FILED: May 17, 2006

IN THE COURT OF APPEALS OF THE STATE OF OREGON

THE ESTATE OF MICHELLE SCHWARZ, Deceased,
by and through her Personal Representative
PAUL SCOTT SCHWARZ,

Respondent - Cross-Appellant,

v.

PHILIP MORRIS INCORPORATED,
a foreign corporation,

Appellant - Cross-Respondent,

and

ROTHS I.G.A. FOODLINER, INCORPORATED,
an Oregon Corporation,

Defendant.

0002-01376; A118589

En Banc

Appeal from Circuit Court, Multnomah County.

Roosevelt Robinson, Judge.

Argued and submitted September 20, 2004; resubmitted en banc September 8, 2005.

William F. Gary argued the cause for appellant - cross-respondent. With him on the briefs were Sharon A. Rudnick and Harrang Long Gary Rudnick P. C.

Maureen Leonard argued the cause for respondent - cross-appellant. With her on the briefs were Robert K. Udziela, D. Lawrence Wobbrock, Charles S. Tauman, and Richard A. Lane.

Before Brewer, Chief Judge, and Edmonds, Landau, Armstrong, Linder, Wollheim, Schuman, Ortega, and Rosenblum, Judges.

EDMONDS, J.

On appeal, award of punitive damages vacated and remanded for new trial limited to determination of amount of punitive damages; otherwise affirmed. Cross-appeal dismissed as moot.

Linder, J., concurring.

Armstrong, J., concurring in part, dissenting in part.

Rosenblum, J., concurring in part, dissenting in part.

EDMONDS, J.

Defendant appeals a judgment based on a jury verdict that awarded plaintiff Richard Schwarz, the personal representative of the estate of his wife Michelle Schwarz (decedent), compensatory damages totaling $168,514.22 and punitive damages of $150 million against defendant Philip Morris Incorporated. (1) Plaintiff alleged that decedent's death resulted from metastatic lung cancer that was caused by her smoking cigarettes that defendant manufactured and promoted as "low-tar." Defendant makes numerous assignments of error on appeal that we discuss below in detail. Plaintiff cross-appeals, challenging the trial court's reduction of the jury's punitive damages award from a total of $150 million to $100 million. On appeal, we affirm the portion of the judgment that finds defendant liable for compensatory damages. However, we vacate the judgment for punitive damages on all claims and remand for a new trial on the amount of those damages. We dismiss the cross-appeal as moot.

We state the facts in the light most favorable to plaintiff because of the verdict in his favor. Or Const, Art VII (Amended), § 3; Jensen v. Medley, 336 Or 222, 226, 82 P3d 149 (2003). Decedent began smoking in 1964, when she was 18 and a student in nursing school. Plaintiff and decedent were married in 1965, the year after they met. After they were married, decedent did not complete her nursing studies but instead raised the couple's children. When decedent started smoking, she knew that there was a potential link between cigarettes and illness, including lung cancer. Her parents had discouraged her from smoking, in part because of health concerns. Plaintiff quit smoking several years after he and decedent were married and he encouraged decedent to follow his example. However, throughout their marriage, she was unable to quit despite a number of attempts to do so, and she continued to smoke about a pack of cigarettes a day.

Decedent first smoked Benson & Hedges cigarettes, a full-flavor brand manufactured by defendant. (2) In 1976, defendant introduced Merit cigarettes to the public with an extensive advertising campaign that emphasized that Merits had less tar than full-flavor brands but, according to the advertising campaign, tasted like full-flavor brands. At about the same time, plaintiff and decedent discussed her quitting smoking. Decedent suggested that, rather than quitting, she would try a low-tar cigarette; plaintiff agreed, believing that switching brands would be a step toward weaning her off cigarettes entirely. Soon after their discussion, decedent began smoking the Merit brand instead of Benson & Hedges. According to her mother's testimony, decedent switched to the Merit brand because she believed that "the low tar and nicotine filters are better for you," an idea that others talked about at the time. Indeed, decedent's stepfather had previously switched to a low-tar brand because he believed that they were safer than full-flavor cigarettes.

After switching to the Merit brand, decedent continued to smoke the same number of cigarettes as before. However, according to the testimony at trial, her method of smoking changed; she took longer puffs, inhaled the smoke more deeply, and held it longer in her lungs. She began smoking each day early in the morning and continued until late at night. She could not go without smoking a cigarette for more than an hour and a half without feeling deprived. Being without cigarettes made her act nervous, edgy, and irritable; smoking a cigarette would cause her to become calm and serene. On one long international airplane flight, she was so obviously upset from the lack of a cigarette that a flight attendant showed her how to smoke in a rest room without setting off the smoke alarm.

After switching to the Merit brand, decedent made further attempts to stop smoking entirely, including using nicotine patches, but she was always unsuccessful. She once told a physician that she had stopped smoking for six months, but plaintiff testified that she never actually quit. An expert on addictive substances testified unequivocally that decedent was addicted to nicotine. Decedent was diagnosed with a brain tumor in February 1998 that proved to be the result of metastatic lung cancer. Despite treatment and a period of temporary remission, she died on July 13, 1999, at the age of 53. At her son's wedding shortly before her death, while she was in a wheelchair and on oxygen, she begged her mother for a cigarette.

Plaintiff brought this action against defendant for damages in February 2000. The case went to trial in February 2002 on plaintiff's third amended complaint, in which he alleged claims based on theories of strict products liability, negligence, and fraud. (3) The gist of his allegations was that (1) the Merit brand of cigarettes was unreasonably dangerous in a manner that was not contemplated by the consumer because it was marketed as a less harmful alternative to ordinary cigarettes; (2) defendant had been negligent in the manner in which it tested, manufactured, and marketed the Merit brand; and (3) defendant had defrauded consumers by making false claims about the health effects of the Merit brand, the contents of the brand itself, and its addictive nature.

After a lengthy trial, the jury returned a verdict for plaintiff on all his claims. As to the strict products liability and negligence claims, it apportioned fault between defendant (51 percent) and decedent (49 percent). As to the fraud claim, the jury found in defendant's favor on two specifications of fraud and in favor of plaintiff on two other specifications. It awarded compensatory damages consisting of $118,514.22 in economic damages and $50,000 in noneconomic damages. The jury also awarded punitive damages of $10 million on the strict liability claim, $25 million on the negligence claim, and $115 million on the fraud claim, for a total punitive damages award of $150 million. The trial court entered judgment for the full amount of the compensatory damages, reasoning that apportionment of fault did not apply to the fraud claim. It also reduced the total award of punitive damages to $100 million without apportioning it among the various claims. As stated above, both parties appeal.

On appeal, defendant makes 21 assignments of error. They include challenges to the denial of motions for directed verdicts for defendant on plaintiff's claims, challenges to the trial court's decision to give or not to give certain jury instructions regarding those claims, a challenge to the court's failure to grant a mistrial, and challenges to the jury instructions pertaining to, and the constitutionality of, the punitive damages awards. We reject without discussion any assignments of error and any arguments not addressed below. We begin with the assignments of error that pertain to the judgment on plaintiff's fraud claim.

I. THE FRAUD CLAIM

In his third amended complaint, plaintiff, after incorporating other allegations in the complaint, alleged:

"13.

"Defendant * * * recklessly and/or intentionally made fraudulent misrepresentations about its tobacco products, including misrepresentations about adverse health effects, the addictive nature of its tobacco products, and their contents.

"14.

"Defendant * * * engaged in an ongoing public relations effort beginning in the early 1950s, designed to manipulate public opinion by creating doubt about the adverse health effects of smoking and to provide rationalizations to help smokers keep smoking in spite of the adverse health effects. Defendant * * * made statements which were intended to and did cause cigarette smokers such as [decedent] to continue smoking cigarettes in spite of their adverse health effects. Defendant voluntarily assumed a duty to disclose all research.

"15.

"[Decedent] did not know defendant['s] representations were false and reasonably relied on, and suffered and died as a result of defendant['s] misrepresentations.

"16.

"Defendant['s] misrepresentations included the following and similar misrepresentations:

"a. That the causal link between cigarette smoking and human disease was in doubt or 'had not been proven' in repeated statements during the past 50 years;

"b. That cigarettes are not addictive; and

"c. That 'low tar' cigarettes delivered less tar and nicotine to the smoker and were therefore safer and healthier than regular cigarettes as an alternative to quitting smoking."

Answering specific interrogatories, the jury found in plaintiff's favor on two theories of fraud. First, it found that defendant voluntarily assumed a duty to disclose all research regarding smoking and health to consumers, that it breached that duty by concealing research from consumers, that decedent, one of defendant's consumers, reasonably relied on defendant's performance of its assumed duty, and that those representations and reliance were a cause of her death. Second, the jury found that defendant falsely represented that "low-tar" cigarettes delivered less tar and nicotine to the smoker and that they were therefore safer and healthier than regular cigarettes and presented an alternative to quitting smoking, that decedent relied on those representations, and that those representations and her reliance on them were a cause of her death. Specifically, the jury answered "yes" to the following questions:

"9. Did Philip Morris voluntarily assume a duty to disclose all research regarding smoking and health to [decedent]?

"* * * * *

"10. Did Philip Morris fail to perform its assumed duty by concealing research, did [decedent] reasonably rely upon defendant's performance of its duty, and was such failure to perform and reliance a cause of [decedent's] death[?]

"* * * * *

"13. Did Philip Morris make false representations that 'low tar' cigarettes delivered less tar and nicotine to the smoker and were therefore safer and healthier than regular cigarettes and an alternative to quitting smoking upon which [decedent] reasonably relied, and if so, were such false representations and reliance a cause of [decedent's] death?"

Defendant first assigns error to the trial court's denial of its motion for a directed verdict on plaintiff's fraud claim, ORCP 60, offering several arguments in support of its position. We begin by addressing the issue of preemption by federal law. On appeal, defendant first argues that the "low-tar" fraud specification is preempted. Later in its brief, in a footnote, it asserts that "[p]laintiff's fraud claim for breach of an assumed duty also is expressly preempted[.]" But defendant did not raise the issue of whether the assumed duty fraud specification is preempted in its motion for a directed verdict to the trial court. We therefore decline to address that argument as it applies to plaintiff's fraud claim for breach of an assumed duty. See ORAP 5.45(1) (embodying preservation-of-error rule); State v. Thompson, 328 Or 248, 254 n 3, 971 P2d 879, cert den, 527 US 1042 (1999) (refusing to address claim absent a "thorough and focused" analysis). We return to the issue that defendant did preserve.

As noted, the jury found that defendant fraudulently represented that low-tar cigarettes were safer than full-flavor cigarettes. As it did in its motion for a directed verdict to the trial court, defendant argues under its first assignment of error that plaintiff's "low-tar" fraud claim is preempted by federal law. It explains, "[P]laintiff's claim necessarily boils down to this: defendant was at fault for failing to disclose information about the health risks of low-tar cigarettes." (Emphasis in original.) The statutory provision relied on by defendant, 15 USC section 1334(b), is part of the Federal Cigarette Labeling and Advertising Act. That section provides:

"No requirement or prohibition based on smoking and health shall be imposed under state law with respect to advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter."

The leading case on the subject of federal preemption of tobacco-related claims is Cipollone v. Liggett Group, Inc, 505 US 504, 112 S Ct 2608, 120 L Ed 2d 407 (1992), in which the United States Supreme Court held that the congressional preemption of state law under section 1334(b) "sweeps broadly and suggests no distinction between positive enactments and common law; to the contrary, those words easily encompass obligations that take the form of common-law rules." 505 US at 521 (plurality opinion). (4) The Cipollone Court considered a number of different common-law claims against cigarette manufacturers and determined whether each was preempted by section 1334(b). We consider defendant's argument that plaintiff's low-tar specification of fraud is preempted by section 1334(b) under the guideposts set out in Cipollone, viewing the evidence relating to the fraud claim generally in the light most favorable to plaintiff.

The possibility of a connection between smoking and disease first received significant public attention in 1952 through an article in Reader's Digest, "Cancer by the Carton," that discussed then-recent research with mice and suggested that smoking caused lung cancer. The next year, overall cigarette sales fell significantly for the first time. As a result, the leading manufacturers in the tobacco industry, including defendant, met and agreed on a common response to the health issue. Their primary public action was to create the Tobacco Industry Research Council (TIRC). In 1954, the TIRC's creators, including defendant, first published as an advertisement in over 400 newspapers, including newspapers in Oregon, a statement entitled "A Frank Statement to Cigarette Smokers" (the Frank Statement). In the Frank Statement, the industry stated that it recognized public concern about recent reports "that cigarette smoking is in some way linked with lung cancer in human beings." Although the Frank Statement emphasized that the research was not conclusive, it also agreed that the research should not "be disregarded or lightly dismissed." Instead, the industry stated that it would "meet the public's concern aroused by the recent reports" by pledging "aid and assistance to the research effort into all phases of tobacco and health." To accomplish that purpose, defendant and other manufacturers of tobacco products created the TIRC and placed it in charge of the industry's research activities. The industry represented that "a scientist of unimpeachable integrity and national repute," along with an advisory board of "scientists disinterested in the cigarette industry" would conduct the research effort. The signers of the Frank Statement, including defendant, explained that "we believe the people are entitled to know where we stand on this matter and what we intend to do about it." Soon afterwards, one of defendant's vice-presidents stated in a publicized speech that the industry would "stop business tomorrow" if it thought that its product was harming smokers.

In 1962, The Tobacco Institute, Inc., the public relations successor to the TIRC, prepared another advertisement, "Some frank words about. [sic] Smoking and Research," (5) in which it stated, in part:

"Most scientists recognized long ago that there are no simple, easy answers in cancer research. They know that the answers to fundamental questions about causation can come only through persistent scientific research.

"The tobacco industry supports and cooperates with all responsible efforts to find the facts and bring them to the public.

"In that spirit, we are cooperating with the U.S. Surgeon General and his special study group appointed to evaluate presently available research knowledge. Similar cooperation has been offered to the American Medical Association's proposed study.

"We know we have a special responsibility to help scientists determine the facts about tobacco use and health.

"The industry accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee to provide research grants to scientists in recognized research institutions. This research program is continuing on an expanded and intensified scale."

(Emphasis added.)

In 1966, the Tobacco Institute issued a press release in response to a forthcoming article on tar and nicotine in cigarettes in which it said, in part:

"Scientists throughout the world are continuing to investigate to learn the full facts about 'tar' and nicotine, and about questions concerning tobacco and health. The tobacco industry is supporting much of this research and will continue to do so."

Based on the evidence before it, the jury in this case was entitled to infer that defendant and the industry as a whole did not conduct the research that they represented that they would conduct. (6) Rather, the evidence produced by plaintiff shows that they focused their efforts and their health-related research on attacking research that showed the dangers of smoking in order to keep alive a public controversy over whether tobacco smoke was harmful to the human body. The jury was entitled to infer that defendant's purpose was to give smokers what one of defendant's executives described as a "crutch"--essentially a rationalization--that would justify their continued smoking. The jury was also entitled to find, based on the evidence produced by plaintiff at trial, that defendant knew throughout this time period that tobacco smoke was a carcinogen and that nicotine was addictive--indeed, that nicotine addiction was the primary reason why smokers continued to smoke. Rather than making its research public as it had represented that it would do, defendant publicly denied and suppressed the results of its research.

Moreover, plaintiff offered evidence that defendant avoided studying the health effects of smoking at the very time that it was insisting on the need for additional research on that subject. For example, defendant's scientists were not allowed to conduct studies on actual production cigarettes or to conduct tests of the effects of those products on animals. Any research conducted by defendant that could involve the "biological activity" of tobacco smoke (a euphemism for its carcinogenic properties) was conducted at a laboratory in Europe. The results of that research were forwarded to only one supervising scientist in the United States at his home address; thus, the research never became part of defendant's official records, nor was it publicized as defendant had represented would occur. In fact, that particular scientist told a subordinate that his role was to keep the controversy over the health effects of smoking alive.

Rather than focusing its research on issues of health, as it had represented that it would do, defendant focused on research that led to the modification of the tobacco in the cigarettes it produced. One of those research efforts included adding substances that would increase the impact of the nicotine in the cigarettes on the smoker, thereby increasing their addictive effect. Although defendant manipulated the tobacco itself and added a number of flavorants, the most significant additives were ammonia and urea. Those substances, according to plaintiff's evidence, have the effect of increasing the proportion of "free base" nicotine in the smoke from the cigarette; that reduces the amount of nicotine that is bound to particulates and is more difficult for the body to absorb. The result is an increase in the effect of the nicotine on the human body, leading to greater addiction.

According to plaintiff's experts, smokers continue smoking because of nicotine's addictive qualities. The jury could find based on the evidence from defendant's internal files that defendant was well aware of that fact. Defendant's research indicated that smokers develop a certain "comfort level" of nicotine and will smoke until that level is reached. Nicotine, according to the evidence, does not itself cause cancer; rather, it is the "tar"--the solid matter in the cigarette smoke--that produces that result. The amount of tar that a cigarette delivers, however, tends to be proportionate to the amount of nicotine in the smoke. During the 1940s and 1950s, the Federal Trade Commission (FTC), working with the tobacco industry, developed what remains the standard method for measuring the amount of tar and nicotine in a cigarette. The FTC created a machine that smokes a cigarette in a standard fashion to a standard length. It is possible through the use of the machine to measure the tar and nicotine that a particular cigarette produces and to use those measurements to develop a relative ranking of the amounts of tar and nicotine in each brand of cigarettes. Although the FTC does not classify specific brands as high or low in tar content, the FTC measurements that the machine produces have appeared on cigarette packages for decades, including the packages for the Merit brand.

One inherent problem with the FTC measurements is that they do not account for the manner in which smokers actually ingest the smoke from a cigarette. For example, a person who takes longer or more frequent puffs than the machine takes will receive a higher dose from each cigarette than the machine indicates. According to plaintiff's evidence, that problem in the FTC measurement process is significant with regard to low-tar cigarettes such as Merit because smokers compensate for the lower nicotine level that such cigarettes contain. The jury could have found that defendant's understanding that smokers tend to compensate for lower nicotine levels played a major role in the development of its Merit brand.

Based on its research, defendant made a number of modifications to its low-tar cigarettes, including using expanded tobacco, reconstituted tobacco, specially treated cigarette paper, and certain additives, and placing microscopic ventilation holes in the paper. (7) The cumulative effect of those modifications was to increase the amount of air in each standard puff that the FTC machine measured and to reduce the amount of tar and nicotine that it measured. Those modifications resulted in more favorable comparisons with other brands regarding tar content. However, the jury could also have found from the evidence that defendant knew that the FTC measurements would mislead consumers because of the ways in which smokers compensate for the reduction in tar and nicotine in brands like Merit. We therefore discuss in more detail what the evidence showed about defendant's research regarding how smokers compensate for reductions in nicotine levels.

The jury could have found from the evidence that defendant knew that smokers who smoke cigarettes that are low in tar and nicotine compensate for those reductions by smoking more cigarettes, by taking longer, deeper, and more frequent inhalations of smoke, by holding the smoke in their lungs longer, and by subconsciously holding the cigarettes in a way that blocks microscopic ventilation holes. Those behaviors are prompted by the need of smokers to reach the level of nicotine in their bodies where they feel physically comfortable. Until that level is reached, smokers will continue to smoke in order to receive the amount of nicotine that their bodies require. Thus, smokers who switch to low-nicotine and low-tar cigarettes such as Merit may compensate for the low content, often unconsciously. Because the ratio of nicotine to tar in a cigarette remains relatively constant, a person who smokes to obtain the effect of increased nicotine--the addictive portion of the smoke--will ingest more tar. Thus, the effect of compensation is that a person who smokes a low-tar cigarette may not actually reduce his or her exposure to the harmful substances in tobacco smoke.

Defendant was aware of the concept of compensation by 1961, at least in broad outline. Its subsequent research confirmed the significance of compensation as it continued to create strategies to meet the onslaught of other research that suggested that cigarette smoking was hazardous to human health. In 1971, defendant conducted a study of smokers in which it asked participants to smoke cigarettes that delivered varying amounts of tar and nicotine. That study showed defendant that, as tar delivery decreased, cigarette consumption increased, with the result that the smoker's daily intake of tar remained constant. A similar effect occurred with nicotine. The study concluded that its "findings support the hypothesis that the smoker does have daily intake quotas for tar and/or nicotine; and that he titrates his smoke intake to meet his quotas." In addition, a 1975 memorandum from one of defendant's leading researchers described research that showed that smokers smoked Marlboro Lights--a Philip Morris low-tar brand--differently from how they smoked the full-flavor Marlboros. Among other things, the study showed that each inhalation was greater in volume, with the result that Marlboro Light smokers received higher proportions of the available tar. Although many of defendant's senior scientists knew about the results of research regarding compensation, defendant neither published that information nor shared it with regulatory agencies or the public health community.

Defendant specifically developed the Merit brand of cigarettes to respond to the health concerns that became especially prominent after the 1964 Surgeon General's report on smoking and health. Defendant's goal in developing Merits was to produce a cigarette that consumers would perceive as healthy. The intended marketing target was smokers who believed that smoking was not healthy, but who sought some reason to continue smoking. Advertisements for the Merit brand described it as a "light" or "low-tar" cigarette. Although defendant did not expressly assert in its advertising campaigns that Merit cigarettes were healthy or safe for consumption, the jury could find from the evidence presented by plaintiff that it otherwise promoted that message.

At the time that defendant began promoting the Merit brand, the public health community generally believed that low-tar cigarettes were safer than full-flavor brands. Indeed, the 1981 Surgeon General's report suggested that smokers who could not quit smoking could diminish the risk to their health by switching to a low-tar brand. At the time of that report, the extent and importance of the concept of compensation was not generally known to the relevant scientific community, in part because defendant kept its research confidential and unpublished. For instance, the person who drafted the 1981 Surgeon General's report testified at trial that, if he had known at the time what defendant knew, he would not have recommended in that report that smokers switch to a low-tar cigarette as an alternative to quitting.

As stated above, defendant argues that plaintiff's low-tar fraud claim is preempted by the Federal Cigarette Labeling and Advertising Act. It argues that plaintiff's claim is, at bottom, "a claim that defendant should have said more about low-tar cigarettes." (Emphasis in original.) According to defendant, "the Labeling Act bars any claim that defendant[] should have provided additional information about the health risks of low-tar cigarettes." Plaintiff responds that "[f]ederal preemption does not relieve defendant of its duty not to deceive." For the reasons discussed below, we agree with plaintiff.

Cipollone makes it clear that section 1334(b) does not preempt all common-law claims. Rather, the Court explained, it is necessary to "look to each of [the] common-law claims to determine whether it is in fact pre-empted." 505 US at 523 (footnote omitted). The plaintiff in Cipollone alleged two theories of fraudulent misrepresentation. Id. at 527. His first theory of fraud was that the defendant used its advertising to neutralize the federally mandated warnings under the statute. That claim was predicated on a state-law prohibition against advertising statements and promotional information that minimized the health hazards associated with smoking. The Court held that that claim was preempted because the statute preempts both warning requirements and prohibitions. Id.

In contrast to the above theory alleged by the plaintiff in his first theory in Cipollone, his second theory was that the defendant had committed fraud by "false misrepresentations of a material fact [and by] conceal[ment] of a material fact." The Court reasoned that that theory was not preempted by the statute because it was predicated not on a duty based on smoking and health, "but rather on a more general obligation--the duty not to deceive." 505 US at 528-29. The Court relied on the fact that the legislation enacted by Congress expressly reserved the FTC's authority to identify and punish deceptive advertising practices. According to the Court, "[t]his indicates that Congress intended the phrase 'relating to smoking and health' [in the statute] * * * to be construed narrowly so as not to proscribe the regulation of deceptive advertising." Id. at 529 (footnote omitted). The Cipollone Court "conclude[d] that the phrase 'based on smoking and health' fairly but narrowly construed does not encompass the more general duty not to make fraudulent statements." Id.

We conclude that plaintiff's "low-tar" fraud specification does not constitute an allegation that is preempted by section 1334(b). Plaintiff alleged that defendant deceived the smoking public by falsely representing that low-tar cigarettes are safer than regular cigarettes and thus constitute a reasonable alternative to quitting smoking altogether. Based on the evidence offered by plaintiff under its fraud specification, the jury could properly have found that, apart from any labeling of its product, defendant affirmatively represented to the smoking public and the public health community that it would reveal the results of its research as part of a common quest to determine the health hazards of smoking. Instead, it hid the results of its research and offered the Merit brand to the public, knowing that the public health community generally believed that low-tar cigarettes were safer than full-flavor brands. In other words, defendant permitted the public health community to promote brands like Merit on its behalf, knowing that, in fact, they were not safer than full-flavor brands. Plaintiff's fraud specification, when understood in this light, does not allege that defendant attempted to neutralize the federally required warnings or that it failed to give additional warnings concerning particular kinds of cigarettes, claims that would have been preempted under the federal act. Rather, it alleges the violation of the general duty not to deceive and, as the Court in Cipollone held, such a claim is not preempted.

We turn to defendant's other arguments relating to plaintiff's fraud claim. In its second assignment of error, defendant challenges the court's jury instruction that, if the jury found that defendant voluntarily assumed a duty to decedent as a member of the consuming public, it must disclose all material matters of which it had knowledge. In its third assignment of error, defendant claims that the court erred in failing to instruct the jury that the Frank Statement was not a representation on which decedent relied and that, therefore, the statement could not be the basis for plaintiff's fraud claim. Defendant supports those assignments in part with arguments that go beyond what it raised to the trial court; we therefore do not consider those portions of its arguments because the trial court did not have the opportunity to consider them. See ORAP 5.45. Nonetheless, some of the unpreserved arguments provide background to our discussion of the arguments that defendant did preserve and that it now raises on appeal. Accordingly, we refer to them below only to provide context.

Defendant first argues--with regard to plaintiff's claim that it failed to disclose its research to the public--that there is no legally cognizable claim in Oregon for a fraud perpetrated on the public based on an assumed duty. It points out that all the Oregon cases that discuss liability for an assumed duty involve claims in which the plaintiff attempted to hold the defendant liable in negligence for responsibilities that the defendant assumed on behalf of a particular person or class of persons. See, e.g., Quackenbush v. PGE, 134 Or App 111, 118, 894 P2d 535, rev den, 322 Or 193 (1995) (assumed duty to make tree safe for decedent to prune it); Peterson v. Mult. Co. Sch. Dist. No. 1, 64 Or App 81, 93-94, 668 P2d 385, rev den, 295 Or 773 (1983) (assumed duty to make safety recommendations to high school football coaches). Defendant's assertion is correct as a matter of a survey of existing case law, but its assertion does not resolve the issue whether liability arises from a fraudulent representation by a defendant that has assumed a duty to the consumer public.

In Williams v. Philip Morris Inc., 182 Or App 44, 48 P3d 824 (Williams I), adh'd to on recons, 183 Or App 192, 51 P3d 670 (2002) (Williams II), rev den, 335 Or 142, vac'd and rem'd, 540 US 801, 124 S Ct 56, 157 L Ed 2d 12 (2003), on remand, 193 Or App 527, 92 P3d 126 (2004) (Williams III), aff'd, 340 Or 35, 127 P3d 1165 (2006), we considered a similar issue. (8) In that case, the defendant argued that Oregon did not recognize a common-law claim of fraud arising out of representations made to the consumer public rather than to a specific individual. We disagreed, observing that the "plaintiff's theory fits comfortably within traditional common-law principles." Williams I, 182 Or App at 53. We apply a similar analysis here.

The elements of common-law fraud are:

"(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; (9) and his consequent and proximate injury."

Conzelmann v. N.W.P.&D. Prod. Co., 190 Or 332, 350, 225 P2d 757 (1950); see also Meader v. Francis Ford Inc., 286 Or 451, 456, 595 P2d 480 (1979) (holding that a claim in fraud need not be founded on a contractual obligation but will lie based on the knowledge of a falsity of a representation and the intention to mislead). As we said in Williams I, "the fundamental character of fraud is the communication of a misimpression to induce another to rely on it." 182 Or App at 54. One species of a misimpression that will give rise to an actionable claim in fraud is a promise made with the knowledge that it will not be performed or with reckless disregard about whether it will be performed. Elizaga v. Kaiser Found. Hospitals, 259 Or 542, 548, 487 P2d 870 (1971). It follows that, if defendant made a promise to the consumer public without intending to perform it, a traditional element of common-law promissory fraud would be satisfied.

Defendant also argues that there is no evidence that it made a promise to disclose research that it did not intend to keep at the time it was made. However, plaintiff points to the Frank Statement as evidence that defendant made promises that it did not intend to keep. In the 1954 statement, defendant promised to give "aid and assistance to the research effort into all phases of tobacco and health." In the 1962 statement, the Tobacco Institute, on behalf of defendant, stated that it "supports and cooperates with all responsible efforts to find the facts and bring them to the public" and recognized that the industry has "a special responsibility to help scientists determine the facts about tobacco use and health," a responsibility that it accepted in 1954 by creating the TIRC to fund scientific research. In 1966, defendant, again through the Tobacco Institute, emphasized its support for research to discover the full facts about tobacco and health. Defendant and the industry made similar statements in later years. We hold, based on all of the above evidence, that the jury could reasonably infer that defendant engaged in a continuing course of conduct in which it represented to the public that it would conduct research and disclose its results to the public over a period of time. (9) The jury could also infer from the above evidence that, at the time that defendant made those representations, it did not intend to perform them.

Defendant argues, however, that there is no evidence that decedent relied on any promise made by defendant to reveal the results of its research. It points out that there is no evidence that decedent ever saw either the Frank Statement or the 1962 statement. Indeed, decedent was eight years old when defendant published the Frank Statement, and plaintiff testified that he had no reason to believe that she had heard, seen, or cared about industry advertising in 1954. Plaintiff agrees with defendant's assertion about the state of the evidence, but responds that it is not necessary to show that decedent was aware of defendant's assumed duty; he points out that the plaintiff in Peterson did not know that the defendant had undertaken the duty that it negligently failed to perform in that case.

In Peterson, the plaintiff became a quadriplegic after suffering a neck injury at a high school football practice. 64 Or App at 83. He asserted that, because the Oregon School Activities Association (OSAA) had voluntarily undertaken to make and disseminate safety recommendations to the high school that he attended and had failed to perform that duty, it was liable for negligence. Id. Plaintiff's argument in this case, however, fails to distinguish between the different requirements for proving a claim of negligence and for proving a claim of fraud. The fraud theories are intended to protect different interests from the negligence theories. The plaintiff's lack of knowledge about an assumption of a duty by the OSAA in Peterson did not matter to his claim for negligence because the assumed duty of care by the OSAA extended to the plaintiff's interest in participating safely in a particular activity.

We conclude that Peterson is inapposite. Unlike in a negligence claim where a defendant may assume a duty to more than one person or to a class of persons, the intrinsic nature of a claim of promissory fraud is such that it protects the interests only of those to whom a promise is made specifically and directly. That is because the requisite intent to mislead in a fraud claim consists of a defendant misrepresenting a material fact for the purpose of misleading the other party. U.S. National Bank v. Fought, 291 Or 201, 225, 630 P2d 337 (1981). That kind of requirement does not exist in a negligence claim where a duty of reasonable care is assumed generally on behalf of a class of persons participating in a particular activity. We conclude therefore that, in the absence of evidence that decedent relied on defendant's representations that it would reveal its research to the public, the trial court erred when it submitted that theory to the jury. Yet, as explained below, because we find no error regarding the "low-tar" specification of fraud, that error does not require reversal. See Moe v. Eugene Zurbrugg Construction Co., 202 Or App 577, 588, 123 P3d 338 (2005) (if jury returns special verdict and court upholds at least one specification, any error regarding other specifications does not require reversal).

We return to the issue whether the trial court properly submitted the "low-tar" specification of fraud to the jury, having already determined that it was not preempted by federal law. Defendant argues that it never represented publicly that low-tar cigarettes were safer; rather, throughout the time that decedent smoked Merits, it was the public health community, not defendant, that gave smokers the information that low-tar cigarettes were safer and that suggested that they switch from full-flavor brands. It follows, according to defendant, that it cannot be held liable for fraud when smokers relied on recommendations from the public health community rather than on what it represented in its promotion of low-tar cigarettes. Plaintiff counters that there is evidence that defendant's development and promotion of low-tar cigarettes, in particular, the Merit brand, was part of its continuing fraudulent effort to dissuade the public health community about the hazards of smoking, an effort that began in 1954 and continued thereafter.

The flaw in defendant's argument is its failure to recognize the extent to which the public health community relied on what the jury could have found to be defendant's deceitful failure to fulfill the promises that it made to the public at large, including the public health community, in the Frank Statements and elsewhere. The jury could have inferred from the evidence that defendant knew from its undisclosed research that the FTC machine results on which the public health community relied were misleading but that defendant and other members of the industry worked to retain that standard of testing because it "gave low numbers." Defendant was also aware of the significance of the concept of compensation and that people who smoke low-tar cigarettes typically do not reduce their intake of tar and nicotine. Although defendant publicly represented that it was working with scientists to discover the truth about tobacco addiction and health, it did not share the essential information that it had learned from its research, either with the public or with non-Philip Morris scientists, as it had promised. In particular, the evidence shows that decedent switched to the Merit brand of cigarettes in 1976 because she believed that "the low tar and nicotine filters are better for you." The jury could infer from the evidence that decedent's belief arose because of the mistaken belief of the public health community that low-tar cigarettes were safer than full-flavor brands. The jury could also find that smokers like decedent were ultimately the intended recipients of defendant's deceit perpetrated on the public health community.

Defendant cannot shield itself from liability merely because it used a third party to deliver its misleading message. In American National Bank of Denver v. Tonkin, 286 Or 73, 77, 592 P2d 1008 (1979), the plaintiff agreed to lend $300,000 to Baron if the defendant would guarantee the loan. The plaintiff told Baron that the loan would be for two and one-half years at nine percent interest. Baron communicated that statement to the defendant, who agreed to guarantee the loan on those terms. In fact, without telling the defendant, the plaintiff made the loan for 365 days with renewal up to two and one-half years and at interest rates higher than nine percent. When the plaintiff sued to collect on the guaranty, the defendant raised the affirmative defense of fraud. The Supreme Court held that there was sufficient evidence that the bank made the statements to Baron with the intent that he would convey them to the defendant to support the affirmative defense. Relying on earlier cases, it held that one who makes representations to another, intending for the recipient to communicate them to a third person so that the third person may act on them, may be liable to the third person for fraud. Id. at 81-83, 85-86.

In Williams I, we held, relying on Oregon Supreme Court decisions, that "a person who makes a misrepresentation may be liable to the intended recipients of a misrepresentation without regard to whether the person making the representation intends to defraud a particular person." 182 Or App at 53. What matters is whether the representation was intended ultimately for the public or for a particular class of persons to which the plaintiff belongs. Id. at 53-55. We adhere to those principles in this case. Here, there is evidence from which the jury could find that defendant concealed the results of its research from the public health community with the intent that low-tar cigarettes would receive a favorable recommendation from that community and that members of the consumer public would rely on those recommendations. That evidence is sufficient to support plaintiff's claim that defendant misrepresented to smokers like decedent that low-tar cigarettes were safer.

Our conclusion that the trial court did not err in denying defendant's motion for a directed verdict on plaintiff's claim that defendant committed fraud by misrepresenting to the consumer public that low-tar cigarettes were safer requires us to consider defendant's thirteenth assignment of error, which affects all of plaintiff's claims--the trial court's failure to grant a mistrial during the jury's deliberations. During the trial, the court admitted hundreds of documentary exhibits offered by both parties. Each party occasionally highlighted portions of the exhibits to show the jury during a witness's testimony or as part of opening statements or closing arguments. Before the jury began deliberating, defendant's counsel gave the clerk copies of defendant's exhibits that did not include any highlighting so that the clerk could give them to the jury; they believed that plaintiff's counsel had done the same with plaintiff's exhibits. On the second day of deliberations, however, defendant discovered that approximately 100 of the exhibits that plaintiff's counsel gave the clerk for delivery to the jury contained highlights that plaintiff's attorneys had made on them. One exhibit also contained an attached note in which plaintiff's attorney included selective quotations from a different exhibit. When defendant objected to the actions of plaintiff's counsel, they explained that they were "just trying to direct [the jury's] attention to the appropriate portions of the documents." Defendant moved for a mistrial, arguing that plaintiff's counsel's actions were misconduct that prejudiced its ability to receive a fair trial.

Rather than granting defendant's motion for a mistrial, the trial court ultimately decided to give a curative instruction that addressed both the highlighting and the fact that the jury had accidentally received several exhibits that had not been admitted into evidence. After telling the jury to disregard those exhibits, the trial court told the jury:

"And also the Court--it has been brought to the Court's attention that in some of the exhibits from the plaintiff they're highlighted with yellow markings. You are not to give any special weight to any highlighting in a document.

"You have the right to review that document and it's your responsibility to determine what weight you will give to various portions of that document. And I will give you an example. I could read a novel, and I could go through that novel and I could highlight portions that I thought were very important to me.

"I could give that same novel to you to read, and you read it, 'Why was this guy highlighting this right here? It doesn't mean anything to me.' You might highlight other areas of the novel. You give it to a third person, a third person might highlight other areas.

"We may have to go through a large number of people before we start finding people that agree with what we, as individuals, highlighted. Just because counsel for the plaintiff highlighted an area, that [does not] mean that you are bound to accept that as being an important area for this trial.

"You might read another paragraph or another page, and that might be more important to you. As a juror that's your responsibility to do that."

Defendant argues that the court's instruction was insufficient to cure the effect of the highlighting, arguing that there is a presumption of prejudice when a jury receives unauthorized communications. The cases on which defendant relies all involve the jury receiving information that was not admitted in evidence; none involves emphasizing certain aspects of the admitted evidence. In addition, they all involve review of the jury's verdict, not actions that the trial court took before the verdict to cure any prejudice. See, e.g., State v. Mapel, 54 Or App 795, 797, 636 P2d 445 (1981) (jurors in drug case attended seminar during trial at which prosecutor and state witness spoke); State v. Holmes, 17 Or App 464, 476, 522 P2d 900 (1974) (court provided dictionary for jury to use during deliberations); Stephens v. South Atlantic Canners, Inc., 848 F2d 484, 486-89 (4th Cir), cert den, 488 US 996 (1988) (prejudicial comments written on exhibits). Assuming, however, that a presumption of prejudice arose under the circumstances of this case, it does not necessarily follow that the trial court's only choice was to grant a mistrial. The question is whether the instruction that the court gave was sufficient to overcome any prejudice that plaintiff's actions may have created.

We review a trial court's denial of a motion for mistrial for an abuse of discretion because the trial judge is in the best position to evaluate the prejudicial effect, if any, of the challenged actions and whether there are alternatives to a mistrial. State v. Lotches, 331 Or 455, 496-97, 17 P3d 1045 (2000), cert den, 534 US 833 (2001). In this case, plaintiff's counsel's action in highlighting exhibits that counsel intended the clerk to submit to the jury may have been improper. The effect of that action was to direct the jury's attention to the portions of the documents that plaintiff thought persuasively supported his contentions. Advocacy, however, ends when the jury retires to consider its verdict. At that point it is the jury's role, not that of the parties, to determine which portions of the evidence are important and which are not. The jury should have been given unaltered exhibits.

The question, however, is whether it was within the trial court's discretion to respond to those circumstances in some way other than ordering a mistrial. In exercising its discretion, the court could have considered that the highlighting was a small aspect of a long and hard-fought trial during which both parties had emphasized to the jury the portions of the evidence that they considered important. The trial court also stated more than once during the course of the trial that the jury was particularly attentive and involved in the case. The curative instruction that the court gave was straightforward, and it illustrated the court's point with an appropriate example. We perceive no prejudice from the highlighting that could not be cured by the instruction. See State v. Terry, 333 Or 163, 177, 37 P3d 157 (2001) ("'Jurors are assumed to have followed their instructions, absent an overwhelming probability that they would be unable to do so.'" (Quoting State v. Smith, 310 Or 1, 26, 791 P2d 836 (1990))). Under the circumstances, it was within the court's discretion to conclude that the jury would follow the direction of the curative instruction to disregard the highlighting. We therefore conclude that the trial court did not act outside of its range of discretion in giving a curative instruction, rather than granting defendant's motion for a mistrial.

We turn now to the award of punitive damages on the fraud claim. Defendant assigns error to the trial court's failure to give its requested jury instruction that "[y]ou are not to punish a defendant for the impact of its conduct on individuals in other states." The issue framed by defendant's assignment implicates constitutional principles under federal due process law and trial practices governed by the law of the State of Oregon. As background, we begin our discussion with two United States Supreme Court cases that established the applicable constitutional principle: State Farm Mut. Automobile Ins. Co. v. Campbell, 538 US 408, 123 S Ct 1513, 155 L Ed 2d 585 (2003) (Campbell), and BMW of North America, Inc. v. Gore, 517 US 559, 116 S Ct 1589, 134 L Ed 2d 809 (1996) (Gore).

In Gore, an automobile purchaser brought an action against an automobile manufacturer for the failure to disclose that a purportedly new automobile had been repainted after being damaged before delivery occurred. 517 US at 563. The manufacturer acknowledged that it had a nationwide policy of not advising customers of predelivery damage to new cars when the cost of repair did not exceed three percent of the car's suggested retail price. Id. The jury returned a $4 million punitive damage award against the manufacturer, which was reduced to $2 million by the Alabama Supreme Court. The United States Supreme Court held, however, that even the reduced award violated the Due Process Clause because it was grossly excessive in relation to the state's legitimate interests in punishing and deterring unlawful wrongful conduct. Id. at 573-74. The Court observed that a state may protect its citizens by prohibiting deceptive trade practices, but that neither the jury nor the trial court was presented with any evidence that the manufacturer's out-of-state conduct was unlawful. Indeed, there was testimony that approximately 60 percent of the vehicles that were repainted were sold in states where such repairs did not constitute unfair trade practices. Id. at 573. Although the plaintiff argued that the manufacturer's conduct was particularly reprehensible because the nondisclosure of repairs regarding his car was part of a nationwide pattern of tortious conduct, the Court held that the Alabama Supreme Court "properly eschewed reliance on BMW's out-of-state conduct," id., and that "a State may not impose economic sanctions on violators of its laws with the intent of changing the tortfeasors' lawful conduct in other States." Id. at 572.

The above rule was reiterated in Campbell, a case in which the insureds brought an action in Utah against an automobile liability insurer to recover for a bad-faith failure to settle within policy limits. Evidence of the insurer's practices both in and out of state was offered to show that the insurer's actions were tortious--that is, to show that its practice was deliberate and to rebut the insurer's assertion that its practices were inadvertent or mistakes in judgment--and to support an award of damages to punish the insurer for its nationwide practices. The jury awarded the plaintiffs $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million, respectively. 538 US at 415. The Supreme Court, in reversing the award of punitive damages, stated that, as a general rule, a state does not

"have a legitimate concern in imposing punitive damages to punish a defendant for unlawful acts committed outside of the State's jurisdiction. Any proper adjudication of conduct that occurred outside Utah to other persons would require their inclusion, and, to those parties, the Utah courts, in the usual case, would need to apply the laws of their relevant jurisdiction."

538 US at 421-22. The Court also admonished:

"Lawful out-of-state conduct may be probative when it demonstrates the deliberateness and culpability of the defendant's action in the State where it is tortious, but the conduct must have a nexus to the specific harm suffered by the plaintiff. A jury must be instructed, furthermore, that it may not use evidence of out-of-state conduct to punish a defendant for action that was lawful in the jurisdiction where it occurred. Gore, 517 U.S., at 572-573 (noting that a State 'does not have the power . . . to punish [a defendant] for conduct that was lawful where it occurred and that had no impact on [the State] or its residents'). A basic principle of federalism is that each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders, and each State alone can determine what measure of punishment, if any, to impose on a defendant who acts within it jurisdiction."

538 US at 422 (emphasis added; bracketed material by Campbell Court).

The issue underlying defendant's assignment of error is whether the trial court erred--in light of the principle announced by the above cases that a state cannot impose punitive damages for harm caused to nonresidents by out-of-state conduct--when it refused to give defendant's requested instruction that "it was not to punish defendant for the impact of its conduct on individuals in other states." That issue also implicates a common law rule regarding Oregon trial practice. In general, a party in a civil action is entitled to jury instructions on its theory of the case only if its requested instruction accurately states the law that governs the trial of the case. Hernandez v. Barbo Machinery Co., 327 Or 99, 106, 957 P2d 147 (1998). At least three corollary principles necessarily flow from that rule. First, the rule contemplates that instructions be based on the evidence adduced at trial and not on abstract principles that do not engage with the evidence. (10) Second, evidence admitted at trial may be probative on more than one issue, and the jury's use of it, once admitted and absent some limitation by the court, is unrestricted. (11) For instance, in this case, plaintiff offered evidence of defendant's out-of-state conduct to demonstrate the ongoing pattern of deceit over many years regarding the harmful effects of its tobacco products. That evidence was probative to demonstrate the reprehensibility and the deliberativeness of defendant's conduct. On the other hand, the jury was not entitled to use that evidence to punish defendant for the impact of that out-of-state conduct on non-Oregon residents under the Due Process Clause. Third, no party under Oregon law is required to request a jury instruction that advances the use of evidence in a way that benefits the party's adversary. Rather, Oregon law allocates the responsibility of each party to request a jury instruction on its theory of the case, not on the other party's theory of the case. (12) Each of those principles is embodied in the general rule, and each is implicated here, as more fully explained below.

To recapitulate: Under the Due Process Clause, a state can punish a defendant for in-state conduct that causes in-state harm. A state also has an interest in punishing a defendant for its out-of-state conduct that causes in-state harm. Both of those interests were at issue in this case because of the evidence that plaintiff adduced. As the Court held in Gore and Campbell, however, a state may not punish a defendant for out-of-state conduct that causes out-of-state harm. The final construct, punishing a defendant for in-state conduct that causes out-of-state harm, also necessarily depends on the state of the evidentiary record. For instance, Oregon could make a legitimate policy choice--that is, a choice that comports with the Due Process Clause--to punish an actor who is conducting a fraudulent advertising campaign from Oregon that causes harm in a neighboring state. But the applicability of that construct, like the other constructs, depends on the evidence adduced at trial and the legal theories of the parties regarding that evidence. We turn, then, to the evidence in this case.

In this case, plaintiff offered evidence of harm that was caused to nonresidents by the consumption of defendant's product. Indeed, one witness testified that there are approximately 500,000 deaths nationwide each year that could be attributed to cigarette smoking. Plaintiff's theory regarding the use of that kind of evidence was that defendant's "unlawful misconduct in 50 states is subject to punitive damages in this courtroom." In turn, defendant sought to limit the jury's use of the evidence of defendant's out-of-state conduct. It told the trial court, "Philip Morris cannot be punished in this state for conduct which occurred out of state. [The requested instruction] informs the jury we cannot be punished for out of state harms." Plaintiff countered that, unlike in Gore, "defendant's conduct in this case before us * * * would be tortious in any state." The court ruled that the requested instruction "is out."

Defendant correctly understood the import of the Court's holding in Gore, and its requested instruction accurately addressed the issue that was before the trial court. Plaintiff's counter argument was legally incorrect. (13) Significantly, the language used in defendant's requested instruction follows almost word-for-word the relevant language in Campbell. In effect, the parties and the court understood that the requested instruction would have placed a limitation on the jury's use of the evidence of defendant's nationwide policies and conduct to punish defendant for purposes of punitive damages. As plaintiff concedes in his brief on appeal, "[t]he constitution prohibits plaintiff f