At issue is a suit filed against Philip Morris by two Arkansas women alleging that the company engaged in unfair business practices in marketing its low-tar Cambridge Lights and Marlboro Lights cigarette brands.

Companies facing class-action lawsuits typically prefer to have those cases litigated in federal courts, where they usually fare better than in state courts.

Philip Morris succeeded in having the case moved to federal court, saying it was appropriate because cigarette advertisements had been regulated by a U.S. agency -- the Federal Trade Commission.

The move was subsequently upheld by a federal appeals court in St. Louis. The U.S. Justice Department told the Supreme Court that the appeals court's ruling should be overturned.

The Supreme Court agreed and reversed the ruling in an opinion written by Justice Stephen Breyer.

Breyer said the fact that a federal regulatory agency directs, supervises and monitors a company's activities in considerable detail does not bring that company under the scope of the law that permits removal to federal court.