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Health News Florida

Florida Supreme Court Turns Down R.J. Reynolds Payment Fight

Medicare is making it easier for beneficiaries to stamp out cigarettes for good.
R.J. Reynolds, in a brief filed in October asking the Florida Supreme Court to take up the case, argued that payments under a settlement are tied to market share and that it should not be responsible for brands it no longer sells.

In the lawsuit, R.J. Reynolds contended that it should not have to make payments to the state related to four brands of cigarettes that it agreed to sell in 2014 to ITG Brands.

In a financial blow to the cigarette maker, the Florida Supreme Court on Friday declined to take up an appeal by R.J. Reynolds Tobacco Co. in a lawsuit rooted in a landmark legal settlement between Florida and major players in the tobacco industry.

The Supreme Court’s decision effectively let stand a July decision by the 4th District Court of Appeal that required R.J. Reynolds to make more than $100 million in disputed payments.

As is common, the Supreme Court did not explain its reasons for declining to hear the case.

The 1997 settlement has led to tobacco companies 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.

But in the lawsuit, R.J. Reynolds contended 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 company, in a brief filed in October asking the Supreme Court to take up the case, argued 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 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.

In a brief filed last month, Attorney General Ashley Moody’s office argued that R.J. Reynolds offered a lack of legal grounds for the Supreme Court to take up the case. Also, the brief said the 4th District Court of Appeal ruled correctly on the underlying issues in the case.

“Petitioner’s (R.J. Reynolds’) reading of the FSA (the Florida settlement agreement) cannot be reconciled with its plain text, which imposes perpetual payment obligations on petitioner in exchange for a perpetual (liability) release,” attorneys in Moody’s office wrote. “Under petitioner’s reading, the FSA would provide a perpetual release while imposing only conditional payment obligations: Petitioner could terminate its obligations at any time by selling all its brands, while retaining all of its rights under the FSA, including its release from liability for ongoing health-care costs arising from past harms that it caused.”

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 contended 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.