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Price v. Philip Morris12/15/2005
id not look to the marketplace or actual consumer behavior. Instead, they relied on the Internet survey mentioned earlier, which was commissioned by class counsel. Based on the results of that survey, which sampled fewer than 300 respondents, plaintiffs' expert, Dr. Jeffrey Harris, postulated that the price of lights would have to be discounted by 77.7%before consumers would still be willing to buy them, assuming the cigarettes were the same healthwise as their full-flavored counterparts. When the hypothetical was changed to assume that lights might be more harmful than regular cigarettes, Harris' analysis determined that the amount of the discount would have to be increased to 92.3%. Based on these figures, plaintiffs argued that difference between the hypothetically discounted prices and the prices consumers actually paid showed that consumers had significantly overpaid for PMUSA's light cigarettes in the false hope that those cigarettes would be healthier for them. In plaintiffs' view, the difference was equivalent to the value of the perceived health benefit of the lights, and the overpayment was the measure of plaintiffs' damages.
Professors Robert Solow and George Akerlof, both recipients of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, submitted a brief as amici curiae attesting that the benefit-of-the- bargain rule expressed by our court in Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d at 196, comports with accepted principles of economics. Although they made general statements in support of the basic theoretical and methodological approach taken by Harris, Solow and Akerlof also noted that the "the actual measurement of damages under the applicable legal standard is intrinsically difficult to implement under the facts and circumstances of this case" and that, under those facts and circumstances, "there may be more than one way to measure damages." One senses from these remarks, and from amici's lack of elaboration in evaluating plaintiffs' approach, a certain unease with plaintiffs' damages calculations. It is no wonder.
Putting aside any questions regarding the scientific validity of the survey on which Harris relied, there is a fundamental flaw in his approach. To understand why, one must first recall the purpose of thebenefit-of-the-bargain rule, which is to compensate the plaintiff for the pecuniary loss occasioned by the defendant's fraud, that is, for "the amount which the plaintiff is actually out of pocket by reason of the transaction. 19A Ill. L. & Prac. Fraud §61 (1991). If a plaintiff cannot prove that he was any worse off financially as a result of the defendant's deceit, his personal feelings of disappointment or dissatisfaction with the transaction are of no consequence. Financial loss is not measured by subjective feelings. It is determined by the choices and values actually available to a consumer in the marketplace. See, e.g., Restatement (Second) of Torts §549, Comment c, at 110-12 (1977) (for purposes of measuring damages in action for fraudulent misrepresentation, value is normally determined by the price for which an item could be resold in an open market or by private sale if its quality or other characteristics that affect its value were known).
The need for objective, market-based standards to prove financial loss is not being raised here for the first time. It was recognized by defendant's damages expert and is fatal to the plaintiffs' damages model. While the Internet survey commissioned for this case may haveshown that survey respondents would have placed a lower subjective value on cigarettes that lacked the health qualities claimed by PMUSA in its marketing of Marlboro Lights and Cambridge Lights, the ma
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