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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
SETTLEMENT AGREEMENT
This Settlement Agreement is made as of this 25th day of August,
1997, by and among the undersigned, and is intended to settle and
resolve with finality all present and future civil claims against
all parties to this litigation relating to the subject matter of
this litigation, which have been or could have been asserted by any
of the parties hereto.
WHEREAS, the State of Florida commenced this action in February,
1995, asserting various claims for monetary and injunctive relief on
behalf of the State of Florida against tobacco manufacturers and
other defendants;
WHEREAS, Defendants have contested the claims in Florida’s
complaint and amended complaints and Plaintiffs have contested the
claims in Defendants’ counter and cross claims against the Florida
Department of Corrections and deny each and every one of the
Defendants’ allegations;
WHEREAS, the State of Florida has, through its Governor, the
Honorable Lawton M. Chiles, Jr. and its Attorney General, the
Honorable Robert A. Butterworth, had a leadership role among the
various states in maintaining civil litigation against the tobacco
industry and in seeking to forge an unprecedented national
resolution of the principal issues and controversies associated with
the manufacture, marketing and sale of tobacco products in the
United States;
WHEREAS, through the efforts of the State of Florida and others a
June 20, 1997 Memorandum of Understanding and attached Proposed
Resolution ("Proposed Resolution") has been agreed to by members of
the tobacco industry, state attorneys general, private litigants and
representatives of public health groups which would provide for
unprecedented and comprehensive regulation of the tobacco industry
while preserving the right of individuals to assert claims for
compensation;
WHEREAS, the Proposed Resolution contemplates action by the
United States Congress and the President to enact and sign a new
federal law with respect to the tobacco industry, which action the
tobacco industry has agreed to support and which will require study
and analysis by Congress and the President;
WHEREAS, jury selection in this action commenced on August 1,
1997, and trial of the action is anticipated to last several months
and a continuance of such trial could prejudice the State of
Florida. The State of Florida and the undersigned defendants have
agreed to settle independently the litigation commenced by the State
of Florida pursuant to financial terms comparable to the Proposed
Resolution, which terms will achieve for Florida immediately the
financial benefits it would receive pursuant to the national
Proposed Resolution, should it become law;
NOW THEREFORE, it is hereby agreed as follows:
I. GENERAL PROVISIONS
A. JURISDICTION
The Settling Defendants and Plaintiffs acknowledge that this
Court has jurisdiction over the subject matter of this action and
over each of the parties to this Settlement Agreement. Jurisdiction
is retained by the Court for the purposes of enabling any party to
this Settlement Agreement to apply to the Court at any time for
further orders and directions as may be necessary and appropriate to
implement or enforce this Settlement Agreement, and the parties
hereto agree to present any disputes under this Settlement Agreement
to this Court.
Notwithstanding the dismissal of claims provided for herein, the
parties hereto agree that the Court will retain jurisdiction over
the State of Florida’s claims for non-economic injunctive relief
provided by the Proposed Resolution. The parties hereto jointly
request the Court to set a trial date for the first Monday in
August, 1998, or such later date as the Court may direct, said trial
to proceed only if the Proposed Resolution or a substantially
equivalent federal program has not been enacted. If the Proposed
Resolution or a substantially equivalent federal program is not
enacted by June 1, 1998, the parties may, with the Court’s
permission, commence any appropriate pre-trial proceedings relevant
to the trial of such issues. If the Proposed Resolution or a
substantially equivalent federal program is enacted, any remaining
claims shall be dismissed with prejudice.
B. APPLICABILITY
This Settlement Agreement shall be binding upon all Settling
Defendants and their successors and assigns in the manner expressly
provided for herein and shall inure to their benefit and to that of
their respective directors, officers, employees, attorneys,
representatives, insurers, suppliers, distributors, agents and of
any of their present or former parents, subsidiaries, affiliates,
divisions, or other organizational units of any kind. This
Settlement Agreement shall be binding on and inure to the benefit of
the State of Florida, the named Plaintiffs, their administrators,
representatives, employees, officers, agents, legal representatives;
all Agencies, Departments, Commissions, and Divisions of the State;
all subdivisions, public entities, public corporations,
instrumentalities, and educational institutions over which the State
has control; and their predecessors, successors and assigns.
C. VOLUNTARY AGREEMENT OF PARTIES
Settling Defendants understand and acknowledge that certain
provisions of this Settlement Agreement impose certain requirements
on them that could give rise to challenges under federal and State
constitutions if the State of Florida unilaterally imposed them. The
parties hereto acknowledge and agree that this Settlement Agreement
is voluntarily entered into by all parties hereto as the result of
arms length negotiations during which all parties were represented
by counsel. None of the parties hereto will seek to void this
Settlement Agreement based on any constitutional challenge to the
provisions contained herein.
D. DEFINITIONS
1. "Plaintiffs" means collectively the Plaintiffs, State
of Florida, Lawton M. Chiles, Jr., individually and as Governor of
the State of Florida, the Department of Business and Professional
Regulation, the Agency for Health Care Administration and the
Department of Legal Affairs.
2. "State" or "State of Florida" means collectively
the Plaintiffs, State of Florida, Lawton M. Chiles, Jr.,
individually and as Governor of the State of Florida, the Department
of Business and Professional Regulation, the Agency for Health Care
Administration, and the Department of Legal Affairs, all of its
officers acting in their official capacities and any other
department, subdivision or agency of the State, regardless of
whether a named Plaintiff.
3. "Settling Defendants" means those Defendants in this
Action that are signatories to this Settlement Agreement.
4. "Non-Settling Defendants" means those Defendants that
are not signatories to this Settlement Agreement.
5. "Market Share" means, for each year, a Settling
Defendant’s respective share of sales of cigarettes for consumption
in the United States.
6. "Tobacco Products" shall be defined in the same manner
as in the Food and Drug Administration Rule and shall include
Roll-Your-Own, Little Cigars and Fine Cut.
7. "Billboards" includes billboards, as well as all signs
and placards in arenas and stadia, whether open-air or enclosed. "Billboards"
does not include: (1) any advertisements placed on or outside the
premises of retail establishments licensed to sell Tobacco Products
or any retail point-of-sale; and (2) billboards or advertisements in
connection with the sponsorship by the Settling Defendants of any
entertainment, sporting or similar event, such as NASCAR, that
appears in the State of Florida as part of a national or multi-state
tour.
8. "Transit Advertisements" means advertising on private
or public vehicles and all advertisements placed at, on or within
any bus stop, taxi stand, waiting area, train station, airport or
any similar location.
9. "Final Approval" means the date on which all of the
following shall have occurred:
a. The Settlement Agreement is approved by the Court;
b. Entry is made of an order of dismissal of claims or a final
judgment as provided herein; and
c. The time for appeal or to seek permission to appeal from the
Court’s approval as described in (a) hereof, and entry of such final
judgment or order of dismissal as described in (b) hereof has
expired or if appealed, the appeal has been dismissed or the
approval and judgment or order have been affirmed by the court of
last resort to which such appeal has been taken and such affirmance
has become no longer subject to further appeal or review.
II. OBLIGATIONS OF PARTIES
A. NON-MONETARY PROVISIONS
1. Elimination of Billboards and Transit Advertisements.
Settling Defendants agree to discontinue all Billboards and Transit
Advertisements of Tobacco Products in the State of Florida. Settling
Defendants agree to exercise their best efforts in cooperation with
the State of Florida to identify all Billboards that are located
within 1000 feet of any public or private school or playground in
the State of Florida. Settling Defendants will remove such Tobacco
Product advertisements (leaving the space unused or used for
advertising unrelated to Tobacco Products) or, at the option of the
State of Florida, will allow the State of Florida, at its expense,
to substitute for the remaining term of the contract alternative
advertising intended to discourage the use of Tobacco Products by
children under the age of 18. Settling Defendants agree to provide
the State of Florida with a preliminary list of the location of all
Billboards and Stationary Transit Advertisements within 30 days from
the date of execution of this Settlement Agreement, such list to be
finalized within an additional 15 days, and to remove all Billboards
and Transit Advertisements for Tobacco Products within the State of
Florida at the earlier of the expiration of applicable contracts or
4 months from the date the final list is supplied to the State of
Florida. The parties hereto also agree to cooperate to secure the
expedited removal of up to 50 Billboards or stationary Transit
Advertisements designated by the State of Florida, within 30 days
after their designation.
Each Settling Defendant shall provide the Court and the Attorney
General, or his designee, with the name of a contact person to whom
Plaintiffs may direct inquiries during the time such Billboards and
Transit Advertisements are being eliminated, from whom the
Plaintiffs may obtain periodic reports as to the progress of their
elimination and who will be responsible for ensuring that
appropriate action is taken to remove any Billboards that have not
been timely eliminated.
2. Support of Legislation and Rules. Following
Final Approval of this Settlement Agreement, Settling Defendants
agree to support legislative initiatives to enact new laws and
administrative initiatives to promulgate new rules intended to
effectuate the following:
a. The prohibition of the sale of cigarettes in vending machines,
except in adult-only locations and facilities;
b. The strengthening of civil penalties for sales of Tobacco
Products to children under the age of 18, including the suspension
or revocation of retail licenses; and
c. The strengthening of civil penalties for possession of Tobacco
Products by children under the age of 18.
3. Document Disclosure. Settling Defendants and the
State of Florida agree to cooperate to secure the expedited review
of any decisions issued prior to the date of this Settlement
Agreement regarding the inapplicability of any assertion of
privilege with respect to documents or other material. The documents
covered by this provision are those documents and materials which
have been presented to the Special Master, the Honorable R. William
Rutter, Jr., and as to which a Report and Recommendation has been
issued requiring the disclosure and production of such documents or
materials, for whatever reason.
B. MONETARY PROVISIONS
1. Initial Payment -- General. On or before
September 15, 1997, Settling Defendants shall, pursuant to a
mutually acceptable Escrow Agreement, cause to be paid into a
special escrow account (the "Escrow Account"), for the benefit of
the State of Florida, to be held in escrow pending Final Approval,
the sum of $550 million; that being Plaintiffs’ good faith estimate
of the portion Florida would receive of the $10 billion payment
provided for in Paragraph A on page 34 of the June 20, 1997
Memorandum of Understanding and attached Proposed Resolution.
2. Initial Payment -- Pilot Program. In support of
Florida’s demonstrated commitment to the meaningful and immediate
reduction of the use of Tobacco Products by children under the age
of 18, Settling Defendants also agree to support a pilot program
(the "Pilot Program") by the State of Florida, the elements of which
shall be aimed specifically at the reduction of the use of Tobacco
Products by persons under the age of 18 years. Accordingly, on or
before September 15, 1997, the Settling Defendants shall, pursuant
to the Escrow Agreement, cause to be paid into a second special
escrow account (the "Second Escrow Account"), for the benefit of the
State of Florida, to be held in escrow pending Final Approval of
this Settlement Agreement, the sum of $200 million. The Pilot
Program will commence upon Final Approval of this Settlement
Agreement and last for a 24-month period following such date. The
$200 million amount payable by Settling Defendants in support of the
Pilot Program shall be used only after approval by the Court and at
the rate of approximately $100 million per 12-month period for
general enforcement, media, educational and other programs directed
to the underage users or potential underage users of Tobacco
Products, but shall not be directed against the tobacco companies
or any particular tobacco company or companies or any particular
brand of Tobacco Products.
3. Annual Payments. On September 15, 1998,
(subject to adjustment for actual market share by January 30, 1999),
and annually thereafter, on December 31st (subject to final
adjustment within 30 days), each of the Settling Defendants agrees,
severally and not jointly, that it shall cause to be paid into a
special account for the benefit of the State of Florida (the
"Account"), pro rata in proportion equal to its
respective Market Share, its share of 5.5% of the following amounts
(in billions):
| Year |
1 |
2 |
3 |
4 |
5 |
6 |
thereafter |
| Amount |
$4B |
$4.5B |
$5B |
$6.5B |
$6.5B |
$8B |
$8B |
The payments made to the Account by the Settling Defendants
pursuant to the calculation set forth in this paragraph shall be
adjusted upward by the greater of 3% or the Consumer Price Index
applied each year on the previous year, beginning with the first
annual payment. Such Payments will also be decreased or increased,
as the case may be, in accordance with decreases or increases in
volume of domestic tobacco product volume sales as provided in
Paragraph B.5 on pages 34-35 of the Proposed Resolution. Any payment
pursuant to this paragraph that is due to be paid before Final
Approval of this Settlement Agreement shall be paid into the Escrow
Account and shall be disbursed only as provided by the terms of the
Escrow Agreement. On September 15, 1998, Settling Defendants shall
pay $220 million without any adjustment, that being Settling
Defendants’ and the State’s best estimate of the first such annual
payment (in respect of 1998).
4. Use of Funds. The monies received under this
Settlement Agreement constitute not only reimbursement for Medicaid
expenses incurred by the State of Florida, but also settlement of
all of Florida’s other claims, including those for punitive damages,
RICO and other statutory theories. In consonance with the Proposed
Resolution, other than the Pilot Program and legal expense
reimbursement, the parties hereto anticipate that funds provided
hereunder, only after approval by the Court, will be used for
children’s health care coverage and other health-related services,
to reimburse the State of Florida for medical expenses incurred by
the State, for mandated improvements in State enforcement efforts
regarding the reduction of sales of Tobacco Products to minors, and
to ensure the Proposed Resolution’s performance targets. The
funds provided hereby may be used for such purposes as the State
match required to draw federal funds to provide children’s health
care coverage and for enhancement of children’s and adolescents’
substance abuse services, substance abuse prevention and
intervention and children’s mental health services.
5. Adjustments in Event of Federal Resolution.
In the event that the Proposed Resolution is enacted as federal
legislation, or if any substantially equivalent federal program is
enacted, the settlement provided herein shall remain in place, but
the terms of such Proposed Resolution or federal program shall
supersede the provisions of this Settlement Agreement, except for
the Pilot Program and to the extent that the parties hereto have
otherwise expressly agreed. In order to provide the Settling
Defendants with a full credit for all payments made hereunder
pursuant to paragraphs II.B.1 and II.B.3 of this Settlement
Agreement in the event of the enactment of the Proposed Resolution
or substantially equivalent federal program, and to the extent that
the payments made pursuant to paragraphs II.B.1 and II.B.3 of this
Settlement Agreement shall differ from the amounts to be received by
the State of Florida pursuant to such Proposed Resolution or
substantially equivalent federal program, the parties hereto shall
take whatever steps are necessary to ensure that the principal
amount of payments received by the State of Florida will be the same
as the amounts it would receive pursuant to the Proposed Resolution
or substantially equivalent federal program.
C. DISMISSAL, WAIVER AND RELEASE OF CLAIMS
1. Dismissal of Plaintiffs’ Claims. Upon approval
of this Settlement Agreement by the Court, Plaintiffs shall dismiss,
with prejudice as to Settling Defendants (including their parents
and affiliates), and without prejudice as to other Non-Settling
Defendants, all claims in this Action, except to the extent such
claims seek non-economic injunctive relief provided by the Proposed
Resolution. In the event any Non-Settling Defendants agree to comply
with the non-economic terms contained in this Settlement Agreement,
Plaintiffs shall dismiss with prejudice all claims against any such
Non-Settling Defendants, except to the extent such claims seek
non-economic injunctive relief provided by the Proposed Resolution.
2. Plaintiffs’ Waiver and Release. On the Final
Approval Date, the State of Florida shall release and forever
discharge all Defendants and their present and former parents,
subsidiaries, divisions, affiliates, officers, directors, employees,
representatives, insurers, agents, attorneys and distributors (and
the predecessors, heirs, executors, administrators, successors, and
assigns of each of the foregoing) (the "Released Parties"), from any
and all manner of civil claims, demands, actions, suits, and causes
of action, damages whenever incurred, liabilities of any nature
whatsoever, including costs, expenses, penalties and attorneys’ fees
("Claims"), known or unknown, suspected or unsuspected, accrued or
unaccrued, whether legal, equitable or statutory, both past, as to
any claims that were or could have been made in this action or any
comparable federal action, and as to the future, as to all Claims
directly or indirectly based on, arising out of or in any way
related to, in whole or in part, the use of or exposure to Tobacco
Products manufactured in the ordinary course of business, that the
State of Florida (including any of its past, present or future
agents, officials acting in their official capacities, legal
representatives, agencies, departments, commissions, divisions,
subdivisions (political and otherwise), public entities,
corporations, instrumentalities, and educational institutions, and
whether or not any such person or entity participates in the
settlement), whether directly, indirectly, representatively,
derivatively or in any other capacity, ever had, now has or
hereafter can, shall or may have (hereinafter, collectively, the
"Released Claims"). Notwithstanding any provision herein, Plaintiffs
do not release the claims for non-economic relief reserved under
this Settlement Agreement, and Defendants retain all defenses
thereto.
The State of Florida hereby covenants and agrees that it shall
not, hereafter, sue or seek to establish civil liability against any
Released Party based, in whole or in part, upon any of the Released
Claims. The State of Florida agrees that this covenant and agreement
shall be a complete defense to any such civil action or proceeding;
provided, however, that those Non-Settling Defendants which are not
parents or affiliates of the Settling Defendants shall be entitled
to the foregoing release and covenant not to sue only upon their
assent to comply with the non-economic provisions of this Settlement
Agreement and the Waiver of Claims.
3. Settling Defendants’ Waiver and Dismissal of Claims.
Upon Final Approval, Settling Defendants shall waive any and all
claims against any of the Plaintiffs in this action including the
State, or against any of their officers, employees, agents, counsel,
witnesses (fact or expert), whistle-blowers or contractors, relating
to or in connection with this litigation and shall dismiss, with
prejudice, any pending claims or actions against such persons or
entities that arise out of this litigation of this lawsuit.
IV. MOST FAVORED NATION
The Settling Defendants agree that if they enter into any future
pre-verdict settlement agreement of other litigation brought by a
non-federal governmental plaintiff on terms more favorable to such
governmental plaintiff than the terms of this Settlement Agreement
(after due consideration of relevant differences in population or
other appropriate factors), the terms of this Settlement Agreement
will be revised so that the State of Florida will obtain treatment
at least as relatively favorable as any such non-federal
governmental entity.
V. COSTS AND FEES
On or before September 30, 1997, the Settling Defendants shall
cause to be paid to the Attorney General of Florida $10 million for
the best estimate of costs and expenses attributable to his office
and other appropriate state agencies or entities in connection with
this litigation (cost for public employees shall be at prevailing
market rates); and on or before September 30, 1997, the Settling
Defendants shall further cause to be paid $12 million to the
Plaintiffs’ private counsel for their best estimate of their costs
and expenses. Thereafter the Attorney General’s Office, the
appropriate state entities and Florida’s private counsel shall
provide the Settling Defendants with an appropriately documented
statement of their costs and expenses. The Settling Defendants shall
promptly pay the amount of such costs and expenses in excess of the
above $22 million, or shall receive a refund or a credit against
other payments due hereunder if the total of such costs and expenses
shall be less than $22 million. Any dispute as to the nature or
amount of reimbursable costs and expenses shall be decided with
finality by the persons selected to award fees, as provided below.
Settling Defendants agree to pay, separately and apart from the
above, reasonable attorneys’ fees to private counsel. If the
Proposed Resolution or substantially equivalent federal program is
enacted, the amount of such fees will be set by a panel of
independent arbitrators with finality, subject to an appropriate
annual cap on all such payments and other conditions. In the absence
of any such legislation enacting the Proposed Resolution or a
substantially equivalent federal program, attorneys’ fees in
connection with this litigation will be awarded in the same manner
(subject to the appropriate annual cap and other conditions) by
three independent arbitrators selected by the parties hereto.
In addition to the foregoing, in the event of the enactment of
the Proposed Resolution or other substantially equivalent federal
program, the parties hereto contemplate that the State of Florida
and any other similar state which has made an exceptional
contribution to secure the resolution of these matters may apply to
the panel of independent arbitrators for reasonable compensation for
its efforts in securing the Proposed Resolution, subject to an
appropriate separate annual cap on all such payments.
VI. MISCELLANEOUS
A. HEADINGS. The headings of the paragraphs and
sections of this Settlement Agreement are not binding and are for
reference only and do not limit, expand, or otherwise affect the
contents of this Settlement Agreement.
B. NO ADMISSION. This Settlement Agreement and any
proceedings taken hereunder are not intended and shall not in any
event be construed as, or deemed to be, an admission or concession
or evidence of any liability or any wrongdoing whatsoever on the
part of any party or any Released Party. The parties hereto and
Released Parties specifically disclaim and deny any liability or
wrongdoing whatsoever with respect to the allegations and claims
asserted against them in this action and enter into this Settlement
Agreement solely to avoid the further expense, inconvenience, burden
and uncertainty of litigation.
C. NON-ADMISSIBILITY. These settlement negotiations
have been undertaken by the parties in good faith and for settlement
purposes only, and neither this Settlement Agreement nor any
evidence of negotiations hereunder, shall be offered or received in
evidence in this Action, or any other action or proceeding, for any
purpose other than in an action or proceeding arising under this
Settlement Agreement.
D. AMENDMENT. This Settlement Agreement may be
amended only by a writing executed by all signatories hereto and any
provision hereof may be waived only by an instrument in writing
executed by the waiving party. The waiver by any party of any breach
of this Settlement Agreement shall not be deemed to be or construed
as a waiver of any other breach, whether prior, subsequent, or
contemporaneous, of this Settlement Agreement.
E. COOPERATION. The parties to this Settlement
Agreement and their attorneys agree to use their best efforts and to
cooperate with each other to cause this Settlement Agreement to
become effective, to obtain all necessary approvals, consents and
authorizations, if any, and to execute all documents and to take
such other action as may be appropriate in connection therewith. The
parties hereto may agree, without further order of the Court, to
reasonable extensions of time to carry out any of the provisions of
this Settlement Agreement.
F. GOVERNING LAW. This Settlement Agreement shall
be governed by the law of the State of Florida.
G. CONSTRUCTION. None of the parties hereto shall
be considered to be the drafter of this Settlement Agreement or any
provision hereof for the purpose of any statute, case law or rule of
interpretation or construction that would or might cause any
provision to be construed against the drafter hereof.
H. INTENDED BENEFICIARIES. This Action was brought
by the State of Florida, through its Governor and Attorney General,
to recover certain monies and to promote the health and welfare of
the people of Florida. No portion of this Settlement Agreement shall
provide any rights to, or be enforceable by, any person or entity
that is not a party hereto or a Released Party.
I. COUNTERPARTS. This Settlement Agreement may be
executed in counterparts. Facsimile or photocopied signatures shall
be considered as valid signatures as of the date hereof, although
the original signature pages shall thereafter be appended to this
Settlement Agreement.
ENTERED INTO THIS 25th DAY OF AUGUST, 1997.
WEST PALM BEACH,
STATE OF FLORIDA
By:
___________________________________
___________________________________
Lawton M. Chiles, Jr., Robert A. Butterworth,
Governor Attorney General
PHILIP MORRIS INCORPORATED R.J. REYNOLDS TOBACCO COMPANY
By: By:
___________________________________
___________________________________
BROWN & WILLIAMSON TOBACCO LORILLARD TOBACCO COMPANY
CORPORATION
By: By:
_________________________________
____________________________________
UNITED STATES TOBACCO COMPANY
_____________________________
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