Lawyers for the Richmond, Va. -based Philip Morris USA Inc. filed a stipulation of dismissal in federal court in Oakland, agreeing to end a lawsuit that claimed the San Francisco law violated its free speech rights.
The action comes after a federal appeals court in San Francisco upheld the law on Sept. 9, affirming a decision in which U.S. District Judge Claudia Wilken of Oakland last year refused to issue a preliminary injunction.
Philip Morris spokesman Jack Marshall said he could not comment except to say that if Wilken signs the stipulation, "Obviously, the case will be dismissed."
The judge's approval is expected because the stipulation was signed by lawyers for both Philip Morris and the city.
City Attorney Dennis Herrera hailed the end of the case, saying, "San Francisco's local officials have the right and the duty to protect public health, and in this case they have a compelling rationale."
"Consumers -- and especially young people -- should reasonably expect pharmacies to serve their health needs, not to enable our leading cause of preventable death," Herrera said.
The San Francisco law, which went into effect on Oct. 1, 2008, was the first of its kind in the nation.
Since then, Boston has enacted a similar measure, Herrera said.
Philip Morris argued in its lawsuit that the law curtailed its free speech because it had the "effect and purpose" of limiting tobacco advertising in drugstores.
But Wilken ruled, and a three-judge panel of the 9th U.S. Circuit Court of Appeals agreed, that the law regulates conduct - the sale of tobacco - and not speech about tobacco.
Chief Circuit Judge Alex Kozinski wrote in September that while advertising is a form of free speech, "Selling cigarettes isn't."
The appeals court decision could have been appealed to an expanded appeals panel or to the U.S. Supreme Court, and Philip Morris said last month that the company was reviewing its options.
But the ruling by the three-judge appeals panel, given in an unusually brief four-paragraph memorandum, did not appear to offer much hope to Philip Morris of making further headway on its legal claims.
A second challenge to the ordinance was filed in the state court system by Walgreen Co. and is now pending before the California Court of Appeal in San Francisco.
Walgreen claimed in a San Francisco Superior Court lawsuit that the law is unfair because it applies to pharmacies but not to grocery stores and so-called "big box" stores that contain pharmacies.
The pharmacy chain is now appealing a trial judge's dismissal of its lawsuit.
The rationale for the San Francisco law, according to Board of Supervisors' findings, is that tobacco is dangerous to health and that pharmacies, which most customers visit for health services, give "tacit approval" to tobacco if they sell it.