Oct. 6 (Bloomberg) -- For the tobacco industry, the new U.S. Supreme Court term has the look of a blockbuster.

The court opens its 2008-09 term today with the first of two arguments involving Altria Group Inc.'s Philip Morris USA unit. The justices will consider whether smokers can sue over the marketing of ``light'' cigarettes. Later on, they will revisit a $79.5 million award to a smoker, hearing a Philip Morris appeal in that case for a second time.

A Philip Morris victory in the lights case would blunt perhaps the most significant legal hazard for the tobacco industry. The high court's decision, later this year or next, could block as many as 40 similar lawsuits that seek billions of dollars from Philip Morris, Reynolds American Inc.'s R.J. Reynolds Tobacco and other cigarette makers.

``The big litigation threat against the industry these days are these light-cigarette cases,'' said David Vladeck, a law professor at Georgetown University in Washington who filed a brief supporting the smokers in the case. ``So the industry is hoping they'll get rid of them in one fell swoop.''

Morgan Stanley tobacco analyst David Adelman said in a Sept. 29 report that he expects the Supreme Court to ``provide a final knockout blow to lights litigation.'' Adelman forecasts Altria will perform in line with other tobacco stocks over the next 12 to 18 months.

The justices will review a lawsuit that accuses Philip Morris, the nation's largest cigarette maker, of violating Maine's consumer protection statute by fraudulently portraying lights as safer than other cigarettes.

Punitive Damages

The suit seeks to recover the money smokers spent on Philip Morris's Marlboro Lights and Cambridge Lights through November 2002, plus punitive damages. A federal appeals court in Boston said the case could go forward.

Philip Morris contends the state suit is preempted by a pair of federal cigarette-labeling laws enacted in the 1960s. Those measures require each package of cigarettes to carry a specified warning label while barring additional state regulation ``based on smoking and health.''

The company contended in court papers that letting the Maine lawsuit go forward would ``obliterate the national regulatory uniformity'' established by the labeling laws.

Philip Morris says the court might need to scrap a 1992 ruling that barred some, though not all, smoker lawsuits against tobacco companies. Cipollone v. Liggett Group, as the case is known, splintered the justices, leaving the court unable to produce a single majority opinion.

Bringing Suits

The lead Supreme Court lawyer for the smokers, David Frederick, said the 1992 ruling made clear that consumer lawsuits can invoke generally applicable state laws to accuse cigarette makers of misrepresentation.

``Seven justices in Cipollone agreed that fraud cases are not preempted, and this is a fraud case,'' Frederick said in an interview.

Philip Morris also says the lights suits are preempted by U.S. Federal Trade Commission policies, including its oversight of cigarette testing. The company said lawsuits would interfere with ``the FTC's longstanding policy of encouraging consumers to rely on the standardized tar and nicotine information conveyed'' by those tests.

That argument may be a tough sell. U.S. Solicitor General Gregory Garre, the Bush administration's top courtroom lawyer, is urging the court to reject it, saying state-law suits are ``complementary'' to the FTC's efforts to regulate cigarette advertising.

Federal Regulations

``It's not easy to argue that state tort law frustrates the purpose of a federal regulatory regime when the federal regulators are there saying, ``No, it doesn't,'' said Paul Clement, Garre's predecessor as solicitor general. Clement stepped down in June, three weeks before the administration filed its brief siding with consumers.

Philip Morris says the administration's stance is a self- serving effort to bolster the Justice Department's own tobacco suit, which accuses cigarette makers of violating a federal racketeering law by marketing low-tar cigarettes as safer alternatives. A federal appeals court in Washington will consider the industry's appeal in that case later this month.

Both sides in the lights case claim support from several former FTC commissioners. The smokers also have backing from the American Medical Association and 47 states and the District of Columbia. The U.S. Chamber of Commerce and the National Association of Manufacturers are among those that filed briefs on Altria's side of the case.

Even if the smokers win at the Supreme Court, their suits will face other hurdles. Some courts have refused to grant class- action status, a designation that lets smokers with relatively small claims sue together.

Adelman, the Morgan Stanley analyst, said the companies ``will retain many very substantial and effective defenses'' in the event of a Supreme Court defeat.

``The industry has very little to lose -- and a tremendous amount to gain,'' he wrote.

The case is Altria v. Good, 07-562.

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

Last Updated: October 6, 2008 00:01 EDT