June 11 (Bloomberg) -- The U.S. Supreme Court gave a boost to smoker lawsuits that claim tobacco companies deceptively marketed ``light'' cigarettes, ruling that Altria Group Inc.'s Philip Morris USA can't shift a case into federal court.

The justices unanimously said Arkansas state courts should handle the suit by smokers Lisa Watson and Loretta Lawson, not the federal tribunals that corporate defendants tend to prefer. Philip Morris argued that it could shift the case because the Federal Trade Commission closely supervised testing of the cigarettes.

Writing for the court in Washington, Justice Stephen Breyer said Philip Morris lacked the type of ``special relationship'' with the FTC that would permit the company to move the suit to federal court.

The ruling, which overturns a lower court decision, may affect several lawsuits against Philip Morris and Reynolds American Inc.'s R.J. Reynolds Tobacco unit, including Missouri and Minnesota cases in which the issue has arisen.

Shares of New York-based Altria fell 8 cents to $70.22 at 4:23 p.m. in trading on the New York Stock Exchange. Reynolds shares rose 22 cents to $62.75.

Some tobacco investors and analysts had been anticipating a loss at the Supreme Court. During arguments in April, the justices signaled they probably would rule against Philip Morris.

`No Surprise'

``No surprise,'' said Charles Norton, a portfolio manager at GNI Capital Inc. in Dallas whose Vice Fund has $116 million in assets, including 117,000 Altria shares. ``It doesn't change our stance about the incredible improvement in the legal environment for the U.S. tobacco companies.''

Philip Morris Associate General Counsel William Ohlemeyer called the high court ruling ``narrow.'' He said in a statement that the company has ``compelling defenses'' to the underlying claims in the case.

Watson and Lawson accuse Philip Morris, the world's largest tobacco company, of designing its Cambridge Lights and Marlboro Lights brands so they would register artificially low tar and nicotine levels on tests mandated by the U.S. Federal Trade Commission.

``This is a major setback for the industry,'' said Edward L. Sweda Jr., a lawyer at the anti-smoking Tobacco Products Liability Project in Boston. He said company officials and analysts had touted the potential impact of the lower court ruling overturned today by the Supreme Court.

The 8th U.S. Circuit Court of Appeals in St. Louis ruled in 2005 that Philip Morris could move the suit. The Bush administration backed the smokers at the high court.

No Delegation

The issue before the high court concerned a federal statute that says a ``person acting under a federal officer'' can shift lawsuits to federal court. Philip Morris contended that tobacco companies meet that definition because they are doing the government's bidding by testing cigarettes for tar and nicotine at an industry-financed lab.

Breyer rejected that contention, saying the companies were simply abiding by a government requirement so that they could sell their products.

``We have found no evidence of any delegation of legal authority from the FTC to the industry association to undertake testing on the government agency's behalf,'' Breyer said.

The ruling, though procedural, may also have substantive implications. The companies are contending that the government's oversight of the testing program shields them from suit over light cigarettes in any court.

`Detailed Rules'

The high court didn't directly address that question, though Breyer mentioned the FTC's ``detailed rules'' about advertising, testing and reporting.

In an investors' note, Morgan Stanley analyst David Adelman said that characterization ``should be moderately helpful to the industry's ongoing defense.'' Adelman rates Altria shares as ``overweight.''

Sweda, the anti-tobacco lawyer, called that characterization ``pure spin and contortion.''

``These lawsuits are about fraudulent marketing and other practices that the companies engaged in,'' he said. ``They voluntarily engaged in those practices, and they most certainly were not just following orders from some government agency.''

The claims that Watson and Lawson raise are similar to those that led to a $10.1 billion award against Philip Morris in Illinois. The state's highest court later reversed that award, and the U.S. Supreme Court in November refused to intervene. Smokers have filed similar suits in some 20 states.

The case is Watson v. Philip Morris, 05-1284.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

Last Updated: June 11, 2007 16:36 EDT