Thursday, January 19, 2017

Florida AG Pam Bondi goes to court for tobacco payments

Posted By on Thu, Jan 19, 2017 at 10:32 AM

click to enlarge PHOTO VIA FLORIDA ATTORNEY GENERAL WEBSITE
Attorney General Pam Bondi on Wednesday asked a Palm Beach County circuit court to resolve a dispute about whether two tobacco companies have improperly avoided paying tens of millions of dollars to the state under a landmark 1997 settlement with the tobacco industry.

Bondi's office filed a motion to enforce the settlement in a dispute that stems from R.J. Reynolds Tobacco Co. selling the Winston, Kool and Salem cigarette brands to the tobacco company ITG Brands. The dispute also includes Maverick cigarettes, which were transferred to ITG amid a merger between R.J. Reynolds and Lorillard Tobacco Co.

The 1997 settlement required certain major tobacco companies, including R.J. Reynolds, to make annual payments to the state in exchange for legal protections.

In the motion filed Wednesday, Bondi's office contends that payments based on Winston, Salem, Kool and Maverick cigarettes improperly stopped after the brands became part of ITG. The motion said the state is owed more than $45 million.

"The sale of major, pre-existing tobacco brands to another company for billions of dollars does not cause the payment obligations to vanish like a puff of smoke," Bondi said in a prepared statement.

A spokesman for Reynolds American, the parent company of R.J. Reynolds, said the company will fight the state's claims, but he couldn't comment directly on the active litigation.

"We believe we have strong legal and factual defenses to the motions filed today in this case and will vigorously defend against them," Reynolds spokesman Bryan D. Hatchell said in an email.

A representative for ITG didn't immediately respond to a request for comment.

The settlement resolved Florida's 1995 lawsuit over the unlawful marketing and sales of cigarettes by R.J. Reynolds and other major tobacco companies.

The settlement required the tobacco companies to annually pay several hundred million dollars to Florida —- the state received $378 million in 2014 —- in exchange for a release from liability for past and future damages tied to the sale and marketing of cigarettes.

After the transfers of the four cigarette brands, Bondi's office contends Reynolds has refused to include money from sales of the four brands in its annual payment to Florida, while ITG has similarly refused despite having agreed to assume obligations regarding the cigarettes.

"While the settling parties provided a mechanism for annual payment amounts to be decreased if the aggregate shipments fell, they necessarily intended that any such decrease would reflect lower consumer demand for these cigarettes —- and thus lower public health care costs for the state," the court document said. "The settling parties could not have intended and did not intend that the amounts paid to the state to cover the public health care costs from consumption of these cigarettes could be eliminated, wholly or partially, by a settling defendant's transfer of iconic cigarette brands to another entity, a conveyance for which it received several billion dollars."

Without any enforcement of the settlement, the motion argues, the state could be out $30 million a year in future payments. Money from the settlement is supposed to cover health care expenses tied to cigarettes.

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