TALLAHASSEE — A three-way dispute between two tobacco companies and the state of Florida attorney general's office has lead to a haze of confusion.
In February, according to a report by the Winston-Salem Journal, ITG Brands filed a lawsuit against tobacco giant RJ Reynolds in the Court of Chancery in Delaware to resolve a dispute over which company is responsible for making payments owed under the Master Settlement Agreement to the state of Florida. The dispute stems from an acquisition made by ITG's parent company, Imperial Brands PLC, of cigarette brands Kool, Maverick, Salem and Winston and the blu eCigs brand from RJ Reynolds.
In the dispute, ITG is arguing that because it did not reach an agreement with the state of Florida before the acquisition of the four brands, it is not liable for any payments owed to the state for the cigarettes sold under those brands.
The MSA is an accord reached in November 1998 between the attorneys general of 46 states concerning the advertising, marketing and promotion of tobacco products.
“According to the agreement under the MSA, the signing tobacco companies, including RJ Reynolds, agreed to make certain payments to 46 states and restrict certain kind of advertising in exchange for the states agreeing to drop parts of their lawsuits against the industry,” Mark Meaney, lead senior staff attorney for technical assistance for the Tobacco Control Legal Consortium at the Public Health Law Center, told the Florida Record.
Florida Attorney General Pam Bondi filed an enforcement action against Reynolds and ITG on Jan. 18, asking for a court order requiring payments to the state for the past and future sales of cigarettes for the four brands. She is requesting $48 million in MSA payments from one or both manufacturers for the period of June 2015 to the time her motion was filed, and an additional $30 million in payments annually, according to the Winston-Salem Journal.
“The cost of these payments are based on the market share and number of cigarettes sold in the state each year,” Meaney said. “The payments are also then recalculated each year.”
Both companies have declined to make the agreed-upon MSA payments to the state, as each contends that the other is the party that is responsible for them.
“The way the MSA is written if a company acquires another than typically the new company should also acquire their MSA obligations,” Meaney said.
However, according to the Winston-Salem Journal report, Bondi disagreed, saying that RJ Reynolds is still responsible for the cost of the MSA payments. Meanwhile, RJ Reynolds stated in the ITG complaint that it wants to be indemnified if the company makes a payment on ITG's behalf.
Meanwhile, ITG has responded by stating that if the state of Florida requires the company to make the MSA payments, then RJ Reynolds should be required to indemnify the company for the cost of those payments.