Pearson v. Philip Morris, Inc.

In order to certify a class action lawsuit under the Oregon Unlawful Trade Practices Act for intentional misrepresentation causing economic losses, plaintiffs must prove that common issues, such as common reliance on defendant’s alleged misrepresentation, predominate over individualized issues.

Defendant (Philip Morris) requested review of the Oregon Court of Appeals’ decision reversing the trial court’s order denying Plaintiffs’ motion for class certification and issue class certification. Plaintiffs sought damages from Philip Morris under the Oregon Unlawful Trade Practices Act (UTPA), alleging that Philip Morris had misrepresented that Marlboro Lights would deliver less tar and nicotine than regular Marlboro brand cigarettes, and because of this misrepresentation, Plaintiffs had suffered economic harm. Plaintiffs sought class certification on two issues on behalf of nearly 100,000 individuals who had purchased Marlboro Lights between 1971 and 2001. Plaintiff first alleged that Philip Morris intentionally misrepresented that Marlboro Lights delivered lower levels tar and nicotine, when in reality, they did not. Second, Plaintiffs alleged that Philip Morris had knowingly misrepresented that Marlboro Lights contained inherently lower levels of tar and nicotine, when really such lowered levels could only be delivered if smoked in a particular way, resulting in Plaintiffs receiving a diminished value for their purchase. The trial court denied certification because it found the individual inquiries predominated over the common inquiries such that class action litigation was improper. On appeal, the Court of Appeals remanded the case by concluding that a UTPA claim could be proved through evidence common to the class. Philip Morris requested review. On review, the Court held that an issue is appropriate for class certification under the “predominance” standard if the Court finds that the common issues among the class are capable of resolution through a common proof, rather than through individualized inquiries. On Plaintiff’s theory of diminished value because of the alleged misrepresentation, the Court found evidence that Marlboro Lights and regular Marlboro cigarettes were priced the same, and therefore Plaintiffs could not show diminished value. On Plaintiffs’ claim for economic damages in the form of the Marlboro Lights’ purchase price, the Court held that Plaintiffs would need to prove individual reliance on Philip Morris’ alleged misrepresentation, and that this could not be accomplished through class action litigation, which requires proof of common reliance. Accordingly, because the Plaintiffs failed to prove that common issues predominated over the class action claim under the UTPA, the Court of Appeals’ decision was reversed, the trial court’s denial of class certification was upheld, and the case was remanded for Plaintiffs’ individualized proceedings.