Philip Morris International Inc. stockholders failed to demonstrate that the company had made false statements about the scientific studies it submitted to the FDA and its projected sales in Japan, according to the Second Circuit ruling on Tuesday.
The investors’ proposed securities fraud class action was appropriately dismissed, Judge Richard J. Sullivan stated for the unanimous appellate panel.
The court faced two matters of first impression, Sullivan noted. The first was whether the company’s statements about the compliance of the studies with international scientific standards, using “inherently subjective” language, constituted inactionable opinion rather than fact. The second concern was whether “an interpretation of scientific data that is ultimately endorsed by the Food and Drug Administration” is inherently reasonable, he explained.
The court answered yes to both.
Investors accused the cigarette and tobacco manufacturer, which markets products outside the US, of misleading them about the methods and results of IQOS clinical studies presented to the FDA. The company sought approval so that its former parent company, Altria Group Inc., could sell the device within the US, with or without marketing claims regarding the reduction of exposure to harmful chemicals or disease risks.
IQOS products are designed to heat tobacco without burning it for smokers’ use. PMI applied with the US FDA in October to sell a new version of the products domestically, seeking a 2024 rollout with wider adoption the following year.
Investors also targeted the company’s statements about projected IQOS sales in Japan, the only country where PMI sold the line of products nationwide at that time.
The district court dismissed the suit, and the investors appealed.
Statements by the company and its executives that the IQOS studies were “rigorous,” “the best science,” and “very advanced” were considered inactionable puffery by the US Court of Appeals for the Second Circuit, rejecting the investors’ argument that such statements could be proven true or false.
Similarly, statements that the studies were “conducted according to Good Clinical Practice” referred to subjective standards rather than hard-and-fast rules, Sullivan said, joined by Judges Amalya L. Kearse and Barrington D. Parker.
PMI statements characterizing the studies’ results as supporting “our conclusion that IQOS has the potential to reduce the risk of smoking-related diseases in adult smokers who switch to it completely” were seen as interpretations of data, the judge said—interpretations that the FDA eventually accepted.
Optimistic remarks about sales performance in Japan were considered allowable forward-looking statements, he added.
Pomerantz LLP and Robbins Geller Rudman & Dowd LLP represented the lead investors, Union Asset Management Holding AG and Teamsters Local 710 Pension Fund. Latham & Watkins LLP represented PMI.
The case is In re Philip Morris Int’l Inc. Sec. Litig., 2d Cir., No. 21-2546, 12/26/23.