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Price v. Philip Morris12/15/2005
ight," "ultra light," "ultra low," or "ultima," although "they appear to be used by the industry to reflect ranges of FTC tar ratings").
With regard to the 1971 and 1995 consent orders, plaintiffs dispute their relevance to the conduct of any industry actor other than the company that was a party to the enforcement action. The 1971 consent order, according to plaintiffs, did not mention "lights" and did not define "low tar." It imposed conditions upon the use of such terms with which, it argues, PMUSA has never complied. The 1995 consent order neither defined "lights" nor established a "numerical standard for `low tar.' "
Plaintiffs distinguish Lanier on the basis that it involved an alleged fraudulent failure to disclose while this case involves PMUSA's "active and direct misrepresentations." In addition, plaintiffs offer Jenkins v. Mercantile Mortgage Co., 231 F. Supp. 2d 737, 752 (N.D. Ill. 2002), in which the federal district court, applying Illinois law, stated that Lanier did not hold that mere compliance with federal law does not bar liability under the Consumer Fraud Act.
D. Analysis
We begin our analysis with the observation that each party overstates its case with respect to this issue.
PMUSA asserts that mere compliance with applicable FTC regulations is enough to bar a Consumer Fraud Act action, correctly noting that application of section 10b(1) of the Consumer Fraud Act has never been held by this court to require that a federal agency or statute expressly authorize the conduct at issue. Rather, according to PMUSA, so long as the challenged conduct is in compliance with applicable federal law, section 10b(1) bars liability under the Consumer Fraud Act. Citing Lorillard Tobacco, 533 U.S. at 548, 150 L.Ed. 2d at 555, 121 S.Ct. at 2418. PMUSA notes that by enacting the Labeling Act, Congress not only mandated the precise warnings that must appear on cigarette packaging and in cigarette advertising but also vested authority in the FTC to enact additional targeted regulations of cigarette advertising. See Lorillard Tobacco, 533 U.S. at 550, 150 L.Ed. 2d at 556, 121 S.Ct. at 2419 (holding that the Labeling Act preempts state regulations specifically targeting cigarette advertising, but does not preempt state regulation of cigarette use or sales, or imposition of regulations of general applicability, such as zoning, which may have an effect on cigarette advertising). PMUSA argues that, pursuant to the authority vested in it by Congress to enact additional regulations regarding cigarette advertising, the FTC "has addressed precisely how cigarette manufacturers may communicate with consumers about tar and nicotine levels and has specifically considered and allowed the use of the descriptors at issue here." PMUSA asserts that its use of the terms "lights" and "lowered tar and nicotine" are in undisputed compliance with FTC regulations governing cigarette labeling and advertising and, as a result, plaintiffs' claims under the Consumer Fraud Act are barred.
We reject PMUSA's assertion that section 10b(1) operates to bar plaintiffs' claim merely because PMUSA may have been in compliance with applicable federal law. The plain language of section 10b(1) requires that two separate conditions be present before a claim is barred. First, a regulatory body or officer must be operating under statutory authority. In this case, the first condition is met. The FTC operates under the authority of the FTC Act (15 U.S.C. §45(a) (2000)), and the Labeling Act (15 U.S.C. §1331 et seq. (2000)), to regulate the packaging and advertising of cigarettes. Second, liability under the Consumer Fraud Act is barred by section 10b(1) only if the action or transaction a
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