*1 (No. 9623 6 PHILIP MOR- al., A. et v. Appellees,
SHARON PRICE RIS, INC., Appellant. May 2006. Rehearing denied
Opinion December filed 2005 . THOMAS, C.J., part. took no FITZGERALD, J., specially concur- KARMEIER, J., joined by ring. KILBRIDE, J., dissenting. J.,
FREEMAN, joined by FREEMAN, J., dissenting. KILBRIDE, J., joined by also KILBRIDE, J., dissenting denial FREEMAN, J., on joined by rehearing. Julie A. Lombardi, Jeffrey Wagner, M. George C. Thompson, James R. Altschuler and Bauer, Stuart Odorizzi, Joel D. Ber- Strawn, L.L.E, Michele & Winston Brown, Rowe & Forde, Mayer, K. and Michael tocchi Forde, Chicago, M. all Maw, L.L.E, and Kevin *2 Bauer, Burroughs, Hepler, of Beth A. and Larry Hepler L.L.E, of Edwards- True, & MacDonald, Hebrank Broom, ville, appellant. for of Swedlow King, and Robert L. A. Swedlow
Stephen Power, Jr., Rogers, R. L.L.C., Larry A. Joseph & King, Jr., and Devon C. Sr., Smith, Larry Rogers, R. Todd A. Smith, Stephen Bruce, Power, Chicago, & all of Rogers of Zelcs, Korein of St. Tillery, A. of Tillery George M. and Brickman, Hudson Louis, Missouri, Jerry J. and Michael Patrick, Richardson, Fields, H. of West- Evans and Nina Carolina, Brickman, L.L.C., Charleston, South & of brook Price et al. appellees for Sharon Locallo, Amari, Timothy Amari & and J. Leonard F. of & of Holper Champagne, Ungaretti Eaton and Kathleen Harris, L.L.E, Washington all of Chicago, appellees Louis) (St. School of Law et al. University McDermott, Frakes, and Aron J. of Pope Michael A. and Alan of and Donald J. Russell Emery, Chicago, &Will Russell, Orsek & Un- Untereiner, Robbins, Englert, E. of L.L.E, Conrad, Washington, all of tereiner, and Robin S. D.C., curiae of Commerce for amici Chamber United States et al. Vedder, of Spizzo, and James A.
David E. Bennett PC., for amicus Price, Kammholz, Chicago, of Kaufman & Illinois Manufacturers’ Association. curiae Hochman,
Robert N. of Chicago, and Gene C. Schaerr and Stephen Kinnaird, B. Washington, D.C., of all of Sid- Austin, ley, Wood, L.L.E, Brown & for amicus curiae National Association of Manufacturers. H.
Jay Sartorio, Tressler and Dion J. Tressler, of Sod- erstrom, Maloney Priess, & of Chicago, and Mary A. Wells and Brooks, Jr., L. Michael Wells, of Race, Anderson & L.L.C., Denver, of Colorado (Hugh Jr., F. Young, of Reston, Virginia, counsel), of for amicus curiae Product Liability Council, Advisory Inc.
Michael Africk, W. Coffield and Joel J. of Chicago, and Gavil, Andrew I. Washington, D.C., of for amici curiae American Medical Association et al. Griffin,
Thomas G. Chicago, An- Megan E. nitto, York, York, New New for amicus curiae Citizens’ Commission to Protect the Truth.
Thomas Mollica, R. Meites and Paul Meites, W. Mulder, Mollica, & Burger Chicago, Allison M. *3 Zieve and Wolfman, Brian of Washington, D.C., for amici Citizen, Inc., curiae Public et al. Kralovec,
John B. Kralovec, Schwartz, of Jambois & of Chicago, for amici curiae Economists Robert Solow and George Akerlof.
Eugene Pavalon, Pavalon, I. Gifford, of Laatsch & Marino, Chicago, Stephen Gardner, Dallas, Texas, of Brueckner, Bland, and Leslie A. Jr., F. Paul and Arthur D.C., H. Bryant, Washington, for amici curiae Trial Lawyers for et Public Justice al. opinion
JUSTICE CARMAN delivered court: court of Madison
After a bench trial the circuit USA, defendant, the court found Morris County, Philip (PMUSA) (formerly Morris, Inc.), Inc. known as li Philip able for fraud in violation of the Fraud and Consumer (Consumer Act) Deceptive Business Practices Act Fraud (815 (West 1998)), ILCS et and the seq. Uniform 505/1 Act) Trade Deceptive (Deceptive Practices Act Practices (815 (West 1998)), et seq. ILCS and awarded the 510/1 estimated 1.14 million members of the class plaintiff compensatory punitive damages, attorney fees, and prejudgment interest totaling billion. We ordered $10.1 that PMUSA’s appeal directly be taken to this court 302(b) (134 pursuant to Supreme Court Rule Ill. 2d R. 302(b)). permitted
We have the Chamber of Commerce United States and the Illinois Commerce; Chamber of the National Association of Manufacturers and the Il linois Association; Manufacturers’ and the Product Li Council, ability Advisory Inc., to file briefs amici curiae on behalf of the defendants. have also permitted We Citizen, Inc., Public along various health public organizations; economists Robert Solow and Ak George erlof; the Trial Lawyers Justice, for Public along with various consumer advocacy groups; American Medi Association, cal along societies; with numerous medical and the Citizens’ Commission to Protect the Truth to file briefs amici curiae on behalf of the plaintiffs. 155 Ill. 2d R. In addition, 345. that, Illinois law depend schools on ing the outcome of appeal, may this receive some of proceeds of the punitive award damages have been (West 2002). permitted to intervene. 735 ILCS 5/2—408 now reverse judgment We of the circuit court on (1) the basis that this action is barred by section 10b (815 505/10b(l) (West the Consumer Fraud Act ILCS 2000)).
I. BACKGROUND Industry History Regulation Cigarette of A. documentary The immense record reveals follow- ing industry history, essentially undisputed. which is jurisdiction advertising
The FTC’s over the and test- ing cigarettes premised on the Federal Trade Com- of 45(a) Act, mission section of which declares unlawful: competition affecting commerce, in or “unfair methods affecting deceptive practices and unfair and acts or in or 45(a) (2000). early § as the commerce.” 15 U.S.C. As against companies 1930s, the FTC took action tobacco unsupported made claims the health benefits that about smoking particular cigarettes. See, e.g., their brand of (1938). 27 F.T.C.1637 Co., Tobacco Julep Cigarette September 1955, the FTC issued its first Advertising permitted cigarette Guidelines, which regarding to make claims tar and nicotine manufacturers yields, only they their claims but if could substantiate proof”: “competent scientific claim, illustration, representation, “No or combination directly thereof, indirectly: or should be made or used which Represents any cigarette 2. brand smoke tars, acids, resins, or other therefrom is low nicotine or substances, by ingredients, its method of manufac- virtue of ture, filter, any reason or without length, added or for other reason, any any assigned than other brand or brands cigarettes competent when it has not been established proof applicable scientific at the time of dissemination and, true, if that such difference or differ- the claim is true significant. ences are filtration, Words, including relating those which Note: smoke, through filter
imply lesser substances in the subject otherwise, considered to this comparisons or are (CCH) (1988) (FTC 39,012 guide.” Reg. Rep. par. 6 Trade “Guides”). 22, 1955, Release, entitled September testing used different Different manufacturers comparison making methods, however, cross-brand Bureau of Consultation unreliable. In late the FTC *5 advisory stating repre- industrywide that “all an issued nicotine, whether of low or reduced tar or sentations otherwise,” as health would be construed filtration accompany- purpose advisory of the and the claims. ing prompt compliance the tobacco demand for cigarette advertising industry was to “eliminate from any way imply representations benefit.” which in health Attorney, Brain, Bureau of Letter of H. FTC William (December 1959). 17, its The FTC indicated Consultation against cigarette intent to take enforcement action making effectively representations, manufacturers such regarding banning advertising tar and nicotine levels. (CCH) Reg. Rep. par. 7853.51, 11,730 See 3 Trade at (1988) (reporting that, 1960, the FTC and the tobacco industry agreement companies an reached would content). advertising refrain from tar and nicotine Terry groundbreak- Dr. Luther released the ing Report Surgeon Advisory of the General’s Committee Smoking Report on and Health. The concluded that “[c]igarette smoking is health a hazard of sufficient importance appropriate in the United States to warrant Department Health, remedial action.” Education, of and Surgeon Advisory Welfare, Committee, U.S. General’s Smoking year, Health, and at 33. Later that same promulgated regulation defining FTC a trade rule it an deceptive meaning unfair and act within the of section 5 clearly promi- disclose, of the nently, Act to FTC “fail to and advertising every pack, in all box, and on carton cigarettes or other container in which are sold to the consuming public cigarette smoking dangerous may health and cause death from cancer or other Deceptive Advertising Labeling diseases.” Unfair or and Cigarettes of in Relation to the Health Hazards of Smok- (1964). ing, Reg. 8324, 29 Fed.
Congress’ Cigarette enactment in 1965 of the Federal Act) (Pub. Labeling Advertising (Labeling and Act L. § 89—92, 79 Stat. codified at 15 U.S.C. 1331 et seq.
(2000)), preemption provision contained a that vacated newly promulgated regulation trade rule. The Label- ing purposes. Act First, served two it was intended to public smoking. inform the Second, hazards of it designed emerging problem was to address the regulation cigarette labeling inconsistent state advertising. § Labeling 89—92, Pub. L. 2. The Act required place specific warning manufacturers to label cigarette packs. § 89—92, on all Pub. L. 4. The Act also required Secretary Health, Education, both the reports Congress Welfare and the to make annual consequences smoking on the health and the advertis- *6 (The ing promotion cigarettes. § and 89—92, of Pub. L. 5. warning subsequently content of the was revised on two Labeling 1969, occasions: in when the Act was amended (Pub. by Cigarette Smoking the Public Health Act L. (1969)), 91—222, 84 Stat. 87 and in when the Labeling again by Comprehensive Act was amended the (Pub. Smoking 98—474, Education Act L. 98 Stat. 2200 (1984)). adoption revisions, Prior to the of the 1984 both Surgeon the and the General recommended to Congress required warnings phe- that the address the compensation, nomenon of which refers to smokers’ smoking alteration of behavior to achieve their ac- consumption. customed level of nicotine This recom- adopted by Congress.) mendation was not the States Health United Public Service reported strongly suggested that scientific evidence that cigarette the in lower the levels of tar and nicotine smoke, the less harmful the effects on the health of the Department smoker. United of Health and Human States Consequences Smoking: Services, The Health (1981) Changing Cigarette, (quoting i at 1966 statement Service). by year, Public Health Later that same the FTC major announced that it had sent letters to each of the United the ban on cigarette ending States manufacturers including tar and nicotine content on labels and in advertising cigarettes. The letters stated: Advertising promulgated by
“The Guides Cigarette September provided represen- no Commission that any tation should be made brand of or the cigarette that *** smoke therefrom is low in nicotine or tars when it has by competent proof ap- been established scientific plicable true, at time of claim is dissemination that the true, and if that such or are signifi- difference differences it, cant. On basis of the facts now available to the Com- mission a factual has determined that statement the tar and (expressed milligrams) nicotine content cigarette mainstream smoke from be in would not viola- Guides, any tion of such or of the provisions of law (1) Commission, administered so long as no col- (other representation lateral than factual statements of tar and cigarettes nicotine contents of sale offered for to the public) made, expressly by implication, are as to reduc- (2) hazards, tion or elimination of health the state- ment of supported by tar nicotine content is adequate records of tests conducted in accordance with Cam- bridge Filter Method ... . It is the position Commission’s public it is in the promote interest the dissemina- tion of truthful concerning cigarettes information which may be material and consuming public.” desired (CCH) (1988). 39,012.70 Reg. Rep. Trade par.
When public concern about health effects of smoking increase, began the FTC determined it might be desirable consumers to be able choose *7 among cigarette on yield brands based their of tar and nicotine. In support goal, FTC, of the in this (FTC method) adopted the “Cambridge Method” as the single acceptable means of measuring tar and nicotine yields in cigarettes. The record is clear that both the FTC cigarette and the manufacturers were aware at that time measurement, that method of including no the FTC method, could accurately predict exposure actual of individual any smokers who smoked brand of particular habits, including smoking in The variations
cigarette. complex too simply of are compensation, the phenomenon However, this despite uniform test. any for in to account to not accurate as the test data would be awareness this concern smoker, the FTC found individual any among comparison need for a basis for by the outweighed for the adopted method was Thus, the FTC brands. benchmark, as a a consistent providing of purpose of individual exposure the actual measuring of means Release—State- nicotine. FTC Press to tar and smokers 1967). (August ment of Considerations use that a manufacturer’s The later FTC declared method based on FTC nicotine measurements tar and not result and would deemed substantiated would be Eventually, the FTC authorized action. regulatory any advertising in their to include manufacturers cigarette of their nicotine content the tar and statement as measured milligrams, expressed cigarettes, these Indeed, presented the FTC itself method. FTC Congress published to reports in its measurements Reg. Rep. 4 Trade circulation to consumers. the data for (CCH) Federal Trade also Letter from 39,012.70. See par. and to manufacturers cigarette major Commission the Cigarette Administrator Meyner, Robert B. 1966). (March 25, Advertising Code Congress, pursuant Report first The made its FTC FTC Act, report, in 1967. In that Labeling to the language strengthen that Congress recommended on all required then that was warning statement stated statement warning The cigarette packages. to health. hazardous” “may be smoking cigarette that smok- direct statement a more recommended recommended The FTC also to health. is hazardous ing nicotine the tar and forth setting “statement that a on appear required should be cigarette of each content Federal advertising.” cigarette and in all package *8 191 Pursuant to Commission, Congress to Report Trade Act, 30 at Advertising Labeling and Cigarette Federal 1967). adopted (June were The recommendations 30, time. at that responded the FTC Congress, to Report
In its 1968 benefit possible regarding emerging consensus to the “Based yields. nicotine reducing tar and to smokers of present yield cigarettes lower upon proposition American the Commis- public,” hazard to the lessened to: year during previous it had acted explained, sion on the “(1) public to the information available augment (2) prompt and of cigarettes and nicotine content tar hazardous to less develop manufacturers cigarette Commission, to Report Federal Trade cigarettes.” and Cigarette Labeling the Federal Pursuant to Congress 1968). (June However, Act, 30, the FTC at 17 Advertising observed: by cigarette manu- analysis provided
“An of sales data yield comparatively that sales of low facturers indicates only, hav- e.g., purposes report this those cigarettes, less, milligrams (mg.) of tar or have not been ing 15 categories cigarettes, thus far. Three classified extensive yields, divided the market in 1967 as fol- according to tar under—2%; mg. and mg. mg.—59%; and 16-21 lows: added.) Federal Trade Commis- (Emphasis over—39%.” sion, Congress Cigarette to Pursuant to the Federal Report (June 1968). Act, 30, Advertising and at 19 Labeling only also a small number report reported The 1968 tar and nicotine making voluntary were companies being “every there packaging, despite disclosures on their of low tar and promotion reason to believe that Federal Trade cigarettes profitable.” nicotine can be yield the Federal Commission, Congress to Pursuant to Report (June Act, at 19 Cigarette Labeling Advertising 1968). hazardous than alert smokers less “[R]ather sought part for the most yield cigarettes, low advertisers anxiety by proclaiming smoker wonders allay Commission, Report their filters.” Federal Trade Congress Pursuant to the Cigarette Federal Labeling (June 1968). Act, Advertising at 19 In its Report to Congress, the FTC continued to press for mandatory disclosure of tar and nicotine *9 content on each cigarette package and in cigarette all advertising and for stronger warnings. addition, urged FTC repeal of the Labeling Act and a complete ban on cigarette advertising on television and radio. Federal Trade Commission, Report to Congress Pursuant to the Cigarette Federal Labeling and Advertising Act, at (June 1969). 30, Congress did not adopt these recom- mendations.
A subsequent proposal FTC that would have declared it an unfair or deceptive practice under section 5 of the FTC Act for cigarette manufacturers to fail to in disclose their advertising the tar and nicotine content of the (see product, based on the most recent FTC test results 35 Fed. Reg. 12,671 8, (August 1970)), was after dropped major five industry members and three of the smaller companies voluntarily agreed to provide this information (see (1971)). on all cigarette packages 36 Fed. Reg. 784 See also Federal Commission, Trade Report to Congress Pursuant to the Public Health Cigarette Act, Smoking at (December 1970). 31, 18-19
The voluntary approach was seen by FTC as a more efficient means of accomplishing its goal. As then- said, chairman Fitzpatrick regulation rules, “Trade if courts, contested in the might take a long time to become A effective. workable voluntary plan by the industry (As could be put into effect immediately.” late as the voluntary agreement in remained effect. See Cigarette Testing; Request Comment, Public Federal Trade Commission, 1997). 48,158 62 Fed. Reg. (September 12, in Nothing the record suggests that the agreement has date.) been terminated since that As a result of this voluntary agreement, PMUSA and the other major have, 1971, included since cigarettes manufacturers tar measured yields by information on and nicotine as advertising. on and in See packaging FTC method Commission, Cigarette Federal on the Report Trade Staff Investigation, May at 4—5. Advertising in began cigarette descriptor appear “low tar” industry as advertising by responded the late 1960s public interest and nicotine adopting lowered tar innovations, filters, holes, such as the use aeration or wrapping quickly. burned more Each of these paper innovations caused in the amounts of tar and reductions above, nicotine measured the FTC method. noted As were industry members well aware that the FTC method did not replicate smoking actual behavior. They were also aware that smokers who from a switched higher brand that was to a tar nicotine brand with one of these features tended to compensate by smok- ing more cigarettes by smoking differently.
In 1969, cigarette the FTC informed manufacturer American Brands of its to charge intent the company with in engaging unfair, misleading, deceptive and the advertising respect with tar of its content Pall (American Mall Lucky and Strike cigarettes. Brands, Inc., was formed in 1969 as parent the company American Company, Tobacco which traced its corporate roots to founding the Duke & Sons North W. 1864.) Carolina in thereafter,
Shortly but complaint before formal was filed, the Authority Code of the National Association of sought Broadcasters an advisory opinion the from FTC. § See 16 1.1 (permitting any C.F.R. person, partnership, or corporation to request advice from the FTC “with respect a course of which the action requesting party proposes FTC, to pursue”). By letter to the the Code Authority inquired whether the FTC had formulated a policy regarding “low,” the use “lower,” of words such as
and “reduced” in
the level of tar and nicotine
describing
Brands,
Inc.,
in cigarettes. American
On Health Smok- April Cigarette Public law, significant changes Act ing making became several (1969). 91—222, to the Act. Pub. L. 84 Stat. 87 Labeling have First, cigarette packages all since November following statement: required carry warning been Has That Surgeon General Determined “Warning: Pub. Is To Your Health.” Cigarette Smoking Dangerous *11 2, Second, January 1971, the Public 91—222, § L. 4. since cigarette Act has barred Smoking Health Cigarette 91—222, radio. Pub. L. from television and advertising And, any new forbids third, provision § 6. a preemption smoking based on or “requirement prohibition *** to the respect under State law with imposed health 91—222, Pub. L. cigarettes.” advertising promotion 5(b). was directed preemption provision § As the new to states, remained free only at actions FTC Co. advertising. See Lorillard Tobacco regulate cigarette 545, 532, 553, 121 525, 150 L. Ed. 2d Reilly, v. 533 U.S. (2001). S. 2416-17 Ct. described Report Congress, its 1970 to exchange Authority heading with the Code under the the Code
“Voluntary Regulation.” reported The FTC to “adopted position had as its similar Authority policy the order” that to as appropriate” the FTC “believed be complaint against a resolution of its American pending Brands. The FTC’s stated was that: clearly policy comparative
“if a broadcast used cigarette advertisement language such as Tow’ or ‘lower’ to describe the tar and cigarette, nicotine content of the advertised the advertise- ment must also disclose:
1. The tar milligrams and nicotine content cigarette; advertised milligrams
2. The tar and nicotine content in yield highest cigarettes; lowest and domestic 3. If the tar and nicotine content of the advertised any cigarette compared specific cigarette, other the brand name and tar and nicotine content in mil- ligrams ciga- produced of the smoke such other Commission, Report Congress rettes.” Federal Trade Act, Cigarette Smoking Pursuant to the Public Health 1970). (December 31, at 21 advisory One result of the rendered to the Code opinion Authority, according to the was that several Report, only television commercials had been withdrawn and that two brands made claims in broadcast comparative Commission, advertisements 1970. Federal Trade during Congress Pursuant to the Public Health Report (December 1970). Act, Cigarette at 21 Smoking Subsequently, complaint against when the formal *12 196 filed,
American Brands was the FTC accused company of creating impression false that cigarettes its were when, low in tar fact, in Pall Mall Gold 100s Lucky and Filters contained 20 21 approximately and milligrams of tar, respectively, at a time when the brand containing lowest level of tar only contained 4 milligrams. In re Brands, (1971). Inc., American 79 F.T.C.225 By time, this the voluntary agreement had been reached, but American Brands had signed not on to it. dispute between the FTC and American Brands
was resolved in with the entry of a consent order that required American Brands to cease and desist from:
“Stating any in advertising cigarette by manufactured it, or the smoke therefrom is low by or lower in ‘tar’ use of ‘low,’ ‘lower,’ the words or ‘reduced’ or like qualifying terms, unless the accompaniedby statement is a clear and conspicuousdisclosure of:
1. The ‘tar’ and nicotine content milligrams in produced by the smoke cigarette; the advertised and 2. If the ‘tar’ content of the advertised brand is compared to that of another brand or brands of (a) cigarette, the ‘tar’ and nicotine content in mil- ligrams by produced smoke that brand or those (b) cigarette, brands of the ‘tar’ and nicotine milligrams content in yield of the lowest domestic cigarette.” Brands, American 79 at F.T.C. 225.
The consent order further defined the term “tar” as “the total particulate matter in the mainstream smoke of cigarettes as determined the testing method employed by the Federal Trade Commission in its testing of the smoke of domestic cigarettes.” Brands, American at 225. F.T.C.
The content of the consent slightly order was differ- ent from that of the order the FTC anticipated its Report Congress. Significantly, originally intended to require any claim of low or lower tar be accompanied only by the tar and nicotine content milligrams, but also the tar and nicotine content of See Federal Trade yield cigarette. lowest domestic Commission, Report Congress Pursuant to the Public (December Cigarette Act, Smoking Health at 1970). end, the use In the the order allowed of the words “ ‘low,’ ‘lower,’ terms,” quahfying or ‘reduced’ or like so long as the tar and nicotine content be- cigarette ing clearly conspicuously advertised was disclosed. if Only being the advertised brand was compared another brand or was the specific cigarettes brands of *13 to required manufacturer disclose the additional informa- tion. 1971, having voluntary
Later in
after
reached a
agree-
ment
most cigarette
manufacturers
to disclose tar
(and
and nicotine levels in their advertising
having
obtained the
compliance
American Brands and other
nonsigners
through
order),
the 1971 consent
the FTC
its
complaints
announced
intention to file
six
against
cigarette companies
if they failed to display in their
advertising, clearly and
conspicuously,
same warning
that Congress
already
had
on
required
cigarette pack-
ages. Again, negotiations between the
major
FTC and the
cigarette manufacturers
in
entry
resulted
of a
(1972). (In
consent order. In
Lorillard,
re
In its 1971 to Report Congress, the FTC described the resolution of the American Brands via dispute consent as order of its part “[rjegulatory activity” for the year. Commission, Federal Trade Report Congress Pursuant to the Act, Public Health Cigarette at Smoking (December 1971). 13—14 addition, the FTC reported “Regulatory activity” heading its under the proposed negotiations” respondents” “extended with “six in the matter. Settlement order Lorillard consent public in this and would “meet the interest matter” resulting much than would “take effect sooner orders adjudicative proceedings.” orders, Such the FTC from “carry observed, would force of law” and violation carry penalties. The did not the orders could civil application or on comment on the effect the orders parties companies thereto. Trade that were Federal Report Congress Pursuant Public Commission, to the (December Cigarette Smoking Act, at 16 Health 1971).
By early including 1970s, the tar addition packaging in their and and nicotine content numbers advertising voluntary plan and in accordance with orders, the 1971 and 1972 consent several manufacturers products advertising being or their as “low” were Vantage, True, tar nicotine. “lower” either both and example, Doral, tar and were advertised as low cigarettes. Mild, Thins, Pall Extra nicotine Mall Silva Lucky Iceberg Carlton, 100s, Ten, Mall Pall Gold Trade as low or in tar. Federal were advertised lower *14 Report Congress Public Commission, to Pursuant to the 1973). (December Smoking Cigarette Act, at 5 Health Congress, Report that “as 1974 to the FTC noted In its Raleighs, Kools, Malls, of Pall Vice- the manufacturers roy’s doing, a are now offers and Marlboros Winston Light and nicotine content.” with lowered ‘tar’ Winston Congress Report Commission, Pursuant to Federal Trade Smoking Cigarette Act, 5at Health to Public 1974). (December 31,
By reporting Congress that low was to 1978, the FTC cigarettes, mil- it those 15 which defined as tar ligrams from tar, had increased market share or less of Commission, Trade in 1967 28% 1978. Federal 2% to Health the Public Pursuant to Congress to Report (1978). addition, the FTC In Act, at 3 Smoking Cigarette ‘tar’ and nicotine to lower “[mjarketing shifts noted that the effects assessing way another may be cigarettes market share increasing The warnings.” health the public indication that seen as an tar brands was low also The FTC reaching consumers. message was health “[wjhile suggest- is evidence however, there noted, that are less and nicotine ‘tar’ with lower ing cigarettes that even the and hazardous, is not conclusive the evidence much health hazards presents yield cigarettes lowest smoking at without be encountered than would higher Congress to Commission, Report Trade all.” Federal Act, at Smoking Cigarette Health Pursuant to the Public (1978). the market reporting the FTC was By had increased to 40.9%. cigarettes tar share low Pursuant Commission, Congress to Report Federal Trade Act, at Labeling Advertising and Cigarette to the Federal (1979). data on report, provided In this the FTC market shares for and advertising expenditures total 15, 12, 9, 6, milligrams and 3 of tar. cigarettes with described that advertisers sometimes report noted less of tar as “ultra low milligrams with 3 or cigarettes ” Commission, Congress to Report ‘tar.’ Federal Trade Labeling and Advertis- Cigarette Pursuant to the Federal (1979). footnote, the FTC stated Act, at 11 a ing “ tar’, term related any ‘ultra-low it had not defined tar’, defines level for ‘low which FTC except ‘tar’ Commission, Federal Trade as 15.0 or less tar.” mg. Cigarette Pursuant to the Federal Congress Report (1979). Act, 1979, “As at n.8 Labeling Advertising observed, variety use a result,” the “advertisers Trade ‘tar’ levels.” Federal distinguish among of terms to to the Federal Commission, Congress Pursuant Report (1979). Act, at 11 n.8 Advertising Cigarette Labeling *15 (An appeared Report identical footnote in the FTC’s 1980 Congress. Report Commission, Federal Trade Congress Cigarette Labeling to the Pursuant Federal (November 1982).) Advertising Act, 15, 11at n.8 ” employed The FTC also the term “low ‘tar’ it when press announcing 15, issued a on 1981, release December report “Report the release ‘Tar,’ of entitled of Nicotine and Carbon Monoxide of the of 200 of Smoke Varieties Cigarettes.” paragraph press The lead in the release today by stated that “Test results released the Federal Trade cigarettes show an Commission increase of number ‘tar,’
with low nicotine and carbon monoxide report addition, levels.” In showed that 150 of the milligrams compared tar, 200 brands had 15 tested less previous May. to 125 of 187 brands tested the Press FTC Cigarette Report Release—FTC Shows More on Brands “Tar,” Nicotine, Market with Low Carbon Monoxide (December 1981). 15, Levels years, multiple Over the the FTC conducted investi- gations regarding the use of tar and nicotine levels and descriptors “lights” cigarette of such as and “low tar” in advertising. investigations place 1981, Such in 1976, took 1988, and 1992. warning the FTC concluded on
cigarette cigarette packages advertising not was provide effective and did sufficient information regarding smoking. of consumers health risks Federal Report Cigarette Commission, Staff Trade on Adver- tising Investigation, May report at 4—7. staff though warnings concluded that even and disclosure required test measurements tar and nicotine were cigarette FTC, the then-current state advertis- ing might deceptive under section 5 be deemed segment purchas- FTC Act a substantial because ing public likely was to be deceived. Federal Trade Com- Report Cigarette Advertising mission, Staff on the *16 1981, Investigation, May at 4—17. This conclusion was based on data in the that report indicating large por- a tion of the public lacked sufficient knowledge hazards of cigarette smoking. Federal Trade Commis- sion, Staff on the Report Cigarette Advertising Investiga- tion, 4—21, at May 4—36. The Commissioners unanimously agreed that this staff report should be transmitted to Congress. only one With Commissioner objecting, report the staff was released to the The public. entire Commission endorsed the substance of the report. See letter Clanton, from David A. Acting Chairman of FTC, 1981) Bush, to George Vice President (May Senate). (transmitting the staff report Neverthe- less, neither the nor Congress FTC acted upon this staff suggestion that cigarette advertising under the then- current policy FTC and regulations should be deemed deceptive. in 1981,
Also
the FTC
an
began
investigation
Bar-
clay cigarettes. The investigation was triggered by
complaints from manufacturer Brown & Williamson’s
competitors, who claimed that the design of the Barclay
filter caused it to falsely register very low tar measure-
ments on the FTC smoking machine. Federal Trade
Comm’n v. Brown & Williamson Tobacco Corp., 778 F.2d
(D.C.
1985).
35, 37
Cir.
determined
that
Barclay claim of 1 milligram of tar was false and decep-
tive and attempted
to require Brown & Williamson
(B&W) to state an estimated tar content of 3 to 7 mil-
ligrams.
refused,
B&W
but
its
changed
advertisements to
state that the 1 milligram tar measurement was obtained
a
using method recognized by “independent
laborato-
ries.”
Williamson,
Brown &
In the 1992 “light” the use of terms such as “low tar” whether they cigarette advertising because should be banned given deceptive, limits was known about the were what phenomenon of method and the real-world of the FTC compensation by concluded, however, smokers. The FTC *17 by FTC of such terms was substantiated that if the use misleading they false, unfair, or results, were not method provisions Act. the of the FTC under investigations, the least two of the In the course of at whether method and considered reexamined the test FTC changed protocol ac- to render it a more should be the given representation behavior, the of human curate changes cigarette design. cases, the In both FTC in public The first on the FTC method. solicited comment triggered by the in and was occurred reexamination protocol suggestion of the FTC Lorillard, Inc., that the being cigarette changed tested the so that method be quite Loril- far into the machine. inserted as would not be cigarettes inserted were was that when its lard’s concern depth, prescribed the ventila- the machine blocked the rating resulting higher and nicotine holes, in a tar tion end, In the uncovered. had remained than if the holes only industry to advocate alter- member Lorillard was depth. ing concluded The FTC insertion the standard agency changed. protocol not be should that the purpose of the statement its 1967 reiterated exposure predict testing the tar and nicotine was not to any but, rather, to determine individual smoker cigarette generated of tar and nicotine when amount prescribed protocol. by a machine under a was smoked 1978). (March Noting Reg. in- 11,856 22, Fed. complicated filters had novations such as aerated among cigarette providing comparability brands, task depth change concluded that “a in the insertion the FTC continuity previous test would cause a lack (March 1978). Reg. 11,856-57 22, results.” 43 Fed. Further, if a each the FTC noted that consumer “smoked way, cigarette ‘tar’ different the same he would inhale proportional the relative and nicotine amounts (March figures.” Reg. 11,856 values of the 43 Fed. 1978). Thus, “in the absence of information indicat- depth ing that a new insertion would be more consistent cigarettes manner in with the which smokers insert modify protocol. use,” actual the FTC decided not to (March 1978). Reg. 11,857 end, 43 Fed. In the investigation by issuing advisory FTC concluded this an opinion stating cigarette that the tar values set forth in ap- advertisements must be consistent with the latest plicable methodology, number, FTC tar based on the FTC any and that tar and nicotine claims not so substantiated permitted. Lorillard, were See In re 92 F.T.C.1035 (1978).
The second reexamination of the oc- FTC method early 1980s, curred in the when some manufacturers began using systems channel rather than ventilation *18 open ciga- airholes. The channels remained when the yielding very machine, rettes were inserted in the low Competitors complained numbers. that the results were open inaccurate because the channels did not remain cigarette when was in the hands of an actual smoker. initiating Barclay investigation, In addition to noted public develop- above, the FTC invited comment on this ment and on possible modifications of its method that might render it a more representation accurate of actual smoking 15,953-54 behavior. 48 Reg. Fed. (April 1983). The FTC also asked for comments on whether such modifications result might unintended conse- quences or affect further innovation in cigarette design. 1983). 15,954-55 48 Fed. Reg. (April addition, In sought comment on the possibility of using system of ranges content, or “bands” of tar as opposed specific numerical values expressed milligrams tar. Finally, the FTC reiterated its long-standing position that its rat- ings were relative, absolute, intended to be even as it posed question: “should consumers be advised that the cigarettes’ actual ‘tar’ delivery depends on how it is 1983). 15,955 smoked?” 48 Reg. (April 13, Fed. Comments were only received not from in the those cigarette industry, but also from a number of health organizations. opinions expressed were widely disparate, ranging from a call for development of a test- ing system that did actual approximate smoking behavior a suggestion that all such testing be abolished. response “banding” system, the idea of a which would categorize tar, as cigarettes high tar, tar, medium low tar, ultra low several manufacturers noted that this would tend to concentrate brands near the upper level of range, each in contrast to the existing system that gave manufacturers an incentive to create a product would deliver the lowest possible level of tar. In the any absence of a consensus on means of eliminating or reducing method, the limitations of the FTC test FTC made no to its changes testing methodology.
The issue of cigarette labeling advertising rules 27, 1992, remained status until quo February when The (made Coalition on OR Health Smoking up of Association, American Heart Lung the American Associa- tion, and the American Cancer filed a Society), petition *19 sought the of an with the FTC in it issuance which complaint against PMUSA other administrative and companies pursuant 5 of FTC Act. tobacco to section alleged labeling Specifically,the Coalition that PMUSA’s products advertising and of its similar one low tar and labeling advertising by and other manufacturers were misleading false and the use of such as because terms “light,” implied falsely tar,” “low tar” and “ultra low cigarettes products. that these were safer than other charged Coalition that the failure of PMUSA other yield manufacturers “to disclose that the tar while cigarettes may their low tar than be less other tobacco- products, carcinogens related there are numerous known products, carcinogens in the constituents of these tobacco pose which a health consumer,” hazard to the and that this failure to make such additional “is a disclosures material omission in violation of the Federal Trade Com- Smoking mission Act.” Petition The Coalition on OR par. Health Commission, before the Federal Trade 1992). (February 27, responded petition by
The FTC to the Coalition’s Peeler, means of letter a from C. Lee the Associate Direc- giving tor of the FTC. Peeler’s letter stated that after questions careful consideration to the raised petition, Coalition’s asked FTC had the National (NCI) Cancer Institute a convene confer- “consensus topic. ence” on this Letter from Lee C. Peeler to Mat- Myers, Smoking thew L. Counsel Coalition on OR 1994). (August 8, Health
The National Cancer Institute Conference on the Cigarette brought Test Method was also about request Representative Henry Waxman, A. chair- man of the on Subcommittee Health and the Environ- Energy ment of House Commerce, Committee on who asked NCI to convene a conference to review the determining FTC’s method of the relative tar and nicotine At cigarettes. content of the “direction of Commission,” the FTC chairman wrote to direc- the NCI tor, noting overlap the substantial between the issues identified Chairman Waxman and those the FTC was examining. then The FTC chair asked that the consensus review exist- “provide comprehensive conference *20 on ing relating scientific evidence issues low-tar and ultra-low that cigarettes.” tar The letter further asked rating consider the “current the conference whether harm to consum- system sufficiently pose flawed as ratings.” Among ers who on the of rely specifi- list conference, for the the letter listed: cally suggested topics of cigarettes (cigarettes mg. “are rated at 15 or less low-tar tar) (those at dangerous high-tar cigarettes less than rated tar) and, so, mg. more than 15 if what is the extent their health benefit?”
and: cigarettes mg. or (cigarettes “are ultra low-tar rated at 6 tar) dangerous high-tar
less of less than low-tar and/or so, and, health cigarettes if what is the extent of their benefit?” Steiger, Chairman,
Letter from D. to Samuel Janet Broder, Director, M.D., (July National Cancer Institute 1994). 6, 1994, 5
The conference was held on December and Bethesda, Maryland. in The conferees concluded numbers, as descriptors yield numbers and such yield They health light,” and “ultra were claims. “light” in such and descriptors recommended that numbers by be labeling advertising accompanied appropriate of smoking, to health but consequences disclaimers as descriptors. See NCI banning did not recommend such Method for Monograph Cigarette Testing The FTC 7: Nicotine, Yields Tar, and Carbon Monoxide Determining (1996). FTC, end, in the did Cigarettes of U.S. other ac- regulatory rule or take adopt regulation trade light and low-tar such disclaimers require tion descriptors.
207 investigation into the an initiated 1994, the FTC by Company, practices which Tobacco American of the parent, by corporate American sold its time had been this advertising its Carlton Tobacco was American Brands. by showing packs cigarettes next to of Carltons brand single pack rat- and nicotine The tar of another brand. a ings along shown, with a claim brand was
for each pack packs tar than one had less of Carltons that an ads, made the claim was In other other brand. single pack tar than a had less entire carton of Carltons alleged complaint that these The FTC of the other brand. misleading would consumers because ads were false smoking packs get Carlton not, fact, less tar Although smoking pack one of the other brands. than having cigarettes indeed, were, rated as the other milligrams, tar, measured in than Carl- times or more through smoking ratings tons, are obtained “those smoking, part that do not reflect actual machine tests into account such because the machines do not take compensatory smoking.” In re American behavior as *21 (1995). Co., Tobacco 119 F.T.C.3 Again, by agreement. resolved Ameri- the matter was any representation agreed of the can to abandon Tobacco using cigarettes by of “a tar and nicotine levels Carlton multiple, the tar or numerical fraction or ratio” of by depicting more than nicotine levels of other brands or pack pack any one of other brand. one of Carltons versus “presentation agreed provided, further, order that ratings any respondent’s the tar nicotine and/or ratings cigarettes nicotine brands of and the tar and/or (with implied any express an other brand or without respondent’s representation ‘low,’‘lower,’ brand is nicotine) shall not be deemed” or ‘lowest’in tar and/or comparisons. American to violate the on numerical ban entry agreed Tobacco,119 F.T.C.at 11. Prior to provision a “limited order, the described this as ‘safe harbor’ for advertising that complies with certain requirements in its use of official tar and nicotine rat- ings.” Analysis of Proposed Consent Order to Aid Public Comment, In re Co., American Tobacco F.T.C. File No. 1994). 31, 2268 (August 1997,
Most recently, in the FTC solicited public com- ment on various proposals for altering the FTC testing method and for changing cigarette advertising so that it would more accurately reflect the limits of the testing method. The request for comment explained that 1970 voluntary agreement between the FTC and most cigarette manufacturers “remains in today, effect and it forms the basis for current disclosure of tar and nicotine yield.” The request comment also raised the issue of compensation and noted inability of the current test- ing method to allow for compensatory behavior smok- ers. See Cigarette Testing: Request Comment, for Public Commission, 48,158 Federal Trade Reg. 62 Fed. (Septem- 1997). ber The record suggests that this inquiry is still ongoing.
B. PMUSA’s Marlboro Lights and Cambridge Lights
Against industry this backdrop, PMUSA responded to increasing consumer concerns about health effects of smoking by introducing Lights Marlboro cigarettes as an alternative its Marlboro Reds. PMUSA began selling Cambridge Lights in 1986. In addition to the use of the word in the “light” names of these new products, suggested they which way were some “lighter” than their counterparts, “full-flavored” Lights Marlboro label promised “lowered tar and nicotine.” Lights
Marlboro became the most popular cigarette brand in the country inspired many imitators. Light cigarettes, brands, including PMUSA eventually *22 constituted 89% of the United cigarette States market.
The tobacco contained in Lights Marlboro did not so- than the tobacco in any less tar or nicotine carry claim low Instead, of cigarettes. called “full-flavor” of a was on the use different premised tar and nicotine filter, to the smoke and which was dilute type designed smoke, to draw it more difficult for smoker to make nicotine, or lungs. and into his her and therefore tar method, to subjected testing by Lights When indeed delivered less tar and nicotine. however, changed
In actual smokers who experience, regular likely from were cigarettes Lights compen- sate for the lower amount of nicotine delivered by cigarettes, filter by smoking more restrictive more smok- ing longer, taking frequent drags they them more as smoked, result, inhaling more As deeply. many a smok- Lights ers as as likely just they inhaled much tar would they have had remained of regular cigarettes. smokers
C. Procedural History
1. The Pleadings 10, 2000, On February as individuals plaintiffs, on behalf of a class of similarly individuals, situated brought this alleging lawsuit violations of the Consumer Act Fraud and the Deceptive They Practices Act. did not seek damages effects, for the health if any, of their consumption Lights. Instead, they sought only eco- damages nomic based on their claim of having purchased a product reliance on statements by PMUSA that were fraudulent, deceptive, and unfair. response plaintiffs’ first amended complaint, separate
PMUSA raised 27 affirmative defenses includ- laches, waiver, ing limitations, statute federal preemption, the statutory exemption contained (1) section 10b Fraud Act for Consumer conduct that is specifically regula- authorized state or federal (815 (West 505/10b(l) 1998)). body tory ILCS 11, 2003, On their February plaintiffs filed second *23 of three and a motion for withdrawal complaint amended by was the granted named which plaintiffs, of the five circuit court. establishes complaint amended second factual allega- this The relevant litigation.
parameters complaint second amended plaintiffs’ contained in tions are: times, packaged sold At all relevant Defendant and
“7. Lights ‘light’ as and as Cambridge Lights and Marlboro decreased tar and nicotine. having marketing promoting decreased tar and 8. and While deliveries, Cambridge Lights designed Defendant nicotine lower levels of Lights cigarettes register Marlboro to and testing ap- ‘Cambridge’ ‘Ogg’ and nicotine to the tar by industry machine used the tobacco paratus—the testing in cigarettes—than ‘measure’ tar and nicotine levels product. the consumers of the be delivered to would delivery the tar and nicotine Defendant controlled Lights under machine Cambridge Lights and Marlboro support for their testing apparent conditions to achieve and Marlboro Cambridge Lights that their representations ‘light’ contain decreased tar and Lights cigarettes are and Lights cigarettes contain nicotine and that their Marlboro tar and nicotine.’ ‘lowered Lights Cambridge representation 9. Defendant’s are lower in tar and Lights cigarettes Marlboro and mislead- regular cigarettes deceptive is and nicotine than ing. tar only higher levels of
10. Not do consumers receive registers, testing apparatus than the and nicotine Lights by Cambridge Lights and Marlboro produced smoke dam- (causing genetic and chromosomal mutagenic is more cigarettes.” milligram ‘regular’ of tar than age) per alleged further complaint amended Plaintiffs’ second PMUSA by conduct” and unlawful following “deceptive “manufacture, distribution, and its in connection with and Marlboro Cambridge Lights sale of marketing and Lights cigarettes”: that their misleadingly representing falsely
“a. and/or nicotine lowered tar and ‘light’ delivers product and/or regular cigarettes; comparison light as when the so-called describing product b. deceptive on depended tar and nicotine deliveries lowered design composition that dilute changes cigarette per puff content of smoke as measured tar and nicotine industry testing apparatus, but not when standard used the consumer. intentionally design and content manipulating
c. in order Lights cigarettes Cambridge Lights Marlboro delivery falsely decep- maximize nicotine while and/or manipula- These tively claiming lowered tar and nicotine. to, include, are limited the modification of tions but *24 circumference; blend, and weight, length, tobacco rod expanded use of reconstituted tobacco sheets and/or tobacco; by pH and the increase of smoke levels chemical additives, ammonia, processing and such as which resulted delivery in the greater amounts of tar and nicotine when under repre- smoked actual conditions than Defendant ‘light’ sented use of the description; employing d. techniques purportedly that reduce Cambridge machine-measured levels of tar and nicotine in Lights actually and Lights cigarettes, Marlboro while effects, increasing biological including mutage- the harmful nicity (genetic damage) chromosomal caused the tar ingested by per milligram the consumer of nicotine.” In answer to the complaint, second amended PMUSA continued to assert the same 27 affirmative defenses.
2. Class and Class Representatives Certification 8, September On plaintiffs moved for class pursuant certification to section 2—801 of the Code (735 (West 1998)). Civil Procedure ILCS A hear- 5/2—801 ing on motion for class certification held plaintiffs’ was 28, 2000, on hearing November with a on supplemental January 2001. 8, 2001,
On the circuit court February granted plaintiffs’ certify plaintiff motion to a class of consumers purchased Cambridge Lights Lights who and Marlboro in the State of Illinois for between personal consumption February 8, Thus,
their introduction 2001. the class period purchases Lights Cambridge was from 1986 period Lights 2001; the class for Marlboro was from 1971 to 2001. July decertify 7, 2002,
On
PMUSA filed a motion to
the class
this
based on
court’s decision Oliveira v.
(2002).
Co.,
Oliveira,
Amoco Oil
Notice of class action was in 21 newspapers, including ChicagoTribune, the St. Louis Post-Dispatch, Today, regional USA and 18 Illinois newspapers. given general addition, notice was to the public press via the Internet and a release to PE News- request wire International Newslines Service. PMUSA’s given that notice be to individual Illinois residents whose *25 names and addresses were available from its own database of was consumers denied. requested adopt
PMUSA that the circuit court a trial plan questions that it would allow to address the of actual deception, reliance, that, actual and other issues it argued, rejected were individual issues. The circuit court proposed plan. Similarly, request the trial PMUSA’s to depose individual class members other than the named plaintiffs by plaintiffs’ and those selected counsel was by denied the court. circuit evidence, 10, 2003,
At the close of on March PMUSA In moved of the class. the final again for decertification found that class judgment order, again the circuit court certification was because common issues of law proper has predominated. “Philip and fact Morris Specifically, engaged a course of conduct that affects this Class way such a that all members share various elements of following this cause of action.” The factual issues were determined the circuit to common all court be of members the class:
“a. descriptor whether Class members understood ‘lights’ and mean ‘lowered tar and nicotine’ to less harm- ful, tar; safer delivering less and/or
b. whether these representations were false and/or misleading members; to Class Philip
c. whether Defendant Morris intended for the rely upon representations; Class these c. Philip [sic] whether Il- Morris’s conduct violated the linois Commerce Fraud Act [sic] whether this violation wanton; was willful and
d. whether damage Class members sustained as a result Philip of deceptive Morris’ conduct.” On appeal, PMUSA argues that the circuit court erred in certifying class predominance because of individual In particular, issues. PMUSA questions whether it was proper the circuit court to conclude that elements actual deception and reliance could be established for all members the class. PMUSA argues expert testimony by plaintiffs offered on these issues could not and did establish the existence facts these as to every member of the plaintiff class. addition, PMUSA argues the circuit court improperly applied discovery rule to toll the running (815 505/10a(e) (West of the statute of limitations ILCS 1998)). According PMUSA, Consumer Act Fraud claims based on purchases more that occurred than three years to the prior filing of this lawsuit are barred sec- 10a(e) tion of the Consumer Fraud The discovery Act. rule tolls running period limitations
214 person have a reasonable put that would to claims respect “ actionable investigate ‘whether notice of the need to on ” v. Contractors Hermitage Corp. conduct is involved.’ (1995), Knox Co., 72, quoting 166 Ill. 2d Adjustment (1981). Thus, 407, 2d 88 Ill. Corp., v. Celotex College rule to asserts, discovery application PMUSA ad raises beyond years three period extend the class when regarding of fact questions ditional individual informa public exposed class members were individual and “low “light” controversy regarding about the tion tar” cigarettes. court the circuit that because respond
Plaintiffs the fraud claimed the factual elements of found each of cannot certifi- now that class argue PMUSA proven, to this court demonstrating without improper cation was against was findings of the court’s factual that each of the evidence. weight manifest on PMUSA’s Judgment Based Summary 3. Motion for Preemption Exemption and Claims of its on summary judgment filed a motion for PMUSA federal implied and express affirmative defenses under sections liability from exemption preemption (815 505/2, Act ILCS Fraud 2 and 10b of the Consumer (West 1998)). 10b consider 28, 2002, was held to hearing
On October PMUSA summary judgment. PMUSA’s motion for expressly preempted claim is plaintiffs’ that argued Act, Labeling Cigarette Advertising Federal prohibition or requirement “[n]o provides which under imposed and health shall be smoking on based advertising promotion to the respect with State law are labeled of which packages any cigarettes 1334(b) (2000). § 15 U.S.C. conformity [this Act].” Supreme under Court’s argued PMUSA also Inc., 505 U.S. Group, Liggett v. Cipollone decision (1992), can plaintiffs 2d 112 S. Ct. 120 L. Ed. allegation has that defendant an their claim on not base cigarette warning Congress requires on neutralized packages *27 Legal Co. v. Buckman and, under Plaintiffs’ 854, 2d 121 S. Ct. 341, 148 Ed. Committee, U.S. L. 531 (2001), predicated plaintiffs’ an on claim cannot he 1012 comprehensive alleged upon the FTC. Based on fraud governing labeling regulatory and scheme federal advertising cigarettes tar as as the disclosure of of well preemption. argued implied levels, PMUSA and nicotine 10b(l) argued section of PMUSA further that complies “exempts conduct that Fraud Act Consumer regulations, rules, of or decisions federal or the laws agencies” and that the “enormous record” federal regula “advertising guides, agreements, proposed trade investigations, determinations, orders, rules, tion consent *** rulemakings specifically to use of related and ” cigarette advertising ‘lights’ tar’ and and label ‘low clearly ing. Because the record demonstrates only products has these “below PMUSA used terms on milligram cutoff,” that such the fifteen PMUSA asserted provided compliance plaintiffs’ a “full defense” to Relying Fraud Act claim. on this court’s deci Consumer Finance, Inc., 1, sions in Lanier v. Associates 114 Ill. 2d (1986) (finding compliance require with disclosure Lending interpreted ments of as federal Truth Act liability Federal staff a defense Reserve Board to be Act), under the Consumer Fraud Jackson v. Hol South (2001) Dodge, compli (finding Inc., land 197 Ill. 2d liability ance to be under with federal statute a defense Act), the Consumer Fraud and Jarvis v. South Oak (2002) Dodge, (recognizing Inc., 2d 201 Ill. state policy against extending require consumer disclosure law), beyond ments those mandated federal PMUSA attempted plaintiffs’ argument to rebut that the lack regulation descrip governing trade rules the use these “specifi meant use have been tors that their could not cally by the FTC. authorized”
Plaintiffs’ on this argument point was that the FTC had not authorized PMUSA to use the specifically terms and, fact, “lights” “lowered tar nicotine” “in authority lacks the to do so.” The circuit took court the matter under advisement. 8, 2002, Between that upon date November the date order, plaintiffs which the circuit court issued its filed their first amended complaint. the first amended complaint, plaintiffs abandoned some the claims that argued had preempted. defendants were The remaining complaint, according plaintiffs, was that defendant’s “lights” use of the terms and “lowered tar and nicotine” and, thus, was an misrepresentation affirmative accord- Cipollone, ing to preempted by the Act.
The circuit argument court’s order noted PMUSA’s claim misrepresentation this of affirmative neces- *28 sarily on depends plaintiffs’ proving neutralization of the warning and a on acknowledged fraud the FTC and “to the extent their claims on depend do such Cipol- showing,” such claims would be under preempted lone and Buckman. However, the circuit court reserved on judgment question, finding the it preemption prema- ture to address these defenses because there were “significant disputes about several material facts” that trial,” could not be without five “A testimony. resolved court, to the according circuit would be before required decide, the court could “on a full and record complete plaintiffs stayed whether have within the bounds of Cipollone and are they attempting whether cross line laid down in Buckman.” 8, 2002,
The November order did not address on exemption PMUSA’s affirmative defense based 10b(l) in provision contained section the Consumer not, however, order this reject Fraud Act. The did Thus, “specifically defense. when the circuit court judgment presented until trial on the issues reserve[d] summary judgment,” judgment defendants’ motion for presumably reserved, on this defense was order for determine, trial, the circuit court to at whether the FTC specifically disputed had authorized the use of the terms.
4. Trial plaintiffs’ trial, At case in chief consisted of the testimony representatives, class 4 other class expert presented members, and 12 witnesses. PMUSA (one testimony the representatives, of 18 class members of the class originally plaintiffs 3 of the named who others) experts. withdrawn, had and 14 and 7 On rebut- plaintiffs experts tal, recalled 2 of their and offered ad- experts. ditional testimony presented by plaintiffs
Little of the in their case in chief was directed at PMUSA’s affirmative prov- defenses for the obvious reason that the burden of ing these defenses rested defendant. For purposes resolving the issue that this court finds dispositive, only testimony expert of two witnesses is relevant. expert
Plaintiffs’ witness Dr. Neil Benowitz holds an University M.D.from the of Rochester and is board certi- pharmacology, fied in medicine, internal clinical toxicology. professor faculty medical He is a full on the University Francisco, of California at San he where pharmacology is chief of the clinical division in the department teaching of medicine. In addition to and see- ing patients, involving Dr. Benowitz does research drugs, including actions nicotine, of various and has writ- subject smoking ten numerous articles on the *29 health. length
Dr. Benowitz testified at about nicotine addic- smoking, compensatory tion, the health effects of testing behavior, and the limitations of the FTC method. cross-examination, On Dr. Benowitz testified that he had recently eliciting received a letter from the FTC his
opinion including testing issues, on a number of the FTC “lights” method and the use of the term descriptors. and other copy A of the letter was admitted into replying inquiry, evidence. addition to to the FTC Dr. Benowitz and other scientists who had received similar joint inquiries they wrote a letter to the FTC which expressed responses their concern that their to the FTC inquiries might suggest they supported be used to testing joint expressed the FTC’s method. The letter also opinion “light,” tar,” the scientists’ that the terms “low “ultra-light” deceptive. joint are letter was also admitted into evidence.Dr. Benowitz stated that the FTC yet inquiry had not concluded the and that the use of the descriptors was still under consideration. point
At cross-examination, this in the the circuit plaintiffs’ objection question- court sustained to further ing subject descriptors on on the basis of relevance. argued ongoing PMUSA that the FTC’s consideration of descriptors “directly pre- the use of was relevant emption.” question The court ruled that there “no was pre-emption.” Although in this court on counsel for PMUSA reminded the circuit court that it had reserved ruling pending on its affirmative defenses the resolution permit issues, of factual questioning the court would not further regard knowledge of this witness with to his participation inquiry of or in the recent into the FTC use descriptors. of low-tar
The circuit court thereafter sustained a series of objections questions regarding testing method descriptors, and the use of but allowed PMUSA to make proof. Nothing a written offer of in the redirect or re- question cross-examination this witness related to the disputed whether FTC authorized use of descriptors. re-cross-examination, At the conclusion of counsel for PMUSA clarified that the written offer of proof addressing filed, three its affirmative would be *30 any ruling circuit court reiterated its defenses. The of the use of FTC consideration currently pending relevant to this case. was not descriptors to other any Plaintiffs have not called our attention in which elicited transcript they of the trial portion cross- either on direct examination or testimony, or examination, may on the of whether FTC question of may descrip- not have authorized the use specifically cigarette labeling such as or “low tar” in “light” tors advertising.
Dr. John Peterman testified as an witness on expert behalf of PMUSA. Dr. Peterman holds a Ph.D. in econom- taught University ics and has at the of and the Chicago He at the University Virginia. employed was FTC from FTC, 1976 to 1993. From 1988 until he left the he was the director of its Bureau of Economics. His area of is expertise regulatory economics. He testified that he had made an extensive study regulation of the tobacco industry, including history regulation of FTC cigarettes, especially those “light” described as or “low tar.”
According Peterman, to Dr. tar FTC and nicotine which program, began First, in has two goals. it aims to provide consumers with information about tar and nicotine yields with the aim of their facilitating movement higher yield from to products yield lower Second, products. to promote FTC seeks an overall reduction tar and nicotine yields by encouraging tobacco companies compete to to lower bring yield to products market. The several adopted mecha- First, nisms in support goals. adopted these it a “single uniform to the tar and protocol” derive nicotine numbers Second, that could be conveyed consumers. it published the numbers derived the testing program. Initially, from Later, the numbers were reported Congress. the FTC (and permitted that the eventually required) numbers be cigarette packaging advertising. included in keeping Thus, goals, encourages competitive with both the FTC advertising yields. of tar and nicotine Dr. Peterman part program further testified that a third of the FTC permitting designators of the use of certain such as “light” product and “low tar” if the meets certain condi- specifiedby tions the FTC. response questions regarding regula- the FTC’s
tory activity, Dr. Peterman testified that the can FTC promulgation undertake the of formal rules. In lieu of rulemaking, proposed formal the can FTC withdraw rules voluntarily agree comply. if those affected to addition, advisory opinions upon-request by the can FTC issue an industry party. Finally, actor or other interested the FTC investigative can undertake and enforcement efforts pursuant 45(a) § to section 5 of the FTC Act. 15 U.S.C. (2000). filing complaint charging After a formal a viola- complaint tion Act, of the the FTC can resolve the and regulatory objective by achieve its means of a consent public order. Such orders are a matter of record and are published Register. According in the Federal to Dr. Peter- “provide guidance man, the such FTC uses orders to to industry.” other firms in stated, the He I was at “While Commission, the we considered all the activities that changes response resulted in in firm behavior in to Com- regulation activity.” mission action as the FTC of that Thus, the FTC selected cases for enforcement “with the providing “significant guidance” industry aim” of to members. part testimony
A substantial of Dr. Peterman’s history regulation cigarette involved the of the advertising already summarized, this court has documentary above, based addition, on the record. In he regarding testified the own FTC’s use of and definitions Specific of the terms “low tar” and “ultra low tar.” refer- Report Congress, ence was made to the FTC’s annual to summarizing a report which Dr. Peterman described as advertising, regard] cigarette [on “what’s to going in, regulatory engaged activities commission is changes for Congress and to make recommendations to in law.” The is an official statement Report Annual FTC, required Labeling of the the FTC is by which prepare. Act to Congress of the to from
Copies Reports annual FTC 2000 were identified Dr. Peterman admit- objection. ted into evidence without Dr. Peterman testi- fied that he his reports preparation reviewed the testimony they and that position reflected official they taken the FTC at the time were transmitted Congress. Specifically, he called attention to the portions 1968, 1970, 1971, 1979, which reports the FTC used defined term “low tar.” He opined that the has an adopted “official definition” of the term as a cigarette containing milligrams or less tar.
Through testimony Peterman, of Dr. PMUSA also called the circuit court’s attention several reports by FTC staff that prepared placed were on the public record and to Congress. According transmitted to Dr. *32 Peterman, such reports represent position In report, FTC. one the FTC staff noted that an- FTC reports nual to in Congress “began early 1967 and signaled the beginning of a new submarket trend based upon the FTC’s official definition of low-tar cigarettes (15 tar).” or less milligrams of See Report, FTC Staff Economics, Bureau of Brand in Ciga- Performance Industry rette and the to Advantage Early Entry, at (June 1979). 1981, Congress the FTC to on reported 1976, of the conclusion a undertaken in in study response to the taking FTC’s notice of extensive promotion and development and cigarettes. of low tar nicotine Accord- ing Peterman, to Dr. staff report “reconfirmed” that the FTC as or “formally milligrams defines” low tar Cigarette Advertising Report,
less. See FTC Staff 1981). (May Investigation, at 1—50n.175 plaintiffs’ objection, to PMUSA was allowed Over copy of a let- admit into evidence a November Jersey Lautenberg to R. of ter from Senator Frank New Pitofsky. urged then-FTC Chairman Robert The Senator Pitofsky begin proceeding suspend a “to Chairman any cigarettes right companies of tobacco to market as supposed ‘Light’ Light’ ‘Ultra list nicotine and ‘tar’ or products ratings until on their and advertisements and system measuring the health unless an accurate implications Lautenberg smoking ac- is established.” industry copies companied the letter with “tobacco provided, Lautenberg’s words, documents” that industry “strong evidence that the tobacco knows that ratings and used what the nicotine tar to determine misleading ‘Light’ cigarettes are constitutes false and request consumers.” Peterman described the Senator’s “light” specificallytargeting as as the use the word a descriptor by companies. and other PMUSA tobacco responded release,
The FTC to the letter in a a news copy into The FTC of which was also admitted evidence. acknowledged receipt of documents it was not of which previously “existing testing aware that the methodol- ogy significantly understates actual tar and nicotine both properly intakes and doesn’t account for differences nicotine The FTC announced that tar and intakes.” also working Department been of Health its staff had an to address and Human Services on informal basis formally requested, “now issues and that it had these agreed,” of the FTC HHS has to conduct review testing methodology benefits, and of “limited health previously tar and believed to be associated with lower cigarettes.” Response Sena- Statement in nicotine Lautenberg’s Documents, Release of Tobacco tor Frank 24, 1998. November *33 does the FTC
Dr. Peterman then testified “lights” descriptor regulate it and that the use of the ‘lights’ cigarette descriptor permits in “the use of the advertising this conditions.” He based under certain understanding expert the FTC’s of on his conclusion operations order, and on the 1971 consent functions and the various order, and the results of the 1995 consent subject investigations on the and deliberations FTC descriptors in and of tar the use of measurements advertising. cigarette that, He testified based on further experience, investigation advertis- his ing and that PMUSA’s Cambridge Lights Lights in Marlboro cigarettes compliance requirements. the Both FTC milligrams yield less than 15 of tar based on the FTC test brands are lower in tar than their method both counterparts, regular full-flavor Marlboro Reds and cigarettes. Cambridge
Regarding order, the American Brands consent Dr. Peterman testified that the order was an “official published purpose act” of the FTC and that it was for the providing guidance industry regarding to members descriptors. use of He stated that the consent order said industry you members, “If in future use effect: any light qualifying [sic] ‘low,’ ‘lower,’ the term or terms your product, necessary put [willbe] it describe yield tar and nicotine in the ad.” Regarding investigation the FTC into the “channel” Barclay cigarettes, filter used the manufacturer Dr. explained Peterman that because the construction of the mandatory produce filter caused FTC method to yield results, unreliable there were no accurate numbers package that the manufacturer could include on the advertising. opined, Thus, its Barclay he “indicated to FTC product wished,
that if it it could advertise the simply estimated tar,” that, if as low because yield construction, not for the channel filter under *34 the FTC method would have in measured the 3 to mil- ligrams range, well within the 15 milligrams or less definition of a low-tar cigarette.
Similarly, when it investigated Carlton cigarettes 1994, the FTC acted to “fractions, ban use of multiples, or ratios that implied actual intake differences” between Carlton and other Nevertheless, brands. Dr. Peterman stated, the FTC allowed Brands, American the manufac- turer of Carltons, to make the claim that Carlton cigarettes were “low” or “the lowest” in tar. He al- was lowed to testify, over plaintiffs’ objection, that publication of the consent order in this matter was by intended give FTC to guidance to the rest of the industry.
Dr. Peterman further testified that on September the FTC caused the publication in the federal register of a request comments regarding cigarette descriptors. “it Specifically, asked for comments as to whether the descriptors Tow tar’ and Tight,’ which covered products between [sic] 15 milligrams less, should be changed or in any way are potentially mislead- ing. And they asked for similar comments with respect ‘ultra light’ products, cigarettes which were ranked us- ing the FTC test method from 6 and under milligrams of tar.” According Peterman, to Dr. investigation remained open as of the date of his testimony.
PMUSA’s expert summarized the FTC’s rules regard- ing “low,” the use of “lower,” “light,” and similar descriptors as follows: use of the terms “low tar” and “lowered tar” permitted if the cigarette yields 15 mil- ligrams or less of tar under method; the FTC test it is not permissible for a manufacturer to make representa- tions of specific numeric reductions tar intake smokers; the term “lights” is deemed the FTC to be synonymous tar”; with the term and, “low finally, “intended industry generally FTC to conform its to these rules.” Dr. Peterman advertising specifically relied the various upon consent orders to formulate this opinion.
Questioned further about “light” terms “lights” as applied cigarettes, Dr. Peterman testified equates FTC the term with “light” “low tar.” He based his opinion on an internal study conducted during his tenure at the FTC which revealed that two terms were used synonymously to refer cigarettes yield tar of milligrams or less. The consid- ers the term “lights” to a description be of a “low tar” cigarette.
He testified further regarding the FTC investigation *35 that began in 1976 and concluded in 1981 with an FTC staff report to Congress. The staff report stated that the had FTC determined that such descriptors were not false or misleading. result, As a the report did not recommend banning the use of such descriptors. Instead, the report recommended strengthening required warnings on cigarette packages and rotating several different warn- ings to keep the message fresh in the minds of consum- ers. According to Peterman, Dr. the FTC responded to the staff report by recommending changes in the warn- ing program, but continued to permit use of the descrip- tors.
The cross-examination of Dr. Peterman focused almost entirely on questions related to the issue of federal preemption. He was not asked in any detail about the FTC’s authorization of the use of the terms “low tar,” tar,” “lower “lights,” or other descriptors. Rather, he was questioned in great detail about whether state regulation of the use of such terms would conflict with the FTC’s program.
During a recess in the cross-examination of Dr. Peter- man, the circuit court indicated to counsel for PMUSA that “if you’re on relying just him, on [sic] you lose your just go
preemption, I—I’ll ahead and not waste your for PMUSA defense.” Counsel time and strike testimony explained also went that Dr. Peterman’s jurisdiction “directly primary defense,” and that descriptors very testimony regarding “the use of primary jurisdictional affirmative of our direct evidence defense.” resumed, Dr. Peterman
After cross-examination identify any regula- admitted that he could not FTC trade regulated descriptors. the use of low-tar tion rule that plaintiffs’ agreed that no FTC He also assertion requires regulation rule either the use such trade descriptors. descriptors approves He the use of such by descriptors then asked if the use of such tobacco was company voluntary replied it “a one.” He that would was A made the individual firm. be a decision to be drop cigarette the use of the term manufacturer could descriptors “light” so, if it chose to do or other low-tar publish policy, the tar still, under have to but would and nicotine numbers. regard entered into to the 1971 consent order
With Brands, and American Dr. Peterman was the FTC he the consent order asked whether believed cigarette industry provided guidance if, even to the party though order, to the it would PMUSA was not a they they go can’t how far can and how far “sort of know go.” agreed with this statement. He *36 by plaintiffs on issue of dam-
The evidence offered Jeffrey worthy expert ages Plaintiffs’ Har- is of mention. “contingent regarding M.D., valuation ris, testified using analysis” J. he conducted data obtained Dennis, Dr. Harris holds a bachelor’s Michael Ph.D. University degree and and masters from Harvard Pennsylvania. University degrees He from the doctoral department currently faculty of the economics on the Technology holds Institute of of the Massachusetts appointment Dr. the Harvard Medical School. an managing president director of the Dennis is the vice Department of and Academic Research Government Knowledge Networks California. Knowledge con-
Dr. Dennis testified that Networks university surveys primarily Internet, ducts on the conducting professors or other academics who are feder- ally sponsored company research. The has “web-enabled” panel randomly 40,000 States of some selected United surveys. participate households to in various The demographic gener- characteristics of these households is ally population similar to the United States as a whole. purposes panel case, 2,701
For of this members were participate survey invited to ing in a on the basis of their be- responded 1,779 current or recent smokers. of these “screening completing to the on-line invitation survey”; “qualified 276 of these for the main interview” screening questions. based on their answers to three screening questions eliminated those who had not previous year, smoked who those did not smoke Cambridge products, finally, and, Marlboro or those who Lights. panel did not smoke addition, members they question were if eliminated answered “no” to the they they initially whether could recall the reason chose light cigarette. to smoke a or lower tar and nicotine remaining About 23% of those could not. In addition to answering questions regard- a series of about their beliefs ing safety cigarettes compared the relative of lower tar to cigarettes, remaining respondents full-flavor were Lights asked to assume that Marlboro were more hazard- cigarettes imagine ous than full-flavor and to the exist- Light ence of a Marlboro that was identical in all other respects product, except truly to the current that it was respondents safer to smoke. The were then asked state required how much of a discount be cause them would purchase product the more hazardous if the safer ver- actually sion were available. *37 question,
Based on the answers to this Dr. Harris average, calculated members, that class on would demand price they a 92.3% discount from the market if were to purchase Lights. Applying continue to Marlboro this purchases Cambridge discount to all of Marlboro and Lights during periods, calculating the relevant class and prejudgment noncompounded, 5%, interest at Harris concluded that the 1.14 million members of the class had damages. suffered billion in $7.1005 economic agreed cross-examination, On Dr. Harris that he had provided input language survey ques- into used in the by Knowledge agreed tions used Networks. He that he expert survey design was not an and did not consult expert formulating questions. such an before He was any guides unaware of texts or for the formulation of contingent surveys, although valuation he was aware surveys that such are controversial. When asked if his analysis diminution-in-value ability “assumes both the reli- validity Knowledge and the Networks survey,” “yes,” he answered but offered no basis for his assumption. expert, Kip professor Viscusi,
PMUSA’s Ph.D., W. is a degrees of economics who holds four from Harvard University. taught University He has at Northwestern University Chicago presently and the and is on the faculty University, at Harvard where he holds an endowed program Empirical Legal chair and heads the on Studies. particular expertise Dr. Viscusi described his in the area survey design analysis. analyzing and He has been survey designing surveys data since 1976 and since 1981 published peer-reviewed and has been in numerous books journals. specialty subject His is the of risk and uncertainty. price Lights
Dr. Viscusi testified that the of Marlboro Cambridge Lights always has been identical to the price counterparts of their and, therefore, full-flavored plaintiffs pay premium for did because the “lightness” products, they these could not claimed regard any Har- have loss. to Dr. suffered economic With Knowledge survey on offered ris’ rebanee by plaintiffs Networks damages, Dr. as evidence economic Vis- *38 survey explained contingent cusi valuation at- that a tempts marketplace determine the value in the of a to hypothetical product. guidehnes He offered three that he “good, practice” surveys. as described sound such survey pretested First, be to that the the should ensure people taking survey questions. the the understand hypothetical “good” being Second, the that is described fully survey must be made to understandable the respondents, they so that will be able to the “value good.” “good” hypothetical Third, the is a because product, necessary “not a transaction,” real market it is survey consistency for the to contain “internal checks.” compare When real market data is not available the survey survey answers and the itself does not ensure consistency, may possible it be determine whether survey respondents seriously. questions They the took the may perceive hypothetical involving transaction as only “funny money.” Dr. Viscusi testified that Knowledge survey Networks all violated three of these guidehnes. again sought
At evidence, the close of PMUSA judgment decertification of the class moved for as a considering proposed findings matter of law. After of fact parties, and conclusions of both law submitted decertify rejected class, circuit court dechned to each judg- defenses, of PMUSA’s 27 affirmative and entered plaintiffs liabihty. ment for the on the issue of Judgment
5. Order judgment The circuit court issued its order on March portion relating 21, 2003. The order to the issue of class certification was noted above. is- order, the circuit court ruled on judgment
In the
judgment. Ruling
it
earlier reserved
sues
which
had
upon
expressly preempt
Act does not
Labeling
Act, the
under the Consumer Fraud
plaintiffs’ claims
Fraud Act
plaintiffs’
stated that
Consumer
circuit court
“
not to make
duty
‘a state-law
upon
claims are based
to conceal such
of material
fact or
false statements
”
528,
2d
Then, specifically referring without 10b(l) Act, the circuit Fraud section Consumer court stated: Defense—Compli- Morris’ Seventh Affirmative
“Philip The false denied. Regulations—is Government ance with ‘Lowered ‘Lights’ and descriptors misleading use of the and by authorized specifically never been has and Nicotine’ Tar on these terms to use voluntarily chose Morris Philip law. No Cambridge Lights. and Lights of Marlboro packages its (or ap- specifically even required body has ever regulatory The court Morris. by Philip these terms the use of proved) its conduct finds that not established Philip Morris has by law.” authorized’ ‘specifically is plaintiffs’ Consumer court characterized The circuit types being on two distinct as based Act claim Fraud plaintiffs by al- First, PMUSA. statements fraudulent “light” representations in tar leged and “lower that the Lights Cambridge Lights and Marlboro nicotine” on and regard to Second, with “material and false.” labels were plaintiffs’ by Marlboro the smoke delivered claim that mutagenic Cambridge Lights Lights than more and counterparts, full-flavored their the smoke delivered claim as one characterized the the circuit court descriptors misrepresentation is, the omission. That “light” were “fraudulent “lowered tar and nicotine” [they] misleading matters did not state because materially qualify made.” The the statement as which according court, the circuit were stated,” “matters not Cambridge Lights Lights and that the tar from Marlboro mutagenic” higher than and more “is in toxic substances expressly regular cigarettes. The circuit court tar from testimony plaintiffs’ experts, reliance on the noted its experts. In PMUSA’s it found more credible than whom although findings fact, its the circuit court stated “misrepresentations in this case were not PMUSA’s explicit of increased health the form of an statement” “universally safety, the mes- understood class members products.” sage The court also these of reduced risk from aware, of its own was as a result found that PMUSA *40 mutagenicity its of the smoke from research, increased of light cigarettes. if addition, found that even In the court compensate light cigarettes com- does not a smoker of pletely, higher he or she will receive levels of most of the cigarette toxic substances contained in than a smoke regular cigarettes. smoker of As for the of claim, elements the Consumer Act Fraud the circuit court found: considering testimony
“After all the and evidenceadmit- trial, at proven ted the finds the Court that Plaintiffs have Philip has Morris violated Consumer Fraud Act through deceptive act of misrepresenting Cambridge its Lights Lights ‘Lights’ and products Marlboro as misrepresenting Lights Marlboro as Tar ‘Lowered Nicotine.’ The Philip Court further finds that Morris rely intended that the deception in this upon Class members case by misrepresentations. created these These misrepresentations occurred in the course conduct involving damage trade or commerce and caused actual the Plaintiffs in the amount of Billion. This actual $7.1005 damage to the proximately Plaintiffs’ was caused misrepresentations Philip Morris.” punitive The circuit court awarded billion dam- $3 ages, paid attorney to be to the State of Illinois and fees compensatory the amount of 25% the award. response posttrial raising to a motion the issue of agreement whether the multistate tobacco settlement receiving any punitive barred state from dam ages judgment amount, the court modified its that the so punitive damages would award revert the members of plaintiff if the state class were found to be barred receiving People Philip Morris, from such funds. See v. (2001) (explaining
Inc., Ill. 2d 92-93 the circum joined under stances which State of Illinois the mul Agreement” against tistate “Master Settlement claims defendants). industry several tobacco II. ISSUES ON APPEAL (1) appeal, argues On PMUSA the circuit court (2) by rejecting defenses, erred certain of its affirmative (3) plaintiff certifying class, the circuit court erred *41 plaintiffs failed to establish their claims and the claims (4) damages members, class award is errone- (5) finding ous, and the circuit court erred in that certain privileged. documents were not Under each of these is- sues, PMUSA raises numerous subissues.
III. PMUSA’SAFFIRMATIVEDEFENSES regulated Since the mid-1950s,the FTC has the label- ing advertising cigarettes, including the disclosure by manufacturers of tar and nicotine levels in their products. unsuccessfully argued PMUSA to the circuit comprehensive court that the existence of a federal regulatory governing topics plaintiffs’ scheme these bars separate claim as a matter of law on four bases. PMUSA arguments renews these before this First, court. PMUSA asserts that sections 2 and 10b of the Consumer Fraud (815 (West 2000)) plaintiffs’ 505/2, Act ILCS 10b bar argues claim. Second, PMUSA that even if state law permits plaintiffs’ such claim, Consumer Fraud Act ac- expressly preempted by tion Cigarette the Federal Act) (15 Labeling Advertising (Labeling Act U.S.C. (2000)). § 1331 et seq. Third, PMUSA contends that this by claim is preemption. barred the doctrine of conflict argues labeling Fourth, light cigarettes PMUSA of its protection comes within the of the first amendment and I, article section of the Illinois Constitution. In addi- three-year tion, PMUSA cites statute of limitations applicable brought to actions under the Consumer Fraud (815 505/10a(e) (West 1998)), Act argues, ILCS which, it precludes damages class certification and limits the period. 10b(l) Because we find section of the Consumer plaintiffs’ Fraud Act bars claim, we need not address the appeal. other issues raised in this The Consumer Fraud Act was enacted in 1961 as a regulatory purpose and remedial statute for the protecting against consumers and others fraud, unfair competition, deceptive methods of and unfair or acts or com of trade or any in the conduct of form practices Motor Credit 201 Ill. 2d Toyota Corp., v. merce. Robinson (2002). to ef liberally It is to construed 403, 416-17 be Leiter, v. Ill. 2d purpose. Cripe fectuate this 10b(1) (1998). Fraud Act of the Consumer Section “[ajctions Act shall nothing apply provides authorized laws adminis specifically or transactions under body acting or officer any regulatory tered States.” this State or the United statutory authority of (West 1998). 505/10b(l) 815 ILCS *42 Practices Act in 1965 Deceptive Illinois enacted the defining prohibiting the purpose primarily (see 2647, Ill. Laws eff. trade 1965 deceptive practices (title Act)) 1, competition and unfair January Inc., 192 Ill. (see Avis Rent A Car Chabraja System, v. (1989) prefatory that the (noting App. 3d conduct deceptive the refer to specifically notes to statute in promo with another the unreasonably interferes business). 4(1) the Section conduct of his tion and ap “This Act does not provides: Practices Act Deceptive (1) or rules in with the orders compliance to: conduct ply Federal, a state or local by a statute administered of or 1998). (West agency.” 815 ILCS governmental 510/4 section court can determine whether Before this 10b(l) claim, Act bars plaintiffs’ Fraud Consumer nature of the conduct clear about the precise we must be fraud. Hav- to have constituted alleged by plaintiffs PMUSA’s reject we carefully pleadings, reviewed ing make one of failure to cast claim as attempt plaintiffs’ required by beyond warning additional disclosures failure to claim is not based on law. Plaintiffs’ federal It is warnings. required on neutralization warn or it claim for FTC, nor is a of fraud on the not a claim health. damage plaintiffs’ fraud. consumer a case of pleaded pure have Plaintiffs terms descriptive used the that PMUSA allege They packaging “light” nicotine” on its tar and and “lowered knowledge advertising that these in its deceptive, the intent that consumers are and with terms rely upon purchasing message making deci in
the false alleged the class have further sions. Plaintiffs claims. relied, detriment, on these false members to their (listing of a at 149 elements See 201 Ill. 2d Oliveira, Act). In addi Fraud cause of action under the Consumer plaintiffs smoke that was delivered tion, assert that the by products and more PMUSA was even more toxic cigarettes. mutagenic than smoke from full-flavor descriptive manner If use of these terms in the by alleged specifically has been authorized the FTC carrying assigned to it the course of out the duties Congress, stand, this action cannot even if the terms might deceptive by trier of fact. 815 be found ILCS 505/10b(l) (West 1998). Similarly, if these terms have compliance with the orders or been used PMUSA Deceptive FTC, rules of the an action under the Practices 1998). (West Act is also barred. 815 ILCS 510/4
A. Standard of Review suggests affirmative defenses raise PMUSA that its proper questions and, therefore, the standard of of law citing 2d review is de Ill. novo, Cole, Woods v. *43 (1998). objected de novo review. 516 Plaintiffs have not warranted, conclude that de novo review is but We suggested by PMUSA. for the reason language matter, As a threshold we must construe the 10b(l). Statutory question construction is a of of section subject law, to de novo review. Advincula v. United Blood (1996). 1, the statute is Services, 176 Ill. 2d 12 Once properly applied construed, terms must to the its be of the individual case to determine circumstances arguably question a of whether it bars this action. It is specifically not, did, the or did fact whether FTC descriptive cigarette terms in authorize the use of certain labeling advertising. Indeed, and the circuit it court felt necessary judgment to reserve on the affirmative defenses pending the of a could, creation factual record at It trial. 10b(l) argued application therefore, be that the of section to the facts be reviewed a should under more deferential See, standard. U.S.A., e.g., Carpetland Inc. v. Illinois 351, Ill. 2d Department Employment Security, of (2002) (noting presented when the “issue cannot be accurately question pure characterized as either a of fact pure question may properly or law,” a of it be reviewed review). under an intermediate standard of application We, nevertheless, the review de novo of 10b(l) Although section the facts of this case. finding specifi circuit court amade that the FTC did not cally disputed authorize use terms, this is not finding proceeded of fact that from circuit court’s credibility weight assessment of of witnesses or the it give conflicting pieces chose to Rather, of evidence. actions of the with relation use to the of these terms cigarette advertising labeling are a matter of public being applied Thus, record. the statute is to facts essentially undisputed. that are we Because need not credibility weigh conflicting evaluate the witnesses testimony to determine whether the actions of the FTC specific have resulted in authorization the use of these by cigarette may properly terms manufacturers, we draw our own conclusion on the issue. Steinbrecher v. Stein (where (2001) question 514, 197 Ill. 2d brecher, appeal application on is limited to law to undis puted novo). facts, the standard of review is de Argument
B. PMUSA’s 10b(l) argues PMUSA that section bars this action regulatory Congress’ based on the FTC’s scheme and regulation Labeling cigarette advertising through Citing Act. this court’s decisions in 114 Ill. 2d at Lanier, 197 Ill. 2d are at which discussed Jackson,
237 argues compliance below, PMUSA that its with detail extending policy against law, federal combined with requirements beyond what is mandated disclosure 10b(l). satisfy requirements law, At oral section argument, counsel for PMUSA characterized section 10b(l) as a “safe whose conduct harbor those does not violate federal law.” argues alternative,
In the PMUSA that even if compliance applicable not sufficient law is to bar (see liability Jackson, Consumer Fraud Act 197 Ill. 2d at (Kilbride, specially concurring, joined by J., 58-60 Harri C.J.) (rejecting compliance son, view that mere with the applicable regulatory scheme, itself, is sufficient to trigger operation 10b(l))), of section the FTC has specifically disputed descriptors authorized the use of the cigarette labeling advertising. PMUSA asserts regulatory agencies, including FTC, “use a wide array regulations of tools other than formal to control industry conduct.”
Throughout history regulation cigarette of FTC marketing, agency advisory claims, PMUSA has used opinions, voluntary cooperation response obtained in regulation, investigations threatened industry of individual reports Congress, actors, and other methods influencing industry Specifi- of cally, the behavior of actors. argues,
PMUSA the FTC “has found that one especially regulation bring effective method of tois an against company enforcement action one to announce to industry an entire what behavior and is not autho- By resolving decree, rized.” such actions with a consent as the FTC did in the cases, 1971and 1995 the FTC com- industry municated all actors the circumstances under they may descriptors. which use tar” “low this For asser- part, upon tion, relies, PMUSA National Labor Rela- Aerospace tions Board v. Bell Co., 267, 294, 416 U.S. (1974) 134, 153-54, L. Ed. 2d S. Ct. (“ may ‘[A]djudicated as vehicles and do ... serve cases *45 applied agency policies, are which formulation of for the ”), quoting Rela- therein’ Labor and announced National 759, 765, 22 Co., 394 U.S. Board v. Wyman-Gordon tions (1969). 1426, 1429 709, 714-15, 89 S. Ct. 2d L. Ed. such insists, the itself considers Further, PMUSA by activity, regulatory as evinced conduct to be many testimony and the FTC documents Dr. Peterman evidence at trial. admitted into court addition, notes that the circuit PMUSA judgment paragraph its order that 148 of its found practices public policy, unethical, immoral, are “offend unscrupulous oppressive course of and that this and injury mem- to the Class a substantial conduct caused Fraud Act bers,” in of both Consumer violation Deceptive under the Act. Because an action Practices the Deceptive if the defendant’s
Practices Act barred compliance rules, PMUSA “in with” FTC conduct is argues Deceptive under the it cannot be held liable that proof of a in the of a violation Act absence Practices governing rule or statute. Response Plaintiffs’
C. “specifically argue has never that the FTC Plaintiffs any descriptor, and it use of the fraudulent authorized any authority legal to do so in event.” lack would They argue the term that, is meant further whatever something clearly requires “specifically authorized,” it compliance federal law. mere with more than testimony point on cross- Dr. Peterman’s Plaintiffs to acknowledged that the FTC he which examination ap- regulation adopt generally rules that trade does not may entity may regulated prove that a conduct regulations adopts engage Rather, the FTC in. choose require other conduct. conduct or forbid certain that They or official statement no FTC document note that company has “sub- a tobacco has ever announced Further, they descriptors. use of such its stantiated” defini- “official” any “disavowal” to the FTC’s point Testing, Request Cigarette See terms. tion of these 48,163 48,158, (September Comment, Reg. 62 Fed. Public define 1997) does not the FTC itself (noting “medium,” “extra tar,” “light,” terms such as “low “ultima,” although low,” or “ultra light,” light,” “ultra ranges to reflect industry used “they to be appear ratings”). tar of FTC orders, 1995 consent to the 1971 and regard
With any their relevance to the conduct plaintiffs dispute party that was a company other than the industry actor order, ac- The 1971 consent the enforcement action. did “lights” did not mention cording plaintiffs, the use upon It conditions imposed not define “low tar.” which, PMUSA has never argues, it of such terms *46 defined order neither The 1995 consent complied. ‘low a “numerical standard for “lights” nor established ” tar.’ that it Plaintiffs Lanier on the basis distinguish failure to disclose while alleged involved an fraudulent misrepre this case involves PMUSA’s “active and direct addition, offer Jenkins v. plaintiffs sentations.” (N.D. Co., 737, 231 2d Mortgage Supp. Mercantile F. 752 court, Il 2002), Ill. in which the federal district applying mere law, linois stated that Lanier did not hold that under liability with federal law does not bar compliance Fraud Act. Consumer
D. Analysis each begin analysis our with the observation that We its to this party respect overstates case with issue. mere compliance applicable PMUSA asserts that with is to Fraud Act regulations enough FTC bar Consumer 10b(l) action, that of section correctly noting application of the Fraud Act has never been held this Consumer agency expressly court to that a federal or statute require 240 Rather, according
authorize conduct at issue. PMUSA, long challenged compli- so as the conduct 10b(l) law, applicable ance li- with federal section bars ability Citing under the Consumer Fraud Act. Lorillard Tobacco, 548, 555, L. 121 533 U.S. at Ed. 2d at S. Ct. 2418, at PMUSA notes that enacting Labeling Act, Congress only precise warnings mandated the appear that must on cigarette packaging cigarette and advertising authority but also vested in the FTC enact targeted additional of regulations cigarette advertising. Tobacco, See Lorillard U.S. at L. Ed. 2d at S. Ct. at 2419 that (holding Labeling Act preempts regulations specifically cigarette state targeting advertising, but preempt regulation does not state sales, imposition use or cigarette regulations general applicability, zoning, may such as which have an cigarette advertising). argues that, effect on PMUSA to the vested in pursuant by Congress it authority enact additional regulations regarding cigarette advertis- ing, precisely cigarette the FTC “has addressed how may manufacturers communicate with consumers about tar and nicotine levels and has considered specifically and the use descriptors allowed at issue here.” “lights” PMUSA asserts its use the terms tar and are in compliance “lowered nicotine” undisputed regulations governing cigarette labeling and, result, advertising plaintiffs’ as a claims under the Consumer Fraud Act are barred. 10b(l) reject
We PMUSA’s assertion section *47 bar operates plaintiffs’ merely claim because PMUSA been in may compliance applicable have federal law. 10b(l) plain language The of section two requires separate present conditions be before a claim is barred. First, regulatory operating or officer must body be case, first statutory authority. under this condi- authority tion under operates is met. FTC (15 45(a) (2000)), § FTC Act U.S.C. and the Act Labeling (15 (2000)), § U.S.C. 1331 et seq. regulate the packag- ing advertising Second, of cigarettes. liability under 10b(l) the Consumer Fraud Act is barred by only section if the action or transaction at issue is “specifically authorized by laws administered” regulatory body. 505/10b(l) (West 1998). 815 ILCS explain detail, As we below, PMUSA’s mere compliance with the ap- rules plicable to labeling is not advertising sufficient 10b(l). trigger the exemption created section Similarly, while the FTC’s own use of the terms “low tar” and “ultra low tar” and its apparent adoption of (15 definitions of these terms milligrams or less of tar and 6 milligrams tar, or less of respectively) clearly invites others to use the same or similar terms to describe certain cigarettes, it cannot be said that the FTC’s own use of such terms in its reports to Congress elsewhere “specifically authorizes” cigarette manufacturers to use these terms in labeling and advertising. Conduct is not specifically authorized merely because it has not been specifically prohibited. Conduct is not specifically authorized merely because it has been passively allowed to go on for a period of time without regulatory action being taken to stop Instead, it. we must look to the af- firmative acts or expressions of authorization by the to answer this question.
Plaintiffs’ argument that the FTC “has never ‘specifi- cally authorized’ the fraudulent use of any descriptor, and it would lack the legal authority to do inso any event” (emphasis in original), is similarly overstated. Whether these terms are deceptive goes to the merits of the fraud claim, not to the threshold question of exemp- tion under 10b(l), section under which the real issue is whether the FTC has specifically authorized PMUSA and other cigarette manufacturers to use these terms on their packaging and in their advertising, no matter how vague or unhelpful these terms might be to consumers.
242 these terms claim that PMUSA’s use of
Plaintiffs also
consent order
cannot be deemed authorized
1971
its
of these
accompanied
PMUSA has not
use
because
and
disclosure of’
conspicuous
terms with “a clear
and
cigarette
tar and nicotine content of the advertised
which it was
This
cigarettes
being compared.
of the
language ap-
no merit because the quoted
has
argument
is
a direct
only
making
when the manufacturer
plies
compet-
its brand of
and a
comparison
cigarettes
between
Brands,
(permit-
brand. See American
Having disposed arguments, (1) of the application and of section 10b interpretation Fraud Act. Consumer Statutory Language
1. The 10b(l) of the whether section Con determining issue, we Act to bar the action at operates sumer Fraud rule of primary guided by principles. are established effect to give construction is to ascertain statutory Inc. Bridgestone/Firestone, the legislature. the intent of (1997), Illinois 141, 2d 149 Aldridge, quoting v. 179 Ill. (1978). so, Mahin, 189, 2d To do Co. v. 72 Ill. Power statute, is the which language examine the we objectives the legislature’s most reliable indicator of v. National Bank Michigan the law. Avenue enacting (2000). 2d When 191 Ill. Cook, County of gives interpreting statutes, words this court undefined ordinary meaning. plain Granite Division their City Board, v. Illinois Pollution Control National Steel Co. (1993). entirely appropriate to It is 155 Ill. 2d dictionary employ to ascertain the as a resource meaning of undefined terms. ex rel. v. Data People Daley *49 (1991). 146 Ill. 2d 16 com Systems Corp., statutory language provides that the at issue The apply “specifi- to actions Fraud Act shall not Consumer cally by any regulatory by authorized laws administered body acting statutory authority of this or officer under 505/10b(l) (West or the United State States.” ILCS 1998). undisputed It is that the acts under federal FTC statutory authority regarding to administer federal laws labeling advertising cigarettes. “give legal authority; empower,”
To authorize is to to formally approve; “[t]o to sanction.” Black’s Law (8th 2004). Dictionary Although dictionary ed. clearly encompasses formally promulgated definition trade.regulation FTC, rules of the neither the definition application provi- nor the statute itself limit the agency rulemaking. sion to authorization via formal long specifically Rather, so as the conduct is authorized “by by” regulatory body, laws administered it is exempt liability. from Act Consumer Fraud Based on dictionary specific authority definition, therefore, 10b(l) contemplated by may express section or be either implied. “specific” relating “[o]f, to, if
Authorization is it is or designating particular thing; explicit,” “[o]f a or defined relating particular thing.” to a named Black’s Law (8th 2004). Dictionary “specifically” ed. term 10b(l) or content of section describes the substance the authorization. It refers to the conduct that has been authorized, rather than the manner in which the autho- rization has been communicated. The term “specifically” indicates a legislative intent to require certain degree of specificity or particularity in the authorization.
Neither party any has offered argument as to the meaning of the phrase “by laws administered by.” However, we conclude that the legislature must have intended the phrase require deference to agency policy and practice as it carries out the duties it delegated Congress or the General If Assembly. the legislature had intended to require that the specific authorization be contained itself, in the law it would have exempted conduct “specifically authorized state or federal statute,” not conduct “specifically authorized by laws by” administered a regulatory body. focus,
Our therefore, must be on the actions of the with regard to cigarette labeling advertising whether, determine as law, a matter of state it specifi- cally authorized PMUSA to use the disputed terms in its labeling and If advertising. the FTC has specifically authorized the use of the terms “lights” and “lowered tar and nicotine” by PMUSA in its labeling and advertis- *50 ing, PMUSA may not be held liable under the Consumer Act, Fraud even if the might false, terms be deemed deceptive, or misleading.
2. Legislative Intent and Public Policy Our reading of the plain ordinary and meaning of the 10b(l) language of section is consistent with apparent legislative intent and with the public policy embodied in the Consumer Fraud Act. the Although Consumer Fraud Act is to be liberally construed to effectuate purposes its of protecting “consumers, borrowers, and business persons fraud, against unfair methods of competition, (Rob and other unfair and deceptive business practices” inson, 416-17), 201 Ill. 2d at the legislature clearly intended for certain actions or transactions in engaged by entities subject otherwise to the Consumer Fraud Act to be from the Fraud exempt liability under Consumer Act, regard Act and Deceptive the Practices without possible merits the asserted claim. 10b(l) Section of defer- legislative policy reflects a authority by ence to the granted Congress General Assembly to federal and and a regulatory agencies state recognition regulated of the need for be actors to able to on rely agencies the directions received from such without risk such may expose reliance them to tort liability.
Further, 10b(l), section certain by exempting conduct from even if liability objectionable, the conduct itself is serves objections to channel and agency policy practice into political process rather than into the courts. See City v. Chicago Beretta U.S.A. Corp., 213 Ill. 2d (2004) (suggesting change in affecting highly law regulated industry be left legislature to the and the politi cal process); Charles v. Seigfried, 165 Ill. 2d (1995) (noting that public social should policy emanate the legislature). from Parties who desire to bring about change agency policies or rules take can their complaints the agency and can participate itself in the formal rulemaking process. If their concerns are not ad by dressed the agency, may seek they assistance from their legislators may political use process, includ ing the power box, of the if ballot their voices are not heard.
We conclude that neither of section language 10b(l) nor public policy Illinois, State of as expressed legislature, requires that a regulatory agency engage formal rulemaking before can specifi- it cally authorize conduct the entities over which it has regulatory authority.
3.
Law
Illinois Case
above,
As noted
both parties rely on
court’s
this
deci
*51
Lanier,
sion in
114 Ill. 2d
as the seminal case regard-
10b(l)
Fraud
of the Consumer
of section
ing application
Lanier,
with
that,
compliance
under
argues
Act. PMUSA
trigger
scheme is sufficient
to
regulatory
federal
a
10b(l).
that
this
argue
of section
Plaintiffs
exemption
from Lanier.
readily distinguishable
case is
Lanier,
plaintiff alleged
the consumer
Fraud Act
violated the
creditor defendants
Consumer
by failing
explain
Practices Act
to
Deceptive
and the
Lanier,
if she
her loan.
prepaid
effect of the “Rule of 78s”
her loan caused
of the rule to
Application
Relying
(Lanier, 114 Ill. 2d at
applicable regulation
tion of the
did not
12-13),
court determined that the defendant
this
by failing
explain
operation
TILA
violate the
court then
Lanier,
“Because the that, section Board, find under Federal Reserve we *52 compli Act, 10b(l) the defendant’s Fraud the Consumer of the Truth requirements the disclosure ance with Illinois liability under is a defense Lending Act Lanier, 114 Ill. case.” present Act in the Fraud Consumer 2d at 18. recognized policy argues that Lanier and PMUSA beyond requirements imposing against disclosure therein ap- require applicable by federal law those mandated 10b(1) plaintiffs’ claim. plication the bar of section respond on Lanier PMUSA’s reliance that Plaintiffs misplaced is not claim of fraud of their the basis
because Their additional disclosures. to make PMUSA’s failure allegations direct” of “active and on claim is based misrepresentation. mere make it clear that since Lanier
Our decisions regulations compliance applicable is not federal with against liability necessarily under the Consumer a shield example, Heinold Commodi For in Martin v. Fraud Act. (1994), a ties, court held that Inc., Ill. 2d 33 this in its certain information failure to reveal broker’s by the not authorized Com disclosure statement was modity (CFTC) Trading or its Commission Futures liability regulations for and, therefore, could be the basis defendant did not Fraud Act. The under the Consumer charged accurately of fees it disclose the amount fail to commodity options processing contracts. investors of the reveal the true nature Rather, defendant failed to charged. Specifically, being Heinold failed to reveal fees charging “foreign instead fee” it was was that the service it would derive a share a commission from which by Martin, that the fee was not authorized CFTC. Citing argued Lanier, Heinold that 2d at 40-42. 163 Ill. requirements compliance the disclosure its literal with liability complete under the defense to the CFTC was Martin, 2d at 49. This court Act. 163 Ill. Consumer Fraud specifically deception “neither concluded that the was compliance Commission, nor in authorized regulations.” Martin, 163 Ill. at 50. the Commission’s 2d addition, this court commented that the itself CFTC compliance” had noted “literal with its disclosure requirements “necessarily would not ensure that a viola regulations tion Commission’s has not occurred.” Martin, 163 Ill. 2d at was on 50. CFTC record as “ stating may [mate customer be ‘a deceived about despite receipt facts] required rial information ” regulations.]’ [the Martin, Commission’s 2d at Ill. quoting Barney, Upham Hammond v. Smith Harris Rep. [1987-1990 Binder] & Co. Transfer Comm. Fut. L. (CCH) (C.F.T.C.1990). par. 24,617 *53 again Jackson,
In
this court
considered whether a
compliance
obligations
defendant’s
with its
under the
provided
TILA
a claim
a defense to
under the Consumer
specific
Fraud Act. The
issue was whether the car dealer
Chrysler
ship
Corporation,
assignee
the
Financial
car
contract,
the
sales
be held liable
the
could
when
dealership failed to reveal in the contract that would
it
portion
charged
retain a substantial
for an
amount
warranty
extended
than transmit
entire
rather
Jackson,
amount to the manufacturer.
It is
that in both Lanier and
limited to
facts
case.
holding
particular
was
(“in
Lanier,
case”); Jackson,
114 Ill. 2d at
the present
(“in
case”).
Jackson,
Consider, for if example, alleged the fraud was the practice of cigarette manufacturer put only 19 cigarettes instead every of 20 in fifth pack cigarettes. Such a scheme would profits by by increase 1% 99 selling cigarettes instead promised of the 100 on the labels. doubt, Without a the manufacturer would be liable under fraud, the Consumer Fraud Act for the notwithstanding scrupulous compliance with all rules applicable and regulations of the FTC. Such a fraud would be “active Jackson,
and Ill. 2d direct.” See at 51-52. See also Savings, Hill v. St. Paul Federal Bank App. 329 Ill. (2002) 705, 713 (rejecting argument 3d that defendant’s failure to disclose order of checks in its fee posting deceptive, compliance schedule was even if in with federal law, the because Consumer Fraud Act does not require required by more extensive disclosure than that the TILA).
Plaintiffs’ claim in the present case is that use of “lights” terms “lowered tar and nicotine” on packaging advertising every PMUSA’s its bit as false as the package promises cigarettes label but that Martin should only delivers 19. Plaintiffs argue control the result in this case use because the of these terms has not specifically been authorized the FTC and was not done in with compliance FTC rules. We conclude that Martin does not answer; provide it merely us formulate the Un- helps dispositive question. less the use of these has been specifically terms autho- 10b(l) FTC, rized section Fraud Consumer Act does not PMUSA from exempt liability. court, circuit PMUSA’s section rejecting
10b(l) defense, relied on Aurora Credit Firefighter’s (1987). Union v. Harvey, 163 Ill. After App. 3d 915 brought against credit union a collection action loan, guarantor of a he raised affirmative defenses and TILA, filed counterclaims under the Fraud Consumer Practices Act. Aurora Act, and the Firefight Deceptive ers, 163 Ill. 3d at 918. to his counter App. regard With claim that the credit union failed to make required TILA, disclosures under the the court held that the TILA borrower, only disclosure to the to the requires transaction. Aurora Firefighters, in a credit guarantor, Ill. 3d at 919. to his counterclaims App. regard With Deceptive under the Consumer Fraud Act and Practices Act, the credit union it could not agreed the court
251 its failure to disclose was alleged be held liable because authorized and in with the TILA. compliance both However, at Firefighters, App. Aurora 163 Ill. 3d 921-22. the court further held that the defendant should be al Act lowed to assert defenses under Consumer Fraud Deceptive alleged and the Practices Act based on abuses other than disclosure Firefighters, violations. Aurora App. Rejecting Ill. 3d at 926. the credit union’s reliance regulation by on its with the compliance Credit Act, Union the court stated that the mere existence of such a statute does not create “a blanket exemption” credit unions from the of the Fraud operation Consumer Act.
We conclude that case can present be distin- from Lanier guished progeny and its because it does not involve the alleged lack of disclosure in the context of loans, leases, or other Rather, transactions. this case involves use of allegedly deceptive terms in the name and description of a consumer product. is, That this is not a case in plaintiff which the argues that the defendant should have made disclosures in addition to the disclo- sures specifically required by the applicable regulations. present case, In the the question is whether the FTC specifically authorized the use disputed terms.
Despite
distinction,
this
Lanier and its progeny,
including
relied,
case
which
upon
the circuit court
do
stand for three separate propositions that are relevant to
10b(l)
the present
First,
case.
if section
is to
to bar
apply
claim,
the authorization
upon
relied
must come from a
Lanier,
state or federal regulatory body. See
114 Ill. 2d at
(the
Federal Reserve Board “is
agency empowered
by Congress to prescribe
implementing
interpretive
regulations”
TILA); Lanier,
for the
(ap
Ill. 2d at 18
10b(l)
section
plying
because
the TILA is “a law
Board”).
administered by the Federal Reserve
See also
(defendant
Systems,
Datacom
Second, such a by regulated engaging authorize conduct entities without rulemaking. in formal A Federal Reserve Board staff interpretation, example, may for be a sufficient basis for finding specific a Lanier, authorization. See 114 Ill. 2d (agency greatest respect at 13 is “entitled to the in the interpretation regulations”; noting of its own and Congress Supreme expressed both and the Court have approval treating interpretations staff as authorita tive). specific—
Third, while the authorization must be particular thing—it express. related to a need not be compliance require Thus, Lanier, full with disclosure liability ments of the TILA was a defense to because the required implicitly provided specific disclosure authoriza any tion not to make additional Lanier, disclosures. interpreta Ill. 2d at 17. Neither the rules nor the staff expressly tion of the Federal Reserve Board stated that lenders need not disclose the 78s; effect of the Rule of regulatory body rather, the dictated the content required implying disclosure, that no additional disclo necessary specifically authorizing and, thus, sure was lenders not to disclosethe information.
Although dealing there is extensive Illinois case law 10b(l) applicability with of section in the context of alleged financial transactions where the fraud is related alleged to the disclosure, issue of this case involves fraud advertising promotion product. in the and of a consumer and requires deeply It to delve into the functions also us turn purposes, of a For these we agency. actions federal to other authorities.
4. Other Authorities look and published We to the FTC’s own materials Supreme cases from the Court and the United States federal courts for additional our effort to authority determine authorization” and “specific what constitutes whether used the and “lights” PMUSA terms “lowered tar nicotine” under authority. such that,
PMUSA argues years, over FTC used number of mechanisms to regulate and authorize of claims tar making regarding the and nicotine content of cigarettes. These include formal agency rulemaking, the issuance of advisory opinions, the use of voluntary agreements cigarette manufacturers obviate rulemaking, need for the initiation enforcement proceedings an against individual Such manufacturer. *57 enforcement proceedings might in a result judgment the against particular manufacturer or in the of entry a consent order. Although the consent order be may enforced only against the who party agreed to the terms order, of the PMUSA that an asserts enforcement action against industry one actor is an “especially effective of method regulation” that the employs FTC “to an- to nounce an entire what is industry behavior and is not authorized.”
Thus,
argues,
PMUSA
American Brands was specifi-
cally
authorized
consent
order to use the
“low,” “lower,”
terms
“reduced,”
“like qualifying
or
terms” in its advertising and
packaging
describe the
level
tar
of
and nicotine in its cigarettes,
so
as it
long
also provided the actual measurement
mil-
of
level in
ligrams.
Brands,
American
Similarly,
Carlton of other brands tar or nicotine levels or ratio” of the tion pack by depicting of versus more than one Carltons or agreed provided, any pack order brand. The one of other “presentation nicotine rat- of the tar further, that and/or cigarettes respondent’s ings any and the brands of of of (with any ratings or brand of other tar nicotine and/or implied representation express or without an respondent’s ‘low,’ ‘lower,’ in tar or ‘lowest’ brand is nicotine) violate the ban not be deemed” to shall and/or comparisons. Tobacco, 119 F.T.C. on numerical American argues, specifically orders, PMUSA 11. Both consent at industry act members of the tobacco authorized other with their terms. in accordance supported by state- the FTC’s own is This assertion the FTC announced and actions. ments requiring regulation promulgation trade rule of a packaging cigarette of the fact on all disclosure may smoking dangerous “cigarette health and cause Decep- Unfair or other diseases.” from cancer and death Labeling Cigarettes Advertising in Relation to and tive Reg. Smoking, at 8325. 29 Fed. Hazards of the Health following year unnecessary the rule was rendered This Labeling However, the Act. enactment of the with the Purpose Trade Basis and “Statement of FTC’s (Unfair Advertising Deceptive Regulation Rule” Labeling Cigarettes Hazards to the Health Relation (hereinafter Reg. Smoking, 29 Fed. at 8325-75 Statement)), insights into valuable contains regula- rulemaking adjudication in the FTC’s use tory process. why offers “ten reasons 1964 FTC Statement *58 may preferable rule-making proceeding an to be
formal adjudicative proceeding, adjudicative a series of or Reg. proceedings.” at 8368. Statement, 29 Fed. 1964 FTC rulemaking proceed- Among are: in formal these reasons
255 to opportunity an given are persons all interested ings, other procedural of evidence and heard; the rules be are in adjudicative process operate safeguards rulemaking and rulemaking; to needs of tailored not time- costly and may be a more adjudication through common dealing problem with a consuming means at Statement, Reg. 1964 FTC Fed. industry. an entire Nevertheless, clearly reveals 8366-68. Statement as an process the adjudicative the FTC considered of rulemaking: alternative means always adjudication is “Rule-making through not This is and even in its results. completely fair handed is practice sought where a be eliminated especiallytrue of the industry-wide agency and the sues members industry stop State- one-by-one practice.” FTC ment, Reg. 29 Fed. at 8367. addition, adjudication settling dispute
“The in on a over focus may in the past practices, and while rule be announced incidentally it be done and suf- process, tends to without laying guidelines ficient concern for down clear often, adjudicative future. rules deci- Most contained administrative, sions, judicial desig- whether or are not must nated as rules or stated in the form of rules. The rule facts language opinion be inferred from the of the and the case; may implicit explicit; it is rather than and it many until subse- remain uncontroversial uncertain adjudications may It quent have refined and clarified it. long take a time for a to be recognized rule even Statement, Reg. understood at as such.” Fed. 8367. concerns, however, these did
Despite repudi- the FTC adjudication regulatory ate as a tool: however, suggest, agencies general, do not that the
“We in particular, or the Federal Trade Commission should adjudicative abandon on the in all situa- reliance method where conduct principle tions a substantive standard of having general declared. The force of application is to be each of the [10] reasons discussed above varies with *59 256
concrete which approaches situation in a choice between is presented. why That is the supreme court has held that the rule-making adjudicative choice between proceed- ings ordinarily agency’s is within the 1964 discretion.” Statement, Reg. 8368, citing Fed. 29 at & Securities Exchange 202, Chenery Corp., 194, Comm’n v. 332 U.S. 91 (1947). 1995, 2002, 1575, L. Ed. 67 S. Ct.
The 1964 FTC Statement did not mention the of use advisory opinions adjudicative or the resolution of ac- expressed However, tions consent order. concern ability regulated about the of entities to discern clear opinions adjudication rules from the rendered after present not when the enforcement action is resolved entry clearly of a Such consent order. an order is intended respect parties rule, to serve as a at least with to question the consent order. The for this court is whether entry expressly directing a order, the industry of consent one way,
member in a to behave certain is an implicit industry for authorization other members to conduct themselves in same manner. The FTC’s adjudication observation that be could used announce principle having “a substantive or standard of conduct general application” suggests may a consent order nonparties serve as authorization to the order fol- its low directives. Supreme
The United States Court has considered the adjudication establishing agency role policy. as a means dispute a Aerospace involved between an
Bell
employer
proper
union over the
classification
buyers
company’spurchasing procure-
certain
within the
department.
269,
ment
at
U.S.
40 L.
Aerospace,
Bell
140,
2d at
Ed.
S. Ct. at 1759. The
Labor
National
(NLRB)
buyers
Relations Board
determined that
managerial employees and,
therefore,
were
were
protections
entitled to the
of the National
Rela-
Labor
288-89,
tions Act. Bell
Bell Aerospace, therefore, offers some support PMUSA’s contention that the 1971 and 1995 consent orders could be the source of specific authorization for the conduct described therein. The Court Bell Aero- however, space, emphasized the importance of a regula- tory agency to have ability to make case-by-case determinations when the question is such it that would be marginal utility to generalized announce a standard for an entire industry. Bell Aerospace, 294, 416 U.S. at L. 154, Ed. 2d at 94 S. at Thus, Ct. 1771-72. the Court “ observed, ‘an agency administrative must equipped be to act either by general by rule or individual order. To insist upon one form of action to the exclusion of the ” other is to exalt form over necessity.’ omit- (Emphasis
ted.)
153,
293,
at
PMUSA also
to numerous documents in the
that,
contends,
record
it
reveal that the
itself
consid-
adjudicated
by judg-
cases,
ers the resolution of
either
“regulatory
ment or
ity.”
consent order to
activ-
constitute
Report
See,
Commission,
Federal
Trade
e.g.,
Congress
Cigarette
Pursuant to the Public Health
Smok-
(December
1971)
ing
(describing
Act,
at 13-14
dispute
resolution of the American Brands
via consent
negotiations”
proposed
“extended
order and its
with “six
respondents”
part
in the Lorillard matter as
of its
“[rjegulatory activity”
year);
Trade
for the
Federal
Com-
Report
Congress
mission,
Pursuant
to the Public
(December
1972)
Cigarette Smoking Act,
Health
at 1
(noting
cigarette
October of
“almost all
*61
advertising published
country
compliance
in this
was in
directly involving only
with the terms of consent orders”
cigarette companies).
six
PMUSA’s characterization
documentary
testimony
record is consistent with the
Peterman,
director, who
of Dr.
a former FTC bureau
provide guid-
stated that the FTC uses consent orders
cigarette industry.
entire
ance to the
regulatory
that the
informal
activ-
Weconclude
FTC’s
ity, including
orders, comes within the
the use of consent
10b(l)’s requirement
specific
scope
that the
of section
by”
“by
a state
authorization be made
laws administered
505/10b(l) (West
regulatory body.
or federal
2000).
815 ILCS
holding
Lanier,
This is consistent with our
challenged
specific authorization for the
which found
(Lanier,
agency
interpretation
114 Ill.
in an
staff
conduct
17),
plain meaning
of the statute
2d at
and with the
expressed by
legislature.
public policy
Appeals
States
for the Seventh
The United
Court
applying
Circuit,
Illinois law in the case of Bober v. Glaxo
(7th
2001),
246 F.3d934
Cir.
cited
PLC,
Avery
Wellcome
216 Ill. 2d
Co.,
v.
Farm Mutual Insurance
State
(2005),
plaintiff’s
properly
found that
claim
was
was,
mat
dismissed
the district court because it
as a
deceptive
law,
ter of
under the Consumer Fraud Act.
However,
Bober,like
case,
involved a claim of fraud
marketing
product.
in the
of a consumer
The defendant
drug company marketed both over-the-counter and
prescription
drug ranitidine,
forms of the
is a
which
By
stomach acid reliever. means of its consumer
Une
hot
marketing practices,
and other
Glaxo indicated to Bober
and other
medicines,
consumers that the two
known as
Zantac 75 and Zantac
were not substitutable.
Bober,
although
products
fact,
The court noted that the “case law
portion
[Consumer
exemp
Act’s]
relevant
Fraud
*62
tion provision is not entirely clear on the
question
”
what is meant Bober,
‘specifically authorized.’
F.3d at 940. After reviewing this court’s decisions in
(discussed
Martin,
“Taken cases [Illinois] stand for the proposition that [Consumer state Act] Fraud will not impose higher requirements disclosure parties on than those that are satisfy sufficient regulations. federal If parties doing something are specifically authorized 10b(l) law, federal protect section will liability them from hand, under the On [Act]. the other the [Consumer Fraud exemption Act] is not available for statements that manage to be in technical compliance with federal regulations, but which misleading deceptive are so in context that federal might regard law itself adequate.” Bober, them as F.3d at 941.
The Seventh Circuit defined the issue as “whether
the statements Bober
of are
complains
sufficiently within
what is authorized by federal law that Glaxo is entitled
10b(l)
Bober,
to section
protection.”
The statement
that the two dosages of the same drug
were “not the same medication” was found
specifi-
to be
cally authorized by
formally
a rule
adopted by the FDA
and codified in
Bober,
the Code of Federal Regulations.
10b(l)
In the even though there was no express autho- rization for the statement, “cannot substitute” the Seventh Circuit concluded that what Glaxo “chose to say and not say to was sufficiently careful compromise to fall within what is authorized specifically by federal law.” Bober, F.3d at 942. The court explained further: pharmaceutical
“The industry highly regulated, both at the federal level and internationally. require Technical abound, ments only and it is possible likely but ordinary consumers will find confusing, some of them or possibly misleading as term the is used in statutes like Act], But, [Consumer Illinois’s Fraud recognizing the primacy of field, federal in law this Illinois statute itself protects companies liability from if their actions are (Such by authorized federal protection law. would amount nothing to if it applied only to statements that were not susceptible misunderstanding; those statements would liability escape under the any [Consumer Act] Fraud in event.) Because Glaxo’sstatements fall within the bound by law, aries established federal under Weatherman [186 472] Ill. 2d they and Martin Ill. [163 2d are 33] entitled to 10b(l) protection under section [Consumer of the Fraud Bober, Act].” 246 F.3dat 942-43.
Bober is particularly helpful analysis our case, present because, Lanier, 1, unlike Martin, 114 Ill. 2d Jackson, 2d it does not 2d 197 Ill. 163 Ill. disclosure present Like the requirements. concern federal agency federal case, regulatory it concerns whether state making authorized the certain specifically has has read ments The Seventh Circuit product. about laws “specifically term authorized statutory 10b(l) by” encompass administered section that “fall within making statements boundaries 943) (Bober, in a federal law” 246 F.3d at established may if those regulated industry, even statements highly if there is confusing misleading to be even tend making state no for the of such express authorization This is regulations. federal applicable ments read decisions, our our entirely previous consistent with *64 of understanding of the and our ing statutory language, 10b(l). section legislative policy underlying the for District Appeals The United States Court of the tendency long noted FTC’s ago of Columbia Circuit its obtaining voluntary compliance with regulate by to rulemaking. in formal See engaging than policies, rather (D.C. Holloway Bristol-Myers Corp., v. 485 F.2d 995 1973) that, dealing “expertise due its in (noting to Cir. the FTC is able to secure practices,” with commercial proceedings,” informal “voluntary compliance through discretion, “formal and, in its determines when sound and, further, necessary; are enforcement measures” in “record approval” “voiced FTC’s Congress has statutory policy generalized fluid contours of shaping the and coherent rules meaningful into pronouncements conduct”). holding its the FTC reaching business of action under which private Act did create a cause claim, the court bring could their the Holloway plaintiffs Act and history a detailed FTC appeals provided noted itself. The court and of its amendments the FTC amendments considering that when 1939 policy judgment a fundamental Act, Congress made com- in with dealing “expertise the FTC’s regarding securing in as a buffer ability its to act mercial practices, proceedings, informal voluntary compliance through enforce- when formal determining in its sound discretion F.2d at necessary.” Holloway, were ment measures the conclusion that support also offers for Holloway 995. respect the FTC with the consent orders obtained authorization industry provided specific one member those conformity members to act in industry other orders. although lacking significant precedential
Finally, interest the memorandum great we note with weight, federal district court for opinion and order of the v. Morris Philip Eastern District of Arkansas Watson (E.D. Ark., December Cos., 4:03—CV—519 GTE No. (8th 2005). 2003), The Watson aff’d, F.3d Cir. had was of smokers who plaintiffs comprised class pack Lights during consumed at least one of Marlboro of their action years prior filing pursuant the six (Ark. to the Arkansas Trade Practices Act Deceptive Code 4—88—107). complaint § Ann. The substance of their Lights was that Morris advertised Marlboro as be- Philip tar, ing lighter or lower in the fact that despite actually delivered more tar and nicotine than cigarettes removed Philip shown the FTC method. Morris testing the action to federal court to 28 U.S.C. pursuant 1442(a)(1) (2000), § on the that it had raised a color- basis Specifically, able federal defense to the claims. plaintiffs’ *65 at the direc- Philip argued Morris its actions were there a agency—the tion of a federal FTC—and that was actions and Mor- Philip causal nexus between FTC’s marketing practices regard light cigarettes. ris’ denied the motion to remand plaintiffs’ The district court the matter to state court. back portion
For our the relevant of the Watson purposes, is the district court’s discussion of the FTC’s decision regulation advertising of light and low-tar cigarettes and the FTC’s use of mechanisms other than formal rules to direct the regulated actions of entities.
After an exhaustive recounting of the history regulation of cigarette advertising, the district court noted that Philip Morris was required to advertise its cigarettes as “light” or Nevertheless, “low tar.” court acknowledged:
“[Philip is permitted by Morris] the FTC to so advertise its cigarettes they if meet the FTC’s standard. Philip Morris is required to adhere to the regulation Tights’ FTC’s advertising. requires The FTC disclosure Cambridge Filter Method tar and nicotine ratings cigarette in adver- tisements, and has stated cigarette may that a be advertised light as if rating using its the FTC Method is less than 15mg using the Therefore, any Method. contention that Philip advertising Morris’ cigarette of these two ‘Lights’ brands as is misleading squarely confronts the FTC’s cigarette mandate that companies disclose FTC Method results in their advertising and use the Method to determine whether a particular cigarette may be classified ” ‘Light.’ Watson, as No. 4:03—CV—519GTE.
The district court also observed that a “formal rule is not required in order for a federal agency to direct the actions of a private company.” FTC “often regulates the industries it governs by compelling voluntary agree- ments and consent orders rather than promulgating formal rules.” In reaching conclusion, this the district court relied upon a documentary record similar to the record in the present addition, case. In the district court cited the 1987 testimony Congress before of then- chairman of Oliver, the FTC Daniel in which he described the FTC’s preference informal regulation via the use of enforcement actions and consent orders rather than formal rulemaking. Oliver stated that it is “more ef- ficient” to bring single against case one actor industry than to use scarce resources to engage rulemaking “the cigarette case of the industry,” it was *66 reasonable to that one action “entirely suppose against an all of cigarette company would have effect on [one] have, them, you and that would not to make a rule.” Oliver, Statement of Daniel Quoting Chairman Commission, Federal Trade Hearing before the Subcom- Tourism, mittee on Transportation, and Hazardous Comm, Materials of the Energy Commerce, House on (1987). 100th 17-19 Cong.
The Watson court noted that the FTC coerced Philip Morris and other cigarette manufacturers into “volun- tary” with its cooperation cigarette and advertis- labeling ing “in such a policies way that a formal rule” was not required to create federal jurisdiction. Finally, although formal rulemaking “may be one ways of the principal federal agencies regulate,” clearly “it is not the only way. case, In the FTC’s it is not even preferred toway regulate the industry.” cigarette
The issue addressed by the Watson court—whether removal to federal court was proper—has no on bearing the present However, case. the federal district court’s detailed analysis support does our conclusion that specific authorization for the use of the disputed descriptors may be found in consent orders rather than in formally promulgated trade regulation rules of the FTC.
5. Summary Based on authorities, these other read in conjunction law, Illinois we conclude could, the FTC did, specifically authorize all United States tobacco companies to utilize “low,” the words “lower,” “reduced” or like terms, qualifying such as “light,” so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the “tar” and nicotine content in milligrams of the produced smoke by the advertised cigarette. See Brands, American Further, 255. F.T.C. the FTC reiterated this authorization in the 1995 consent order, which forbade the representation of tar ratings as multiple, fraction or ratio of the tar or
“a numerical ratings any specifically brand,” other but al- nicotine “express implied representation” that a lowed the “ cigarette ‘lower,’ in tar ‘low,’ or ‘lowest’ and/or Thus, at 11. nicotine.” F.T.C. Tobacco, American 10b(l) plaintiffs’ by section we hold that claim is barred *67 of the Fraud Act. Consumer argument, plaintiffs’ that the
At oral counsel noted (1) findings separate of fraud: a circuit court made two finding “light” that PMUSA’s use of the terms and deceptive “lowered tar and nicotine” was fraudulent and phenomenon compensation, on the known of based (2) plaintiff finding that the members of the class were failed to disclose that its defrauded because PMUSA “light” cigarettes mutagenic more than full-flavor were cigarettes. argued that, even if this court were Counsel claim, reverse on the merits of the first the second to portion judgment still stand. of the circuit court’s must aspect not reached the merits of either We have having plaintiffs’ claim, fraud found the entire claim (1) by Fraud Act. barred section 10b of the Consumer However, thus far has focused on the our discussion question disputed terms. The we PMUSA’s use of whether, if the of the must next address is even use terms by may specifically FTC, be was authorized a claim brought under the Consumer Fraud Act based on mutagenic cigarettes describing as PMUSA’s more delivering “light” For and as “lower tar and nicotine.” reasons, find that the claim of fraud based on two we mutagenicity increased cannot stand. plaintiffs’ regarding mutagenicity
First, is claim “lights” inextricably linked to their claim that the terms decep- tar and nicotine” are fraudulent and and “lowered though the circuit court found that members tive. Even making plaintiff understood these terms as class implied safety understand- claim of and relied on this an by ing, section Fraud Act claim is barred their Consumer 10b(l). has It clear from the record that is meaning milligrams or less of defined both terms as specifically to use tar. Because PMUSA was authorized descriptive terms on its labels and its advertis- these any ing products meeting definition, this claim based 10b(l) on is section the use these terms barred meaning Act, the Consumer Fraud no matter what plaintiffs might have attributed to them. plaintiffs’ mutagenicity
Second,
on
claim based
beyond
PMUSA’sfailure to make additional disclosures
required by
voluntary
those
federal statute and
agreement with the
tar and nicotine content
FTC—the
milligrams
mandatory warning
Thus,
and the
label.
Lanier,
the claim is barred
this court’s decisions in
(finding compliance
Despite plaintiffs’ well-supported arguments in favor upholding the circuit determination, court’s we decline except to address the issue to note that PMUSAdid make privilege argument before and, thus, this court can- acquiesced not be deemed to have in the admission of the single document into evidence in this case. appeal
Several of the other issues raised in this are of great importance deserving by of consideration this proper particular, court in the case. In the circuit court’s plaintiff certification of a class 1.14 million individuals covering significant with claims decades raises several is commonality sues. The circuit court found sufficient certify Citing Oliveira, issues to the class. 201 Ill. 2d at proximate 155, in which this court held that the cause element of a Consumer Fraud Act claim must be met proof plaintiffs having of a been deceived some man argues ner, PMUSA that the element of causation is an individualized issue that makes class certification improper. questions
We note that the five common of fact justifying class certification that were enumerated judgment correspond circuit court in its order do not private the five elements of a cause of action under repeatedly Consumer Fraud Act this court has spelled Marketers, out. See v. Zekman Direct American (1998); Inc., 182 Ill. 2d Oliveira, 2d Ill. at Specifically, although 149. the circuit court considered “lights” what the class members understood the terms mean, “lowered tar and nicotine” to and whether allegedly PMUSA intended reliance on its false and misleading statements, and whether the class members *69 damages specific result, sustained as a it did not make the inquiry by required Oliveira—whether the members of plaintiff by deceived the use of terms. class were intentionally they impression is, That did a false hold they when period made created PMUSA’suse these terms every purchase long as each and decision over years? as 30
Similarly, listing portion judgment in the order Act, five elements of a claim under the Fraud Consumer circuit court cites Oliveira as the source for ele- deception ments, does mention neces- but actual as a sary finding proximate under the element of cause. findings making However, its factual as ele- to each message ment, the circuit court did find that the false lighter upon smoke and tar lower was “relied as a determining all causative factor for Class members degree may even if the or extent have varied between Class members.” present case,
In the the causation issue at least has aspects. First, two to meet the causation element of a (Oliveira, 154), Consumer Fraud Act claim 201 Ill. 2d at actually the members of the class must have been alleged deceived misrepresentations some manner the defendant’s equated Oliveira, of fact. In this court deception. Oliveira, cause-in-fact with at Ill. 2d 150. negligence In the context of claim, a fraud in a claim, as cause-in-fact is for” is, “but cause. That the relevant inquiry is whether the harm would have occurred absent the defendant’s Shannon, conduct. Evans v. 201 Ill. 2d (2002). 424, 434 The circuit court’s use of the words “may degrees” ques relied have to different causes us to tion the existence if, Even cause-in-fact. as the circuit every purchaser found, court must have relied to some degree disputed language, perhaps upon making on purchases light cigarette, question the first of a we reasonably “light” whether it can be said that the words actually and “lowered tar and nicotine” over a deceived people million for decades. *70 University Loyola v. court cited Leonardi
The circuit
(1995),
proposition
Chicago,
that
the
2d 83
for
168 Ill.
of
person
“[a]
it
his or her conduct whether
is liable for
injury
plaintiffs’
wholly
partly
as
to the
contributed
long
injury.”
proximate causes of the
one of the
as it was
malpractice
action
Leonardi, however,
a medical
was
hospital
question
the defendant
the
was whether
which
alleged
physicians
the
admit evidence of
could
party
physician
negligence
to
who was not a
of another
proximate
Leo
lack of
cause.
to demonstrate
the suit
present
Leonardi,
Unlike
the
nardi,
V adopted that the FTC has never Plaintiffs note descriptors regulation approving use of rule trade “light” tar,” the FTC has never such or “low and that as descriptors has been “substan- that the use of such stated plaintiffs by any cigarette Further, manufacturer. tiated” any proof argue to has never claimed have that PMUSA regular cigarettes. “Lights” These than that its are safer question true, not resolve the are but do statements specifically the use of authorized the FTC has whether fairly has, Plaintiffs also assert that FTC these terms. recently entering orders, into the consent and after any expressly of the definitions “official” disavowed Cigarette Testing, Request See for terms. Public Com- 1997) Reg. (September ment, 48,158, 48,163 62 Fed. (“There are no for official definitions these terms but they appear by industry ranges to be used to reflect ratings”). of FTC tar It is not clear to this court what by definitions,” the FTC meant “no official it unless was referring regulation to the absence of a trade rule. The certainly publications itself uses these in terms its reports Congress. Perhaps published and its to the FTC’s definitions of these terms these contexts are considered by agency to be “unofficial.” specific required
We conclude that
authorization
10b(l)
trigger
exemption
to
require
of section
does not
rulemaking
formal
or official
See
definitions.
(finding specific
Lanier,
to act while the authoriza given express, tion to American Brands was the authori given industry implied, zation to the rest of the was but specific. no less degree necessary specificity provided by of is
273 long- language by the orders and FTC’s of the consent standing adoption, the definition of use, if not formal meaning milligrams per or less of tar “low tar” as cigarette. specifically was to use
Because PMUSA authorized disputed challenging without fear of terms exempt deceptive unfair, them it from civil li- as 10b(l) ability Fraud Act for the under Consumer long use of the as the other conditions set out terms so in the no consent orders were met. We find evidence in the record that PMUSA failed to use these terms in compliance with the terms of the orders. consent mutagenicity
The increased smoke delivered by Lights Lights Cambridge Marlboro cannot be a separate basis for a claim under the Consumer Fraud Act “light” because, even if the terms and “lowered tar and convey message safety, nicotine” do a their use is specifically by any addition, authorized the FTC. In claim of fraud based on PMUSA’s disclose failure to increased mutagenicity long-standing is barred this court’s rule against imposing requirements additional disclosure beyond agency regulation. those established statute or Deceptive
Plaintiffs’ claim under the Practices Act Deceptive must also fail. Section of the Practices Act exempts liability compliance from “conduct in with the (West 2000). agency. orders” of a federal 815 ILCS 510/4 Because we have concluded that the 1971 and provided specific consent orders authorization to all industry engage permitted by members to in the conduct scope the orders, these orders fall within the section though party even was not PMUSA either consent order. See also Mario’s Butcher Center, & Food Shop Inc. (N.D. 1983) Supp. v. 574 F. Co., Armour & Ill. (noting parallel exemption between clauses of Act). Deceptive Consumer Fraud Act and the Practices present entirely We have resolved the case on the *73 exemp- and an by construing applying law basis of state address PMUSA’s in a state statute. do not tion clause We impliedly action is or expressly this arguments (1) is of section 10b Operation federal law. preempted Rather, it is Congress. on the intent of dependent Assembly on the intent of the Illinois General dependent entities in commercial regulated engage to allow fraudulent alleged be to be might conduct that otherwise as that liability, long risk of civil so deceptive or without regulatory body. authorized specifically content is expressed by plaintiffs share the concerns Finally, we effects of devastating their amici about the health and, smoking among particular, scourge in smoking action is that because this people. emphasize We young 10b(l) Act, Fraud it is by section of the Consumer barred claim that plaintiffs’ to reach the merits of unnecessary Our resolution intentionally public. deceived the PMUSA approval an way expression of the case is no present Nevertheless, justices, conduct. as alleged of PMUSA’s exists, the law as it not to decide how apply our role is to must defer to the improved. policy the law be We might of the language as in the legislature expressed Therefore, Act. and others plaintiffs Fraud Consumer companies to alter the conduct of tobacco who would seek Assembly, their case to the General where must take 10b(l); to the seek amendment of section they might regulations; FTC, they might changes where seek amendments to they might where seek Congress, Act. Labeling of the circuit court judgment reverse the
We to section pursuant instructions to dismiss remand with 10b(l) Fraud Act. Consumer reversed;
Circuit court judgment
with instructions.
cause remanded
in the
part
took no
THOMAS
JUSTICE
CHIEF
this case.
or decision of
consideration
KARMEIER,
concurring:
specially
JUSTICE
of the circuit court should
agree
judgment
I
that the
view, however,
is not
that conclusion
my
be reversed.
*74
10b(l)
section
on the
dependent
applicability
505/10b(l) (West 2000)).
(815
Fraud Act
ILCS
Consumer
fatally
fraud claim is
infirm for an
Plaintiffs’ consumer
reason:
failed to
plaintiffs
additional and more basic
actual
they
damages.
establish that
sustained
Insurance
v. State Farm Mutual Automobile
Avery
Co.,
100,
(2005), this court
reiter
recently
216 Ill. 2d
in order to maintain a
principle
ated the well-settled
Act, a
cause of action under the Consumer Fraud
private
must
that he or she suffered actual dam
plaintiff
prove
damages
as a result of a violation of the Act.1 Actual
ages
are thus an element of a
of action under the
private right
(West 2000);
See
v.
statute.
815 ILCS
Oliveira
505/10a
(2002).
Co.,
Amoco Oil
201 Ill. 2d
If a plaintiff
cannot establish that
the defendant’s
conduct caused
him or her to suffer actual
no
damages,
recovery under
the Act will lie. See
1Courts have been criticized for the terms “damage” “damages” interchangeably when these should actually concepts, damage being be considered distinct loss injury damages hurt being results from the amount compensate damage. Fischer, Understanding awarded to J. (1999). 161(c), § passing Remedies at 506 Without on the merits of criticism, this I note that there is no such confusion here. The prove damages merely damage need to and not is based not on a judicial gloss, express language but on the of section 10a of the Act, bring Consumer Fraud which authorizes an consumers to damages” damages.” “action for and recover “actual economic added.) (West 2000). (Emphases 815 ILCS 505/10a ages may not be predicated on mere speculation, hypoth esis, conjecture or whim. Petty See v. Chrysler Corp., 343 (2003). Ill. App. 3d
The record in the case before us shows that PMUSA developed and marketed Marlboro Lights and Cambridge Lights cigarettes in response to heightened public concern over health risks posed by smoking. The company believed that it could forestall declining sales offering a product which consumers as perceived better for them than conventional “full-flavored” brands. Pursuant that strategy, PMUSA advertised Marlboro Lights and Cambridge Lights cigarettes in a way that led consumers to believe that the brands posed lower health risk than their “full flavored” counterparts. In reality, and as fully aware, PMUSA was “light” cigarettes so-called only benefits, offered no health but actually were more toxic.
When a consumer chooses one product over another in the belief that it will be less harmful to his or her health, to only discover later that it have may been more harmful, the existence of damages might seem self- evident. In case, however, this plaintiffs are not seeking based damages any on heightened adverse effects on their health. Personal is injury not at issue. The losses for which plaintiffs seek compensation are purely economic. Their claim simply is that they did not receive they what bargained for. They paid for health benefits did they not get. rule benefit-of-the-bargain by invoked plaintiffs
governs common law fraudulent misrepresentation cases. Gerill Corp. Builders, v. Jack L. Hargrove Inc., 128 Ill. (1989). 2d Although plaintiffs’ cause of action is statutory nature, in the parties agree that the benefit-of- the-bargain rule provides the appropriate standard for ascertaining plaintiffs’ right to in damages this case. rule, Under the damages are by determined at looking the to the plaintiff gain the loss to the rather than defendant. The rule is based on the rationale that party defrauded is entitled to be same placed financial he have had the position occupied would misrepresentations in fact true. See Martin v. All been (1981). Co., App. state Insurance 92 Ill. 3d rationale, damages Consistent with this the measure of an compensate plaintiff “is such amount as will fraud, or, occasioned as it has been loss actually expressed, plaintiff the amount which the out of pocket reason the transaction ***.” 19A Ill. L. & (1991). § Prac. Fraud ultimately proceeded trial, When this case to two individuals were identified representing plaintiff as class, Sharon Price and Michael Fruth. Both named plaintiffs testified that to they light cigarettes switched they because such cigarettes believed be in tar lower and nicotine and therefore Price healthier. also stated that she valued the health component light cigarettes, or what thought she was the health component lights. Significantly, however, Price also admitted that she continued smoking light PMUSA’s even cigarettes after this litigation her alerted to the fact that cigarettes not, fact, were any may healthier and be actually more regular harmful than the cigarettes. version of those News that PMUSA’s low-tar and light representations illusory were likewise did deter Fruth from continu- smoke, ing although he testified that he did switch back from lights regulars.
Whatever valuation the class representatives may have on placed the health component light cigarettes, that valuation had no consequences. observable economic *76 Neither Price nor Fruth offered any suggest- testimony ing that from switching lights to regulars resulted in their paying any cigarettes more for than they would have otherwise. There price was no disparity between light cigarettes and their full-flavored counterparts, regulars to from that the switch indication
there is no cigarettes. buy packages lights of to more caused them they quantity go up. they paid price The did not ancillary or purchased additional did not increase. No Moreover, Price neither identified. costs were incidental cigarettes complained not worth were that the nor Fruth contrary, they paid Price’s them. To the for what being lights purchase after alerted even continued suggests that she was of health benefits their lack entirely of what she received the value satisfied with cigarette-purchasing dollar. her Fruth cannot circumstances, Price and
Under these damages any as a result actual have sustained said to be they misrepresentations Because PMUSA. made theof damages, any and Fruth failed Price actual did not show private right prove action under Consumer Automobile Farm Mutual Fraud Act. Under v. State Avery only cause of to their own fatal not that is Co., Insurance in Avery, As held class action. we action, to the entire but proven representative claim for not his has a class when on fraud claim asserted fraud, the consumer consumer The consumer either. class cannot stand of the behalf judgment be reversed. the class must in favor of fraud reaching a no basis for 2d at 204. There is 216 Ill. Avery, ap Accordingly,regardless contrary result here. 10b(l) Act plicability Fraud of the Consumer of section 505/10b(l) (West (815 2000)), judgment in favor ILCS plaintiffs must be set aside. attempt plaintiffs did not damages trial, counsel for At compensate to the class of actual for the absence testimony relying representatives from other on smoking experiences of the class, for the members Price and those of similar to members were other class similarly unhelpful. Instead, class therefore Fruth and survey they presented internet results of an counsel cited, I am have Plaintiffs had commissioned. *77 the permit that would of, authority any not aware to establish survey respondents internet opinions where, Act Fraud the Consumer under damages actual to shown have not been representatives class here, as the have not views respondents’ survey the share answered those who way in the harmed themselves been hypotheti- the be under they would survey the claimed to them. presented cals plaintiffs’ these problems, look past if I could
Even sup law to as a matter of is insufficient model damages contend that Plaintiffs judgment. court’s the circuit port rule, as benefit-of-the-bargain under the damages their differ case, are to the equal facts of this to the applied if have had cigarettes the would ence the value between they represented were qualities they possessed v. Corp. See Gerill actually as sold. have and their value Builders, 179, 196 Inc., 128 Ill. 2d Hargrove Jack L. (1989). as to the misrepresentations Because defendant’s true, to be their were believed cigarettes properties cigarettes possessing the market value of ascertaining is possess its lights defendant claimed qualities actually charged It is the PMUSA straightforward. price ciga for those plaintiffs actually paid and the amount rettes. from the analysis arises problem plaintiffs’ actually value, i.e., cigarettes the value of the as
second value, to the compute equivalent sold. To which commanded in the cigarettes would have price the health attributes marketplace they possessed had did plaintiffs PMUSA’s by misrepresentations, suggested consumer behavior. to the or actual marketplace not look mentioned Instead, survey relied on the Internet they counsel. Based earlier, was commissioned class which than sampled which fewer survey, on the results of that Harris, Jeffrey Dr. plaintiffs’ expert, respondents, to be would have price lights postulated discounted before 77.7% consumers would still be will- buy them, ing assuming cigarettes were same healthwise as their counterparts. full-flavored When hypothetical changed was to assume that lights might be regular more harmful than cigarettes, Harris’ analysis determined that the amount of the discount would have to be increased to 92.3%. Based these figures, plaintiffs on argued that the difference between the hypothetically *78 prices discounted the prices actually and consumers paid that showed consumers had significantly overpaid for light PMUSA’s in cigarettes the false that hope those cigarettes would view, be healthier for them. In plaintiffs’ the difference was to the value of equivalent perceived the health benefit of the lights, and the was overpayment the of plaintiffs’ measure damages. Akerlof,
Professors Robert Solow and George both of recipients Bank Sweden Prize in Economic Sci Nobel, ences in Alfred Memory of submitted a brief as amici attesting curiae the benefit-of-the-bargain rule expressed by our court v. Jack Corp. Gerill L. Builders, Inc., Hargrove at comports Ill. 2d accepted principles they of Although economics. made general statements support of basic theoretical and methodological approach by Harris, taken Solow and Akerlof also noted that the “the actual measurement of under damages applicable is legal standard intrinsi cally difficult to implement under facts and circum that, stances this case” and under those facts and circumstances, may “there be more than way one remarks, measure damages.” One senses from these from plaintiffs’ amici’s lack of elaboration in evaluating approach, plaintiffs’ certain unease with damages It calculations. is no wonder.
Putting aside any questions regarding the scientific validity relied, on which Harris there is a survey approach. why, To fundamental flaw in his understand purpose one must first recall the of the benefit-of-the- bargain compensate plaintiff rule, which is to for the pecuniary by fraud, loss occasioned the defendant’s plaintiff actually is, for “the amount which the out of pocket by reason of the transaction.” 19A Ill. L. & Prac. (1991). § plaintiff prove If a cannot that he was Fraud any financially worse off as a result of the defendant’s personal feelings disappointment deceit, his or dis consequence. satisfaction with the transaction are of no by subjective feelings. Financial loss is not measured It is actually determined choices values available marketplace. to a See, consumer in the e.g., Restatement (Second) (1977) § 549, c, of Torts Comment at 110-12 (for purposes measuring damages in action for misrepresentation, normally fraudulent value is deter price mined for which an item could be resold in open by private quality an market or sale if its or other known). characteristics that affect its value were objective, The need for market-based standards to prove being financial loss is not raised here for the first *79 recognized by damages expert time. It was defendant’s plaintiffs’ damages and is fatal to the model. While the survey may Internet commissioned for this case have survey respondents placed shown that would have subjective cigarettes lower value on lacked the qualities by marketing health claimed PMUSA in its of Lights Cambridge Lights, marketplace Marlboro and the reality, that, demonstrated consumers would not have paid satisfy lights’ less to their tobacco habits had the properties They true been known. would not have stopped smoking, they they addicted, for were could bought cigarettes not have that cost 77.7%less or 92.3% cigarettes they less, for no such most, existed. At would to “full-flavored” versions of the have reverted back cigarettes.2 observed, already and as I have
Significantly, and the price charged by cigarettes, PMUSA for such willing pay despite consumers were the absence price benefits, of claimed health was the same as the precisely “lights.” for In marked contrast to the price charged aimed at health many products situation with conscious- ness, there was no cost differential for consumers versions of the “healthy” “regular” between Accordingly, while PMUSA’s product. misrepresentations may altering purchas- have deceived consumers into their decisions, the net in consumers’ economic ing change as a result of those was zero. position misrepresentations words, In plaintiffs may other have received (i.e., bargain obtaining benefit of their but the bargain, they to be than thought cigarettes what were healthier nothing would otherwise have cost them purchased) harm, were unaf- pecuniary plaintiffs extra. terms the same. fected. Their financial status remained This conclusion is not altered the fact the full- light cigarettes PMUSA’s were more toxic than toxicity unquestionably flavored versions. The additional repeat- had adverse effects on health. It bears plaintiffs’ however, part plaintiffs’ that health effects are not ing, are not damages They seeking compensation claim. based on their switch personal injury, only pecuniary loss in reliance on PMUSA’s For lights misrepresentations. loss, the increased purposes calculating pecuniary if one could show toxicity lights only would be relevant 2The “full-flavored” versions manufactured PMUSA used light only very same tobacco as the brands. The difference cigarettes Ironically, the extent that was the filters. between toxic, light to blame. The brands were more the filters were impairing light brands’ had the additional effect of filters lights full-flavored only were chosen over their flavor. The reason perceived was their health benefits. versions *80 (1) toxic- high cigarette equally an alternative that cost than the market at lower levels was available on ity (2) that consumers would for charged lights the price the truth cost alternative had switched to that lower have lights about been known. suc- manufacturers could cigarette
The notion that to be more toxic than cessfully cigarette market a known is with the realities of consumer regulars inconsistent that led to the products demand for more healthful It therefore light cigarettes. unsurpris- is development more cheaper that there is no evidence that a but ing available for cigarette actually purchase. toxic brand of suit, is, bringing Given the nature of the class this interested in a less harmful to their product smokers health, of them would highly unlikely any it is also to a different brand that was more harmful than change testimony even at a reduced The regulars, price. certainly they class does not representatives suggest would, and plaintiffs’ survey Internet does not speak the issue. respondents Internet were not about it. queried
The Internet survey hypothetical looked to conduct as- that a healthier version existed. It did not suming truly measure or purport measure how consumers would if, case, behave actually really truly as is there is no healthier version. harm, sustained lack
Having pecuniary plaintiffs no the actual economic to sustain their damages necessary cause of action under the Consumer Fraud Act. When situation confronted the for the representative same Illinois we concluded that putative Avery, class deficiency (Avery, was fatal to his consumer fraud claim 199) judgment 216 Ill. 2d at and reversed the not hesitate to reach the plaintiffs outright. We should same conclusion here.
Here, as in there is no need to remand for a Avery, *81 new trial on the This damages question. case does not in present a situation which rulings by erroneous trial court to hampered plaintiffs’ ability fully present their theory recovery. evidence or The record is complete, and were wide plaintiffs given latitude in developing damages their claim. Further proceedings would serve no claim fails purpose. Plaintiffs’ as a mat- ter of law. they Because sustained no actual economic damages, judgment no their favor under the Consumer Fraud Act could ever stand.
Plaintiffs’ consumer fraud claim cannot be revived on the theory they might be entitled to an award of nominal damages notwithstanding inability their show actual Nominal damages. damages only can be awarded where plaintiff discussed, a in a As prevails already case. however, plaintiff private a cannot sustain right a of ac tion under the Fraud he Consumer Act unless or she has sustained damages. actual Unless all elements of action, the cause of including the element of actual dam established, ages, are damages nominal cannot be Ogden Inc., recovered. See v. Chrysler Plymouth, Tolve (2001). 485, 324 App. Ill. 3d 491-92 The lack of actual damages preclude would therefore from plaintiffs recover ing damages nominal even if the were case remanded.3
Similarly, plaintiffs cannot lack of actual sidestep damages grounds on the are they nevertheless entitled damages. to an award of Illinois punitive law does not permit an award of punitive damages absence of Lowe v. compensatory damages. See Norfolk damages prevail private
3Because actual must be in a shown right damages Act, under action for the Consumer Fraud nomi- actually purpose plaintiff náis If serve no in such cases. shows damages, compensation. actual he or she will receive real When awarded, compensation largely symbolic there is no need for the doubt, is, why plaintiffs by function served That nomináis. no did request complaint in their were nomináis not awarded nomináis the circuit court.
285 (1981). Ry. App. 637, Co., & Ill. Western 3d exception. damages Fraud is no Consumer Act Punitive compensatory damages are in addition to and cannot be damage Ap unless re allowed actual is shown. See In (1984). plication App. Busse, 3d 124 Ill. plaintiffs damages here, Because sustained no actual punitive damages their claim for must fail therefore as Indemnity Illinois, well. See Florsheim v. Travelers Co.of (1979). App. 75 Ill. 3d foregoing fully reasons, For the I concur in the result majority. reached Plaintiffs cannot recover under judg- Act, the Consumer Fraud circuit and the court’s awarding damages ment them under Act cannot reaching conclusion, add, stand. In I hasten this as the *82 opinion majority rejection plaintiffs’ did, that of cause of way action should in no be construed as an endorsement of PMUSA’s conduct. Our reversal court’s circuit judgment merely is not an exoneration of PMUSA. It is particular by conclusion that this cause of action this particular group seeking particular of claimants this form recovery cannot be sustained under the law of Illinois. joins special
JUSTICE FITZGERALD this in concur- rence. dissenting: FREEMAN,
JUSTICE brought is This a consumer fraud action class under Deceptive the Consumer Fraud and Business Practices (Consumer Act) (815 (West seq. Act Fraud ILCS et 505/1 1998)) Deceptive and the Uniform Trade Practices Act Act) (815 (West (Deceptive seq. Practices ILCS et 510/1 1998)). Philip The circuit court found Morris USA (PMUSA) using hable for consumer fraud for the materi- ally deceptive “lights” false and terms and tar “lower marketing Lights and nicotine” its Marlboro and Cambridge Lights cigarettes. court This reverses the judgment by on the basis that the is action barred sec- 10b(l) exempts Act, Fraud which of the Consumer
tion
“specifically
laws administered
authorized
conduct
any regulatory
statutory
acting
body
under
or officer
authority
The court
United States.”
of this State or the
(FTC), through
that the Federal Trade Commission
holds
specifically
orders,”
authorized
two “consent
the use of
descriptive
companies
terms
to use
American tobacco
all
“lights,”
nicotine”
or “lowered tar and
such as
cigarettes.
marketing
promoting
2d at 265-
219 Ill.
liability
exempt
from civil
Therefore, PMUSAwas
66.
(1)
10b
terms under section
the use of those
Deceptive
Act and section
Fraud
Consumer
Act.
in this area agree was that PMUSA I do reasons and because 10b(l), join liability exempt I cannot under section from opinion. that the FTC Rather, I would hold in the court’s specifically PMUSA, the mean- within authorize did not *83 10b(l) ing Act, to use Fraud of the Consumer of section respectfully disputed descriptors. I therefore dissent. the Background I. February complaint on filed their initial
Plaintiffs they alleged Fraud the violations of Consumer it, 2000. against unjust PMUSA on enrichment Act and claims purported had who Illinois residents class of of a behalf cigarettes “Light” the purchased Illinois since Plaintiffs in 1971. Lights of Marlboro introduction “lowered phrase and the “lights” that the word claimed led those words in that deceptive nicotine” were tar and receive would he or she that to believe each consumer that, as and cigarettes, these nicotine from tar and lower than hazardous be less result, smoking them would Plaintiffs al- cigarettes. full-flavored smoking regular, because Lights purchased members that all class leged hazardous, and provided less they were a belief that full-flavored regular, not associated health benefits Lights have purchased no one would and that cigarettes, acts deceptive “unfair for” PMUSA’s “but and/or and/or economic solely for sought damages Plaintiffs practices.” on September certification moved for class loss. Plaintiffs motion, that arguing opposed 2000. PMUSA the Illinois satisfy requirements plaintiffs failed statute, because, alia, ques- individual inter class action common issues any over predominated tions of fact The circuit court class members. purported shared 8, 2001. February certified the class on certification, PMUSA moved for sum- class Following in enact- Congress, that argued PMUSA mary judgment. Act Advertising and Cigarette Labeling the Federal ing Act) (15 (2000)), speci- had seq. § U.S.C. 1331 et (Labeling give must manufacturers warnings cigarette fied the from states prohibited and had expressly to consumers argued PMUSA also additional disclosures. requiring measure the FTC test method to adopted had encouraged and had allowed yields tar and nicotine terms such as “lowered descriptive to use manufacturers terms long so as those “lights” tar and nicotine” Any method. inconsistent with the FTC were consistent contended, conflict with PMUSA would duty, state-law disclosures. tar and nicotine regarding policies FTC’s conduct as al- reason, PMUSA asserted that its For this from the Consumer exempt was plaintiffs leged *84 10(b). by parties Fraud Act of section virtue Both experts thereafter submitted affidavits of on this issue. that expert Plaintiffs’ averred the FTC did not have an policy permitted cigarette official which to use companies these terms. Plaintiffs further maintained that issue, had had to ever at not occasion consider the terms “lights” tar and descrip- “lowered nicotine” and as those tors were used PMUSA in this case. that Finding there “significant disputes were about several material facts trial,” which can only be decided at the circuit court judgment” “reserved on the matter until trial. trial, pretrial
At as it was during proceedings, it was position, PMUSA’s established through testimony exhibits, and its use of the terms “lights” tar and compliance “lowered nicotine” were in with FTC policies. Dr. John Peterman as expert testified an on behalf of PMUSA respect relationship with to FTC’s cigarette advertising. to The FTC in 1955 established Guidelines,” Advertising “Cigarette which set forth the FTC’s on the disclosure tar and policies yields nicotine in cigarettes. permitted The Guidelines a manufacturer to only make claims tar and nicotine if regarding yields the manufacturer could substantiate the claims “by competent 1950s, and scientific In the proof.” late began scientists to discern a between relationship exposure cigarette tar and tumors in laboratory Cigarette animals. responded testing manufacturers cigarettes the amount of tar their produced by advertising the Each results. manufacturer used differ- tar, ent machines to measure the and confusion ensued. Peterman, According response multiple Dr. to the used, the FTC a uniform testing systems being developed testing system for use Tar and throughout country. nicotine be provided they measures could advertised according testing were measured to the FTC’s method. methodology, Under this a low-tar testing cigarette cigarette milligrams which had a tar level of 15 or less. any adopt However, enact the FTC did not trade regulation respect cigarette advertising. rule dispute parties Indeed, the do the fact that there is not any industrywide rulemaking authorizing formal *85 disputed descriptors case, use of the at issue in this “lights” they and “lowered in tar and nicotine.” doNor dispute any the fact that the FTC does not have indus trywide cigarette requires formal rule which or authorizes “light” manufacturers to use the any tar” terms or “low or undisputed Moreover, thereof. it variation is that the “regulatory” FTC views it what considers to be a scheme approach.” “voluntary in this area aas See Ill. 2d at 192. expert, Peterman,
Defendant’s Dr. that testified primary variety mission is to FTC enforce a protection federal antitrust and consumer laws. FTC primarily agency, is a law enforcement conferred with investigative powers. both However, and enforcement knowledge, Dr. best of Peterman’s there was no bureau, section, or to, other subset of the FTC dedicated regulation. or even with, associated tobacco The two primary employs tools the FTC to enforce consumer protection regulation are laws trade rules and enforce- procedures. regulation promulgated ment Trade rules are through rulemaking. formal notice and comment FTC policy adopted approved by is or the FTC commissioners acting collectively as the commission. Dr. Peterman giving admitted an individual FTC commissioner a speech discussing policy policy. not, FTC is per se, FTC policy. An FTC staff member cannot create FTC expert, Peterman, Dr. defendant’s testified that there regulation governing has never an been FTC trade rule cigarette advertising put that has been into effect. In formally promulgated regulation 1964, the FTC a trade declaring deceptive practice rule it an unfair and within prominently meaning fail to Act to of the FTC advertising packaging, cigarette and disclose, in all may dangerous smoking cigarette death from cause Advertising Deceptive diseases. Unfair or cancer or other Labeling Cigarettes to the Health in Relation (1964). Reg. Smoking, 8324, 8325 29 Fed. Hazards of Labeling Congress the federal However, enacted newly promulgated alia, Act, inter vacated Act. This warning regulation cigarette rule. No health trade FTC regulation, document, has ever or official statement FTC regulated descriptors. “lights” Further,
“low tar” and any of these definition “official” the FTC has disavowed case, “lowered in this as the term involved terms as well company’s cigarette decision Rather, nicotine.” tar and “light,” descriptors tar,” is “low such as or to use voluntary; governing requiring no rule there is using stop cigarette company those could their use. A policy descriptors, that would is no FTC and there prohibit it. *86 opinion expert that the an Peterman did not offer
Dr. regulating prohibits policy states from has a that FTC “lights” cigarettes. an did he offer Nor on the term granted cigarette opinion expert has the FTC “lights” right companies and “low tar” use the to thereby, descriptors from state them and, immunize descriptors. regulation of those regulation proposed trade a formal 1970, In the FTC companies cigarette required to have rule that would advertising tar and FTC-measured in their disclose Reg. cigarettes. Fed. See 35 of their nicotine content 1970). August (proposed However, the FTC 12,671 compa- cigarette eight proposed dropped after order this voluntary agreement. Those trade into a nies entered provide voluntarily agreed signatories the information (1971). Reg. cigarette packages. See 36 Fed. on their agreement voluntary not all- was trade The 1970 agree- signed inclusive; every cigarette company sign agreement did not companies ment. Those in their cigarette rates tar and nicotine have not included taken trial, has FTC to the time advertising. Up companies. those against action no enforcement American company, a cigarette In the FTC and that was memorial- an Brands, Inc., agreement reached order, the In the 1971 consent in a consent order. ized American Brands’ advertisements charged that FTC 100s, “Pall Gold” as “Pall Mall designated its cigarettes imprecise Filters” were “Lucky Menthol” 100s and Mall being because the were misleading cigarettes selling king.” the best filter described as “lower than fact, however, the found that these brands actual FTC than other brands. many were in tar levels higher American Brands that American Brands’ agreed FTC and low cigarettes which stated that its were advertisements as yield in tar must contain the tar and nicotine results (the advertise- testing measured under the FTC methods in this action did not challenged by ments results). any yield contain tar and nicotine If American a comparison Brands’ advertisements contained then the advertisement had to include product, another the tar and nicotine of that as well. In re yield product (1971). Brands, Inc., American 79 F.T.C.
During expert the direct examination of defendant’s witness, consent Peterman, Dr. he stated that Brands, Inc., American was “an official act against order Further, “industry guid- the order provided FTC.” use of regarding descrip- ance to and others [PMUSA] found in the terms of the “guidance” tors.” This was to Dr. Peter- According American Brands. against order order, man, even an entire nonparties consent *87 they the order how far can and can- industry, learn from Peterman, the consent order According to 1971 go. industry- to intending provide of the exemplary was respect guidance wide with consent issues in addressed orders. quali- cross-examination,
However, on Dr. Peterman testimony by admitting fied his direct examination that descriptor the did 1971 consent order not mention the “lights.” Also, the consent order did not define descriptor tar,” or a “low establish numerical standard “compliance” voluntary for that term. This form of is a part cigarette company. on decision each is not It a regulation party Further, trade rule. PMUSA a was never proceeding signed to the and never the consent order. cigarette company, including Each PMUSA, industry collectively, simply using stop entire could disputed descriptors they if so chose. Peterman further acknowledged any that the FTC has never taken enforce- against cigarette ment action manufacturer of these so- “light” called brands because that did not manufacturer “light” use the word is brand name. There no complied in the evidence record that PMUSA ever with this consent order. cigarette company, the FTC and another Company, agreement
American an Tobacco reached that was memorialized in a consent In the consent order. agreed order, the FTC and American Tobacco “presentation any ratings of the tar nicotine and/or respondent’s cigarettes brands of and the tar and/or (with ratings any nicotine other brand or an without express implied representation respondent’s nicotine) ‘low,’‘lower,’ brand or ‘lowest’in tar and/or existing shall not be an ban deemed” violate on comparisons. numerical Co., In re American Tobacco (1995). Peterman F.T.C. Dr. testified that the FTC provide industrywide respect guidance intended against to issues addressed the 1995 consent order Company. American Tobacco trial, circuit denied At conclusion court *88 10b(l) upon PMUSA’saffirmative defense based section specifically Fraud The court found of the Consumer Act. testimony “unpersuasive” on Dr. Peterman’s to be the in this case PMUSA’s claim that issues could potentially a conflict between state and federal law. cause Moreover, not the court found that Dr. Peterman did any “expertise assessing in have regulation in FTC involvement plaintiffs’
of the issues” and that the claims any way case not the this did conflict regulations federal Labeling policies the Act or and the FTC. respect FTC, With to the the court ruled: misleading descriptors “The ‘Lights’ false and use of specifically and Tar Nicotine’ has never ‘Lowered and been by voluntarily Philip authorized law. use Morris chose to these on its and packages Lights terms of Marlboro Cambridge Lights. regulatory body No has ever required (or specifically by even use approved) the of these terms Philip Philip Morris. court finds that Morris has ‘specifically by established that its conduct is authorized’ law.” plaintiffs proven The circuit court further found had through that PMUSA violated the Consumer Act Fraud deceptive misrepresenting CambridgeLights act its Lights products “lights” misrepre- and Marlboro as senting Lights as Marlboro in Tar and “Lowered Nico- tine.” 10b(l)
II. Section of the Consumer Fraud Act 10b(l) exempts Section Consumer Fraud Act “specifically by conduct authorized laws administered any regulatory body acting statutory or officer under authority of this State or the United States.” 815 ILCS 505/10b(l) (West 1998). PMUSAcontends that the FTC’s policies regarding cigarette advertising fall within the scope phrase “specifically of authorized laws by any body regulatory acting administered or officer statutory authority under of this State or the United 10b(l) States.” Because PMUSA asserted section anas proving defense, PMUSA has burden affirmative 2d 32 Ill. Paddock, Glennon, See Pascal P. Inc. v. it. (1964) “elementary” party (observing as rule it); proving serting has the burden of affirmative defense (2000) App. Marriage of Jorczak, 315 Ill. 3d In re (same). plain language reviewing statute,
After 10b(l), concerning case section this court’s law case, conclude, unable to as the court facts in this I am 10b(l) Philip today exempts does, Morris that section *89 reading I that a fair of the statute from suit. believe policies compels FTC, the of the as the conclusion that specific presented not rise to level of trial, at do the contemplated legislature it our when authorization enacted the statute. colleagues correctly point primary
My out that the statutory give ef is to ascertain and rule of construction legislature; indica the intent the that the best fect to of legislative statutory language; a the tor of intent is ordinary plain gives their and court meaning; undefined words dictionary appropriate to to a and that it is use meaning 2d at undefined 219 Ill. ascertain the of terms. ignores note, however, I that the court several 242-43. statutory example, principles of construction. For other examining that, in a statute’s court does mention “ language, plain ‘[t]he as a statute should be evaluated provision with each construed in connection whole, ” every Center, v. Inc. other section.’ Eden Retirement (2004), quot 273, 2d Revenue, 213 Ill. 291 Department of (1997); ing 173, accord Ill. 2d 177 179 Feder, Paris v. (2002) 300, Lieberman, 201 Ill. 2d 308 Detention re phrases (recognizing not be and should that “words light interpreted in isolation, but must be construed statute”); provisions v. of the relevant Huckaba other (1958); Singer, 2A Sutherland 126, 14 Ill. 2d 131 N. Cox, (6th 2000); § Statutory Am. 73 46:05 ed. Construction on (2001). acknowl the court § does Nor Jur. 2d Statutes statutory construction canon of the fundamental edge intent of the determining “in provides which only consider not may properly the court legislature, necessity statute, also the reason of the but language remedied, and the to be law, sought for the the evils Lieberman, 2d at 308. 201 Ill. to be achieved.” purpose Fraud Act mandates: 11a of the Consumer Section effect construed to liberally “This Act shall be 1998). (West By thereof.” 815 ILCS purposes 505/lla then, courts are mandated virtue, plain language, of its section construction: “This to the Act liberal give clear mandate to Illinois courts to utilize provides a to eliminate all forms possible Act to the extent greatest ap practices provide or unfair business deceptive v. Continental relief to consumers.” Totz propriate (1992); Acura, 3d accord Page App. Du 236 Ill. Vernon, Illinois, Inc. v. American Club Mt. Buyers (1977) Honecker, 46 Ill. 3d refer App. (expressly statute). Thus, construing exemption ring 10b(l) Act, merely in section it is not provided consider, alia, proper for this court inter evils achieved, remedied and the sought purpose to be be the Act mandates such consider affirmatively but itself Act is to *90 Although acknowledges ation. the court that the (219 liberally 244), be construed Ill. 2d at its actual 10b(l) of section is not a liberal interpretation decidedly one, constricts, the Act’s am expands, as it rather than bit. does “liberal construction” mean?
What statutory signifies interpreta- “Liberal construction an produces coverage ap- tion broader or more inclusive statutory plication concepts. [Citation.] Liberal construc- ordinarily more apply tion is one that makes a statute the case under things or in more situations than would be ‘ “ strict construction’ [Citation.] ‘[L]iberal construction. statutory freely give language provision, means to of a 296 consciously, commonly, its generally accepted meaning,
to the end that the comprehensive application most thereof may accorded, be doing any without violence to of its ’ terms.” [Citation.]” Board Community Education Consolidated School District No. 59 v. State Board Edu cation, (2000). App. 790, 317 Ill. 3d 795 Stevens, Smith v. (1876) (observ Accord 554, 82 Ill. 556 ing that statute “is emphatically act, a remedial and, in accordance with a canon, well established it must receive a liberal construction, and made to apply to all cases which, by a fair terms, construction of its it can be made reach”); 3 Singer, N. Sutherland on Statutory Con (6th 58:2, § struction at 2001); 88 ed. 73 Am. 2d Jur. (2001). Statutes § Thus, section 11a of the Consumer Fraud actually Act directs courts to employ judicial construction to supply gaps in the statutory language, order to afford broader coverage or a more inclusive ap plication. Bank One Sanchez, Milwaukee v. 336 Ill. App. 319, 321-22, 3d Cottier, Hurlbert v. (2003); 56 Ill. (1978). 3d App. case, however, this rather than using judicial
construction
to effectuate
expansive
coverage
Consumer
Act,
Fraud
the court employs arduous judicial
construction to establish limitations on the reach of the
Act. The court breaks down the
term
statutory
“specifi
cally
authorized
laws
by” and,
administered
with the
aid of
dictionary,
separately and in a vacuum defines
the word “specific” and the word “authorize.” 219 Ill. 2d
at 243-44.
dissection,
Based on this
speculates
court
the legislature
“must have intended”
phrase
“laws
by”
administered
to require deference to agency
policy and practice.
The court’s tortured construction of section ignores the rule that statutes are to be construed as a whole, and the fact that expansive construction of the Act comes from the Act itself.
Even more disturbing than the dissection of the
10b(1)
statutory
language of section
is the court’s
speculation as to the “apparent
legislative intent.” 219
10b(l):
Ill. 2d at 244. The court states that section
objections
“serves to channel
agency policy
practice
political
into the
process rather than into the courts. [Cita
tions.] Parties who desire
bring
change
about
in agency
policies or rules can
complaints
take their
agency
itself and
participate
can
in the formal rulemaking process.
If their concerns are
by
agency,
addressed
they
may seek assistance from
legislators
their
may
use the
political process, including
power
box,
of the ballot
if
their voices are not heard.”
This statement is a brazen usurpation of the power of the legislature. only Not does it completely ignore the statutorily mandated expansive Act, construction of the but it injects the court’s own preferred public policy into this statutory provision without any basis in law or fact. 10b(l)
Such an expansive reading section flies in the face of plain language the Act read as a whole. First, as I have explained, the plain language of section 11a mandates an expansive construction. 815 ILCS 505/ (West 1998). 11a Second, the plain language section 10b(l) exempts conduct “specifically authorized laws administered any regulatory body or officer acting under statutory authority of this State or the United 505/10b(l) (West 1998). Accepting 815 ILCS
States.” indicator of the *92 “the most rehable language this plain Fraud enacting the Consumer objectives” legislature’s Cook, County Bank v. Avenue National (Michigan Act (2000)), legislature 493, 2d it is clear that 191 Ill. 504 under sec exempt PMUSA’s conduct would not consider 10b(l). does not establish that simply The record tion “specific constituted activity the FTC’s regulatory descrip the disputed authorization” for PMUSA to use nicotine,” in tar and tors, i.e., and “lowered “Lights,” Cambridge Lights. Marlboro or marketing Lights 10b(l) Fraud Act Further, section of the Consumer expansive from the otherwise exemptions lists this, that Because of I believe inclusive reach of Act. 10b(l), excep of section an expansive reading court’s Act, flies in the only Fraud tion to the Consumer an mandating of the Act plain language face of the rule of construction, also another ignores but expansive statute, being in a statutory exceptions construction: body in the or limit what is declared designed qualify Chemi act, strictly be construed. Mid-South of an should (1958) (and 514, 14 Ill. 2d 519 Carpentier, cal v. Corp. therein); Circulating v. People Levy cited see Chas. cases § 371 168, (1959); 82 C.J.S. Statutes Co., 17 Ill. 2d 171 (1999). statute by rule is established general “Where a not curtail the court will exceptions, ordinarily (Emphasis the latter by implication.” or add to former (1999). added.) I note 371, at 496-97 § 82 C.J.S. Statutes “[tjhese where, in applicable particularly that rules are to a liberal construc itself is entitled the law general, (2001). 212, at 402 § 2d tion.” 73 Am. Jur. Statutes restrictive words a may give apparently plain Courts whole, as a if is understood the statute such meaning United history. gloss legislative persuasive 765, 194, 199, 1 L. Ed. 2d Witkovich, 353 U.S. v. States at Whelan, 256 Ill. 3d 779, (1957); App. S. Ct. 782 77 District College Community v. Board 558; Fleischer (1984). The court’s 757, Ill. 3d App. No. mandated statutorily the combination disregard construction of the Consumer and inclusive expansive construc Act, statutory well-settled rule of Fraud and the con strictly are to be statutes exceptions tion its statu strued, persuasiveness undercuts the fatally tory construction. informal regulatory
The court holds that “the FTC’s
orders, comes within
activity, including the use of consent
10b(l)’s
specific
that the
scope
requirement
of section
by’
administered
a state
‘by
authorization be made
laws
However,
Ill. 2d at 258.
regulatory body.”
or federal
policy
neither the court’s
discussion of FTC
lengthy
nor the court’s citations to our case law establish
practice
constituted
regulatory activity
“specific
FTC’s
*93
descrip
use the disputed
authorization”
for PMUSA to
or
marketing
Lights
Cambridge Lights.
tors in
Marlboro
court
that our
decisions
correctly
past
observes
it clear that
compliance
applicable
“make
mere
necessarily
not
a shield
li
regulations
against
federal
under the
Fraud Act.” 219 Ill. 2d at
ability
Consumer
fact,
their
My colleagues,
pages
247.
devote several
of
analysis
discussing
some of this court’s decisions
10b(l).
(discussing
section
“specific interpreta- was found in a Federal Reserve Board staff as fol- regulation. explained tion of a federal This court lows: by Congress to Lending
“The Truth in
Act was enacted
terms,
credit
so that
meaningful
assure
disclosure of
readily
consumers can
comparevarious
options
credit
avail
able to them.
Congress granted
[Citation.]
the Federal
authority
Reserve Board the
prescribe
regulations carry out
purposes
Truth in Lending Act. [Cita
tion.] Pursuant
authority,
to that
the Board enacted a
rules,
comprehensive set
Regulation
known as
[cita
Z
tion], implementing
principles
the Truth in Lending
added.)
Act.” (Emphasis
Lanier,
“Although binding courts, upon the the Federal Reserve Board’s formal interpretations are entitled to a great degree of deference. This especially deference is ap propriate in interpreting the Truth in Lending Act and the Board’s Regulation own Z. Supreme [Citation.] The Court has stated that demonstrably ‘[u]nless irrational, Federal Reserve Board staff opinions construing the Act regula tion dispositive.’ [Z] should be Lanier, [Citations.]” 114 Ill. 2d at 13.
The Lanier court explained as follows. The Federal Reserve Board is the agency that Congress empowered to prescribe implementing and interpretive regulations for the Truth in Act. Lending Therefore, the Board is entitled to greatest respect in the interpretation its own regulations. Further, it is unimportant ’ “formal interpretations’ are issued by Federal Reserve Board staff rather than the itself, Board because judicial deference is based on agency expertise. Moreover:
“Congress included compliance with interpre- official staff tations when it absolved creditors liability from under the Truth in Lending ‘any Act for act done good or omitted in *94 conformity any rule, faith in with regulation, or interpreta- by tion thereof the Board or in conformity any interpretation by approval or an employee officialor of the System Federal duly Reserve authorized the Board to (15 1640(f) (1980).) issue such interpretations.’ U.S.C.sec. Section 1640 congressional evinces a clear determination to treat the Board’s administrative interpretations under Lanier, the Truth in Lending Act as authoritative.” Ill. 2d at 13-14. required The Lanier court concluded that the disclosure interpretation Regulation the Board’s staff Z implicitly provided “specific authorization” not to make any Lanier, additional disclosures. 2d Ill. at 17-18.4 clarity strength agency regulation of the implicit Lanier stands in marked contrast to the methodology uncertain FTC this case. Lanier interpretation agency’s involved a formal staff formally promulgated regulation. of an enabling
Indeed, the legislation recognizes interpretation. such a staff In this promulgated any industrywide case, the FTC has never regulates disputed descrip- formal rule that the use of the interpret, formally tors. There is no formal rule to either informally. The evidence adduced at trial established employ that, rulemaking, rather than even informal “voluntary approach” regulating FTC took a cigarette industry. acknowledged Dr. Peterman that the generally, adopt FTC, approve does not trade rules that FTC-regulated may conduct that an engage business choose to adopts regulations Rather, in. the FTC require specific Regarding cigarettes, or forbid conduct. promulgated single regulation has never a trade governing cigarette advertising that has ever been in ef- regulation, fect. No FTC document, or officialstatement regulated “lights” has ever descriptors. “low tar” and any Further, the FTC has disavowed “official” definition cigarette company’s of these Rather, terms. decision to descriptors “light,” use voluntary; such as tar,” or “low requiring cigarette there is no FTC rule their use. A company stop using descriptors could those and there is
4The court also
subsequent
discusses a
court,
decision of this
(2001).
Jackson v.
Dodge, Inc.,
South Holland
However, the 1971 consent disputed the did it concern Nor descriptor “lights.” The nicotine.” case, tar and in this “lowered descriptor tar,” or “low descriptor did not define the consent order Peterman for that term. a numerical standard establish voluntary is a “compliance” that this form of testified not a It is cigarette company. the of each part decision on that acknowledged rule. Peterman regulation trade to the and never party proceeding PMUSA was never a includ- cigarette company, consent order. Each signed the PMUSA, collectively, could industry and the entire ing they if so using disputed descriptors the simply stop has further that the FTC acknowledged chose. Peterman any against cigarette never taken enforcement action of brands because “light” manufacturer these so-called in the “light” did not use the word that manufacturer in the record that brand name. There is no evidence order. complied PMUSA ever with this consent that intended to Dr. Peterman also testified FTC to issues ad- provide industrywide guidance respect in order American against dressed consent However, as with the 1971 consent Company. Tobacco mention the order, the 1994 consent order did not Also, not define the “lights.” descriptor it did descriptor tar,” a numerical standard for “low or establish PMUSA Indeed, upon term. consent orders which two it, other This is parties. relies were not directed at but at “specifically the issue: whether PMUSA’s conduct was authorized” two by the FTC consent orders directed at Inc., other parties: Brands, American and American Tobacco See 219 Company. Ill. 2d at 253-54. I observe not offer an that Dr. did expert Peterman opinion that has granted cigarette companies right use “light” or descriptors “low tar” and immunize them from state regulation those descriptors.
Further as to the lack proof regulatory action with respect to the can descriptors be found in Dr. disputed testimony. FTC, Peterman’s asked for com ments as to whether use of the disputed descriptors changed “should be or in any way are potentially misleading.” According Peterman, “that investigation remained open as the date of testimony.” his 219 Ill. 2d at 224. Given that the record evidence establishes position FTC’s on the use of the descriptors “remained it is open,” difficult to understand how the FTC’s activities in this area can be deemed be “specific anything. authorization” above,
In fight of the I believe the regulatory action present this case is much less than the specific regula- tory action *97 taken the Federal Reserve Board with Lanier, Lanier. respect Z in Regulation therefore, is distinguishable and, to, from not contrary consistent with, this case. Jackson conclusion in court’s likewise distinguishable from the court’s in holding this case. colleagues
Unlike
in
my
I do not
majority,
believe
that
the Illinois General
intended
Assembly
that such
(see
255)
“implicit”
and “uncertain”
219 Ill. 2d at
action,
orders,
methods
of agency
such as consent
directed at other
parties,
“specific
constitute
authori
10b(l)
zation”
section
required
exempt
in
conduct
I
coverage
from the broad
of the
Fraud
Consumer
Act.
note the court refers to a 1964 FTC Statement
why
offers “ten
a formal rule-making proceeding
reasons
may
preferable
be
to an
or a
adjudicative proceeding,
adjudicative
series of
proceedings.”
Further, while an has the agency discretion to use adjudicatory to announce proceedings a sectorwide substantive principle conduct, or standard of it must be remembered that the consent upon orders which PMUSA relies are not directed at PMUSA. The court reasons:
“The
adjudication
FTC’s observationthat
could be used to
announce ‘a substantive principle or standard of conduct
having general application’ suggests that a consent order
may serve as
nonparties
authorization for
to the order to
added.)
followits
(Emphases
directives.”
ing its efforts to obtain voluntary compliance with the two consent orders. Negotiations to obtain voluntary compliance parties individual do equate from announcing an industrywide substantive principle or standard conduct.
Federal courts share my view of consent orders. An administrative consent order is agreement an reached in an administrative proceeding between parties, one of which is usually the agency’s litigation staff. If agency accepts agreement, the agency issues an order as a *98 court issues a consent decree. A.R. ex rel. R.V. v. New 65, Education, F.3d 77 n.12 City Department
York of therein). (2d 2005) (and cited While the authorities Cir. charged a the with its by agency statute interpretation deference, a consent order administration is accorded an to end simply agreement parties memorializes certain terms. An unsubstantiated asser- litigation upon in tion of a an administrative consent legal proposition is untested in the adversarial crucible. It reflects order the or view of an nothing drafting agency more than by that has not been considered carefully staff member “Hence, reliable agency necessarily the itself. it is not view the issue.” agency’s evidence of an considered v. Hanover Trad- Trading Futures Comm’n Commodity (S.D.N.Y. 1999). 203, 2d 206 n.19 ing Corp., Supp. F. analogy with the between Continuing accepted consent judicial administrative consent orders decrees, the 1971 and 1995 orders it is clear that force. industrywide legal cannot be considered to have explained: The United States Court has Supreme case parties decrees are entered into to a “Consent on their negotiation produced agreement after careful has right litigate waive their the precise parties terms. in the case and thus save themselves the issues involved Naturally, time, litigation. risk of expense, and inevitable agreement normally compromise; reached embodies a risk, exchange saving for the of cost and elimination of they something might have won parties give up each they litigation. Thus the decree proceeded had parties purpose; said to have a rather the itself cannot be other, generally opposed to each purposes, have opposing those decree embodies as much of resultant bargaining respective parties have the purposes as the reasons, scope these power and skill to achieve. For corners, its four a decree must be discerned within consent satisfy purposes might and not reference to what original.) United parties (Emphases to it.” one of 681-82, Co., 29 L. Ed. 2d & 402 U.S. States v. Armour (1971). 256, 263, 91 S. Ct. a or contract
Thus, authority expand court has no *99 307 might reflect “what have been.” consent order’s terms to (4th 1981). Hunt, F.2d 60 Cir. Willie M. v. 657 incor- simply demonstrates it is authority This consent court to refer to the 1971 and 1995 rect for the Only as the FTC commis- establishing policy. orders FTC The FTC staff members formally adopt policy. sioners can make agency who drafted the consent orders cannot Further, to ad- subjected the orders have been policy. The and 1995 consent orders must testing. versarial only private agreements viewed as what are: two they be cigarette companies between the FTC and individual industrywide without force of law.
It is clear from the
long history
regulation
FTC
in the
cigarette industry,
opinion,
as described
court’s
economic, i.e.,
that consent orders are
are not based
they
on substantive law.
cases before the
are filed as
The
FTC
a result of
one
the other.
competitors complaining
against
are
They
simply
binding
administrative
and are not
authority.
they may
persuasive
At most
be
to other
1(A)
Indeed,
in
participants
industry.
in Part
of the
opinion (“History
court’s
of the
Regulation
FTC
the court
Cigarette Industry”),
mentions Federal Trade
Comm’n v. Brown &
Tobacco
778 F.2d
Corp.,
Williamson
(D.C.
1985),
I
Cir.
which
believe to be instructive
Williamson,
point.
on this
Despite the uncertain nature of FTC involvement
area,
this
the court
today concludes that
the FTC’s
“informal regulatory activity,
including
use of consent
orders,”
10b(l) (219
satisfies the requirement of section
258)
Ill. 2d at
and has the force of law. I very
doubt,
much
however,
that a federal court
regard
would
the FTC
10b(l).
consent orders as “law” in the context of section
For
example, Wabash Valley Power Ass’n v. Rural
*100
(7th
Administration,
Just agency as the letter in Wabash was not based on a rule, formal the two consent orders this case are not any on rule. If the based formal letter Wabash Valley cannot be as as a matter considered “law” Power concluding law, federal then is no there basis for that the consent orders constitute “laws” administered for the 10b(l). purposes of section opinion, “note[s] matter, court,
As a final
in its
(219
263)
great
with
a
interest”
Ill. 2d at
decision
United States District Court for
Eastern
District of
Arkansas. Watson v. Philip Morris
No. 4:03—CV—
Cos.,
(E.D.
2003),
Ark.,
519 GTE
December
420 E3d
affd,
(8th
2005),
Cir.
involvedan Arkansas consumer fraud
charged Philip
action,
class
which
Morris
the same
Philip
fraudulent misconduct as in this case.
Morris
removed the cause from Arkansas
court
state
to federal
1442(a)(1)
pursuant
(2000),
§
court
to 28 U.S.C.
which
provides
person
for removal where a
is sued for actions
Philip
taken under the direction of a federal officer.
Mor
requirements
ris claimed that
it satisfied the
acting
federal officer statute “because it was
under the
engaged
[FTC]
alleg
direct control of the
when it
in the
edly unlawful
conduct.”
A for federal removal that the defendant under act the direction of a federal of- ficer. “ ‘[Rjemoval “person a under” acting a federal of-
ficer predicated must be upon showing that the acts ... performed were pursuant to an direct officer’s orders or to comprehensive and regulations.’ detailed Virden v. Altria *101 (N.D. Group, Inc., 2004) Supp. 832, 304 F. 2d 844 W. Va. (quoting Ryan Dow Co., v. Chem. F. Supp. 934, 781 947 (E.D. 1992)). N.Y. Mere participation regulated a industry is insufficient to support removal unless the chal- lenged ‘closely conduct linked to detailed and specific regulations.’ Virden, 304 F. Supp. Watson, 2d at 844.” 420 F.3d at 857. private
The model cases in which actors have success- fully removed cases federal court under the statute government have involved: contractors with limited 310 they because
discretion; contractors program Medicare and private the federal government; as agents serve are so intertwined whose functions actors effectively are considered they that government federal Inc., Altria Group, Virden v. employees. to be federal 2004) (and (N.D. cases cited 2d W. Va. Supp. F. 1442(a)(1) therein). permit- § will not be “Removal under detailed direct and if the defendant cannot establish ted under relevant acts occurred only that control but officer, would be the of a federal as auspices the general simply defendant were case, if the example, Paldrmic v. Altria industry.” in a regulated participant (E.D. Services, Inc., 2d Supp. 327 F. Corporate 2004). Wis. that the FTC in Watson reasoned
The district court
by compel
its purview
industries within
regulates
often
orders rather
and consent
voluntary agreements
ling
Ill. 2d
See 219
regulations.
formal
by promulgating
than
that “the FTC
Further,
court stated
264.
the district
at
manufacturers
cigarette
Morris and other
Philip
coerced
labeling
cigarette
with its
cooperation
‘voluntary’
into
rule’
that a formal
way
‘in such a
advertising policies
See
jurisdiction.”
to create federal
required
was not
with the
agreed
court of appeals
2d at 265. The
Ill.
record:
are convinced
view of the
“We
district court’s
compulsion
level of
in this case shows a
the record
that
‘acting
indeed
Morris was
Philip
establishes
that
Watson, 420
officer.”
of a federal
under’ the direction
voluntary agreement:
the 1970
Regarding
F.3d at 859.
to cause
power
used its coercive
effectively
“The FTC
*** This
the agreement.
to enter
companies
the tobacco
for a formal
a substitute
was
‘voluntary agreement’
the consent
Watson,
Regarding
at 859.
420 F.3d
rule.”
the consumer
opined
orders,
appeals
the court
the enforcement
“directly implicates
class action
fraud
explained
as
policies”
tobacco
of the FTC’s
and wisdom
Watson,
311 court concludes: case, the In this court—whether the Watson issue addressed “The bearing on no proper—has federal court was removal to court’s However, district the federal case. present specific that conclusion analysis support our does detailed may descriptors disputed the use of the authorization formally in than orders rather in consent be found 219 Ill. 2d rules of the FTC.” regulation trade promulgated at 265. disagree.
I respectfully
“have
actions
interest
that removal
great
I note with
have
and courts
jurisdictions,
in other
brought
been
remove,
Philip Morris
to permit
declined
generally
direct and
did not exercise
that
the FTC
concluding
being
it
for which
was
over the acts
detailed control
Indeed,
Paldrmic,
2d at 966.
Supp.
327 F.
sued.”
candidly
in Paldrmic and Virden
courts
federal district
court
holding of the district
contrary
acknowledged
Virden,
n.2;
Paldrmic,
F.
2d at 966
Supp.
in
Watson.
in
Likewise,
appeals
the court of
304 F.
2d at 846.
Supp.
acknowledged
contrary holding
candidly
Watson
Watson,
Although
courts.
The and Paldrmic Virden agent employee acted as an or an Morris has never Philip Virden, 2d at Supp. 304 F. government. of the federal corporation most, private Morris] it is a [Philip 846. “At Paldrmic, F. industry.” regulated in a doing business Indeed, decision appeal’s 968. in the court Supp. 2d at “to Watson, of that concurred panel a member con- should not be today that our decision emphasize heavily in a every participant invitation to strued as an Morris, it, like Philip to claim that industry regulated merely acts at the direction of a officer federal because it products tests regulations.” markets its accord federal (Gruender, Watson, F.3d J., at 863 concurring). concurring judge believed that “in most *103 principal-agent relationship, instances, contract, or near-employee relationship government with the will be necessary degree by to show the of direction a federal of- necessary ficer to invoke removal under 28 U.S.C. 1442(a)(1).” § (Gruender, Watson, F.3d J., 420 at 863 concurring). concurring judge However, because the regulation cigarette viewed the level of FTC of the industry “extraordinary,” opined as he that “this is a jurisdiction appropri- rare case in which federal officer principal-agent ate even contract, absence aof relationship, near-employee relationship with the government.” (Gruender, Watson, 420 F.3d at J., 864 concurring).
However,as the court Virden concluded: “The indicia present finding of federal control in cases federal officer jurisdiction wholly lacking removal are Virden, here.” Supp. 304 F. 2d Paldrmic, at 846. In the court found that Philip disputed Morris did not that establish its use of the descriptors “was Paldrmic, mandated the FTC.” Supp. voluntary F. 2d at 966. Both courts focused on the agreement. According nature of the Virden court, “the most that can be said is that FTC has impliedly regulating industry through been the tobacco acceptance voluntary private agreement its tacit of a years thirty ago.” Supp. Virden, made 304 F. 2d at 846. may court Paldrmic reasoned: “while it be true that cigarette companies preferred agreement the regulation, an to a they
the fact remains entered into the agreement voluntarily.” Supp. Paldrmic, 327 F. 2d at courts, therefore, 966. These reasoned: clearly “On some level the FTC has coercivecontrol companies’ advertising over the tobacco tar and nicotine power regulate deceptive advertising. based on its However, in this Court’s opinion, right neither the control, control, nor the taking threat of constitutes the direct and detailed required control for the application jurisdiction.” Virden, federal officer removal Supp. 304 F. 2d at 846-47.
See Paldrmic, F. Supp. 2d at 966.
I disagree with the Watson, reasoning on which relies, the court and agree with the better-reasoned deci- sions such as Paldrmic and Virden.
In light above, I believe that a proper statutory construction analysis leads to the conclusion opposite to reached the majority. The analysis begin must with our Consumer Act, Fraud viewed as a whole. Its plain language mandates expansive coverage the use of judicial construction to effectuate that mandate. Sec- tion 10b of the Consumer Fraud Act exempts from the Act conduct “specifically authorized by laws administered by” Illinois or federal regulatory bodies. In case, this two consent orders upon which PMUSA relies, directed *104 at other parties, did not establish an industrywide standard of conduct for PMUSA. Stated simply, PMUSA did not carry its burden in proving the existence of this affirmative defense.
Further, regardless how the FTC views the role of consent orders in industrywide rulemaking, for purposes Act, Consumer Fraud including 10b(l), section a may court not expand 10b(l) exemption section implication. I do not believe that the consent orders in this case are sufficient to “specifically authorize” PMUSA’s use of the disputed descriptors, so as to exempt that conduct from the statutorily mandated expansive scope of the Consumer Fraud Act.
III. Damages I Although could end my here, dissent I feel compelled to address the special concurrence’s suggestion that reversal is warranted for a “more basic reason” than sec- 10b(l). plaintiffs claims that The concurrence special
tion damages sustained actual they to establish that failed is an damages absence of actual suggests reaches. The majority the result basis for alternate dam- measure of wrong applies concurrence special A fraud claim. however, to consumer plaintiffs’ ages, at issue leads to the law to the facts proper application by the suggested that the alternate basis the conclusion in merit. lacking concurrence special a frank assess- begins concurrence special The by PMUSA practices employed deceptive ment of the cigarette products: its promoting PMUSA before us shows that “The record in the case Cambridge Lights marketed Marlboro developed and heightened public to concern cigarettes response Lights The believed by smoking. company risks posed over health by offering product a declining sales that it could forestall than as better for them perceived consumers which brands. Pursuant to ‘full-flavored’ conventional Lights and Cam PMUSA advertised Marlboro strategy, way in a that led consumers bridge Lights cigarettes risk than their posed a lower health that the brands believe reality, PMUSAwas and as counterparts. ‘full flavored’ only offered aware, ‘light’ cigarettes not fully the so-called benefits, actually 219 Ill. more toxic.” but were no health joined (Karmeier, J., concurring, specially 2d at 276 J.). Fitzgerald, comments, further “When concurrence special another in the belief one over product
consumer chooses health, only his or her be less it will harmful harmful, it have been more may later that discover 219 Ill. seem self-evident.” damages might existence concurring, joined by (Karmeier, J., specially 2d at 276 J.). damages, nature of the The “self-evident” Fitzgerald, *105 concurrence however, special to hardly gives pause actual failed to establish that prove plaintiffs to quest its damages. representa- class notes that concurrence special light PMUSA’s smoking Price “continued
tive Sharon to the fact alerted her litigation even after this cigarettes not, fact, healthier and any were cigarettes that version regular harmful than the actually be more may (Karmeier, J., Ill. 2d at 277 those cigarettes.” of J.). Addition concurring, joined by Fitzgerald, specially that that “[n]ews concurrence notes ally, special were il light representations low tar and PMUSA’s Michael Fruth did not deter class lusory” representative smoke, he that he although to testified continuing “from 2d at from 219 Ill. lights regulars.” did switch back (Karmeier, J., specially concurring, joined by Fitzger J.). ald, observations, concurrence special From these concludes: may representatives valuation the class have
“Whatever light cigarettes, on the health of placed component consequences. valuation had no observable economic any testimony suggesting Neither Price nor Fruth offered switching regulars lights from resulted in their any they paying cigarettes more for than would have price disparity light otherwise. There was no between cigarettes and their and there is counterparts, full-flavored no indication that regulars lights switch from caused buy packages cigarettes. they them to more The price paid go up. they did not The quantity purchased did not ancillary increase.151 No additional or incidental costs were Moreover, identified. neither complained Price nor Fruth they cigarettes paid that the were not worth what for them. contrary, lights To the even purchase Price’s continued being suggests after alerted to health their lack of benefits entirely that she was satisfied with the value of what she 5Myreading point of the record differs on this from that of the special Cambridge Lights in concurrence. When Price switched to pack cigarettes day. consumption she smoked one a Her packs cigarettes day. after she increased to IV2 lawsuit, cigarette learned of the Price was able to reduce her consumption pack per day. summary to one-half to one A of Price’s cigarette consumption admitted evidence as Plaintiffs’ Exhibit into cigarette consumption. 99 reflected the increase in *106 received for her cigarette-purchasing dollar.” 219 Ill. 2d at (Karmeier, J., 277-78 specially joined by concurring, J.). Fitzgerald,
Having explained that
representatives
class
did
not sustain damages
they
because
continued to smoke
after
the true
learning
nature of light cigarettes,
special concurrence makes a similar argument regarding
smokers and class members
in general. The special
concurrence
recognizes
the Knowledge Network
Survey respondents placed a “lower subjective value on
cigarettes
lacked the health qualities claimed by
PMUSA in its
marketing Marlboro Lights and Cam
bridge Lights.” 219
2d
(Karmeier,
Ill.
at 281
J., specially
J.).
concurring, joined by Fitzgerald,
However, the special
concurrence maintains that real-world “consumers would
not have paid less to
their
satisfy
tobacco habits had the
lights’ true properties been known.”
The court in Drew thus be rule for the measure benefit-of-the-bargain tween and the out-of- and deceit in cases of fraud damages in a fraud The damages.7 plaintiff rule measure pocket in the placed to be merely entitled deceit case is and He is was made. bargain he was before condition Moreover, the courts bargain. of his entitled to the benefit a dif bargain by assigning plaintiffs will not rewrite the plaintiff an item than what price ferent to. agreed originally defendant Corporation Gerill Gerill, 128 Ill. 2d at Builders, Inc., joint had formed a Hargrove L. Jack Il Woodridge, land owned Gerill develop venture John Rosch approached Eventually, parties linois. Hargrove’s purchase that Rosch the proposition Hargrove’s purchased venture. Rosch joint interest in the list of the handwritten reviewing 19-page a interest after invoices open loans and outstanding joint venture’s sale, consummation Upon by Hargrove. prepared had Hargrove discovered Rosch’s accountant in that liabilities joint venture’s misrepresented Woodridge properties to the of liabilities related number or misstated. from the list either been omitted had for Hargrove’s to Rosch damages awarded circuit court court appellate and the misrepresentations fraudulent affirmed. *108 110, § Keeton, at & Keeton on Torts 7According to W Prosser rule, (5th by a 1984), pocket” followed the “out of ed.
767-68 the jurisdictions, “looks to American minority perhaps a dozen of transaction, gives plaintiff in the the has suffered loss which parted with he has between the value of what him the difference was If what he received he has received. the value of what damaged, can it, and there paid he has not been he for worth what rule, loss-of-bargain adopted contrast, In the recovery.” be no question the which have considered of the courts some two-thirds he deceit, of what was “gives plaintiff the benefit the in actions for the actual recovery the difference between promised, and allows have had that it would received and the value he has value of what represented.” if it had been as court’s the circuit argued that court, Hargrove In this claimed Hargrove incorrect. damages was computation rule, damages benefit-of-the-bargain the under that the upon must be based misrepresentation fraudulent as a result paid the money plaintiff amount circuit the Thus, Hargrove argued, misrepresentation. the excluded evidence not have court should never or were paid either liabilities were misrepresented joint in the sold his interest after Rosch not until paid reasoning: argument, this rejected The court venture. the rule, governs benefit-of-the-bargain which the “Under misrepresentation in fraudulent damage computations by assessing the difference cases, damages are determined value property the sold and the the actual value of between had misrepresentations if the have had property would (Hicks 170; (1900), 164, Mun 187 Ill. v. Deemer been true. Warner, (1985), 3d App. Inc. 138 Ill. jal v. Baird & 341.) (1984), 186-87;Kinsey App. 124 Ill. 3d v. Scott joint case, Hargrove represented found that this it was they actually were. being as less than venture’s liabilities damages measure of under benefit-of-the- proper The by the rule, then, that was used bargain and the formula court, joint venture’s was the differencebetween circuit by Hargrove and what those misrepresented liabilities as joint actually Rosch or the venture were. How liabilities irrelevant to subsequently dealt with those liabilities was Gerill, Ill. 2d at 196. determination.” this measure of proper court restated that Gerill for fraudulent damages misrepresentation in an action of the property the difference the actual value between have had if the and the value the would property sold had been true. The court added misrepresentations are not damages, and the measure of bargain, af- might might actions. Rosch subsequent fected of the liabilities for the full amount have been held hable made However, Rosch was venture. whether joint not to the determina- for the liabilities mattered pay Sexton, v. Antle & Brothers tion of See also damages. *109 320 (1891) (where
Ill.
416
the land conveyed consisted of
30 acres rather
than 80 acres as represented,
the trial
court did not err “in refusing evidence
tending
show
that notwithstanding the shortage [in acreage] plaintiffs
got the worth of their money in the whole trade”); Kin
Scott,
v.
sey
(1984)
124 Ill.
3d
App.
329
(holding the
proper measure of damages was the difference in value
between the apartment building as a five-unit structure
including a basement unit and as a four-unit structure in
1973, the year of the purchase.
addition,
the rental
income which the plaintiff received from the basement
unit, which defendant had not built
code,
from 1973 to
1981 also belonged to the plaintiff as owner of the build
ing). And see City Chicago v. Michigan Beach Housing
(1998)
Cooperative, 297 Ill.
3d
App.
(observing that
in an appropriate case, a plaintiff may recover the differ
ence between the value of the note or security interest as
represented, and the value of the note or security inter
est received); Kleinwort Benson N.
Quantum
America v.
Financial Services,
(1996)
The special concurrence and PMUSA concede that
*110
the proper
damages
bar,
measure of
in the case at
inas
an action for common law fraudulent misrepresentation,
is the benefit-of-the-bargain.
(Karmeier,
second time however, way undercut any does not knowledge, that frame, when sustained in the first time damages they for the health benefits purchased light cigarettes they PMUSA. touted purchase makes the I simple point.
A illustration a development upon representation acres of land for constructing After subject flooding. the land is never acres, remaining I acre houses on nine discover because it lies below development is not suitable I flooding. and is construct floodplain subject periodic acre and leave part remaining on fishing pond in its natural so the purchasers the balance state Under the benefit-of- houses benefit from view. may I to the dif- damages, measure of am entitled the-bargain *111 of the land as that promised, ference between the value toto, in is, development the of land suitable for value received, is, that the value of the value of the land as development. nine acres suitable for only land with would approach, special to this the concurrence Contrary and the development fishing pond the focus on view, and that I must of the natural conclude benefit I on the land received since higher have a value placed for it. The concurrence special was able to find some use value to by assigning greater rewrite my bargain would actions to the time my subsequent the land based on the purchase. mistake in the same special repeats concurrence general. members in As regarding
its the class analysis the above, recognizes the concurrence special noted a lower Survey respondents placed Network Knowledge that she example, representative Sharon Price testified class light cigarettes truly lower in tar and were not learned that spring entered into evidence a of 2002. Plaintiffs nicotine the February cigarette purchases from 1986 until summary of her 2001. cigarettes qualities
value on lacked the health However, claimed PMUSA. the concurrence special does not focus on the the difference between value of the cigarettes as PMUSA and the value of the represented cigarettes Instead, without the health the benefits. (1) concurrence on two factors: discounted special focuses cigarettes were not for purchase available the market- (2) the place; and class members were addicted to the use of From these cigarettes. special factors the concur- rence concludes that the class members did not incur damages, and are not entitled compensation, because they purchased would have cigarettes at the nondis- prices counted to continue their feeding addiction. essence, In the concurrence special rewrites bargain that plaintiffs made. The special concurrence ignores the evidence that cigarette consumers would have required a steep discount to purchase light cigarettes without Instead, health benefits. the special concur- rence asserts that cigarette consumers would have continued to purchase light cigarettes, at nondiscounted prices, even knowing the true properties of the cigarettes. alternative, the special concurrence asserts that cigarette consumers would have purchased regular cigarettes at a price equal price paid light cigarettes as misrepresented by PMUSA. But the focus under benefit-of-the-bargain the difference in value, as of the time of the transaction, between the goods as received and the goods promised. Thus, as Genii court focused on the difference between joint venture’s liabilities as *112 misrepresented what those li- actually abilities were. How Rosch subsequently dealt with those liabilities was irrelevant to the determination damages. Hargrove could not in forgiveness share the any liabilities rewriting bargain the to assign a higher value to the joint venture.
The result that the special is, concurrence advocates best, surprising. misrepresented qualities at PMUSA its light cigarettes. misrepresentations The led cigarette consumers overcome their aversion to the light cigarettes taste of purchase light cigarettes an unsuccessful their attempt lower intake of the harmful to which products they exposed smoking were cigarettes. PMUSA saw its profits While increase because of the sale of light cigarettes, cigarette consumers did not they receive the health benefits for which The bargained. special dispenses concurrence with the in the inequities transaction, long price however. So as the the consumers paid for the false was than light cigarettes no more price for the nonbargained-for cigarettes, PMUSA could make misrepresentations of whatever kind it desired. in light
When considered
of the addictive nature of
cigarettes,
special
position
only
concurrence’s
is not
but
surprising
special
untenable. Recall
concurrence’s
that “PMUSA was
acknowledgment
fully
the so-
aware[ ]
‘light’ cigarettes
called
offered
only
no health
benefits,
actually
but were
more toxic.”
325 light reap profits increased as customers switched the cigarette by However, marketed PMUSA. consumers misrepresentations could not for the because recover they directly could the not break free of addiction flow- ing marketing light from of PMUSA’s full-flavored and cigarettes. bolstering by major-
Far from the result reached the ity, special the concurrence serves as a reminder of the problems out-of-pocket associated with of the measure damages opinion in an action for fraud or deceit. an joined by today’s opinion, ap- majority the of author our pellate court observed: (1921)]
“The
[Perry Engel,
rule set forth in
v.
‘When the value what plaintiff the has received under the equal transaction with the defendant is fully with, the value of parted what he has he has suf- loss, out-of-pocket fered no and under the rule stated (a) (1), [providing subsection recipi- clause that the ent misrepresentation may choose to recover his loss], out-of-pocket actual he could recover no dam- ages. This would mean that defrauding the defendant successfully has accomplished his fraud and im- is still mune an from action in deceit. Even though plaintiff may rescind the transaction and recover price paid, the speculate defendant enabled to on his and still be assured that he pecuni- can no fraud suffer ary This justice parties. loss. is not between the admonitory requires function of the law not escape liability justifies defendant allowing the plaintiff added.) bargain.’ (Emphasis benefit of his (Second) i, § Restatement of Torts Comment at (1977). Keeton, See also W. & § Prosser Keeton on Torts at (5th 1984) (‘in many ed. cases out-of-pocket measure permit will the fraudulent defendant all escape profit liability if the transaction chanceto and have a it’).” away get Ill. Wisegarver, v. he can Kirkruff (1998). 826,837 App. 3d ring Perhaps true in the heart words still these today’s majority opinion, are the reason author posi- majority does not endorse of the court that the special as it concurrence. Be that tion advanced *114 damages proper may, in Il- measure of that the I note on action, whether based and deceit linois in a fraud benefit-of-the-bargain, law, common is statute or at damages out-of-pocket or measure than the rather that the record I note further relative thereof. some close support dam- an award of evidence to sufficient contains ages plaintiff the class members of class. Several to the light cigarettes they because to that switched testified they exposure to the harmful reduce their to wanted representative cigarettes. compounds regular Class in light having that, switched to Price testified Sharon lung cigarettes cancer concerns about because of gone regular to diseases, not have back she would other they cigarettes her for free. In a offered to if were even Survey respondents Knowledge similar vein, the Network steep required they discount a would have stated that light cigarettes they did not offer either that had known regular cigarettes compared any or to health benefits regular cigarettes. actually than more harmful were plaintiff class were of the the members fact remains that by misrepresentations made because defrauded cigarettes. regarding light should Illinois law PMUSA deceptive practices aimed at tolerate the use defrauding of this state. the consumers
IV Conclusion just Today in six months second time marks the completely dollar a multibillion reversed has this court corporate See v. defendant. Avery a in favor of verdict Co., 216 Ill. 2d Insurance Mutual Automobile Farm State (2005). an construed the court in Avery, do so To despite strictly against its an insured contract insurance contrary. precedent See ambiguities and our own concurring (Freeman, in J., at 215-29 216 Ill. 2d Avery, J.). joined dissenting part, Kilbride, In this part 10b(l) by interpreting so section so case, court does very purpose expansively of the Act. it dilutes the 10b(l), just speaking section addition, not content nothing engage concurring justices specially the two analysis damages—an analysis conclusory on more than ignores above, overlooks which, as I have detailed greatly legal points serve which several salient say, position. issue it to Suffice their undercut justices cut-and-dry damages these would as not as have one believe. highly publicized two, in which these
The manner leads me to several this court been decided cases have majority troubling court has First, a of this conclusions. increasingly to the interests of desensitized become my average doubt in There is little Illinois consumer. chill wind over will send a mind that these decisions *115 protection. to the said, I am not blind That consumer very problems action in the world of class that exist real opinion my separate I in Avery, in As I stated lawsuits. vehicle has the class action in the concerns that share greatly potential However, concern that to abused. the be been set the of law that have transcend rules must not my past means view, this in decisions. In this court Fifth filed in our cases, class actions that all even long-recognized guided the same District, must be procedural construction, review, rules of standards of guided proof requirements, all that have and burdens of years. Aspects types of the the of actions over other opinion today opinion cause in Avery and in its court’s my colleagues majority will continue that me to fear large in an ef- standards to different hold class actions to perception fort to reduce the court Illinois system disingenuous serves as a for the ac- playpen class tion practitioner.
JUSTICE joins KILBRIDE in this dissent. KILBRIDE, JUSTICE dissenting: also fully I all agree with Justice aspects Freeman’s I dissent and in it. I join write to ad- separately express ditional concerns opinion. majority
The majority
party
notes that neither
offered
has
argument
regarding
phrase “by
meaning
laws
10b(l)
administered
by” in section
of the Consumer
Act.
Fraud
Nowhere reference “agency policy and Yet the practice.” majority concludes practice have the force of law. agency policy *116 Statutes and rules with published made accordance statutory authority are clearly by “laws administered a regulatory body.” To the extent published statutes conduct, rules authorize certain that conduct cannot serve as a predicate an action under the Consumer Fraud Act. That was the import of this court’s holding Lanier.
Lanier did
not,
however, hold that agency policy and
practice allowed use of the unexplained
“Rule of 78s”
term in
Instead,
loan documents.
we held
Regula
Z permitted
tion
use of the term without
further elabora
tion. Regulation
Z is a
rules,
set of comprehensive
enacted and published
by
Board,
Federal Reserve
pursuant
to authority granted by Congress implementing
the principles of the
Lanier,
Truth in Lending Act.
Ill. 2d at 11. In
holding
conduct complained of was
specifically
law,
authorized
by
we relied on
formal,
a
published Federal Reserve Board staff interpretation
of a
section
of Regulation
Z. That
regulation
required
identification of the method of computing any unearned
portion of the
charge
finance
in the event of prepayment.
The published
staff
interpretation
concluded that
simple
by
reference
name to the “Rule of 78s” without
its
describing
operation
satisfied
the identification
requirement. Lanier,
heldWe
the Federal Reserve
formal,
Board’s
published interpretation
of its own rules is entitled to
great deference, absent any obvious repugnance
to the
Truth in Lending
Lanier,
Act.
We
to treat
the Board’s admin
determination
congressional
in Lending
under the Truth
Act
istrative determinations
Lanier,
Thus,
held
It is that Lanier apparent, 10b(l) because the disclosure creditor’s section defense Truth in Lend- by was authorized the federal specifically require- Act. found defendant with the ing complied We formal, published agency ments of the Act because a by Congress, a authorized interpretation regulation conduct. disputed authorized the specifically does not Conversely, present the record this case has Congress empowered basis for of Lanier. application prevent Trade and directed the Federal Commission acts or in or af- deceptive practices the use of unfair or delegated § 45. It has also fecting commerce. 15 U.S.C. 16 C.F.R. rulemaking authority Commission. conceded, Peterman, expert, § 1.22. As the defendant’s Dr. rule autho- any has never promulgated Commission at issue in this specific descriptors the use of the rizing enforcement The an primarily case. Commission consumers from unfair charged protecting agency Truth in Lend- trade Unlike the deceptive practices. no Act, Trade Commission Act contains ing the Federal liability persons good from who provision absolving its regula- comply interpretations faith with official any Further, published as the Commission has tions. Z, there is no Regulation equivalent functional comparable regulation governing the con- Commission duct at issue here. support
Hence, Lanier offers no for the conclusion descriptors deceptive in this that use of the claimed to be specifically case is authorized federal law. Lanier (1) only that teaches section 10b can bar a Consumer remedy specifically Fraud Act if the conduct is authorized suggests a federal It law. neither holds nor agency policy policy techniques informal enforcement published rulemaking formal, short of could invoke the 10b(l) exemption liability. majority section from regulatory concludes, however, that “the informal FTC’s activity,including orders, the use of consent comeswithin *118 10b(l)’s scope requirement specific the of section that the ‘by by’ authorization be made laws administered a state regulatory body,” contending or federal that this asser holding tion “is consistent with our in Lanier.” 219 Ill. Again, simply support 2d at 258. Lanier offers no for this conclusion.
Additionally, majority acknowledges, as noted in my special compliance Jackson, concurrence in that mere applicable necessarily law does not bar Consumer liability Fraud that, Act rather, the conduct at issue specifically must be authorized. 219 Yet, Ill. 2d at 249. majority effectually ignores principle in its analysis. majority reasoning can take no comfort in the alleged deceptive
the Seventh Circuit in Bober. The
state-
specifically
ment in that case was held to be
authorized
formally adopted by
a rule
the FDA and codified in
Regulations.
the Code of Federal
Bober,
In this
the federal law in
forbids unfair
deceptive
practices affecting
or
acts or
commerce. The
FTC has issued no formal rule or regulation authorizing
Bober,
in
in
descriptors
question, as
and it has issued
any
no formal
as in
interpretations
regulations,
Lanier.
The majority
authority
asserts that Lanier is
for the
proposition that an
staff
be a
agency
interpretation may
sufficient basis for a
finding
specific authorization and
that formal
is therefore not
rulemaking
prerequisite
specific
authorization.
Nevertheless, majority relies on 1971 and 1995 consent orders entered resolution of claims as- Brands, Inc., serting that American and American Tobacco violated the Act’s Company, respectively, prohibi- *119 tion of competition unfair methods of and unfair and acts and in commerce. In the case of deceptive practices order, the the filed a in detail- complaint 1969 ing claims related to American advertising Brands it found American Brands then products deceptive. order, agreed, admitting in a consent without it violated alleged complaint, the law as in the to refrain from in advertising cigarettes by that its were low or lower tar “low,” “reduced,” use of the words “lower” or or like terms, accompanied by is unless the statement qualifying of the tar and nicotine conspicuous a clear and disclosure produced by content in in the smoke the milligrams Brands, Inc., cigarette. advertised In re American (1971). F.T.C. 255 against
It apparent complaint that the American only at used particular advertising Brands was directed The company. only order forbade American claims, Brands from the reduced tar and autho- making only rized American Brands use “low tar” descriptors if only accompanied by of tar and conspicuous disclosures nicotine content. The order be reasonably cannot viewed Indeed, as directing use it descriptors. prohib- ited their use unless certain conditions were met. No reference whatever is made or descriptors “light” used “lights,” facts, therefore, as PMUSA. The plain demonstrate no basis to conclude that is a like “lights” qualifying Thus, term to “low in tar.” if even other cigarette order, read published marketers consent could not they reasonably it specifically conclude autho- any rized descriptors other than tar” “low or “lower tar.” Nor could they agreed conclude resolution of the Commission’s claim against American Brands was anything other than the of a compromise disputed claim. not, It be, was and did not purport regulation rule or permitting cigarette entire industry to use these other any descriptors.
Similarly, 1995 consent order was entered after the FTC filed a complaint alleging that American Tobacco Company deceptive committed unfair and or prac- acts tices in advertising its Carlton of cigarettes. brand The complaint alleged the advertisements claimed that 10 packs Carltons contained less tar than one of five pack competing alleged that, brands. Commission truth, get consumers would not less tar by smoking packs of Carltons because of the behavior of compensa- *120 order, American As 1971 consent smoking. in the tory agreement into an settlement entered Tobacco it the law. admitting without had violated purposes, entry of an order forbid- American Tobacco consented representa- disputed unless ding representations and reliable were true as confirmed competent tions order further that provided scientific evidence. The 1995 nicotine of American ratings of tar and comparison and the of cigarette ratings competing brands Tobacco’s brands, respondent’s or representation with without “low,” “lower,” in either tar or or “lowest” brand is consent nicotine, deemed violations of the would not be use of the Specifically, order under certain conditions. if Tobacco did was not forbidden American descriptors pack or depict single cigarette more than a visually not In re American comparative of its and brands. (1995). Co., 119 Tobacco F.T.C. order, the order
Like the 1971 consent 1995 consent “light” to the terms or made no reference whatever tár” in 1995 order is The reference to “low “lights.” that term not a authorization to use clearly Commission of brands only comparisons terms. It refers or similar consent descriptors. use The 1995 with or without of such American disputed against a claim merely order resolved from Company arising alleged advertising false Tobacco cigarettes. Competitors of of one brand particular order for might Tobacco look Company American the Com- guidance concerning advertising practices what could deceptive, or but not may deem unfair mission were any descriptors conclude that the use reasonably complaint order. authorized specifically particu- use of American Tobacco’s question did not even that American Instead, it contended descriptors. lar Thus, claim was untrue. comparative Tobacco’s case, in this forbade conduct at issue consent order descriptors “low on conditioned use of tar” only more than using Tobacco’s forbearance American of its brand versus or single cigarette pack of a depiction brand. any other cigarette pack a single consent orders dealt Both the 1971 and 1995 *121 to the FTC the Commission violate conduct deemed the par- the force of law as to only Act. The orders have agreements—American into the settlement entering ties most, At the Company. American Tobacco Brands and attitudes toward may orders be of Commission predictive stated, those in future cases. advertising practices Simply an in- reasonably consent orders cannot be deemed be the use of particular authorization for dustrywide specific descriptors. advertising not closed certainly the FTC has
Equally important, cigarette advertising. on the issue of deceptive book poli- it comment on whether its sought public regarding testing descriptors cies methods and use should be At the agency’s request, revised. National (NCI) and, in Cancer Institute studied issues 13. The NCI published Monograph November convincing ciga- concluded there was no evidence that rettes in tar and nicotine reduced the disease yield lower a 13 was critical population Monograph burden on basis. and use of industry testing practices comparative its Peterman, FTC, to Dr. at the descriptors. According trial, time of its evaluating change poli- was whether of the The light ongoing cies NCI’s conclusions. indicate to industry competitors review should cigarette descrip- on the use of agency policy comparative was, remains, in a tors state of flux. why
The illustrates as foregoing policies, opposed statutes, cannot be published regulations formal meaning deemed to have the force of law within the 10b(l). legislative purpose exemption section 10b(l) from liability section is to shield defendants authorized That specifically purpose conduct law. not served if discernment of what is forbidden and what is authorized rests on the shifting sands of ever-changing and evolving agency A statute or policy. published regula- tion, on hand, the other remains in effect unless formally repealed. Policy can change be effected simply by an agency decision to commence an enforcement proceeding. Thus, consent orders enforceable only against parties to an enforcement proceeding are not laws administered by 10b(l). federal agency within the meaning of section Accordingly, I agree with the trial court that defendant 10b(l) did not establish its section affirmative defense. issue, On a different I am compelled to respond to Justice Karmeier’s argument that plaintiffs did not prove damages. Justice Karmeier observes that plaintiffs cited no authority permitting opinions of Internet survey respondents to establish actual damages under Consumer Fraud Act because the representative plaintiffs have not been harmed in the way survey respondents *122 claimed they would be in answering the survey hypo theticals. 219 Ill. 2d at (Karmeier, J., 278-79 specially J.). concurring, joined by Fitzgerald, The Internet survey was admitted in evidence during the testimony of Dr. Co hen, a credentialed survey who expert, validated the survey. Dr. Cohen testified that the Knowledge Networks survey was and “proper” represented “appropriate ways of gathering information from smokers via survey Dennis, method.” Dr. who conducted the survey, highly credentialed in survey research practices and was recognized the by trial court as a qualified and experi enced expert in survey research.
On appeal, defendant has not challenged the trial court’s qualification of Dr. Dennis as an expert, nor could it legitimately question qualifications. his At the time of trial, the Viscusi, defendant’s own damage expert, Dr. was working with Dr. Dennis on a government-sponsored research survey project the utilizing Knowledge Networks
337 survey methodology. Similarly, survey expert, defendant’s Mathiowetz, learned Dr. had coauthored a treatise techniques. Dr. Dennis concerning survey Admittedly, subjected Dr. Dennis was to extensive cross-examination, his challenged conclusions were witness, by expert defendant’s Dr. Mathiowetz. Nonethe less, the record no a pretrial request Frye reveals for on the issue of of the hearing general acceptance Knowledge survey methodology. Frye Networks See v. (D.C. 1923). States, United Cir. Although F. moved regard defendant to strike Dr. Dennis’ testimony ing survey on foundation and Donaldson no grounds, to challenge general of his acceptance survey methods Thus, was enunciated record. no coherent requisite challenge general of the acceptance survey method either in trial or in appears record Frye defendant’s briefs. issues are reviewed under an abuse of discretion standard. Donaldson v. Central Il (2002). Co., linois Public Service 2d Ill. Ac cordingly, there is no basis the record to conclude the trial court abused its discretion in admitting the Knowl edge Networks survey because of its authentication credentialed witnesses defendant’s failure lodge a sufficient challenge general acceptance survey method.
Thus, in addition to the points asserted Justice I Freeman, conclude that 10b(l), neither section nor the admission the Knowledge survey, Network provides basis for trial reversing Therefore, court’s judgment. I respectfully dissent.
JUSTICE joins FREEMAN in this dissent.
Dissent Upon Denial of Rehearing FREEMAN, JUSTICE dissenting: petitioned Plaintiffs for rehearing this case. may have judgment court’s this Because I believe petition of the erroneous, from the denial I dissent been rehearing. for
I matter, correctly question plaintiffs preliminary As a Plaintiffs decision. value of this court’s the precedential 15, 2005, judg- in the December that no rationale observe words, there In other of votes. majority ment received a the majority opinion—except a holding by no was i.e., voted for cause, justices four of the disposition reversal. that PMUSA’s holding opinion,
Justice Garman’s
10b(l) of the Con
under section
exempt
was
conduct
505/10b(l) (West
(815
1998)), was
Act
ILCS
sumer Fraud
Karmeier, joined by
McMorrow. Justice
by Justice
joined
with Justice
agree
specifically
did not
Fitzgerald,
Justice
10b(l)
2d at 275
219 Ill.
holding.
section
Garman’s
J.,
joined by Fitzgerald,
(Karmeier,
concurring,
specially
J.) (“I
circuit court should
the
judgment
agree
is not
view, however, that conclusion
In my
be reversed.
10b(l)
of section
applicability
on
dependent
Act”).
language
point,
“On this
Fraud
Consumer
can use
opinion
a divided
when it delivers
this court uses
where
concurrence’
one
‘special
A
some clarification.
and the judg
joins
opinion
Justice
both
authoring
authoring Justice
where the
is one
ment. A ‘concurrence’
Cruz, 162
v.
People
the court.”
judgment
joins only
(1994)
J., dissenting, joined
(Heiple,
n.1
Ill. 2d
C.J.).
expressly
case, Justice Karmeier
Bilandic,
In this
major
result reached
“I
concur in the
fully
states:
added.)
(Karmeier, J.,
II In their petition for rehearing, plaintiffs contend that Justice Garman’s plurality opinion misap overlooked or plied points. four critical Plaintiffs first contend that the plurality failed to properly apply the canons of statutory and, construction accordingly, misinterpreted section 10b(l) (815 505/10b(l) Consumer Fraud Act ILCS (West 1998)). Specifically, plaintiffs that Justice argue Garman’s plurality opinion apply fails to section 11a of Act, the Consumer Fraud which requires court to liber (815 (West ally construe the Act 1998)), ILCS 505/1la and overlooks the canon of statutory construction that (see in a exceptions statute should strictly be construed Mid-South Chemical Corp. Carpentier, v. 14 Ill. 2d (1958) (and therein)). cases cited
Plaintiffs also contend that Justice Garman’s plural- the de novo ity review, opinion misapplied standard of mischaracterized the standard it actually review utilized. Justice Garman’s plurality opinion concluded that de novo review is because the appropriate actions of the FTC with to the use of the respect disputed descrip Therefore, tors are a matter of public record. reasons the 10b(l) plurality, section is being applied essentially undisputed plurality facts. The concludes that “we need not evaluate credibility of witnesses or weigh conflict ing testimony to determine whether the actions of the *125 have FTC resulted in authorization specific of the use of these terms cigarette manufacturers.” 219 Ill. 2d at J.). (Carman, J., McMorrow, joined by However, plaintiffs argue Justice Garman’s plurality opinion did precisely this.9
Plaintiffs next contend that Justice Garman’s plural- ity opinion heavily relied on the testimony defendant’s Peterman, expert witness Dr. at yet same time ignores his testimony on cross-examination. Plaintiffs argued further that Justice plurality Garman’s opinion overlooked PMUSA’s “Petition for Rulemaking” filed 18, with the September 2002, FTC on which it submitted as an exhibit at trial. witness, PMUSA’s own trial Nancy Lund, testified on direct examination that PMUSA filed petition this FTC for the following purpose: “There were kind of three areas guid- where we asked for itself, method; ance. One inwas the measurement the FTC plurality opinion upon 9Justice heavily Garman’s relies testimony expert Viewing of defendant’s witness Dr. Peterman. totality of testimony, Dr. Peterman’s both on direct and cross- examination, relating it sup- is clear that the facts to the FTC’s posed “specific highly authorization” of the fraud in this case were disputed by parties. plurality opinion Justice Garman’s selectively weighs testimony, crediting Dr. Peterman’s his testimony ignoring testimony on direct examination and his on cross-examination. Such action on review is inconsistent with a de novo standard of review. talking
one was about disclaimers about descriptions what about actually cigarette yields and low tar all about; and last one some guidance descriptors, was on as lights such and ultra lights.” Plaintiffs argue petition this FTC and Lund’s testimony, trial in corresponding PMUSA acknowledged litigation that, this as of the FTC had never authorized PMUSA’s use of the “lights” terms Indeed, “lowered tar and nicotine.” as plaintiffs reasoned petition if rehearing, the FTC had previously authorized PMUSA to use the disputed descriptors as part of the consent decrees it had entered into with other tobacco companies 1971 and then there would have been no reason for PMUSA to petition FTC for “guidance” on rulemaking the use of very these same descriptors.
Plaintiffs also contend that
the plurality acknowl
edged PMUSA’s intentional
fraud.
Plaintiffs rehearing, that Justice on their contention focuses which scope misinterprets opinion plurality Garman’s voluntary inform us that Plaintiffs orders. consent agree- plainly a “consent held that has the FTC itself binding only party] [with Com- between one ment Corp., party].” [that 118 F.T.C. Trans Union mission and 2001). (D.C. (1994), Cir. 245 F.3d aff’d, n.18 voluntary according plaintiffs, consent an FTC Thus, party. by a third as a shield be used order cannot plaintiff that the 1971 informs us Indeed, further plurality upon Garman’s order, which Justice consent opinion FTC rule between relies, terminated was voluntary agreement— party to that the actual FTC and plaintiffs: According “Therefore, it Brands. American upon rely possible this terminated for this Court is not concerning party conduct different a different order engage Philip ‘specific Morris to authorization’ as litigation.” in this at issue fraud the intentional persuade significant me to are These contentions rehearing. vote for
Ill petition supplement plaintiffs’ for rehear- to their misinterpre- regarding ing, pursuing contention their plaintiffs: voluntary orders, consent of the FTC tation
343 (B) and (A) primary jurisdiction, of the doctrine invoke implement court could which this a means suggest the doctrine.
A jurisdic name, primary the doctrine of “Despite It is a com jurisdictional questions. involve tion does not and coordinate administrative doctrine used to mon law Chippewa Band Red Lake decisionmaking.” judicial of (8th 1988). 474, Cir. “Nor Barlow, F.2d 476 v. 846 Indians to the applies the doctrine it questioned can be Commonwealth, v. Services Ass’n Agricultural states.” (1970); 840, 843 accord 506, 509, 171 S.E.2d 210 Va. (2000) Comm’n, 421, 2d 428 191 Ill. v. Industrial Segers is not techni jurisdiction of (“noting primary doctrine rather a jurisdiction ques of at all but cally question tion of self-restraint and relations between judicial citing Peoples agencies”), courts and administrative Comm’n, 142 Ill. App. v. Illinois Commerce Energy Corp. 1029, Flo-Sun, Kirk, 2d 917, (1986); 3d Inc. v. 783 So. (Fla. 2001) (“It to note that important is also 1037-38 the doctrine is a application primary jurisdiction mat deference, comity, subject policy matter of Corp., v. United States Steel jurisdiction”); ter State (1976) (“The 374, 380, 316, 319 Minn. 240 N.W.2d is judicially primary jurisdiction created doctrine orderly concerned with the and sensible coordination courts”). agencies the work of jurisdiction The doctrine of primary originally cognizable in the “applies where a claim is courts, play into enforcement of and comes whenever which, under a requires claim the resolution of issues scheme, placed special have been within the regulatory body; in such a case the competence of an administrative is- pending referral of such judicial process suspended body its views.” United to the administrative sues Co., 59, 64, 352 U.S. 1 L. Ed. States v. Western R.R. Pacific (1956). 161, 2d 77 S. Ct. Accord Port Marine Ass’n v. Boston Terminal Rederi *128 of Transatlantic, 62, 68, aktiebolaget 400 U.S. 27 L. Ed. 2d (“When (1970) 203, 209, 203, 91 S. 208 there Ct. is a action, basis for judicial independent agency of proceed ings, route may courts the threshold decision as to charged certain issues the agency with primary responsibility governmental for supervision control of the particular industry involved”); or activity Kellerman v. MCI 428, Telecommunications 112 Ill. 2d Corp., 444-45 (1986). recognized that long ago Courts coordination judicial between and machinery traditional administra agencies tive if necessary “was consistent and coherent policy emerge. were to [Citation.] The doctrine of primary jurisdiction key judicial has become one of the switches through Boston, which this current has Port passed.” of 68, 208-09, 400 L. U.S. at Ed. 2d at 91 S. 27 Ct. at 208. jurisdiction rationale for the doctrine of primary has been as described follows: “ raising ‘[I]n cases issues of not within fact the conven- experience judges
tional of requiring or cases the exercise discretion, by agencies Congress administrative created subject for the matter regulating passed should be over. This though they is so even the ap- facts after have been praised by specialized competence as premise serve for legal consequences judicially Uniformity to be defined. and consistency regulation in the of business entrusted to a secured, particular agency are limited and the functions of by rationally exercised, judiciary by review the are more preliminary for ascertaining interpreting resort underlying legal agencies circumstances issues that are by equipped specialization, insight better than courts gained experience, by more through proce- flexible ” Weinberger Pharmaceuticals, Inc., dure.’ v. Bentex 412 645, 654, 235, 242, 2488, U.S. 37 L. Ed. 2d 93 S. Ct. 2494 (1973), States, Far East v. United quoting 342 Conference 570, 574-75, 582, 576, 492, U.S. 96 L. 72 Ed. S. Ct. (1952). 64-65,
Accord
Pacific,
Western
U.S. at
L. Ed. 2d at
132,
165; Kellerman,
In their to their for supplement petition rehearing, this plaintiffs request court solicit FTC’s views the issue voluntary on of the 1971 and 1995 consent court, however, A orders. this majority apparently request believes that this should unanswered go with no response to the made in compelling legal arguments sup- my it. Unlike believe port colleagues, I in their plaintiffs supplemental petition rehearing *129 have legitimate questions raised this about court’s deci- of sion the denial their request merits some form of discussion.
I note plaintiffs that have made this request for the time, first court, before this in their for rehear petition ing. could Consequently, we deem issue procedurally this 341(e)(7) (“Points forfeited. See 188 Ill. 2d R. not argued are waived and shall not be the reply brief, raised in argument, oral on petition or for rehearing”). Indeed, since the doctrine of primary jurisdiction does not refer to the subject matter jurisdiction court, of a primary jurisdiction is an that issue can be or waived forfeited. Carrier, Gross Common Inc. v. Baxter Healthcare Corp., (7th 703, 51 F.3d 1995); Gas, 706 Cir. & Kendra Oil Inc. Homco, (7th Ltd., v. 240, F.2d 1989); 879 242 Cir. Segers, 191 Ill. 428; see, Airlines, 2d at e.g., Northwest Inc. v. County Kent, 355, n.10, 510 U.S. 366 127 L. Ed. 2d of (1994) 183, n.10, 195 855, 114 S. Ct. 863 n.10 (declining invoke, sua sponte, primary jurisdiction doctrine where it). parties failed to or argue brief However, the rule principle waiver is a of administra- 346 it not a convenience, to the parties; an admonition
tive
limitation
any
upon
requirement
jurisdictional
this court
regard,
a
court.
this
reviewing
of
jurisdiction
in further
may,
a
court
reviewing
has
recognized
result and to
just
responsibility
provide
ance of its
over
body
precedent,
sound and uniform
maintain a
from the adver
of waiver that stem
ride considerations
C.R.H.,
263,
In re
Ill. 2d
our
163
system.
sarial nature of
Raben,
v.
223,
(1967);
224-25
Hux
(1994);
38 Ill. 2d
366(a)(5).
case,
In this
for the fol
155 Ill. 2d R
accord
reasons,
outweighs plaintiffs’
responsibility
this
lowing
Hospital,
Dillon v. Evanston
See,
e.g.,
default.
procedural
therein).
(2002) (and
483,
cases cited
199 Ill. 2d
504-05
is a
principle
our rule of
default
procedural
As
courts,
similarly,
for the
administrative
convenience
for the proper
“exists
primary jurisdiction
doctrine of
and administra-
judicial
between
power
distribution
of the parties.”
and not for the convenience
tive bodies
Co., Massachusetts
v. Boston Gas
Distrigas
Corp.
1982).
(1st
may
a court
1113,
Accordingly,
Cir.
F.2d
For
sponte,
sua
examine,
applies.
the doctrine
whether
Pacific,
63, 1 L. Ed. 2d at
Western
352 U.S. at
example,
131-32,
Supreme
at
the United States
77 S. Ct.
jurisdic-
the issue of
obliged
primary
felt
to address
Court
challenged
aspect
had
tion, although
party
neither
Indeed, “courts often invoke
rulings.
court’s
of the lower
de Maldo-
their own motion.” Fontan
the doctrine on
Costarricenses, S.A.,
Aereas
936 F.2d
nado v. Lineas
(1st
1991)
Syntek
cases);
see also
(collecting
Cir.
*130
Inc.,
F.3d
Microchip Technology
Co. v.
307
Semiconductor
(9th
2002)
did
parties
(“Although
n.2
Cir.
we
do
may
primary jurisdiction,
of
question
not raise
v.
Gas
Empire
Line Co.
Pipe
Williams
sponte11)',
so sua
1996)
(10th
(same); Red
1491, 1496
Cir.
Corp.,
76 F.3d
Band,
(addressing
primary
Lake
F.2d at 475-76
for
in petition
for first
time
issue raised
jurisdiction
& Ohio
Terminal R.R. Co.
Chicago
Baltimore
rehearing);
(7th
Ltd.,
v. Wisconsin Central
404, 411
154 F.3d
Cir.
1998)
that court “would reheve the
(acknowledging
par-
if primary jurisdiction
ties of their waiver”
doctrine were
“of
to administration
importance”
transcendent
(not-
Carrier,
statute); Gross Common
Given the foregoing, I do not believe that plaintiffs’ procedural default would serve as bar to this court’s of its granting request to address the primary doctrine of jurisdiction. Turning to the merits of plaintiffs’ argu- ments, I agree with plaintiffs that the doctrine applies the present case. It is clear the reasons for the doctrine are present. Justice plurality Garman’s opinion purports resolve this case by construing and applying 10b(l) (815 section of the Consumer Fraud Act ILCS 505/10b(l) (West 2000)). The opinion attempts the fol- lowing explanation: 10b(l)
“Operation
dependent
of section
is not
on the intent
Rather,
Congress.
it is
intent
Il
dependent on the
Assembly
linois
regulated
General
to allow
entities to
engage in
might
commercial conduct that
otherwise be al
leged
deceptive
to be fraudulent or
li
without risk of civil
ability, so long
specifically
as that content is
authorized
regulatory body.”
the
conduct of PMUSA was
autho-
rized”
the
claim,
FTC. Plaintiffs’ Consumer Fraud Act
originally cognizable
requires
in
court,
the circuit
issue, i.e.,
resolution of an
the existence and extent of
“specific
the FTC’s
authorization”
conduct,
of PMUSA’s
special competence
which lies within the
of the FTC. See
WesternPacific,
64,
132,
application
purposes
primary
in this case. The
(1)
jurisdiction doctrine are to:
ensure desirable unifor
mity
types
in the determination of certain
of administra
(2)
questions,
promote
tive
and
resort to administrative
agency experience
expertise
and
where the court is
presented
question
experi
with a
outside its conventional
R.R.,
ence. Western
64,
If,
opinion contends,
as Justice
plurality
Carman’s
the
has been
with
actively
complex
FTC
concerned
the
cigarette
issues that
policy
advertising presents,
then
prudential
judicial
should counsel
restraint
referral of
this specific dispositive
specialized
issue to the
agency
that
intended to
with this
Congress
deal
issue—the FTC.
generally
See
v.
Co.,
Hansen
& Western Ry.
689
Norfolk
(7th
1982).
F.2d 707
Cir.
The FTC should first address
this issue to
the possibility
avoid
of a multitude
of
interpretations
several
states
same FTC
voluntary
orders,
consent
and to achieve a uniform
administration of FTC
See
policy.
Agricultural Services
Ass’n,
509,
Indeed, a question of how to an interpret administra- tive order agency sort of determination “classically to agency committed discretion under the doctrine of primary v. jurisdiction.” United Zapp Transportation 1984). (7th Union, 617, 727 F.2d Cir. The denial of plaintiffs’ referral request appears rejec- constitute tion of “orderly and sensible coordination of the work of Minn, (United agencies Steel, courts” States at 380, 319), 240 N.W2d at that and indicates this court is to the emergence insensitive of “consistent and coherent policy.” Boston, Port 400 U.S. at Ed. 27 L. 2d at 208, 91 Ct. at S. 208.
B refer- implement this court can that suggest Plaintiffs amicus curiae to submit an the FTC soliciting ral FTC, an through plaintiffs I agree brief. to the issues without definitively amicus brief, speak can court would primarily this only question delay. undue when it it intended to do what simply the FTC is ask orders. voluntary consent and 1995 into the 1971 entered fully and can be answered question “this I believe more elaborate If participation. amicus through quickly can so agency required, are agency proceedings Further, 1119. Distrigas, 693 F.2d at inform us.” Indeed, a requests. referral accommodates regularly leads to an site, www.ftc.goy, agency’s to the Web visit amicus briefs. of their sample on-line examples common has revealed two research My more specific. and one general one requests: referral v. in Cole referral is found general of a example An 2004): (7th Inc., 389 F.3d n.2 Cir. Capital, U.S. the Federal court invited argument, “After oral charged with (‘FTC’), agency Trade Commission *133 Act], to Reporting [Fair the Credit administering FCRA the court’s accepted The curiae. FTC file a brief as amicus the FTC its thanks to invitation, expresses court and the it rendered.” has for the assistance fol- form of the took the invitation Circuit’s The Seventh office: court’s clerk’s through the order issued lowing will have issues that presents case “Because this of the Fair Credit the enforcement effect on significant Com- the Federal Trade Act, court invites the Reporting If the amicus curiae. Commission file a brief as mission to 45 invitation, be filed within brief should the accepts our pages. 30 not exceed The brief should days this order. appreciate the Commission’s also The court would whether as to court, practicable, soon as the as informing ef- can be This notification file such a brief. plans it to the Clerk. through a letter fected invitation, the court’s accepts If the Commission
351 addressing mat- briefs may supplemental reply file parties Any reply brief. such in the Commission’s presented ters be length shall in pages not exceed should brief brief of the Commission’s days filing filed within 20 this court.” ac- the FTC acknowledged opinion, in its As the court brief, aided which court with an amicus commodated the in its decision. reaching the court in Dis- general request of a found example Another Appeals First Circuit concluded trigas, where the Court follows: opinion as original its docket, while shall hold case on therefore this “We to the instructing copy opinion of this the clerk send a request FERC along with this court’s SolicitorGeneral Commission] amicus Energy Regulatory file an [Federal may file This parties responses The to FERC’sbrief. brief. as is appropriate.” court will then take such further action 1119. Distrigas, F.2dat opinion, captioned
The next section of the “MEMORAN- ORDER,” acknowledged receipt DUM AND brief, and of the case. Distri- agency’s disposed amicus 693 F.2d gas, at 1119. amicus general request contrast to a court’s for an
brief,
request
the form of the
can be very specific,
example,
Phillips
a certified
For
in
resembling
question.
(Fed.
2004),
v.
F.3d 1382
Cir.
the United
Corp.,
AWH
for
Federal Circuit denied
Appeals
States Court of
banc.
rehearing,
rehearing
for
but allowed
en
petition
The court invited amicus briefs from several administra-
FTC,
to address
agencies, including
specific
tive
seven
F.3d
joined
at 1383.
FTC
questions. Phillips,
ultimately
amicus
and the court
decided the
an
brief
(Fed.
Phillips
Corp.,
case.
v. AWH
With I have plaintiffs’ petition rehearing. lowed also would ad- to file an brief order to requested amicus *134 the FTC specifically following question: dress the Did specifically (i.e., authorize Philip Morris’ conduct the use of or “Lights” the terms “Lowered Tar and Nicotine” on the packages of Marlboro Lights Lights Cambridge 2001) from through February 8, October 1973 through any of the following FTC actions:
(1) the 1971 consent order between the FTC and Inc.; Brands, American
(2) the 1995 consent order between the FTC and Company; American Tobacco and/or (3) voluntary agreement? the 1970 Further, was Morris’ Philip use “Lights” and/or “Lowered Tar and Nicotine” on the packages Marl- Lights boro or Cambridge Light cigarettes, governed by thereby “in compliance” 1971 and 1995 consent orders?
Further, invitation, had accepted the FTC I would have held this on case our until docket we could have decided this appeal with benefit of the experi- FTC’s ence and expertise.
IV significant points Plaintiffs raise which this court has overlooked or misapprehended. suggest Plaintiffs also reasonable and generally means accepted by which this court can obtain the FTC’s of that agency’s view own consent adoption orders. The this approach would obviously be of great benefit to this court in present appeal. Further, such a basic to the request addressed (1) FTC would indicate this court: is cognizant of uniformity need the determination of adminis- (2) issues this, trative such as is sensitive to the need for prudential judicial Regrettably, restraint. however, the court appears finality more concerned with than reaching possible the most informed decision based on highly pertinent—if dispositive—information from very federal at agency whose consent orders are heart of Justice Carman’s denial analysis. court’s *135 of this speak for does not well petition rehearing ultimately will be disappointing, prove court. It is embarrassing. History judge. will be reasons, I foregoing For dissent from the court’s petition rehearing. denial KILBRIDE in this joins dissent. JUSTICE
(No. 9922 1 ILLINOIS, THE PEOPLE OF THE OF STATE Appel- lee, KOLTON, v. MARIAN Appellant.
Opinion 22,May Rehearing March denied 2006. filed 2006 .