The foundation had argued that Lorillard Tobacco could not file the lawsuit because the firm was part of the Master Settlement Agreement between U.S. states and major tobacco companies, which created the foundation and paid to fund its campaign.

But Lorillard argued that the foundation's "Truth" campaign violates the 1998 agreement, which prohibits personal attacks and "vilification" of tobacco companies or their executives in anti-smoking advertising campaigns.

American Legacy Foundation President Cheryl Healton said the court's ruling would force the foundation to redirect resources to fight the lawsuit. But, she added, "We will not be distracted nor deterred from pursuing our ongoing commitment to save lives."

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