By Jonathan Stempel
July 29 (Reuters) – A divided U.S. appeals court ruled on Wednesday that British American Tobacco must face class-action litigation claiming it misled consumers into believing Natural American Spirit cigarettes were safer than other cigarettes and contained no additives.
The 2-1 decision by the 10th U.S. Circuit Court of Appeals in Denver included a dissent from a Republican-appointed judge who said the case “likely warrants Supreme Court review,” after the majority let consumers sue Reynolds American — the main U.S. subsidiary of British American — and its units, R.J. Reynolds Tobacco and Santa Fe Natural Tobacco, as a group for damages.
A spokesperson for the tobacco companies declined comment, saying they do not discuss pending litigation. Lawyers for the consumers did not immediately respond to requests for comment.
Consumers from 12 U.S. states sued over cigarettes whose labels contained terms such as “100% Additive-Free,” “Natural” and “Organic.”
They claimed to have overpaid because the labels falsely conveyed that the cigarettes were “safer and healthier to smoke” than competing cigarettes, despite a disclaimer that the absence of additives “does NOT mean a safer cigarette.”
Consumers who bought menthol cigarettes pursued separate class action claims, on the theory that menthol is an additive.
The 12 states are California, Colorado, Florida, Illinois, Massachusetts, Michigan, New Jersey, New Mexico, New York, North Carolina, Ohio and Washington.
‘SAFER CIGARETTE’ THEORY PREMATURELY REJECTED
In a 423-page decision in 2023, U.S. District Judge James Browning in Albuquerque, New Mexico, declined to certify a 12-state class premised on the “safer cigarette” theory, saying individual claims would overwhelm class claims.
He did certify a class action for consumers in eight states — California, Colorado, Florida, Illinois, New Jersey, New Mexico, New York and North Carolina — premised on the “menthol” theory, saying individual inquiries weren’t needed and damages were easier to prove.
Wednesday’s decision upheld certification of the menthol claims, and set aside the denial of certification of the safer cigarette claims.
Circuit Judge Veronica Rossman said Browning wrongly concluded that the damages model for the 12-state class violated a 2013 U.S. Supreme Court decision to decertify an antitrust class action by Comcast cable TV subscribers. She also said the judge prematurely addressed the merits of the disclaimer’s effectiveness.
“Whether a reasonable consumer would have interpreted the labels to mean something other than health benefits is a factual dispute about how and whether the label was misleading,” Rossman wrote. “At the certification stage, (courts) must focus on how — not whether — plaintiffs will prove their claims.”
The appeals court rejected the defendants’ argument that it would be unfeasible to administer the proposed classes. It returned the case to Browning for further proceedings.
DISSENT WARNS OF WEAPONIZATION
Circuit Judge Timothy Tymkovich dissented, saying neither class should have been certified.
He said the damages model for the safer cigarette claims didn’t show how much consumers overpaid because they read the labels, and opened the door for “uninjured” consumers who never read the labels to collect.
“Courts must be vigilant in ensuring that [a federal class certification rule] is not weaponized with classes that are overinflated or only theoretically exist,” Tymkovich wrote.
Tymkovich also said more clarity from the Supreme Court on how administrative feasibility applies to class actions would resolve lower court confusion that could encourage plaintiffs to shop around for class-action-friendly courts.
Rossman was appointed to the appeals court by former Democratic President Joe Biden. Tymkovich was appointed by former Republican President George W. Bush. The other judge in the majority, David Ebel, was appointed by former Republican President Ronald Reagan.
(Reporting by Jonathan Stempel in New York; editing by David Gaffen)
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