Philip Morris International Operation Center is pictured in Lausanne August 19, 2009. REUTERS/Denis Balibouse

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 the state claims could not go forward against them and 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, a native Alaskan, died at 52 of lung cancer in December of 2004, leaving a 10-year-old son and Hunter, his common law wife, his attorney Don Bauermeister said. Hunter was appointed the personal representative of his estate by a state court.

A lower court agreed 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 the case did not belong in federal court and instructed it be remanded to Alaska state court for further proceedings.

Jack Marshall, a spokesman for Philip Morris and Altria, said the companies were disappointed by the appeals court ruling and planned to defend the case vigorously in state court.

It is important to note that the decision addressed only where the case should be tried and does not address the merits of the plaintiff's claim, Marshall said.

Bauermeister said his client, Hunter, was very relieved and excited about the appeals court ruling that will return the case to the court in the native Alaskan village of Bethel where it was filed. She hopes the lawsuit will hold (Altria) accountable not only for Francis' death, but for high rates of smoking among Alaska's native peoples, he said.

(Cigarette companies) fight these cases very hard and I hope justice is at the end of this story for all the 10-year- old boys in the world who might lose their fathers or who might smoke these things, Bauermeister said.

A spokesman for Alaska Commercial Co could not be reached for comment.

On the New York Stock Exchange, Altria shares closed up 17 cents, or about 1 percent, at $17.67.

The case is Dolores Hunter v. Philip Morris et al, Case No. 07-35916, U.S. Court of Appeals for the Ninth Circuit.