Supreme Court Justice Antonin Scalia on Friday evening put on hold a Louisiana state court ruling that would require major tobacco companies to start paying into a $241.5 million fund to finance programs to help smokers stop using cigarettes.  The action will postpone the payment duty until after the Supreme Court completes action on an appeal the companies will be filing later this year.  Scalia explained his order in a five-page opinion, saying he thought it likely the Court would grant review, and that it was “significantly possible” that the Justices in the end would overturn the state decision.  Scalia also suggested that the case may raise a fundamental constitutional issue on limiting state court class-action lawsuits.

Scalia wrote that “the extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question.”  In this case, he noted, the companies are contending that the Louisiana court has denied them any opportunity to contest whether any smokers in the class had actually relied on claimed “distortions” by the companies of the health hazards of smoking through nicotine addiction.

The class of smokers contends in the case that the tobacco companies “distorted the entire body of public knowledge” about whether nicotine leads to addiction.  Under Louisiana law, Scalia said, that is a claim of fraud, and ordinarily, the suing party will be required to show that it had relied on the fraudulent conduct, and it suffered injury as a result of that reliance.  But, Scalia added, the state court has lifted that requirement as a condition for getting funds from the smoking-cessation program.

“The apparent consequence of the [state court's] holding is that individual plaintiffs who could not recover had they sued separately can recover only because their claims were aggregated with others’ through the procedural device of the class action,” Scalia wrote. And, for the companies, they would have lost the chance to challenge any reliance evidence, since none would have been offered.

In discussing why this is an important constitutional due process issue, the Justice cited “national concern over abuse of the class-action device.”  Because of the nature of this state case, he added, the tobacco companies would not be likely to get their constitutional complaint into any federal court, short of the Supreme Court.

Thus, he went on, the tobacco firms had satisfied the requirements for an order staying the Louisiana ruling.  That, however, was not enough to actually get a stay, Scalia said.  He also had to balance the convenience or inconvenience that the two sides might face from grant or denial of a stay.  Because the companies are obliged right now to start paying into the smoking-cessation fund, and to immediately cover some $11.5 million in administrative expenses to set up the fund, and because those spent funds may not be recoverable before the Supreme Court can act finally, the balance works in the companies’ favor, he concluded. For the class of smokers, he added, there apparently will be no permanent harm, because other smoking-cessation programs are readily available to them.

The stay, Scalia specified, will remain in effect pending the companies’ filing on time a petition for review, “and this Court’s disposition” of that petition — in other words, until the petition is denied, or, if granted, until the case is finally decided by the Justices.

Posted in Cases in the Pipeline, Featured