US judge: health labels may stem tobacco co rights

* Suggests rule overlooks companies' free speech rights

* Final ruling on health labels expected before April 10

WASHINGTON, Feb 1 (Reuters) - A federal rule requiring large graphic health warnings on cigarette packaging and advertising may violate the free speech rights of tobacco companies, a U.S. district court judge said at a hearing on Wednesday.

In a case that could wind up before the Supreme Court, five cigarette makers are suing to overturn a Food and Drug Administration rule requiring companies to label tobacco products with images of rotting teeth, diseased lungs and other images intended to illustrate the dangers of smoking.

The FDA was directed to adopt the rule by the 2009 Family Smoking Prevention and Tobacco Control Act, which requires color warning labels big enough to cover the top 50 percent of a cigarette pack's front and back panels, and the top 20 percent of print advertisements.

The law gave the FDA broad powers over cigarette and tobacco products for the first time.

Reynolds American Inc (NYSE: RAI - news) 's R.J. Reynolds unit, Lorillard Inc (NYSE: LO - news) , Liggett Group LLC, Commonwealth Brands Inc, which is owned by Britain's Imperial Tobacco Group (Dusseldorf: 517719.DU - news) Plc, and Santa Fe Natural Tobacco Co Inc contend that the FDA rule would force them to engage in anti-smoking advocacy against their own legal products.

U.S. District Judge Richard Leon, who last November (Stuttgart: A0Z24E - news) issued a temporary injunction blocking the rule, said he would issue his final ruling in the case well before April 10. That is the date when the U.S. Appeals Court for the District of Columbia Circuit is scheduled to hear the government's appeal of Leon's injunction. The FDA rule was due to take effect this September.

Lawyers said a ruling before April 10 would give appellate judges leeway to rule on the case and the injunction at the same time.

In his injunction order, Leon agreed with cigarette makers that the government had failed to show how the graphic images met legal precedents requiring government-imposed labeling to be factual and uncontroversial.

Leon cast additional doubt on the legality of the rule on Wednesday by suggesting that Congress had ignored legal precedents protecting commercial speech from government control.

"There's nothing on the record to suggest that Congress gave any clear and thoughtful analysis on the First Amendment implications of this," the judge said.

In a 2010 case, a federal judge in Kentucky upheld much of the Family Smoking Prevention and Tobacco Control Act. The ruling is now before the U.S. appeals court in Cincinnati, Ohio.

ANTI-SMOKING ADVOCACY?

At the hearing, Leon invited Justice Department attorney Mark Stern to explain why the court should not view the labels as a form of anti-smoking advocacy designed to frighten and disgust the public, which would violate legal precedents that protect companies from "compelled speech".

Stern said the images were needed to reach adolescent smokers in danger of becoming addicted to nicotine and adult smokers already addicted.

"We want to really get through. We're not trying to disgust you. We're trying to remind you," he told the court.

"It's no secret that the government wants people to stop smoking. It would be crazy for the government not to want people to stop smoking," Stern said. "It's very unusual for people to sell a product, that when used as intended, will kill you."

According to the Centers for Disease Control and Prevention, about 46 million U.S. adults, or 20.6 percent, smoke cigarettes. There has been little change in that rate since 2004.

More than 221,000 Americans are expected to be diagnosed with lung cancer in 2011, according to the American Cancer Society.

In May, the World Health Organization said that tobacco was expected to kill nearly 6 million people worldwide in 2011, including 600,000 nonsmokers.

Tobacco company attorney Noel Francisco argued that the graphic labels provide no information that could not be conveyed in written messages like the U.S. surgeon general's warnings that already appear on cigarette packs and advertisements.

"Consumers are overwhelmingly aware of the risks of smoking," said Francisco, contending that many people overestimate health dangers associated with smoking.

Cigarette makers have said the regulation would impose a "massive burden" on their operations, including millions of dollars for implementation and the loss of branding.

The case is R.J. Reynolds Tobacco Co et al v. FDA, U.S. District Court, District of Columbia, No. 11-01482. (Reporting by David Morgan; Editing by Tim Dobbyn)

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US judge: health labels may stem tobacco co rights