LOS ANGELES - A U.S. appeals court on Monday reinstated an Alaska lawsuit against Altria Group Inc's Philip Morris USA by the survivor of a deceased smoker, saying her state product liability claims were not preempted by federal law and should have been tried in state court.

Altria and Philip Morris had argued that the state claims could not go forward against Alaska Commercial Co, a local retailer, because a victory for plaintiffs Dolores Hunter and the estate of Benjamin G. Francis could result in a ban of cigarette sales in the state.

Francis died at 52 of lung cancer in December of 2004. Hunter was his common law wife and was appointed the personal representative of his estate by a state court.

A lower court agreed that the state claims were barred by congressional intent not to ban the sale of cigarettes and dismissed the case due to Hunter's failure to bring a claim under federal law, the opinion by the Ninth U.S. Circuit Court of Appeals said.

But the appeals court ruled that Altria had failed to establish a clear conflict between Hunter's claim and federal law and that U.S. regulatory laws do not provide strong evidence of a federal policy against more stringent state regulation.

The court found that the case did not belong in federal court and instructed that it be remanded to Alaska state court for further proceedings.

Representatives for Philip Morris and Alaska Commercial could not be reached immediately for comment. Hunter's attorney was not available for comment.

In afternoon New York Stock Exchange trading, Altria shares were up 19 cents or 1.1 percent to $17.69.

The case is Dolores Hunter v. Philip Morris et al, Case No. 07-35916, U.S. Court of Appeals for the Ninth Circuit. (Reporting by Gina Keating, editing by Gerald E. McCormick)

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