R.J. Reynolds Tobacco Co. received last week another setback in a legal dispute over responsibility for about $84 million in annual Master Settlement Agreement-type payments covering four traditional cigarette brands.
A three-judge District Court appeals court in Florida ruled Wednesday that Reynolds is obligated to make annual payments on Kool, Maverick, Salem and Winston rather than ITG Brands LLC of Greensboro.
Tobacco manufacturers, including Reynolds and Philip Morris USA, agreed in 1998 to settle lawsuits that 46 state attorneys general, including North Carolina, brought over smoking-related health-care costs.
They agreed to pay those states at least a combined $246 billion over 20 years. MSA payments to some states are in perpetuity.
The MSA fees fluctuate annually because they are based on each participating manufacturer’s traditional cigarette sales volume.
According to the Kaiser Family Foundation, participating manufacturers have paid $160.07 billion since 1998, including $3.05 billion to North Carolina.
Florida, Minnesota, Mississippi and Texas chose to negotiate separate settlements with the manufacturers.
The four brands were sold by Reynolds in June 2015 for $7.1 billion to U.K.-based Imperial Brands Plc, which transferred them to U.S. subsidiary ITG. The four brands combined represent about 7.5% of the U.S. market share for traditional cigarettes.
Reynolds divested Kool, Salem and Winston, while Lorillard Inc. divested Maverick, in order for Reynolds to gain federal regulatory approval of its $29.25 billion purchase of Lorillard.
Imperial has made the fee payments in the 46 MSA states since acquiring the brands.
However, federal judges have ruled that Reynolds retains the MSA payment responsibilities in Florida, Minnesota and Texas despite divesting the brands.
Imperial reached an MSA fee payment agreement with Mississippi.
Source: Winston Salem Journal