$289bn Tobacco Ad Fraud Lawsuit Can Proceed, Rules US Judge

28 May 2003

America’s tobacco firms are likely to face trial for alleged marketing fraud after a judge dismissed attempts to scupper a government lawsuit.

In a major setback to the industry, Judge Gladys Kessler of Washington’s US District Court ruled that claims of deceptive advertising cannot be removed from a massive suit from the Justice Department.

Federal prosecutors are seeking $289 billion (€243bn; £176bn) in damages from the nine major tobacco firms plus two non-profit organisations. The defendants are accused of lying to consumers about the perils of smoking and targeting children in their ads. Such practices, the government argues, have been taking place for half a century and continue today [WAMN: 19-Mar-03].

In a desperate bid to avoid such massive damages – calculated as the ‘ill-gotten gains’ made by tobacco firms from the 33 million Americans who started smoking as minors after 1971 – the industry sought to have the key ad fraud claims removed from the suit.

It argued that regulation of advertising and marketing is the remit of the Federal Trade Commission, therefore the Justice Department cannot include such accusations in a suit based on the Racketeer Influenced and Corrupt Organizations Act.

Launched under the Clinton administration, the suit is not due to reach court until September 2004. Judge Kessler’s decision increases the probability the case will make it that far.

“The chances are now only slight that the tobacco companies can blow up this case before trial through some sort of procedural ruling,” commented Professor Richard Daynard of the Northeastern University School of Law. “This is a powerful case. Any fantasy that Judge Kessler would be sweet-talked into dropping it is gone.”

Data sourced from: The Wall Street Journal Online; additional content by WARC staff