WEST PALM BEACH – A Florida appeals court has ruled cigarette maker R.J. Reynolds must continue to pay $92.6 million it promised the State of Florida in a 1997 lawsuit settlement.
Reynolds claimed it no longer owed the money because it has sold the four brands of cigarettes included in the settlement and that the new owner, ITG Brands, is now responsible for the payments.
“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,” Florida’s Fourth District Court of Appeals ruled last month.
The settlement followed a suit by Florida against Reynolds and other tobacco companies to recover health care costs that resulted from smoking.
In 2014, Reynolds sold Winston, KOOL, Salem and Maverick brands to ITG for $7 billion. As part of the sales agreement, ITG was to assume “all liabilities under the state settlements in respect of the acquired tobacco Cigarette Brands that relate to the period after the closing date,” the appeals court said.
However, ITG, “never executed an amendment” to become a party to the Florida settlement agreement, the court ruled. Reynolds discontinued its payments. Florida sued.
A trial court ruled that ITG was not liable under the settlement agreement but Reynolds is. It ordered Reynolds to pay Florida $92.6 million.
The appeals agreed with the lower-court ruling.
The language in the settlement agreement was “clear and unambiguous” and did not relieve Reynolds of its obligations to pay Florida, the appeals court said.
“ITG did not agree to assume the settlement payment obligations,” the court ruled. “Rather, ITG agreed only to use its ‘reasonable best efforts’ to try to reach an agreement with Florida to become a party to the [agreement] and it is undisputed that ITG never became a party to that agreement.”
A spokeswoman for R.J. Reynolds did not immediately return a phone call or email requesting comment.