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The Supreme Court's Latest Decision on Federal Preemption of State Law: Why it Is Significant, and What it Hints About the Likely Outcome of the Upcoming Major Preemption Decision


Tuesday, Dec. 30, 2008

Earlier this month, the U.S. Supreme Court decided the first of two cases concerning federal preemption of state law on its 2008-09 docket. As I will explain in this column, the case, Altria Group v. Good, is important for two reasons: First, because the Court, by finding that there was no preemption, has given the green light to an important new litigation threat to the tobacco industry. Second, because the two deeply-divided opinions produced by the Court give us hints as to how it will decide the next preemption case, Wyeth v. Levine, a case about which I have already written, and which may be one of the most significant cases decided by the Court this year.

The Facts and Legal Claims in the Good Case

Starting about five years ago, plaintiffs' lawyers began to sue the tobacco industry under state (and federal) fraud law, typically in class actions. The basis of their claims was that the tobacco industry had defrauded smokers when it sold them "lights" cigarettes, starting in the 1970's, since the cigarettes were purported to be safer than regular cigarettes. The plaintiffs claimed that the cigarettes were not, in fact, safer and that the tobacco industry knew it. Meanwhile, the plaintiffs alleged, the industry induced reliance on the part of the consumer that led some consumers to choose to purchase lights instead of reducing their cigarette consumption or buying regular cigarettes.

Lights were introduced by the tobacco industry as an alternative to regular cigarettes. They differed from regular cigarettes in that they included certain filters designed to reduce the amount of carcinogens that a smoker would inhale with each puff. The term "light," as used in advertisements, connoted a number of different qualities, including (according to the plaintiffs) less potential harm. The advertisements also contained references to the amount of tar and nicotine in a cigarette, as measured by a test developed by the tobacco industry called the "Cambridge Method."

The theory of the cases that have been filed is that the Cambridge Method is a misleading test, since most smokers do not smoke like a testing machine and, in fact, compensate for the reduced tar and nicotine per cigarette either by puffing harder to get more smoke than normal, or smoking more cigarettes. According to the plaintiffs, the tobacco manufacturers knew this, and therefore committed fraud when they sold the lights cigarettes.

Good is not about whether the underlying factual claims about the Cambridge Method are true, or whether the tobacco companies possessed scienter (the legal term for the intent to defraud). It is not even about whether the plaintiffs have any legal ground for recovery under fraud law, given that many were no worse off for the alleged fraud, since many would have smoked regular cigarettes if they had not smoked lights. These are all hard questions—but they are not within the Supreme Court's jurisdiction, since these questions mostly involve state law claims.

In contrast, the only federal question raised by Good - and the only one that was before the U.S. Supreme Court -- is whether the claims made by the plaintiffs can be heard at all, or whether they are preempted by federal law.

The Circuit Split: The Fifth Circuit Versus the First Circuit

The Supreme Court was likely driven to accept the Good case because there was a circuit split -- a classic basis for Supreme Court review. In 2007, the U.S. Court of Appeals for the Fifth Circuit held that a lights class action brought under Louisiana's consumer fraud law was preempted by the Federal Cigarette Labeling and Advertising Act (Labeling Act) and that the only remedies available to the plaintiffs were under that federal statute. The Labeling Act provided for no private right of action, so the Fifth Circuit decision essentially left the plaintiffs with nothing but the empty hope that the Federal Trade Commission might punish the tobacco industry.

Also in 2007, the U.S. Court of Appeals for the First Circuit reversed a district court's grant of summary judgment on behalf of Altria, the manufacturer of Marlboro Lights, in a class action brought under Maine's consumer fraud law. The First Circuit held that the fraud claims were not preempted, and it cited the United States Supreme Court's 1992 decision in Cipollone v. Liggett Group as controlling precedent.

The Key Precedent of Cipollone

Cipollone is a lightning rod among lawyers and academics who follow the preemption debate. It dealt specifically with the question of whether various state tort claims -- arising from a personal injury suit against a tobacco company by the family of a deceased smoker -- were preempted. The Court produced a fractured opinion that pleased no one, and since the decision was issued, it has been attacked, cited, and debated.

Cipollone's "real" meaning is not clear, given that it was decided by a four-Justice plurality. Furthermore, even if its meaning had been clear, it was not clear that the Supreme Court today would embrace it, since three of the four Justices who signed onto the plurality have since been replaced. Good answered the second question - whether the Court embraces Cipollone as good law - with a "yes."

In Cipollone, Justice Stevens, writing for a plurality that consisted of Chief Justice Rehnquist, and Justices White and O'Connor, held that the Labeling Act preempts state law—sometimes. The Labeling Act, in essence, says that in order to promote uniformity among the states, no state may place any additional requirement on the labeling or advertising of cigarettes "based on smoking and health." The idea behind the Act was that it would be the federal government that would set the floor and the ceiling as to what a tobacco company could, and must, say about the effects of smoking on health.

From this basic understanding of Congress's "intent," Stevens held that the Labeling Act preempted suits based on a state's products liability law - that is, suits where the plaintiffs alleged that the manufacturers were required by state products liability law to warn of the dangers of smoking. Liability under a state common law duty to warn would be the same thing as a state "requirement" to label or advertise. On the other hand, a suit under state fraud law based on an allegation that there was a deliberate concealment of a "material fact" -- even if that material fact related to the health effects of smoking -- was not preempted. The latter, said Stevens, was a case of liability imposed not because the state was interested in affecting the labeling of cigarettes, but because the state has a general interest in regulating false or misleading statements.

The other five Justices could only agree on one thing: Stevens was wrong. Justice Blackmun, joined by Justices Kennedy and Souter, said that he found Stevens's distinction between failure to warn claims (which were preempted) and concealment of material fact claims (which were not preempted) "baffling." These three would have found that there was no preemption for any common law state tort action under the Labeling Act.

In turn, Justice Scalia, joined by Justice Thomas, claimed to be baffled as well, and predicted a short and unhappy lifespan for the rule articulated by Stevens. Scalia and Thomas advocated the opposite position from Blackmun, Kennedy and Souter: All the state tort claims were federally preempted.

Explaining the Surprising Decision in Good

The plaintiffs in the lights cases had one thing going for them as they approached oral argument in Good: Cipollone explicitly held that certain kinds of fraud were not preempted. But they had two things going against them: First, the fraud claims upon which the lights suits are based are statutory consumer fraud claims, not common law claims, which had been the subject of Stevens's original decision. Second, the last fifteen years have not been kind to Cipollone: Scalia's obituary, while premature, was still hanging in the background. If it wasn't dead, Cipollone's main holding was still viewed as a freak of nature — it lived, but no one was quite sure why.

It is quite incredible, therefore, that at the end of 2008, Stevens emerged as the author of the majority opinion of Good. The five-Justice majority for which he wrote held that not only were the statutory fraud claims not preempted, but they were not preempted because of the holding in Cipollone.

Justice Stevens's majority opinion is remarkable for two reasons. First, he was able to convert Justices Kennedy and Souter, convincing them to endorse a position that they had called "baffling" and incoherent in 1992. In addition, he was able to get Justices Breyer and Ginsburg to join this ringing endorsement of the much-despised plurality opinion.

Stevens's achievement demonstrates how the "facts on the ground" often dictate the strategic choices of Supreme Court Justices. Certainly Justices Kennedy and Souter understood that the partial dissent penned by Justice Blackmun offered much greater protection for consumer tort claims than Stevens's compromise—like Blackmun, they wanted to bar preemption of all common law claims, and Stevens was not willing to go that far. But the justices who wanted to bar all common law preemption by the Labeling Act faced some problems. For example, the claim in Good was a consumer fraud claim based on a statute. Although most consumer fraud statutes are treated like common law, the technical difference put Kennedy and Souter on weaker ground.

Another problem was that, by 2008, the federal courts had rejected the idea that a state liability rule was not a "requirement" for purposes of preemption analysis. In other words, even if Stevens's argument was unattractive, it was now more attractive than the position pushed by Blackmun, which no one viewed as a serious contender anymore. Discretion being the better part of valor, Kennedy and Souter jumped to Stevens's position--which was better than the alternative.

And what was the alternative? The four-person dissent, written by Justice Thomas, threatened to overturn Stevens's legacy. It was nothing more than a reiteration of Scalia's two-person dissent in Cipollone—but now strengthened by the addition of Chief Justice Roberts and Justice Alito. Who knows what Stevens had to promise to Breyer to secure his vote? But it is easy to see that this was a close call—Cipollone almost went down in the face of a gathering storm of widening preemption.

Resurrecting the Presumption Against Preemption

Stevens's second achievement was that he resurrected an argument that had receded into the background in the last decade in the Supreme Court's ongoing argument over preemption. Surprisingly, in Good Stevens offered little argument in support of his earlier Cipollone opinion. In fact, he based most of his defense on something called the "presumption against preemption." This presumption is a weak canon of statutory interpretation that suggests that the burden of proof for preemption is on the party who seeks the doctrine's protection. In his dissent, Justice Thomas doubted that this presumption still exists today. He also scornfully noted that if it ever existed, it was a principle more honored in its breach than its observance.

The fact that five justices signed onto an opinion that resurrected the "presumption against preemption" tells us something about the debate occurring within the court over preemption in general, and Wyeth v. Levine in particular. It suggests that Breyer may have lost patience with the new conservative voting bloc that emerged after the nomination and confirmation of Roberts and Alito. It is hard to speculate too broadly from the skirmish over the meaning of Cipollone, but the outcome in Good suggests that Scalia will have to work extra-hard to get five votes for a sweeping pro-defendant decision in Levine.

At the very least, Good is a fitting reminder that, even as he prepares to retire, Justice Stevens has a lot of fight left in him.

Anthony J. Sebok, a FindLaw columnist, is a Professor at Benjamin N. Cardozo School of Law in New York City. His other columns on tort issues may be found in the archive of his columns on this site.

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