R.J. Reynolds ask Justices to resolve payment fight
October 27, 2020
Jim Saunders
TALLAHASSEE --- In a dispute stemming from a landmark legal settlement between Florida and cigarette makers, R.J. Reynolds Tobacco Co. is asking the state Supreme Court to take up a case about whether the company owes more than $100 million after selling off some of its brands.
Attorneys for R.J. Reynolds late Monday filed a 16-page brief asking the Supreme Court to hear the case after the 4th District Court of Appeal ruled that the company was required to make the payments under the 1997 settlement, which has involved cigarette makers paying hundreds of millions of dollars a year to the state because of smoking-related health costs. In exchange for the payments, the companies received liability protections.
R.J. Reynolds contends that it should not have to make payments to the state related to four brands of cigarettes --- Salem, Winston, Kool and Maverick --- that it agreed to sell in 2014 to ITG Brands, LLC. The brief filed Monday argued, in part, that payments under the settlement are tied to market share and that R.J. Reynolds should not be responsible for brands that it no longer sells.
“The market share calculation is not some fixed and certain sum that Reynolds agreed to pay in perpetuity: Depending on whether Reynolds ships more or less cigarettes in a given year, it pays more or less to the state,” the brief said. “Reynolds is no longer manufacturing or shipping the acquired brands --- ITG is --- but the Fourth District nonetheless held that ITG’s shipments will remain included in Reynolds’ market share.”
But the appeals court, which upheld a ruling by a Palm Beach County circuit judge, pointed to a lack of changes in the 1997 settlement that would have freed R.J. Reynolds from making the payments. Also, the state’s attorneys have argued that R.J. Reynolds made $7 billion in selling the brands to ITG Brands, which is known as Imperial Brands, while also maintaining the liability protections that were included in the settlement.
“The FSA (Florida Settlement Agreement) required that Reynolds make annual payments to the state of Florida in perpetuity, with no condition of termination, in exchange for the release of liability for past and future medical costs incurred by the state of Florida,” a three-judge panel of the appeals court said in July. “Significantly, the FSA could be ‘amended only by a writing executed by all signatories hereto and any provision hereof may be waived only by an instrument in writing executed by the waiving party.’ It is undisputed that there was no written agreement by the signatories to the FSA altering or waiving Reynolds’s payment obligations to Florida.”
Florida filed a lawsuit in 1995 against R.J. Reynolds and four other tobacco companies, pointing to the state’s health-care costs stemming from cigarette smoking. The settlement ultimately led to the defendants making an initial payment of $750 million and agreeing to pay $440 million a year, with that amount subject to adjustments, according to a state brief at the appeals court.
R.J. Reynolds said in a brief filed last year, for example, that it had paid $4.1 billion to the state.
But R.J. Reynolds’ parent company sold the Salem, Winston, Kool and Maverick brands to ITG Brands, which was not part of the settlement. While R.J. Reynolds contends it should not continue to be responsible for payments related to the brands, the Palm Beach County circuit judge ordered it to pay $92.6 million to the state and $9.8 million to Philip Morris USA, another tobacco company that became involved in the lawsuit because of increased payment obligations it faced, according to court documents. Philip Morris was part of the 1997 settlement.
