Federal Judiciary

Second Circuit Tosses Out $800 Billion Class Action by Light Cigarette Smokers

By Robert Loblaw

McLaughlin v. American Tobacco Company, 06-4666 (2^nd Cir., April 3, 2008)

In a major decision, a panel of the Second Circuit has tossed out an $800 billion RICO class action against big tobacco. The plaintiffs are current or former smokers who allege that for almost fifty years the tobacco companies deceived them into paying more for light cigarettes on the belief that they were a healthier option. The district court certified their claims as a massive class action, but the panel disagrees.

The Second explains that to establish causation, each plaintiff must show that he or she relied on misrepresentations made in the tobacco companies? marketing campaigns. District Judge Jack Weinstein?affectionately known as “Reversible Jack”?applied a variation of the fraud on the market theory used in securities class actions, reasoning that the tobacco companies? longstanding campaign of disinformation amounted to a fraud on the market. But the Second rejects this analogy. The Court explains that a smoker?s choice of cigarette is too personal a decision to give rise to a blanket presumption of causation. While some smokers may have bought into the “light is healthy” campaign, others may have preferred the taste of lights, and still others may have smoked lights for the ”cool” factor. Indeed, the theory that smokers chose lights for health reasons is belied by the fact that sales of light cigarettes have remained robust even though we now know the truth about their so-called health benefits.

The panel also takes issue with the district court?s analysis of the injuries alleged by the class and the intractable problem of how to apply RICO?s four-year statute of limitations to the entire class of light cigarette smokers. All of this means that any smokers who want to pursue RICO claims will have to go it alone. It could still happen, but it will be a lot less daunting than a market-wide class action. 

So big tobacco companies can breathe a big sign of relief. The plaintiffs? Well, let’s just say they are just lucky to be breathing at all. 

Full post as published by Decision of the Day on April 03, 2008 (boomark / email).