State of Vermont v. R. J. Reynolds Tobacco Co., No. S1087-05 CnC (Pearson, J., Mar. 10, 2010) [The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the accompanying data included in the Vermont trial court opinion database is not guaranteed.] STATE OF VERMONT CHITTENDEN SUPERIOR COURT CHITTENDEN COUNTY, SS. DOCKET NO. S1087-05 CnC STATE OF VERMONT v. R. J. REYNOLDS TOBACCO CO. FINDINGS OF FACT, CONCLUSIONS OF LAW, AND INTERIM DECISION ON LIABILITY “. I’m so tired I’ll have another cigarette, and curse Sir Walter Raleigh, he was such a stupid get!” 1 In this action brought by the State of Vermont seeking to impose liability for allegedly deceptive advertising used by Defendant R. J. Reynolds Tobacco Co. (“RJRT” or “Reynolds”) for its non-traditional Eclipse cigarette, 2 Reynolds has conceded the pharmacological basis for the insomniac smoker’s lament: nicotine is a powerful addictive substance, and the cigarette is essentially a nicotine delivery device which the smoker uses to ingest the necessary amount of nicotine that the individual smoker craves. Indeed, that premise, which tobacco companies have known for decades, 3 was one of the principal reasons behind RJRT’s development and marketing of the Eclipse cigarette. Because Reynolds knew that smokers are addicted to nicotine and attempts to quit smoking are difficult at best and rarely successful on the 1 st (or 2 nd or 3 rd ) try without medical aids and other support and assistance; and because it also knew, and now fully acknowledges that cigarettes are an inherently dangerous product — which, even when used properly and as directed, will result in unnecessary disease, bodily injury and harm, and even death — it sought to develop, and market a cigarette product for smokers who were concerned about their health but unable to quit, which could potentially result in a reduced risk to that smoker of contracting one (or more) of the most common tobacco-related diseases. Such a “potentially reduced exposure product,” or “PREP,” may well be the Holy Grail for cigarette 1 J. Lennon, “I’m So Tired,” White Album (Apple Records 1968). 2 The Eclipse heats, but does not actually burn the tobacco inside its otherwise traditional looking shell. The heated vapor carries the tobacco “taste,” and other chemical “smoke” components. 3 In other cases, tobacco companies, including RJRT, have denied that nicotine is in fact highly addictive, beyond just a psychological habit, and have until recently resisted evidence showing they have known for years about nicotine’s addictive properties. See, e.g., United States v. Philip Morris USA, Inc., et al., 566 F.3d 1095, 1119, 1127-28 (D.C. Cir., May 22, 2009) (civil RICO judgments affirmed against RJRT (and others) for fraudulent statements regarding health effects of smoking). “As early as 1963, Brown & Williamson’s [now owned by, and a subsidiary of RJRT] general counsel wrote a confidential memorandum stating: ‘We are, then, in the business of selling nicotine, an addictive drug effective in the release of stress mechanisms’.” Id. at 1127-28. makers and tobacco sellers facing ever-increasing regulatory restrictions, and a business model in which the product being sold inevitably results in the death of a significant number of customers and an otherwise shrinking customer base. 4 Although technologically feasible, 5 marketing such a product so that sufficient numbers of smokers would adopt it as their “usual brand” is, and was the much stiffer challenge for Reynolds, as it has (and had) been for other cigarette makers. Not only is nicotine maintenance an issue, but there are also “taste,” “mouth feel,” and “cigarette ritual” factors which must be considered and, at times, overcome to make the PREP acceptable to smokers who choose to keep smoking. To entice smokers to try Eclipse, RJRT decided that it would hav e to emphasize what it had concluded, after many years of testing and product development, were the potential health benefits of smoking Eclipse over traditional tobacco-burning cigarettes. Accordingly, in magazine ads, Eclipse packaging, and on-line websites devoted to Eclipse beginning in 2000 and expanded nationally in 2003, Reynolds essentially stated: The smoke from Eclipse contains far less of many of the components that have been linked to the risk of cancer and certain other smoking-related diseases. SCIENTIFIC STUDIES SHOW THAT, COMPARED TO OTHER CIGARETTES, ECLIPSE: ● May present less risk of cancer, chronic bronchitis, and possibly emphysema . THE BEST CHOICE FOR SMOKERS WHO WORRY ABOUT THEIR HEALTH IS TO QUIT. THE NEXT BEST CHOICE IS ECLIPSE. Reynolds relied on a panel of scientists it had assembled to vet the tests, studies, and other evidence backing up these statements, although the panel itself did not formally approve or disapprove the ads or marketing statements. The principal Reynolds print advertisement for the Eclipse at issue here, primarily used only in 2003-2004 and then withdrawn – the so-called “Scott ad” – is set forth below, and repeats the essential marketing message described above. 6 4 At least domestically, in the U.S. market, where the absolute number of smokers continues a slow, but fairly steady decline (despite some reported recent bumps in teenage smoking, at least in Vermont). In foreign markets, however, cigarette sales are reported to be strongly increasing. 5 Cigarettes are perhaps one of the most highly engineered, constantly tested, and precisely manufactured consumer products ever. There is very little that is still “natural” about the end product in packs and cartons in the locked cabinets at the supermarket and convenience store. 6 The * note on the ad reads as follows: “Eclipse is not perfect. For instance, we do not claim that Eclipse presents smokers with less risk of cardiovascular disease or complications with pregnancy. As everyone knows, all cigarettes present some health risk, including Eclipse.” 2 The controlling legal standard is clear. “[W]here advertising expressly or impliedly represents that it is based on scientific evidence, the advertiser must have that level of substantiation, and, in particular, must satisfy the relevant scientific community that the claim is true.” 7 Thus, in order to establish that RJRT has made deceptive and misleading statements in violation of Vermont’s Consumer Fraud Act, 9 V.S.A. § 2453(a), 8 the State was, and is required in this case “(1) to establish the particular evidence that would pass muster in the medical (or scientific) community for the types of claims made; and (2) demonstrate that the proffered substantiation failed to meet these standards.” 9 7 In Re Removatron International Corp., 111 F.T.C. 206, 299 (1988) (cits. omitted). 8 The State also contends that RJRT has violated the 1998 Master Settlement Agreement (“MSA”) between Vermont (and other states) and Reynolds (and other settling tobacco companies), and the resulting Consent Decree entered by this court adopting the MSA, which prohibits Reynolds (and the other signatory tobacco companies) from making “any material misrepresentation of fact regarding the health consequences of using any Tobacco Product.” MSA, § III(r), Decree, ¶ V(I). 9 Removatron, supra fn. 6. Vermont law provides that application of the CFA, and what constitutes a deceptive or misleading statement, is to be “guided by the construction of similar terms” by the Federal Trade Commission and federal courts. 9 V.S.A. § 2453(b). Although the court later concludes that not necessarily all of the legal precepts announced by the FTC in its reported decisions are binding under the CFA as a matter of Vermont law, that essential standard 3 By a clear preponderance of the evidence in this case, stretching over 26 days of trial; 22 trial witnesses (all but one were MDs or PhDs, all with impressive resumes); numerous depositions of additional witnesses which have also been reviewed by the court; and thousands of pages of exhibits, the State has done so. The relevant, and larger scientific and medical community knowledgeable about tobacco-related diseases, including several of the same scientists who performed some of the underlying studies and/or sat on RJRT’s expert panel, would require that Reynolds’ affirmative health benefit statements about Eclipse be supported by long-term epidemiological studies which would (a) follow an adequate number of actual Eclipse smokers in real-world settings for a sufficiently lengthy exposure period under sufficiently controlled circumstances, and (b) establish to a statistically significant degree that smoking Eclipse instead of a traditional cigarette in fact reduces the likely incidence of, or risk of contracting “cancer, chronic bronchitis, and possibly emphysema” for all smokers (or any given smoker) who might choose to continue smoking but switch to Eclipse. Alternatively, at the very least the Eclipse ad claims would have to be measured against validated “biomarkers” for the identified diseases, but no such surrogates for disease incidence are generally agreed to. Although the tests and studies cited and relied on by RJRT were consistently promising and indicated sometimes substantial reductions in toxic smoke components, observable laboratory impacts, or some of the harmful effects of smoking (e.g., lung inflammation), the State proved there is no present scientific consensus that these reductions were medically “linked to the risk of cancer and certain other smoking-related diseases” as claimed by Reynolds. Inasmuch as RJRT concedes there are no such epidemiological studies of Eclipse smokers – indeed, Reynolds argues that conducting such studies is an unreasonable, if not impossible requirement in this instance – its claim that a smoker switching to Eclipse will in fact face a lesser risk of contracting “cancer, chronic bronchitis, and possibly emphysema,” which is the unqualified message actually communicated by RJRT’s ads for and statements concerning Eclipse, is deceptive and misleading as a matter of law.