166215927_48b7336d26_zDuring the May term, the Illinois Supreme Court heard oral argument in Price v. Philip Morris, Inc., the second appeal from a massive $10.1 billion consumer fraud verdict. Price poses the question of how much discretion a trial court has on a motion to set aside a verdict based upon new and different circumstances. Our detailed summary of the facts and lower court opinions in Price is here.

The plaintiff filed a putative class action under the Illinois Consumer Fraud and Deceptive Business Practices Act, alleging that the defendants had violated the statute by advertising certain cigarettes as “light” and “low tar.” In 2003, the court entered its multi-billion dollar verdict for the plaintiffs. In 2005, the Illinois Supreme Court heard Price for the first time, reversing the judgment on the grounds that the defendant’s conduct was “specifically authorized” by the Federal Trade Commission.

Two years after the Supreme Court’s judgment became final, the FTC filed an amicus brief in an unrelated case saying that it had never intended to specifically authorize the use of such terms. Not long after, the FTC issued a “rescission of guidance” revoking a 1966 document relating to permissible statements in advertising and packaging about tar and nicotine. Ten days after the rescission of guidance was issued, the plaintiffs in Price filed a petition for relief from judgment seeking to overturn the judgment entered in defendant’s favor after the verdict became final. The trial court dismissed the petition as untimely, but the Fifth District reversed. On remand, the trial court held that it was more likely than not, if the FTC’s new actions had been available at the time of trial, that the defendant’s Section 10b(1) defense would have failed. Nevertheless, the Circuit Court denied the petition, but the Fifth District reversed once again.

Counsel for the defendant split the argument. Lead-off counsel began by arguing that the Court’s judgment in Price I was correct. The plaintiffs’ motion for relief from that judgment was filed more than two years after the Supreme Court’s judgment and mandate. The plaintiffs argued that their motion was timely because it was filed within two years of the final order from the trial court, but counsel argued that making that order the trigger would exalt form over substance. The trial court’s order was a purely ministerial act carrying out the Supreme Court’s judgment, counsel argued; therefore, the operative judgment for purposes of the statute was that of the Supreme Court. Neither the FTC amicus brief nor the rescission of guidance had been in existence at the time of trial, counsel noted. Therefore, under traditional rules justifying new trials based on new evidence, neither was sufficient. Besides, counsel argued, the argument to set aside based on the rescission of guidance had been waived. The first time the plaintiffs had raised the matter was on their petition for rehearing. At no time during trial had the plaintiffs asked the FTC for its view on the case. Neither the amicus brief nor the rescission of guidance had challenged the Court’s opinion in Price I – far from it. The FTC had distinguished Price I in its brief. What if the judgment were reinstated, but when the FTC commissioners changed yet again, the Commission reversed its guidance, counsel wondered – could the defendant restart the process yet again? Surely, counsel concluded, litigation was not a game of musical chairs.

The second counsel for the defendant followed, arguing that the Court should decline the invitation to overrule a ten year old decision. Counsel argued that the FTC’s statement in 2008 that it had never authorized the defendant’s conduct was not newly discovered evidence; that term has never included legal arguments, as opposed to extrinsic truths that can be proven. Whether or not the conduct was authorized was not an objective fact which the FTC either observed or experienced. The FTC’s 2008 statements didn’t show that Price I was wrong, counsel argued; no court has ever overruled itself based on an agency amicus brief. Counsel argued that the class contained countless smokers with no claim of having been deceived; plaintiffs’ evidence demonstrated that the class includes people who would have bought the cigarettes anyway. Counsel argued that although plaintiffs claimed that every smoker in America thought “lights” were safer, their own survey says the opposite. Counsel argued that if smokers would have bought the cigarettes anyway, then there is no claim because there is no causation. Moreover, plaintiffs failed to prove any financial injury, according to counsel. A financial loss cannot exist unless the market places some value on the allegedly misrepresented feature. But here, counsel argued, the record showed that the market placed no value on the health attributes of light cigarettes. Therefore, plaintiffs had no damages.

Counsel for the appellee argued next. Counsel argued that in Price I, the issue of authorization had come up when the defendant offered evidence about the FTC’s intent. Chief Justice Garman asked what authority the plaintiff could cite for allowing a lower court to set aside the judgment of a higher court. Counsel argued that had happened before when information brought to the Circuit Court’s attention had changed the outcome. The purpose of a Section 2-1401 motion to set aside the judgment is to achieve the proper income, counsel argued. The Chief Justice asked whether there was anything to prevent such a motion from being filed in the Supreme Court. Counsel responded that the motion had to be filed in the trial court. It was the defendant who asked that the final judgment be filed in the Circuit Court, plaintiff argued. There was no question that if the Court had known about the FTC amicus brief, it would have discounted the testimony of defendant’s expert, according to plaintiff. Justice Burke asked whether the motion could have been filed at the Supreme Court as a motion to recall the mandate. Counsel answered that a final judgment had been entered at the trial court on the Supreme Court’s instructions at the defendant’s urging. The Chief Justice suggested that according to the plaintiff’s view, the Circuit Court could wait years and extend the period for entering judgment indefinitely. What about the finality of judgments? Counsel responded that the delay was a result of a rehearing petition followed by a cert petition. So to the extent the court was troubled by the idea of a trial court sitting on the matter for a year, this wasn’t the case to opine on that. Counsel argued that the defendant is making a distinction between points of fact and law on a motion to set aside, but the court has rejected that distinction, holding that ineffective assistance of counsel is a valid reason for a motion to set aside. Nor does the distinction between facts and newly discovered evidence exist, counsel argued.

The class survey defendants cited was done several years after the class was certified, according to plaintiff. Counsel argued that the defendant ignored the standard of review on damages. The proper test was for the benefit of the bargain. The issue was comparative valuation – did the person get what he or she bargained for? Counsel argued that the record lacked a safe cigarette comparator because of the defendant’s alleged distortion of the market. The light cigarette was essentially worthless, counsel claimed, and there were $7.6 billion worth of purchases in the state. Counsel insisted that the only people not yet compensated were the state’s consumers.

Counsel for the defendant argued in rebuttal that there was nothing in the statute saying where a party must file the petition to set aside. The statute says that the petition must be filed two years after filing of the judgment “from which relief is sought.” The plaintiffs were arguing that the Supreme Court made a mistake, not the Circuit Court, counsel argued. Counsel argued that the Court would be the first state to ever hold that getting the law wrong is sufficient grounds to revisit a judgment. The defendant wasn’t asking for herculean efforts, according to counsel – the plaintiff could have simply made a phone call to the FTC. As for causation, was the plaintiff contending that every member of the class relied on health issues to purchase every single time? The price of light cigarettes had never dropped – the market placed no premium on the cigarettes. Accordingly, no internet survey could possibly justify a finding of damages. Counsel argued that there was no evidence that the defendant had manipulated the market to ensure that regular and light cigarettes cost the same; all kinds of purportedly healthy products were not priced at a premium by the market. Counsel concluded by arguing that the classwide judgment had never been about compensating the people of Illinois for any economic injury.

We expect a decision in Price in three to four months.

Image courtesy of Flickr by SuperFantastic (no changes).