Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDOhio: Light Cigarette Advertising Suit Dismissed, (Mar 26, 2013)

By Jody Coultas, J.D.

Cigarette purchasers could not state Ohio Consumer Sales Practices Act (CSPA) or Deceptive Trade Practices Act (DTPA) class action claims against Philip Morris Companies Inc. for deceptively advertising that its “light” cigarettes contained less tar and nicotine, according to the federal district court in Akron, Ohio (Phillips v. Philip Morris Companies Inc., March 21, 2013, Lioi, S.).

According to the complaint, Philip Morris deceptively and unlawfully advertised that Marlboro Light cigarettes delivered decreased tar and nicotine, but designed them to deliver higher levels of tar and nicotine than could be measured by the standard testing apparatus.

The purchasers failed to meet the notice requirement of the CSPA, according to the court. Section 1345.09(B) of the CSPA allows for a class action if the alleged violation was an act or practice declared to be deceptive or unconscionable by rule adopted under division (B)(2) of section 1345.05 before the consumer transaction on which the action is based. However, the purchasers argued that they were not required to meet the notice requirement of 1345.09(B) because the broader provisions of Federal Rule of Civil Procedure 23 applied. Specifically, the purchasers argued that because 1345.09(B) conflicted with Rule 23 by prohibiting plaintiffs from maintaining a class that may otherwise meet the prerequisites for class certification under Rule 23, it cannot apply in a diversity action brought in federal court.

In Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 559 U.S. 393 (2010), Justice Stevens outlined a narrow test for determining whether a federal rule applied, holding that a federal rule “cannot govern a particular case in which the rule would displace a state law that is procedural in the ordinary use of the term but is so intertwined with a state right or remedy that it functions to define the scope of the state-created right.” Applying this test, the court found that the notice requirement of 1345.09(B) was so intertwined with state substantive rights that it defined the scope of the rights afforded under the CSPA. Because the purchasers could not allege that they met the notice requirement, the claim was dismissed.

Because the purchasers lacked standing to assert the DTPA claims, the court dismissed the claims as a matter of law. There is a split of authority on the issue of whether consumers have standing to bring DTPA claims, although most courts have ruled against standing. Courts have held that to allow consumers to assert DTPA claims would render the CSPA superfluous as both statutes regulate the same type of conduct. However, the purchasers rely on the DTPA’s inclusion of an “individual” in the definition of a person who may bring suit in their argument for standing. The Lanham Act, which is analogous to the DTPA and contains a similar provision regarding “individuals,” does not confer standing to consumers. Based on the reasoning of previous courts and the language of the Lanham Act and DTPA, the court concluded that the purchasers lacked standing to assert the DTPA claims.

The case is No. 5:10-cv-1741.

Attorneys: A. Russell Smith (Law Office of A. Russell Smith) for Eva Phillips. Patrick M. McLaughlin (McLaughlin Law) for Philip Morris Companies Inc.

Company: Philip Morris Companies Inc.

Cases: StateUnfairTradePractices OhioNews