Tobacco.org

• Regulating Tribal Cigarette Sales under the Master Settlement Agreement 

The Supreme Court of Oklahoma, in Edmondson v. Native Wholesale Supply, 2010 OK 58, 237 P.3d 199 (2010), recently issued a ruling affirming the authority of the state of Oklahoma to regulate the sale of cigarettes in Oklahoma even though the cigarettes as issued were manufactured by an Indian tribe, distributed through a business owned by a tribal member, and sold to a tribal wholesaler located on an Oklahoma reservation. Similar litigation has arisen against Native Wholesale Supply (NWS) in New Mexico, California, and Idaho, as each of these states seeks to enforce their tobacco laws to prevent the alleged unlawful sale of cigarettes into their states.

The Edmondson decision made important findings about tribal immunity and the application of the Indian Commerce Clause in the context of tobacco regulation by the state. With respect to sovereign immunity, it held that only an entity owned and managed by the tribe for the benefit of the tribe enjoys immunity from suit. An entity owned by a Native American but operated for his or her personal benefit is not eligible for such protection. And with respect to the Indian Commerce Clause, states may clearly enforce their tobacco laws against entities owned by a Native American if their cigarette sales involve sales to non-tribal members, sales between different tribes, or sales off a reservation.k . . .

Specifically, the Court found that the Seneca cigarettes sold by NWS into Oklahoma were manufactured in Canada, shipped to the United States, and stored in a Free Trade Zone in Nevada. Id. The Muscogee Creek Nation Wholesale placed orders for the cigarettes from its reservation located within Oklahoma to NWS at NWS' business in New York on the Seneca reservation. Id. NWS delivered the cigarettes to Muscogee Creek Nation Wholesale by shipping them from the Nevada Free Trade Zone to the Muscogee Creek reservation in Oklahoma where they were then sold to other retailers who offer them for sale to the general public in Oklahoma. Id. at 208 and 216.

Because NWS' cigarette sales involved no less than three tribes (the Seneca tribe, the Sac and Fox tribe, and the Muscogee Creek) and transportation of cigarettes off the reservation (Canada to the Nevada Free Trade Zone) and sale to the general public (not just tribal members), this conduct was subject to all states laws so long as they did not discriminate against tribes and were not expressly preempted by federal law. As a final matter, the Court found that the Complementary Act was not discriminatory and that Congress had not preempted state regulation of the distribution and sale of tobacco product in the Oklahoma market. Id. at 216. Therefore, the Indian Commerce Clause did not preclude Oklahoma from enforcing its Complementary Act against NWS.

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• Several US states weigh in on cigarette label suit 

Several states and U.S. territories are weighing in on a lawsuit over proposed graphic cigarette warning labels that include a sewn-up corpse of a smoker and a picture of diseased lungs, saying the federal government should be allowed to require the labels for the "lethal and addictive" products.

The 24 attorneys general filed a friend of the court brief on Friday in the U.S. Court of Appeals in Washington in support of the Food and Drug Administration's challenge of a lower court ruling in the case.

Last month, a U.S. District Court judge granted a request by some of the nation's largest tobacco companies, including R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co., to block the labels while deciding whether the labels violate their free speech rights. The judge ruled it is likely the cigarette makers would succeed in a lawsuit to block the requirement that the labels be placed on cigarette packs next year.

Representatives for R.J. Reynolds declined to comment. Officials with Lorillard did not immediately respond to an email seeking comment Saturday. . . .

In the filing Friday, the attorneys general said that the First Amendment does not prevent the government from requiring that "lethal and addictive products carry warning labels that effectively inform consumers of the risks those products entail."

"Over forty years' experience with small, obscurely placed text-only warning labels on cigarette packs has demonstrated that they simply do not work," they wrote. "The warning labels reflect the unique magnitude of the problem they address, the deadly and addictive nature of the product, and the unparalleled threat this product and its marketing pose to America's youth."

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Over forty years' experience with small, obscurely placed text-only warning labels on cigarette packs has demonstrated that they simply do not work. The warning labels reflect the unique magnitude of the problem they address, the deadly and addictive nature of the product, and the unparalleled threat this product and its marketing pose to America's youth.
24 attorneys general, in a friend of the court brief on Friday in the U.S. Court of Appeals in Washington in support of the FDA's challenge of a lower court ruling in the case.

• Olens travel tab paid by tobacco lobbyist  

Before he won election to the attorney general's office last fall, Sam Olens talked tough about ethics in state government.

"It's time to earn back the public trust," Olens intones in a Youtube video he made during the campaign. He talked about holding elected officials to a higher standard.

But even his proposals wouldn't have reined in spending by lobbyists on Georgia's public officials. In November, Olens was the beneficiary of such spending. Lobbyist Sean Collins works for Altria, parent company of tobacco giant Philip Morris.

Collins' November disclosure on the state ethics commission site shows that he spent $1304.54 for "corporate air travel and ground transportation" for Olens' visit to Palm Beach in November. Olens was there to attend the Republican Attorneys General Association meeting.

"A lobbyist doesn't pay for something for any other reason than to buy influence," said William Perry of Common Cause Georgia. . . .

The free trip for Olens also raises questions because of the role state Attorneys General play in the administration of a huge settlement fund that was created following a lawsuit between states and big tobacco companies more than a decade ago.

The website for the national attorneys general association has an entire page dedicated to the tobacco settlement -- and the association's devotion to reducing tobacco use.

"It's just one more way that the tobacco companies are able to influence these public officials,"

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• Judge sets bidding procedures for assets of three bankrupt Mocksville tobacco companies 

An U.S. Bankruptcy Court judge has established the bidding procedures for the assets of three bankrupt Mocksville tobacco companies.

At stake is the attempt by CB Holdings LLC of Raleigh to buy Renegade Holdings Inc., Renegade Tobacco Co. and Alternative Brands Inc. for $15.6 million. An auction will take place Oct. 4. A final hearing on the sale of the companies will take place Oct. 12.

The deal, announced July 11, was projected to close Oct. 30. The Davie manufacturers have a combined 100 employees.

On Aug. 3, the National Association of Attorneys General filed an objection to stop the sale of all the assets. The association is involved because the 16 state attorneys general represent the largest unsecured creditor group.

It also has opposed a reorganization plan for the companies, citing a criminal investigation in Mississippi — at least 3 years old — involving Calvin Phelps, the owner of the companies, and accusations of "unlawful trafficking in cigarettes and other related crimes."

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Tobacco settlement said to be near  

A settlement appears in the works that could allow major tobacco manufacturers, such as R.J. Reynolds Tobacco Co., to keep billions in disputed Master Settlement Agreement money.

Multiple media sources reported Wednesday that 46 state attorneys general are reviewing a proposal to resolve the manufacturers' claims that they have been hurt by nonparticipants of the landmark 1998 MSA agreement.

The four largest U.S. tobacco companies and the attorneys general agreed in 1998 to an MSA that would settle the states' Medicaid lawsuits against the tobacco companies for recovery of their tobacco-related health-care costs. The agreement protected the companies against liability from lawsuits over the harm caused by tobacco use. Also, the companies agreed to curtail or cease some tobacco marketing practices, as well as to make payments to the states for some of the medical costs of people suffering from smoking-related illnesses.

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• Cigarette Makers Could Recoup $2 Billion From States - WSJ.com 

Big cigarette makers could recoup $2 billion under a proposed deal with state attorneys general to resolve a long-running dispute over payments required by the landmark 1998 tobacco settlement.

Negotiators for Altria Group Inc.'s Philip Morris USA and other tobacco companies have reached a tentative deal with officials representing the 46 states that signed the 1998 Master Settlement Agreement, say people familiar with the matter.

Native American brands, such as Seneca at the Tonawanda Seneca reservation in New York, account for as much as 4% of U.S. volume.

The accord would allow big tobacco companies to keep part of the money they have withheld from states or otherwise disputed under the 1998 pact, under which they agreed to pay more than $200 billion to help states recover the costs of treating sick smokers.

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• Broke state governments may owe $5.2 billion to big tobacco companies  

State governments struggling to close yawning budget gaps are fighting to get billions of dollars from a landmark 1998 tobacco settlement that they counted on to help fund everything from Medicaid to elder care programs.

Since 2006, R.J. Reynolds Tobacco Co., Lorillard Inc., and about 40 other cigarette makers that signed the settlement have withheld about $3.2 billion from the states. The companies claim the states failed to enforce a provision stopping small, rival cigarette companies that didn't sign the settlement from undercutting them on prices.

That provision requires states to force non-settling cigarette companies -- such as National Tobacco Co., Cheyenne International and Smokin Joes -- to pay a portion of revenue into escrow accounts as a hedge against future litigation, and to level the playing field with the companies that did sign the settlement.

Philip Morris USA, far and away the largest tobacco company, has made the disputed payments to the states. But it says it is owed a refund of $1.3 billion plus interest, and will contest another $400,000 in payments made over the past two years.

All told, the tobacco companies are disputing about $5.2 billion in payments, according to the National Association of Attorneys General.

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STONE: Eclectic Rant: Marketing and Promotion of Tobacco Products.  

Why the "Break Free Adventure" campaign? Because RJ Reynolds wants new smokers? The campaign targeted America's youth, the next generation of possible smokers. Smoking has declined in the U.S. in the past ten years. According to the CDC, the smoking rate is about 20 to 21 percent since 2005, down from 28 percent earlier in the last decade. And the American demand for cigarettes is down 4.7 percent from last year and tobacco companies' revenues have stayed flat. In 2010, Camel held 19 percent of the adult smokers under 30. Forty-four percent of its buyers were under 30, and the brand saw 10 percent of tobacco consumers in that category switch from another brand to Camel.

On November 23, 2010, the National Association of Attorneys General (NAAG) asked RJ Reynolds Tobacco Co. to stop this promotional campaign that the group claims appeals to young people. In a letter to the nation’s second-largest cigarette maker, the group said Reynolds’ “Break Free Adventure” campaign has substantial youth appeal and may encourage underage tobacco use. . . .

Clearly, regulation has had some, but not enough effect on smoking in the U.S. As long as the manufacture and sale of tobacco products is legal, tobacco companies like any other company will market and promote their products to increase sales and market share. The tobacco companies will come up to, an occasionally step ove,r the legal line. It is up to law enforcement agencies and the public to be on the alert.

Is a ban on the manufacture and sale of tobacco products the answer? The tobacco-growing states and the tobacco lobby would be a huge obstacle to such a step. If you banned tobacco products, should we also ban alcohol because of widespread alcoholism. (We know how effective prohibition was.) How about banning certain food items or ingredients that contribute to obesity, heart disease, etc.

Clearly, regulation is not the only answer. Perhaps, more education, public service announcements on television and radio would help. I don't know the answer and neither do our politicians.

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AGs in six states put under microscope in ATRA report 

A tort reform group says, in a new report, that some plaintiffs attorneys have used their relationships with state attorneys general as "a litigious cash cow."

The American Tort Reform Association study -- titled "Beyond Reproach? Fostering Integrity and Public Trust in the Offices of State Attorneys General" -- says it is no coincidence that some of the biggest contributors to attorney general campaigns end up being awarded state contracts.

The report focuses on six states -- Alabama, Louisiana, Mississippi, New Mexico, New York and West Virginia.

"In certain states, attorneys general relationships with private attorneys appear to be highly questionable or unethical, but may be nearly impossible to trace due to state campaign finance laws," ATRA president Sherman Joyce said.

"In other states, the record of past attorney general practices contrasts with recent promises of ethics reform by state leaders - creating a cautionary tale of 'practice versus promise' that voters and good-government advocates should closely watch." . . .

The report goes back 13 years when discussing New York. That's when then-Attorney General Dennis Vacco filed a lawsuit against the tobacco industry, hiring three private firms that "had no prior experience with tobacco litigation," the report says.

Those firms received more than $80 million in fees, and gave $250,000 to state politicians before the settlement and another $200,000 after.

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• NAAG Letter to RJR on Camel Break Free Adventure promotion (PDF) 

We are concerned that this advertising campaign is using aspects of popular culture, including independent music, art, motor sports, and “hip” or countercultural attitudes, to advertise Camel cigarettes in a way that is appealing to young people’s psychological needs for rebelliousness, sensation-seeking, and risk-taking. . . .

Moreover, the basic theme of the promotion is a geography game, which is typically an activity for children of school age.

Because of these concerns, we ask that you stop the campaign. We also ask that you inform us of any further plans Reynolds has for the campaign that have not been publicly announced. . . .

As you will recall, Attorneys General Goddard and McKenna, our predecessors as Co-Chairs of the NAAG Tobacco Committee, and Attorney General Sorrell met with you in Seattle three years ago to express their concern that certain of Reynolds’ promotions -- Camel No. 9, Camel Farm Rocks, and Camel Artist Packs - were using art, music, and fashion in a way that resulted in an unacceptably high level of exposure of Reynolds’ products to youth. Like those promotions, the Camel Break Free Adventure uses various attractive elements of the young, hip culture to promote Camel cigarettes. . . .

As you know, Reynolds and the MSA Settling States have a shared commitment “to reducing underage tobacco use by discouraging such use and by preventing Youth access to Tobacco Products.” MSA, § I. Reynolds also has a corporate culture commitment under Section III(l) to achieve the same objectives. We therefore hope that you will terminate the Break Free Adventure campaign, based on this request and out of concern for America’s youth.

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• State AGs Ask RJ Reynolds to Stop Cigarette Promo  

The National Association of Attorneys General is asking cigarette maker RJ Reynolds Tobacco Co. to stop a promotional campaign for Camel cigarettes that the group says appeals to young people.

In a letter to the nation's second-largest cigarette maker, the group said Reynolds' "Break Free Adventure" campaign has substantial youth appeal and may encourage underage tobacco use.

"We are concerned that this advertising campaign is using aspects of popular culture, including independent music, art, motor sports, and 'hip' or countercultural attitudes, to advertise Camel cigarettes in a way that is appealing to young people's psychological needs for rebelliousness, sensation-seeking, and risk-taking," the group said in a Nov. 23 letter. It was written by Nebraska Attorney General Jon Bruning and Arkansas Attorney General Dustin McDaniel, co-chairmen of the group's tobacco committee.

The group also cited the 1998 tobacco settlement that prohibits the marketing of tobacco to youth.

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Tobacco Settlement Could Go to the Supreme Court  

For anti-smoking advocates the 1998 tobacco settlement was a major step forward that brought industry money to their side of the cause and would ultimately reduce the number of people in America who smoke.

Now, thanks to the efforts of a pro-free market organization called the Competitive Enterprise Institute, the agreement may be headed to the United States Supreme Court because, the groups argues, it violates the Compact Clause of the U.S. Constitution.

[See which members of Congress get the most in campaign donations from the tobacco industry.]

In a nutshell, the Tobacco Master Settlement Agreement, as it is formally known, resulted from an agreement between the nation's four largest tobacco companies and the attorneys general . . .

In its petition for Supreme Court review, CEI alleges the tobacco agreement "violates the constitutional provision against multi-state agreements that have not been approved by Congress."

In a release announcing the petition for cert had been filed, CEI General Counsel Sam Kazman called the settlement agreement a deal "hatched in a smoke-free backroom between tobacco companies and state attorneys general."

"The state AGs imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it," Kazman went on to say, adding it "was a major power grab by state attorneys general at the expense of citizens."

It's a complicated issue, but one that runs to the core of many of the constitutional issues currently being argued in federal courts, like the lawsuit challenging the requirement in Obamacare that individuals must purchase some form of health insurance or face a penalty.

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• Renegade opposes delay of trial 

Renegade Holdings Inc. is protesting a bid by 16 state attorneys general to delay their request for a new trial by at least two weeks, saying that approval could harm its recent exit from bankruptcy.

Renegade Holdings Inc., Renegade Tobacco Co. and Alternative Brands Inc. entered Chapter 11 protection in January 2009, listing liabilities of $3.3 million and assets of $6.2 million. The companies have about 140 employees in Davie County.

The company won approval of its reorganization plan from Judge William Stocks of the Middle District of North Carolina and exited from bankruptcy June 1. . . .

The group, represented by the National Association of Attorneys General, said it has gained pertinent information regarding a criminal investigation of the companies and Calvin Phelps, their chairman and chief executive. The investigation has been going on for at least two years.

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• TOBACCOVILLE USA, INC. v. McMASTER 

Tobaccoville USA, Inc., Respondent, v. Henry D. McMaster, in his Official Capacity as Attorney General of the State of South Carolina, Appellant. . . .

In this case, the Attorney General (the AG) appeals the administrative law court's (ALC) order compelling production of numerous documents the AG contends are privileged, confidential communications. We certified the appeal pursuant to Rule 204(b), SCACR, and reverse and remand to the ALC for findings in accordance with this opinion.

FACTS/PROCEDURAL BACKGROUND

In 1998, South Carolina was one of many states to enter into a Master Settlement Agreement (MSA) with certain tobacco companies to settle litigation brought by the states to recover tobacco-related health care expenses. The MSA contained a Model Escrow Statute that South Carolina adopted and codified as the South Carolina Escrow Fund Act at S.C. Code Ann. § 11-47-10, et. seq. (Supp. 2008). The Escrow Fund Act provides that a "tobacco product manufacturer"[ 1 ] (TPM) that sells cigarettes to consumers within the state must either: (1) join the MSA and make settlement payments required under the MSA, or (2) remain a "non-participating member" and make payments each year to a qualified escrow fund. Id. § 11-47-10.

Tobaccoville is an importer and distributor of Seneca brand cigarettes, which are manufactured by Grand River Enterprises Six Nations, Ltd. (Grand River) in Canada. Tobaccoville asserts that it is the exclusive "off-reservation" importer of the Seneca brand, and that Native Wholesale Supply is the exclusive "on-reservation" importer. Based on these and other assertions by Tobaccoville, the AG certified Tobaccoville as a TPM for the Seneca brand in November 2003. Tobaccoville was recertified as a TPM for years 2004 through 2006.

Since that certification, "on-reservation" Seneca cigarettes manufactured by Grand River and distributed by Native Wholesale Supply improperly were being sold "off-reservation" in South Carolina. In April 2007, the AG determined Tobaccoville no longer qualified as a TPM, and that Grand River would have to be certified as a TPM instead if Seneca cigarettes would continue to be sold lawfully in South Carolina. . . .

We find the AG has a common interest with the other settling state attorneys general in matters relating to the MSA and tobacco regulation and litigation.[ 3 ] The settling state attorneys general and the NAAG are working together to have uniform tobacco regulations and enforcement of the MSA. Accordingly, if the documents were privileged and thus exempt from production, that privilege was not waived when the AG shared the information with other state attorneys general.

CONCLUSION

For the foregoing reasons, we reverse the ALC's decision and remand for further determinations made in accordance with this opinion.

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Valero Inks Deals With 39 AGs 

Valero Retail Holdings Inc. and Valero Marketing & Supply Co. have signed agreements with 39 state attorneys general calling for Valero, which owns 1,000 convenience store outlets and has nearly 4,000 franchise outlets, to abide by a number of measures designed to keep underage consumers from buying tobacco.

California attorney general Edmund G. Brown Jr. announced the multi-state agreement with Valero to stop young people from purchasing tobacco products at its c-stores.

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