# Price v. Philip Morris, Inc. > Illinois Supreme Court · May 5, 2006 · 219 Ill. 2d 182 URL: https://www.frixlaw.com/law-library/cases/9862102 ## Case - **Full name:** SHARON A. PRICE Et Al., Appellees, v. PHILIP MORRIS, INC., Appellant - **Court:** Illinois Supreme Court - **Decided:** May 5, 2006 - **Citations:** 219 Ill. 2d 182; 302 Ill. Dec. 1; 848 N.E.2d 1 - **Precedential status:** Published - **Opinion:** Concurrence by Karmeier - **Judges:** Carman, Thomas, Karmeier, Fitzgerald, Freeman, Kilbride - **Cited by:** 142 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9862102 ## How later opinions describe it (automated extraction) - concluding that the regulatory exemption in the Illinois Consumer Fraud Act “reflects a legislative policy of deference to the authority granted by Congress or the [legislature] to federal and state regulatory agencies and a recognition of the need for regulated actors to be a… - holding that FTC’s informal regulatory activity of cigarette advertising, including use of consent orders, fell within Illinois Consumer Fraud Act’s exemption provision exempting actions or transactions “specifically au thorized by laws administered by” a state or federal regu… - stating “[t]heoretical harm is insufficient. Damages may not be predicated on mere speculation, hypothesis, conjecture or whim” and concluding “[h]aving sustained no pecuniary harm, plaintiffs lack the actual economic damages necessary to sustain their cause of action” - stating that whether terms “lights” and “lowered tar and nicotine” are deceptive “goes to the merits of the fraud claim, not to the threshold question of exemption” ## Opinion text JUSTICE KARMEIER, specially concurring: I agree that the judgment of the circuit court should be reversed. In my view, however, that conclusion is not dependent on the applicability of section 10b(l) of the Consumer Fraud Act (815 ILCS 505/10b(l) (West 2000)). Plaintiffs’ consumer fraud claim is fatally infirm for an additional and more basic reason: plaintiffs failed to establish that they sustained actual damages. In Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 195 (2005), this court recently reiterated the well-settled principle that in order to maintain a private cause of action under the Consumer Fraud Act, a plaintiff must prove that he or she suffered actual damages as a result of a violation of the Act. 1 Actual damages are thus an element of a private right of action under the statute. See 815 ILCS 505/10a (West 2000); Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 140 (2002). If a plaintiff cannot establish that the defendant’s conduct caused him or her to suffer actual damages, no recovery under the Act will lie. See Avery, 216 Ill. 2d at 196-200 . The requirement of actual damages means that the plaintiff must have been harmed in a concrete, ascertainable way. That is, the defendant’s deception must have affected the plaintiff in a way that made him or her tangibly worse off. Theoretical harm is insufficient. Damages may not be predicated on mere speculation, hypothesis, conjecture or whim. See Petty v. Chrysler Corp., 343 Ill. App. 3d 815, 823 (2003). The record in the case before us shows that PMUSA developed and marketed Marlboro Lights and Cambridge Lights cigarettes in response to heightened public concern over health risks posed by smoking. The company believed that it could forestall declining sales by offering a product which consumers perceived as better for them than conventional “full-flavored” brands. Pursuant to that strategy, PMUSA advertised Marlboro Lights and Cambridge Lights cigarettes in a way that led consumers to believe that the brands posed a lower health risk than their “full flavored” counterparts. In reality, and as PMUSA was fully aware, the so-called “light” cigarettes not only offered no health benefits, but were actually more toxic. When a consumer chooses one product over another in the belief that it will be less harmful to his or her health, only to discover later that it may have been more harmful, the existence of damages might seem self-evident. In this case, however, plaintiffs are not seeking damages based on any heightened adverse effects on their health. Personal injury is not at issue. The losses for which plaintiffs seek compensation are purely economic. Their claim is simply that they did not receive what they bargained for. They paid for health benefits they did not get. The benefit-of-the-bargain rule invoked by plaintiffs governs common law fraudulent misrepresentation cases. Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d 179, 196 (1989). Although plaintiffs’ cause of action is statutory in nature, the parties agree that the benefit-of-the-bargain rule provides the appropriate standard for ascertaining plaintiffs’ right to damages in this case. Under the rule, damages are determined by looking at the loss to the plaintiff rather than the gain to the defendant. The rule is based on the rationale that the defrauded party is entitled to be placed in the same financial position he would have occupied had the misrepresentations in fact been true. See Martin v. Allstate Insurance Co., 92 Ill. App. 3d 829, 835 (1981). Consistent with this rationale, the measure of damages “is such an amount as will compensate the plaintiff for the loss occasioned by the fraud, or, as it has been expressed, the amount which the plaintiff is actually out of pocket by reason of the transaction ***.” 19A Ill. L. & Prac. Fraud § 61 (1991). When this case ultimately proceeded to trial, two individuals were identified as representing the plaintiff class, Sharon Price and Michael Fruth. Both named plaintiffs testified that they switched to light cigarettes because they believed such cigarettes to be lower in tar and nicotine and therefore healthier. Price also stated that she valued the health component of light cigarettes, or what she thought was the health component of lights. Significantly, however, Price also admitted that she continued smoking PMUSA’s light cigarettes even after this litigation alerted her to the fact that the cigarettes were not, in fact, any healthier and may actually be more harmful than the regular version of those cigarettes. News that PMUSA’s low-tar and light representations were illusory likewise did not deter Fruth from continuing to smoke, although he testified that he did switch back from lights to regulars. Whatever valuation the class representatives may have placed on the health component of light cigarettes, that valuation had no observable economic consequences. Neither Price nor Fruth offered any testimony suggesting that switching from regulars to lights resulted in their paying any more for cigarettes than they would have otherwise. There was no price disparity between light cigarettes and their full-flavored counterparts, and there is no indication that the switch from regulars to lights caused them to buy more packages of cigarettes. The price they paid did not go up. The quantity they purchased did not increase. No additional ancillary or incidental costs were identified. Moreover, neither Price nor Fruth complained that the cigarettes were not worth what they paid for them. To the contrary, Price’s continued purchase of lights even after being alerted to their lack of health benefits suggests that she was entirely satisfied with the value of what she received for her cigarette-purchasing dollar. Under these circumstances, Price and Fruth cannot be said to have sustained any actual damages as a result of the misrepresentations made by PMUSA. Because they did not show any actual damages, Price and Fruth failed to prove a private right of action under the Consumer Fraud Act. Under Avery v. State Farm Mutual Automobile Insurance Co., that is fatal not only to their own cause of action, but to the entire class action. As we held in Avery, when a class representative has not proven his claim for consumer fraud, the consumer fraud claim asserted on behalf of the class cannot stand either. The consumer fraud judgment in favor of the class must be reversed. Avery, 216 Ill. 2d at 204 . There is no basis for reaching a contrary result here. Accordingly, regardless of the applicability of section 10b(l) of the Consumer Fraud Act (815 ILCS 505/10b(l) (West 2000)), the judgment in favor of plaintiffs must be set aside. At trial, counsel for plaintiffs did not attempt to compensate for the absence of actual damages to the class representatives by relying on testimony from other members of the class, for the smoking experiences of the other class members were similar to those of Price and Fruth and therefore similarly unhelpful. Instead, class counsel presented the results of an internet survey they had commissioned. Plaintiffs have not cited, and I am not aware of, any authority that would permit the opinions of internet survey respondents to establish actual damages under the Consumer Fraud Act where, as here, the class representatives have not been shown to share the survey respondents’ views and have not themselves been harmed in the way those who answered the survey claimed they would be under the hypotheticals presented to them. Even if I could look past these problems, plaintiffs’ damages model is insufficient as a matter of law to support the circuit court’s judgment. Plaintiffs contend that their damages under the benefit-of-the-bargain rule, as applied to the facts of this case, are equal to the difference between the value the cigarettes would have had if they possessed the qualities they were represented to have and their value as actually sold. See Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d 179, 196 (1989). Because defendant’s misrepresentations as to the properties of their cigarettes were believed to be true, ascertaining the market value of cigarettes possessing the qualities defendant claimed its lights to possess is straightforward. It is the price PMUSA actually charged and the amount plaintiffs actually paid for those cigarettes. The problem in plaintiffs’ analysis arises from the second value, i.e., the value of the cigarettes as actually sold. To compute that value, which is equivalent to the price the cigarettes would have commanded in the marketplace had they not possessed the health attributes suggested by PMUSA’s misrepresentations, plaintiffs did not look to the marketplace or actual consumer behavior. Instead, they relied on the Internet survey mentioned earlier, which was commissioned by class counsel. Based on the results of that survey, which sampled fewer than 300 respondents, plaintiffs’ expert, Dr. Jeffrey Harris, postulated that the price of lights would have to be discounted by 77.7% before consumers would still be willing to buy them, assuming the cigarettes were the same healthwise as their full-flavored counterparts. When the hypothetical was changed to assume that lights might be more harmful than regular cigarettes, Harris’ analysis determined that the amount of the discount would have to be increased to 92.3%. Based on these figures, plaintiffs argued that the difference between the hypothetically discounted prices and the prices consumers actually paid showed that consumers had significantly overpaid for PMUSA’s light cigarettes in the false hope that those cigarettes would be healthier for them. In plaintiffs’ view, the difference was equivalent to the value of the perceived health benefit of the lights, and the overpayment was the measure of plaintiffs’ damages. Professors Robert Solow and George Akerlof, both recipients of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, submitted a brief as amici curiae attesting that the benefit-of-the-bargain rule expressed by our court in Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d at 196 , comports with accepted principles of economics. Although they made general statements in support of the basic theoretical and methodological approach taken by Harris, Solow and Akerlof also noted that the “the actual measurement of damages under the applicable legal standard is intrinsically difficult to implement under the facts and circumstances of this case” and that, under those facts and circumstances, “there may be more than one way to measure damages.” One senses from these remarks, and from amici’s lack of elaboration in evaluating plaintiffs’ approach, a certain unease with plaintiffs’ damages calculations. It is no wonder. Putting aside any questions regarding the scientific validity of the survey on which Harris relied, there is a fundamental flaw in his approach. To understand why, one must first recall the purpose of the benefit-of-the-bargain rule, which is to compensate the plaintiff for the pecuniary loss occasioned by the defendant’s fraud, that is, for “the amount which the plaintiff is actually out of pocket by reason of the transaction.” 19A Ill. L. & Prac. Fraud § 61 (1991). If a plaintiff cannot prove that he was any worse off financially as a result of the defendant’s deceit, his personal feelings of disappointment or dissatisfaction with the transaction are of no consequence. Financial loss is not measured by subjective feelings. It is determined by the choices and values actually available to a consumer in the marketplace. See, e.g., Restatement (Second) of Torts § 549, Comment c, at 110-12 (1977) (for purposes of measuring damages in action for fraudulent misrepresentation, value is normally determined by the price for which an item could be resold in an open market or by private sale if its quality or other characteristics that affect its value were known). The need for objective, market-based standards to prove financial loss is not being raised here for the first time. It was recognized by defendant’s damages expert and is fatal to the plaintiffs’ damages model. While the Internet survey commissioned for this case may have shown that survey respondents would have placed a lower subjective value on cigarettes that lacked the health qualities claimed by PMUSA in its marketing of Marlboro Lights and Cambridge Lights, the marketplace demonstrated that, in reality, consumers would not have paid less to satisfy their tobacco habits had the lights’ true properties been known. They would not have stopped smoking, for they were addicted, and they could not have bought cigarettes that cost 77.7% less or 92.3% less, for no such cigarettes existed. At most, they would have reverted back to “full-flavored” versions of the cigarettes. 2 Significantly, and as I have already observed, the price charged by PMUSA for such cigarettes, and the price consumers were willing to pay despite the absence of claimed health benefits, was precisely the same as the price charged for “lights.” In marked contrast to the situation with many products aimed at health consciousness, there was no cost differential for consumers between the “healthy” and “regular” versions of the product. Accordingly, while PMUSA’s misrepresentations may have deceived consumers into altering their purchasing decisions, the net change in consumers’ economic position as a result of those misrepresentations was zero. In other words, plaintiffs may not have received the benefit of their bargain, but the bargain (i.e., obtaining what were thought to be healthier cigarettes than they would otherwise have purchased) cost them nothing extra. In terms of pecuniary harm, plaintiffs were unaffected. Their financial status remained the same. This conclusion is not altered by the fact that PMUSA’s light cigarettes were more toxic than the full-flavored versions. The additional toxicity unquestionably had adverse effects on plaintiffs’ health. It bears repeating, however, that health effects are not part of plaintiffs’ damages claim. They are not seeking compensation for personal injury, only pecuniary loss based on their switch to lights in reliance on PMUSA’s misrepresentations. For purposes of calculating pecuniary loss, the increased toxicity of lights would be relevant only if one could show (1) that an alternative cigarette with equally high toxicity levels was available on the market at lower cost than the price charged for lights and (2) that consumers would have switched to that lower cost alternative had the truth about lights been known. The notion that cigarette manufacturers could successfully market a cigarette known to be more toxic than regulars is inconsistent with the realities of consumer demand for more healthful products that led to the development of light cigarettes. It is therefore unsurprising that there is no evidence that a cheaper but more toxic brand of cigarette is actually available for purchase. Given the nature of the class bringing this suit, that is, smokers interested in a product less harmful to their health, it is also highly unlikely that any of them would change to a different brand that was more harmful than regulars, even at a reduced price. The testimony of the class representatives certainly does not suggest they would, and plaintiffs’ Internet survey does not speak to the issue. The Internet respondents were not queried about it. The Internet survey looked to hypothetical conduct assuming that a truly healthier version existed. It did not measure or purport to measure how consumers would actually behave if, as is really the case, there is no truly healthier version. Having sustained no pecuniary harm, plaintiffs lack the actual economic damages necessary to sustain their cause of action under the Consumer Fraud Act. When the same situation confronted the representative for the putative Illinois class in Avery, we concluded that the deficiency was fatal to his consumer fraud claim (Avery, 216 Ill. 2d at 199 ) and reversed the judgment for plaintiffs outright. We should not hesitate to reach the same conclusion here. Here, as in Avery, there is no need to remand for a new trial on the damages question. This case does not present a situation in which erroneous rulings by the trial court hampered plaintiffs’ ability to fully present their evidence or theory of recovery. The record is complete, and plaintiffs were given wide latitude in developing their damages claim. Further proceedings would serve no purpose. Plaintiffs’ claim fails as a matter of law. Because they sustained no actual economic damages, no judgment in their favor under the Consumer Fraud Act could ever stand. Plaintiffs’ consumer fraud claim cannot be revived on the theory that they might be entitled to an award of nominal damages notwithstanding their inability to show actual damages. Nominal damages can only be awarded where a plaintiff prevails in a case. As already discussed, however, a plaintiff cannot sustain a private right of action under the Consumer Fraud Act unless he or she has sustained actual damages. Unless all of the elements of the cause of action, including the element of actual damages, are established, nominal damages cannot be recovered. See Tolve v. Ogden Chrysler Plymouth, Inc., 324 Ill. App. 3d 485, 491-92 (2001). The lack of actual damages would therefore preclude plaintiffs from recovering nominal damages even if the case were remanded. 3 Similarly, plaintiffs cannot sidestep the lack of actual damages on the grounds that they are nevertheless entitled to an award of punitive damages. Illinois law does not permit an award of punitive damages in the absence of compensatory damages. See Lowe v. Norfolk & Western Ry. Co., 96 Ill. App. 3d 637, 648 (1981). The Consumer Fraud Act is no exception. Punitive damages are in addition to compensatory damages and cannot be allowed unless actual damage is shown. See In re Application of Busse, 124 Ill. App. 3d 433, 438 (1984). Because plaintiffs sustained no actual damages here, their claim for punitive damages must therefore fail as well. See Florsheim v. Travelers Indemnity Co. of Illinois, 75 Ill. App. 3d 298, 310 (1979). For the foregoing reasons, I fully concur in the result reached by the majority. Plaintiffs cannot recover under the Consumer Fraud Act, and the circuit court’s judgment awarding them damages under the Act cannot stand. In reaching this conclusion, I hasten to add, as the majority opinion did, that rejection of plaintiffs’ cause of action should in no way be construed as an endorsement of PMUSA’s conduct. Our reversal of the circuit court’s judgment is not an exoneration of PMUSA. It is merely a conclusion that this particular cause of action by this particular group of claimants seeking this particular form of recovery cannot be sustained under the law of Illinois. JUSTICE FITZGERALD joins in this special concurrence. Courts have been criticized for erroneously using the terms “damage” and “damages” interchangeably when these should actually be considered distinct concepts, damage being the loss or hurt that results from injury and damages being the amount awarded to compensate for damage. J. Fischer, Understanding Remedies § 161(c), at 506 (1999). Without passing on the merits of this criticism, I note that there is no such confusion here. The need to prove damages and not merely damage is based not on a judicial gloss, but on the express language of section 10a of the Consumer Fraud Act, which authorizes consumers to bring an “action for damages” and recover “actual economic damages.” (Emphases added.) 815 ILCS 505/10a (West 2000). The “full-flavored” versions manufactured by PMUSA used the very same tobacco as the light brands. The only difference between the cigarettes was the filters. Ironically, to the extent that the light brands were more toxic, the filters were to blame. The filters had the additional effect of impairing the light brands’ flavor. The only reason lights were chosen over their full-flavored versions was their perceived health benefits. Because actual damages must be shown to prevail in a private right of action for damages under the Consumer Fraud Act, nomináis actually serve no purpose in such cases. If a plaintiff shows actual damages, he or she will receive real compensation. When compensation is awarded, there is no need for the largely symbolic function served by nomináis. That is, no doubt, why plaintiffs did not request nomináis in their complaint and were not awarded nomináis by the circuit court. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9862102. Public record. Not legal advice.