JOSEPH NAEGELE, as Trustee, etc., et al., Plaintiffs and Appellants, v. R.J. REYNOLDS TOBACCO COMPANY et al., Defendants and Respondents; RICHARD DONALDSON, Plaintiff and Appellant, v. R.J. REYNOLDS TOBACCO COMPANY et al., Defendants and Respondents, 28 Cal. 4th 856

Opinion KENNARD, J. Tobacco-related illnesses are a leading cause of death in this state and worldwide, and these debilitating illnesses have imposed enormous costs on tobacco users, their families, and society. (See, e.g., Health & Saf. Code, § 104350, subd. (a).) Although the risk of illness and death from tobacco use has become increasingly well known in recent decades, tobacco consumption continues to be widespread, at least in part because tobacco contains nicotine, a substance the Surgeon General of the United States has determined to be addictive. (U.S. Surgeon Gen.

Rep., The Health Consequences of Smoking: Nicotine Addiction (1988) <www.cdc.gov/tobacco/sgr_1988.htm> [as of Aug. 5, 2002].) In 1987, the California Legislature enacted former

section 1714.45 of California’s Civil Code (which we here sometimes refer to as the Immunity Statute) stating that in a product liability action a court could not require a manufacturer or seller to pay damages for injuries caused by certain products, including tobacco products, that are inherently unsafe and known to be unsafe by the ordinary consumer of that product. (Stats. 1987, ch. 1498, § 3, p. 5778 (hereafter sometimes former

section 1714.45).) Ten years later, the Legislature repealed the Immunity Statute as it applied to manufacturers of tobacco products. (Stats. 1997, ch. 570, § 1.) In the companion case of Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828 [123 Cal.Rptr.2d 40, 50 P.3d 751] (Myers), we consider how the repeal of the statutory immunity affects the liability of tobacco manufacturers for injuries caused by tobacco use before, during, and after the 10-year period during which the Immunity Statute was in effect.

In Myers, we hold that, because the repeal was not retroactive, the Immunity Statute continues to provide an immunity for tobacco companies in product liability actions, but only for conduct they engaged in during the 10-year period when the Immunity Statute was in effect. The liability of tobacco companies based on their conduct outside the 10-year period is governed by general tort principles. Here, we are asked to decide what forms of conduct by tobacco companies during the 10-year immunity period come within the protection conferred by the Immunity Statute.

The Court of Appeal held that, as applied to liability for injuries caused by tobacco products, the Immunity Statute covers all conduct by tobacco companies acting as manufacturers or sellers of tobacco products except conduct resulting in manufacturing defects or breach of express warranty. We, however, conclude that the Immunity Statute’s protection is not so broad and that it does not extend to allegations that tobacco companies, in the manufacture of cigarettes, used additives that exposed smokers to dangers beyond those commonly known to be associated with cigarette smoking.

I Plaintiff Edwin Brigham smoked cigarettes from 1950 until 1996, when he was diagnosed with lung cancer. He sued defendants R.J. Reynolds Tobacco Company and Brown & Williamson Tobacco Corporation seeking personal injury damages on theories of negligence, product liability, and fraud. Defendants demurred, citing the Immunity Statute as a bar to all of plaintiffs causes of action. The trial court sustained defendants’ demurrer but granted plaintiff leave to amend the complaint.

When defendants thereafter demurred to plaintiffs first amended complaint, the trial court sustained the demurrer and dismissed plaintiffs lawsuit against defendants. On plaintiffs appeal, the Court of Appeal affirmed. We granted plaintiffs petition for review. II At issue here is what types or categories of conduct by tobacco companies fall within the immunity given to them by the Immunity Statute, which was in effect from January 1, 1988, until December 31, 1997.

The statute specifies that the immunity it gives to manufacturers and sellers of specified inherently unsafe products, including tobacco, applies in product liability actions. (Former § 1714.45, subd. (a), Stats. 1987, ch. 1498, § 3, pp. 5778-5779.) The statute defines a product liability action as “any action for injury or death caused by a product, except that the term does not include an action based on a manufacturing defect or breach of an express warranty.” (Former § 1714.45, subd. (b), Stats. 1987, ch. 1498, § 3, p. 5779.) Therefore, the immunity conferred by the Immunity Statute does hot cover liability for manufacturing defects in tobacco products or for a tobacco company’s breach of an express warranty, but otherwise it appears in general to cover all liability for injury or death caused by tobacco products.

Additional limitations on the scope of the immunity may be deduced from the history and purpose of the Immunity Statute, which we examined in detail in Richards v. Owens-Illinois, Inc. (1997) 14 Cal.4th 985 [60 Cal.Rptr.2d 103, 928 P.2d 1181] (Richards), a unanimous decision.

The statute’s express premise, we said, was “that suppliers of certain products which are ‘inherently unsafe,’ but which the public wishes to have available despite awareness of their dangers, should not be responsible in tort for resulting harm to those who voluntarily consumed the products despite such knowledge.” (Id. at p. 1002.) We described the Immunity Statute as based on the principle that “if a product is pure and unadulterated, its inherent or unavoidable danger, commonly known to the community which consumes it anyway, does not expose the seller to liability for resulting harm to a voluntary user.” (Id. at p. 999, italics omitted.) Thus, as applied to tobacco products, the Immunity Statute was intended to protect tobacco companies from liability for their conduct as manufacturers and sellers of products containing tobacco that is pure and unadulterated; when the claim seeks damages for personal injuries or death resulting from dangers or risks that are commonly known to be inherent in tobacco products.

We now apply this understanding of the purpose and scope of the Immunity Statute to the allegations of plaintiffs first amended complaint, which seeks damages from defendant tobacco companies for plaintiffs lung cancer, which was diagnosed in October 1996. At that time, plaintiff had smoked cigarettes regularly since 1950. His complaint alleged causes of action for negligence, product liability, and various theories of fraud, based, in part at least, on defendants’ conduct in manufacturing and distributing cigarettes during the statutory immunity period.

Plaintiff argues that the Immunity Statute bars only product liability claims and not claims based on fraud. According to plaintiff, a fraud claim is one that challenges the propriety of defendants’ conduct, while a product liability claim is one that assails the safety of defendants’ products.

The Court of Appeal rejected plaintiffs proposed distinction between fraud and product liability claims as “of no consequence in interpreting [the Immunity Statute], because the Legislature supplied its own expansive definition of. . . ‘product liability’ actions.” As defined by the Legislature in the Immunity Statute, a product liability action is “any action for injury or death caused by a product, except that the term does not include an action based on a manufacturing defect or breach of an express warranty.” (Former § 1714.45, subd. (b).) Relying on that language, the Court of Appeal stated: “The Legislature’s plain language compels the conclusion that whether based on allegations or theories of fraud, negligence, or manufacture of an inherently unsafe product, an action in which a plaintiff seeks damages for personal injury or death caused by a tobacco product clearly is a ‘product liability’ action within the meaning of the statute.” Thus, the Court of Appeal held, the Immunity Statute bars each of plaintiffs various claims that defendant tobacco companies defrauded the public about the safety of their products and the risks of tobacco use.

We agree with the Court of Appeal that under the Immunity Statute’s broad definition of product liability lawsuits, it makes no difference whether a claim seeking damages for “personal injury or death” caused by a tobacco product is labeled as one for negligence, manufacture of an inherently unsafe product, or fraud. But we disagree with the Court of Appeal that the Immunity Statute precludes plaintiffs recovery under all of his fraud allegations.

As we explained in Richards, which we discuss at length in the companion case of Myers, supra, 28 Cal.4th 828, the Immunity Statute drew “its express inspiration from product liability principles addressed by

section 402A of the Restatement Second of Torts (Restatement), and particularly comment i thereto (comment /).” (Richards, supra, 14 Cal.4th at p. 999, citing former § 1714.45, subd. (a)(2).) We observed: “Section 402A of the Restatement proposes generally that when a manufacturer or distributor sells a product ‘in a defective condition unreasonably dangerous to the user or consumer’ [citation], and the product reaches that person, as expected and intended, without substantial change in its condition, the seller is ‘subject to liability’ for physical harm ‘thereby caused to the ultimate user or consumer.’ ” (Richards, supra, at p. 999, italics deleted.) We went on to say in Richards: “However, comment i asserts an important qualification of the general rule ....

Comment i makes clear that, under the Restatement formulation, ‘[t]he rule [of liability] applies only where the defective condition of the product makes it unreasonably dangerous to the user or consumer.’ (Restatement, p. 352, italics added.) As comment i then explains, ‘[m]any products cannot possibly be made entirely safe for all consumption,’ but if a product is pure and unadulterated, its inherent or unavoidable danger, commonly known to the community which consumes it anyway, does not expose the seller to liability for resulting harm to a voluntary user. “Thus, comment i observes, ‘[ordinary sugar is a deadly poison to diabetics, and castor oil found use under Mussolini as an instrument of torture,’ but this is not what the Restatement means by ‘unreasonably dangerous.’ ‘Good whiskey is not unreasonably dangerous merely because it will make some people drunk, and is especially dangerous to alcoholics ....

Good tobacco is not unreasonably dangerous merely because the effects of smoking may be harmful .... Good butter is not unreasonably dangerous merely because, if such be the case, it deposits cholesterol in the arteries and leads to heart attacks . . . .’ (Restatement, pp. 352-353, italics added.)” (Richards, supra, 14 Cal.4th at p. 999, some italics added in 1st par.) Richards added: “The clear premise of comment i is that no ‘liability’ arises under the circumstances therein described because there is no sound basis for liability.

In other words, comment i posits, a manufacturer or seller breaches no legal duty to voluntary consumers by merely supplying, in an unadulterated form, a common commodity which cannot be made safer, but which the public desires to buy and ingest despite general understanding of its inherent dangers.” (Richards, supra, 14 Cal.4th at p. 1000.) Thus, as we explained in Richards, the Immunity Statute applied with respect to “pure and unadulterated” tobacco products (that is, products whose contents consumers “desire\\ to buy and ingest’), notwithstanding that the “inherent or unavoidable danger[s]” of those products were “commonly known to the community.” (Richards, supra, 14 Cal.4th at pp. 999-1000, italics added.) Accordingly, the statutory immunity does not shield a tobacco company from product liability for injuries or deaths to consumers of its products caused by something not inherent in the product itself—that is, if some adulteration of the product made it unreasonably dangerous.

In this case the trial court, relying on the Immunity Statute, sustained defendants’ demurrer to plaintiffs first amended complaint, which included four theories of recovery based on alleged fraud by tobacco companies. For the limited purpose of reviewing that ruling with respect to those four theories of recovery, we treat the first amended complaint’s allegations, as true. (Kasky v.

Nike, Inc. (2002) 27 Cal.4th 939, 946 [119 Cal.Rptr.2d 296, 45 P.3d 243].) The trial court was wrong that the Immunity Statute required it to sustain defendant tobacco companies’ demurrer to two causes of action alleged in plaintiffs first amended complaint.

In one of these, plaintiff alleges that defendants “manipulat[ed] the addictive properties of cigarettes via . . . additives,” and in the other he asserts that defendants “control[led] nicotine delivery to the smoker, through adding ammonia.” The essence of these allegations is that defendant tobacco companies adulterated the cigarettes plaintiff smoked with additives that exposed him to dangers not inherent in cigarette smoking.

Because, as we have explained, the statutory immunity does not shield a tobacco company from liability for injuries or deaths caused by something not inherent in the product itself, the Immunity Statute does not bar these claims.

But the trial court was correct to sustain defendant tobacco companies’ demurrer to two other fraud claims alleged in plaintiffs first amended complaint, to the extent those claims were based on conduct by tobacco companies during the immunity period. (The concurring and dissenting opinion, however, would allow plaintiff to pursue these two claims.) The complaint alleges that defendants “controlled] the nicotine content of their cigarettes ... by developing high-nicotine tobacco and blended tobáceo.” Because nicotine is naturally present in tobacco, the risks associated with nicotine are inherent in tobacco products.

Therefore, an allegation that defendants increased the nicotine content of their cigarettes through blended or high-nicotine tobacco does not avoid the bar of the Immunity Statute because it does not allege that defendants exposed plaintiff to a risk other than those inherent in tobacco products. The state Court of Appeal reached a similar conclusion in American Tobacco Co. v. Superior Court (1989) 208 Cal.App.3d 480 [255 Cal.Rptr. 280] (American Tobacco), a decision authored by Presiding Justice J. Anthony Kline.

Although it observed that the Immunity Statute’s protection would not extend to risks caused by “unknown dangerous elements” in a tobacco product (id. at p. 490, fn. 5), the Court of Appeal rejected the plaintiffs’ contentions in that case that the word “tobacco,” as used in the Immunity Statute, applied only to unprocessed tobacco leaves rather than to cigarettes: “The Legislature could not have intended to limit the statute to pure tobacco any more than it intended ‘alcohol’ [another product listed in the Immunity Statute] to apply only to pure alcohol and not to beer, wine and other liquors, which are the forms in which alcohol commonly is consumed.” (Ibid.) Plaintiff’s first amended complaint further alleges that defendants “lied about the addictive nature of smoking,” in “a campaign designed to deceive the public, plaintiff, the government, and others as to the health hazards of smoking.” According to the complaint, this deception began before 1969, when the federal government first banned certain cigarette advertising, and it continued after 1969, when defendants “disseminate[d] deceptive, erroneous, misleading and false statements” about the “health hazards” and “addictive nature” of smoking cigarettes.

These allegations do not suggest that the cigarettes plaintiff smoked exposed him to dangers other than those inherent in cigarette smoking. Thus, to the extent they pertain to conduct by tobacco companies during the immunity period, these allegations fall squarely within the reach of the Immunity Statute, which, during its effective dates from January 1, 1988, until December 31, 1997, shielded tobacco companies against product liability “for injury or death” caused by pure and unadulterated tobacco products.

As this court explained in Richards, the Legislature enacted the Immunity Statute to protect manufacturers and sellers of certain inherently dangerous products, including cigarettes, from liability for injuries caused by those products precisely because the Legislature itself had concluded “the public desires to buy and ingest [those products] despite general understanding of [their] inherent dangers.” (Richards, supra, 14 Cal.4th at p. 1000.) According to the concurring and dissenting opinion, the Immunity Statute does not bar plaintiffs fraud claim based on allegations that defendant tobacco companies deceived the public about the addictive nature of nicotine because smokers generally were not aware of the specific health risks of cigarette smoking.

But in American Tobacco, supra, 208 Cal.App.3d 480, decided the year after the Surgeon General issued his report concluding that nicotine is addictive, the Court of Appeal soundly rejected essentially the same argument.

It explained: “[T]here is no requirement under [the Immunity Statute] that consumers fully appreciate all the risks involved in the use or consumption of [a particular] product[] .... [I]t is sufficient if the ordinary consumer knows the product is ‘unsafe.’ ” (Id. at p. 490, fn. 5.) Ill From January 1, 1988, and lasting through December 31, 1997, California’s Legislature, by its enactment of the Immunity Statute, protected tobacco companies from product liability lawsuits by smokers. Here, plaintiff was a cigarette smoker for 46 years (from 1950 through 1996).

He argues that the immunity does not apply to defendants’ conduct during the 37 years he smoked before January 1, 1988, the effective date of the Immunity Statute. We agree. As we hold in the companion case of Myers, supra, 28 Cal.4th 828, the Immunity Statute governs conduct of tobacco companies during the immunity period, which began on January 1, 1988, and ended on December 31, 1997.

But when, on January 1, 1998, the California Legislature’s repeal of that immunity took effect, the Legislature restored the common law principles that had, until enactment of the Immunity Statute, governed tort liability against tobacco companies. Thus, the Immunity Statute provides no protection to tobacco companies for conduct that occurred before the statute’s 10-year period of immunity.

Regarding defendants’ conduct during the statutory immunity period, we conclude that the Immunity Statute bars plaintiffs claims, however labeled, where they allege no more than personal injury caused by dangers or risks inherent in the consumption of tobacco products such as cigarettes. But the Immunity Statute does not bar plaintiffs claims that the defendants adulterated the cigarettes plaintiff smoked with additives that exposed him to dangers not inherent in cigarette smoking. Nor does the Immunity Statute shield tobacco companies from liability for conduct outside the immunity period.

Disposition We reverse the judgment of the Court of Appeal and remand to that court for reconsideration of plaintiffs appeal in light of our conclusions here and in the companion case of Myers. George, C. J., Baxter, J., Chin, J., and Brown, J., concurred. Further undesignated statutory references are to the Civil Code. As in Myers, we use the term “immunity” rather loosely to describe the effect of a law that declares certain described conduct not to be a legal wrong or tort, and thus not a basis for liability.

Plaintiff died while the appeal was pending, and the Court of Appeal granted the application of Joseph Naegele and others as trustees to substitute for plaintiff. For simplicity’s sake, we refer to both Brigham and the trustees as plaintiff. The Court of Appeal also consolidated plaintiffs appeal for purposes of oral argument with that of Albert J. Pavolini, who had likewise claimed in his lawsuit that he suffered personal injury caused by smoking cigarettes. When Pavolini died, the Court of Appeal substituted his successor in interest, Richard Donaldson, as plaintiff in that case.

Because Donaldson did not seek review here, we do not further discuss that consolidated matter. Former

section 1714.45 provided: “(

a) In a product liability action, a manufacturer or seller shall not be liable if: [í¡]

(1) The product is inherently unsafe and the product is known to be unsafe by the ordinary consumer who consumes the product with the ordinary knowledge common to the community; and ffl]

(2) The product is a common consumer product intended for personal consumption, such as sugar, castor oil, alcohol, tobacco, and butter, as identified in comment i to

Section 402A of the Restatement (Second) of Torts. [^[] (

b) For purposes of this section, the term ‘product liability action’ means any action for injury or death caused by a product, except that the term does not include an action based on a manufacturing defect or breach of an express warranty. [T|] (

c) This

section is intended to be declarative of and does not alter or amend existing California law, including Cronin v. J.B.E. Olson Corp., (1972) 8 Cal. 3d 121 [104 Cal.Rptr. 433, 501 P.2d 1153], and shall apply to all product liability actions pending on, or commenced after, January 1, 1988.” (Italics added.)