The 2nd Circuit ruled yesterday that New York City can’t force tobacco retailers to display graphic anti-smoking signs, which depict decaying teeth, diseased lungs and a damaged brain.

Several tobacco companies, including Philip Morris USA, Lorillard Tobacco Co. and R.J. Reynolds Tobacco Co., along with two retail trade groups and two convenience stores, sued the city in 2010 after Mayor Michael Bloomberg required tobacco retailers to hang the signs as part of his citywide anti-smoking campaign. The plaintiffs argued the signs violated their rights, and in the city agreed to temporarily halt the enforcement of the signs as the lawsuit proceeded.

The three-judge panel for the 2nd Circuit affirmed U.S. District Judge Jed Rakoff’s December 2010 opinion. Rakoff said the city overstepped its power when it required tobacco retailers to display the signs as only the federal government may impose such conditions.

Murray Garnick, associate GC for Philip Morris’ parent company, the Altria Group, agreed with the panel’s decision. “That is a power reserved to the federal government without interference or additional efforts by state and local authorities,” Garnick told Reuters.

The city sees the decision as a blow to an important life-saving initiative.

“The City’s warning signs depicted the grisly toll of smoking and provided helpful information about how to quit at a place where smokers were most likely to see it,” the New York City Department of Health said in a statement. “Today’s ruling is likely to reduce the number of smokers who quit.”

The debate over graphic anti-tobacco ads is nothing new. Read InsideCounsel’s ongoing coverage of this hotly debated issue:

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