RJ Reynolds ordered to pay $1.4 trillion to the state of Florida

Tobacco company RJ Reynolds Tobacco will have to pay nearly $100 million to Florida, the state's appeals court ruled on Wednesday, July 29.[1]-[2], in accordance with a court decision issued more than twenty years ago.

In 1995, the State of Florida sued several tobacco companies over the health costs of smoking incurred by the government under the Medicaid social security system. Two years later, the companies agreed to a settlement agreement committing them to pay $750 million immediately to Florida, and $440 million annually, with no time limit but possible adjustments. It was agreed that the sums would be divided among the five companies that signed the agreement, namely RJ Reynolds, Philip Morris, Brown & Williamson, Lorillard and United States Tobacco Company,[4] in proportion to their market share. After selling its main brands (Salem, Winston, Kool and Maverick) to ITG Brands (Imperial Tobacco Group), which was not involved in the litigation with the State of Florida, RJ Reynolds sought to avoid liability for these " annual payments in perpetuity ".

" A contract is a contract »

Florida lawyers pointed out that the tobacco company made $7 billion from its deal with ITG Brands. Furthermore, the 1997 Florida Settlement Agreement[3] required the firm to " makes annual payments to the State of Florida in perpetuity, with no termination conditions, in exchange for the release of liability for past and future medical expenses incurred by the State of Florida " The Court of Appeal summed up its decision as follows: " We find, simply put, that a contract is a contract and that Reynolds continues to be liable under the contract it signed with the State of Florida. »[3]. It confirms RJ Reynolds' payment obligations.

Musical chairs

Interestingly, Florida was joined by another plaintiff in its case: Philip Morris. To understand the reason for this surprising association, it is necessary to recall the game of musical chairs played by American tobacco companies over the past 20 years (limiting ourselves to the companies that signed the settlement agreement with Florida). Through a series of mergers and acquisitions, the British American Tobacco (BAT) group took control of Brown & Williamson, RJ Reynolds, and Lorillard, with the corollary that the payment obligations of these companies are now those of BAT. The United States Tobacco Company—renamed US Smokeless Tobacco Company in 2001—was acquired by Altria, aka Philip Morris USA. As a result of these consolidations, the annual payment of $440 million to the State of Florida is split between just two groups: BAT (through its American subsidiary RJ Reynolds) and Philip Morris USA. With RJ Reynolds in default, the responsibility for paying the $440 million would have fallen entirely on Philip Morris. It is therefore easy to understand why the latter joined forces with Florida to demand that the BAT subsidiary continue to pay its share.

Keywords: Justice, RJ Reynolds, Florida ©Generation Without Tobacco

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[1] Jim Saunders, Court deals blow to RJ Reynolds in tobacco payments fight, Miami Herald, July 29, 2020 (accessed July 31, 2020). [2] District Court of Appeal of the State of Florida, Fourth District. RJ Reynolds Tobacco Company, Appellant, v. State of Florida and Philip Morris USA Inc., Appellees. No. 4D18-2616 July 29, 2020 https://www.4dca.org/content/download/641672/7288381/file/182616_DC05_07292020_084802_i.pdf [3] Settlement Agreement. In the Circuit Court of the Fifteenth Judicial Circuit, in and for Palm Beach County, Florida. The State of Florida, et al., Plaintiffs v. The American Tobacco Company, et al., Defendants. Civil Action No. 95-1466 AH, August 28, 1997. Tobacco Institute Records. https://www.industrydocuments.ucsf.edu/docs/mggd0033 National Committee Against Smoking |