Pearson v. Philip Morris, Inc.
358 Or. 88, 2015 Ore. LEXIS 752, 361 P.3d 3 (2015)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
For a class action to be certified, common questions of law or fact must predominate over questions affecting only individual members. When a claim requires proof of each class member's subjective state of mind, such as reliance on a misrepresentation and individual reasons for a purchase, individual issues are likely to predominate, making class certification inappropriate.
Facts:
- In the 1950s, public health concerns grew regarding the link between lung disease and tar and nicotine in cigarette smoke.
- The Federal Trade Commission (FTC) developed a standardized machine-based method for measuring tar and nicotine yields, while acknowledging the method could not measure what an actual human smoker inhales.
- In 1971, Philip Morris introduced Marlboro Lights and advertised them as having 'lowered tar and nicotine' based on the FTC's testing method.
- Marlboro Lights achieved lower machine-measured yields through perforated filters that diluted the smoke with air, a design that could be easily defeated by human smokers.
- Smokers could defeat the design by covering the filter holes, taking deeper or more frequent puffs, or smoking more of the cigarette, behaviors known as 'compensation' or 'titration' often used to satisfy nicotine cravings.
- Philip Morris was aware of the 'compensation' and 'titration' phenomena and understood that many smokers would likely not receive the benefit of lowered tar and nicotine.
- Until 1990, Philip Morris did not include a disclaimer on its cigarette packages explaining that tar and nicotine delivery could vary depending on how the cigarette is smoked.
- Plaintiffs were individuals who purchased Marlboro Light cigarettes in Oregon during the period from 1971 to 2001.
Procedural Posture:
- Plaintiffs sued Philip Morris in an Oregon trial court under the state's Unlawful Trade Practices Act (UTPA).
- Plaintiffs moved to certify a class of approximately 100,000 individuals who purchased Marlboro Lights in Oregon between 1971 and 2001.
- The trial court denied the motion for class certification, finding that questions affecting individual members predominated over common questions.
- Plaintiffs appealed the denial to the Oregon Court of Appeals.
- A divided en banc Court of Appeals reversed the trial court, holding that common issues did predominate, and remanded the case.
- Philip Morris (defendant) petitioned for review, which the Supreme Court of Oregon granted.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a claim under Oregon's Unlawful Trade Practices Act (UTPA) based on an alleged misrepresentation about 'light' cigarettes require so many individualized inquiries into each class member's reliance, understanding, and potential statute of limitations defenses that common issues fail to predominate, thus making class certification improper under ORCP 32?
Opinions:
Majority - Linder, J.
Yes. A claim requiring proof of each class member's subjective reliance on an alleged misrepresentation involves individualized inquiries that predominate over common issues, making class certification improper. The court reasoned that to establish causation for their UTPA claim based on a refund theory, plaintiffs must prove that each class member relied on the 'lowered tar and nicotine' representation. This reliance is a subjective state of mind that cannot be presumed on a class-wide basis. The court found that defendant Philip Morris produced significant evidence showing that consumers purchase 'light' cigarettes for varied and sometimes irrational reasons, such as taste or brand loyalty, not just for perceived health benefits. Furthermore, the ambiguity of the representation and the long 30-year class period, during which public information about 'light' cigarettes became available, created a high likelihood of variation in class members' understanding and reliance. The court also held that defendant is entitled to challenge each individual's reliance and raise individualized defenses like the statute of limitations, which would require separate adjudications that overwhelm any common questions.
Concurring - Walters, J.
Yes. I concur with the majority's conclusion but write to emphasize the distinction between two types of ascertainable loss under the UTPA: 'diminished value' and 'refund of purchase price.' A claim for a refund of the purchase price, like the one pursued here, requires a plaintiff to show subjective reliance—that they would not have purchased the product but for the misrepresentation. This subjective element is what necessitates the individual inquiries that defeat predominance. In contrast, a 'diminished value' claim, based on the objective difference between the price paid and the product's actual market value, may not require proof of subjective reliance, although that theory failed in this case for other reasons. This distinction is important for future UTPA cases.
Analysis:
This decision significantly raises the bar for certifying consumer fraud class actions in Oregon, particularly those based on misrepresentation claims. By requiring rigorous proof that subjective elements like reliance can be adjudicated with common evidence, the court makes it difficult for claims involving varied consumer motivations, ambiguous representations, or long class periods to meet the predominance standard. The ruling reinforces the trial court's role as a gatekeeper in conducting a pragmatic, evidence-based analysis that goes 'behind the pleadings.' This precedent will likely lead to fewer certifications of consumer class actions where individual states of mind are central to the claim, forcing more plaintiffs to pursue claims individually.
