In a closely watched case, the U.S. Supreme Court ruled today that consumers may pursue state-law fraud claims arising out of the sales of light cigarettes. The case is known as Altria v. Goode.
Typically, manufacturers like Philip Morris promoted their light cigarette brands with on-package statements like, "Lowered Tar and Nicotine." But what Philip Morris never told light cigarette buyers is that the "lowered tar and nicotine" refered to test results from a mechanical smoking machine. When humans smoke light cigarettes they typically uconsciously act in ways that allow them to obtain more tar and nicotine from the cigarette. According to consumers who have sued Philip Morris, Philip Morris knew that consumers weren't getting lowered tar and nicotine and even designed less cigarettes so that consumers would get the full dose.
By way of full disclosure, I am a lawyer who represents consumers and have been involved in cases against tobacco giant Philip Morris for the same problem. For that reason, I am not unbiased about these issues.
It's a good result for consumers for the simple reason that state law fraud claims provide an important check on corporate conduct. For the vast majority of consumers and businesses this is a yawner. Most sellers are truthful. But when they are not, consumers often have very limited ways to protect themselves. This is especially true in this era of deregulation. Since the government isn't looking out for consumers, the U.S. Supreme Court properly left it to state consumer laws and juries to determine whether fraud has occurred and--if so--whether a consumer should recover damages.
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