EXHIBIT 99
EXPANDED LITIGATION DISCLOSURE
TOBACCO-RELATED LITIGATION
OVERVIEW. Various legal actions, proceedings and claims are pending or may
be instituted against R. J. Reynolds Tobacco Company ("RJRT") or its affiliates
(including, with increasing frequency, RJRN and RJRN Holdings) or indemnitees,
including legal actions claiming that lung cancer and other diseases as well as
addiction have resulted from the use of or exposure to RJRT's tobacco products.
During 1997, 492 new actions were filed or served against RJRT and/or its
affiliates or indemnitees and 212 such actions were dismissed or otherwise
resolved in favor of RJRT and/or its affiliates or indemnitees without trial.
There have been noteworthy increases in the number of these cases pending. On
December 31, 1997 there were 516 cases pending as compared to 234 on December
31, 1996, 132 on December 31, 1995 and only 54 on December 31, 1994. As of
March 3, 1997, 540 active cases were pending against RJRT and/or its affiliates
or indemnitees, 534 in the United States, two in Canada, two in Puerto Rico, and
one in each of the Marshall Islands and Nigeria.
The United States cases are in 46 states and are distributed as follows:
198 in Florida, 101 in New York, 21 in Louisiana, 17 in each of Texas and
Pennsylvania, 14 in California, 12 in each of Alabama and Ohio, 11 in Tennessee,
nine in each of the District of Columbia, Illinois and Mississippi, seven in
each of Indiana, New Jersey and West Virginia, six in Georgia, five in each of
Maryland and Massachusetts, four in each of Kansas, Michigan, Minnesota and
South Dakota, three in each of Arizona, Arkansas, Colorado, Hawaii, Iowa,
Missouri, Nevada, Oklahoma, and Rhode Island, two in each of Connecticut,
Montana, New Hampshire, New Mexico, Oregon, South Carolina, Utah, Washington,
and Wisconsin, and one each in Alaska, Idaho, Kentucky, Maine, North Carolina,
and Vermont. Of the 534 active cases in the United States, 426 are in state
court and 108 in federal court. Most of these cases are brought by individual
plaintiffs, but an increasing number, discussed below, seek recovery on behalf
of states or large classes of claimants.
THEORIES OF RECOVERY. The plaintiffs in these actions seek recovery on a
variety of legal theories, including, among others, strict liability in tort,
design defect, negligence, special duty, voluntary undertaking, breach of
warranty, failure to warn, fraud, misrepresentation, unfair trade practices,
conspiracy, aiding and abetting, unjust enrichment, antitrust, Racketeer
Influenced and Corrupt Organizations Act ("RICO"), indemnity, medical monitoring
and common law public nuisance. Punitive damages, often in amounts ranging into
the hundreds of millions or even billions of dollars, are specifically pleaded
in a number of cases in addition to compensatory and other damages.
Eight of the 534 active cases in the United States involve alleged non-smokers
claiming injuries purportedly resulting from exposure to environmental tobacco
smoke. Forty-seven cases purport to be class actions on behalf of thousands of
individuals. Purported classes include individuals claiming to be addicted to
cigarettes, individuals and their estates claiming illness and death from
cigarette smoking and Blue Cross Blue Shield subscribers claiming reimbursement
for premiums paid. One hundred two of the active cases seek, among other
things, recovery of the cost of Medicaid payments or other health-related costs
paid for treatment of individuals suffering from diseases or conditions
allegedly related to tobacco use. Four, brought by entities administering
asbestos liability, seek contribution for liabilities incurred relating to
asbestos exposure.
DEFENSES. The defenses raised by RJRT and/or its affiliates, where
applicable, include preemption by the Federal Cigarette Labeling and Advertising
Act ("the Cigarette Act") of some or all claims arising after 1969; the lack of
any defect in the product; assumption of the risk; comparative fault; lack of
proximate cause; statutes of limitations or repose; and, in the attorneys
general cases (discussed below), various constitutional defenses. RJRN has
asserted additional defenses, including jurisdictional defenses, in many of the
cases in which it is named.
In June, 1992, the United States Supreme Court in CIPOLLONE V. LIGGETT
GROUP, held that claims that tobacco companies failed adequately to warn of the
risks of smoking after 1969 and claims that their advertising and promotional
practices undermined the effect of warnings after that date were preempted by
the Cigarette Act. The Supreme Court also held that claims of breach of express
warranty, fraud, misrepresentation and conspiracy were not preempted.
VERDICTS. Juries have found for plaintiffs in three smoking and health
cases in which RJRT was not a defendant, but in one such case, no damages were
awarded and the judgment was affirmed on appeal. The jury awarded plaintiffs
$400,000 in another such case, CIPOLLONE V. LIGGETT GROUP, but the award was
overturned on appeal and the case was subsequently dismissed. In the third such
case, on August 9, 1996, a Florida jury awarded damages of $750,000 to an
individual plaintiff. The defendants in that case, CARTER V. BROWN &
WILLIAMSON, are seeking to reverse the judgment on appeal. On May 5, 1997, in
an individual case filed against RJRT, brought by the same attorney who
represented plaintiffs in the CARTER case, a Florida state court jury found no
RJRT liability. On October 31, 1997, in still another case (KARBIWNYK V. R.J.
REYNOLDS TOBACCO COMPANY) brought by the same attorney, another state court jury
found no RJRT liability. On March 19, 1998, an Indiana state court jury also
found for RJRT, RJRN Holdings and other defendants in an individual case, DUNN
V. RJR NABISCO HOLDINGS CORP., in which plaintiffs had sought damages for the
alleged harm caused to a non-smoker by environmental tobacco smoke ("ETS"). In
addition, during 1997 and early 1998, RJRT and other tobacco industry defendants
have settled five lawsuits. These settlements are described in the Registrants'
Form 10-K for the fiscal year ended December 31, 1997 (the
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"1997 Form 10-K") to which this exhibit 99 relates. See, Item 1, "Business --
Tobacco -- Litigation Affecting the Cigarette Industry - Interim Agreements."
CLASS ACTIONS
A smoking and health class action against United States cigarette
manufacturers including RJRT, in which a class was certified consisting of "all
non-smoking flight attendants who are or have been employed by airlines based in
the United States" and who are allegedly suffering from exposure to ETS aboard
aircraft, BROIN, ET AL. V. PHILIP MORRIS, INC., ET AL., Circuit Court
of the Eleventh Judicial Circuit in and for Dade County, Florida, Case No. 91-
49738-CA-20, was settled in October, 1997. The settlement's principal terms are
described in the 1997 Form 10-K. See Item 1, "Business -- Tobacco Litigation
Affecting the Cigarette Industry -- Interim Agreements."
In another smoking and health class action against United States cigarette
manufacturers including RJRT, pending in Florida state court since May 1994, a
class has been certified consisting of all Florida citizens and residents and
their survivors who have suffered injury "caused by their addiction to
cigarettes that contain nicotine." ENGLE, ET AL., V. R.J. REYNOLDS TOBACCO
COMPANY, ET AL., Circuit Court of the Eleventh Judicial Circuit in and for Dade
County, Florida, Case No. 94-08273-CA-20. Various challenges to the class
certification have been denied on appeal. That case is scheduled to go to trial
sometime in 1998.
In March 1994, a smoking and health class action was filed in Alabama state
court against three United States cigarette manufacturers including RJRT and was
subsequently removed to federal court. LACEY, ET AL., V. LORILLARD TOBACCO
COMPANY, INC., ET AL., United States District Court, Northern District of
Alabama, Jasper Division, Civil Action No. 94-4-B-0901-J. Plaintiffs, claiming
to represent all smokers who had smoked or were smoking cigarettes sold by
defendants in the State of Alabama, sought compensatory and punitive damages not
to exceed $48,500 per each class member as well as injunctive relief arising
from defendants' alleged failure to disclose additives used in their cigarettes.
On January 31, 1997, the judge granted defendants' motion for summary judgment
based on preemption by the Cigarette Act. Plaintiffs did not appeal, and the
case has been closed.
In March 1994, a smoking and health class action was filed in federal
district court in Louisiana against United States cigarette manufacturers,
including RJRT, and others, including RJRN, seeking certification of a purported
class consisting of all United States residents who allege that they are
addicted, or are the legal survivors of persons who were addicted, to tobacco
products. CASTANO, ET AL., V. THE AMERICAN TOBACCO COMPANY, INC., ET AL.,
United States District Court, Eastern District of Louisiana, Case No. 94-1044.
Plaintiffs alleged that the cigarette manufacturers concealed and/or
misrepresented information regarding the addictive nature of nicotine and
manipulated
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the levels of nicotine in their tobacco products to make such products
addictive. In February 1995, the trial court certified the class and in May
1996, the Fifth Circuit Court of Appeals reversed the trial court's class
certification and remanded the case with instructions that the class allegations
be dismissed. The class has been decertified. Summary judgment motions against
the two remaining named plaintiffs in this case were denied on February 21,
1997. The parties have agreed to move for dismissal of the remaining individual
case with a right to replead after November 15, 1998.
In September 1994, a smoking and health class action was filed in federal
district court in Louisiana against United States cigarette manufacturers,
including RJRT, and others, including RJRN, seeking certification of a purported
class of all residents or domiciliaries of the United States who used and became
addicted to tobacco products. GRANIER V. THE AMERICAN TOBACCO COMPANY, ET AL.,
United States District Court, Eastern District of Louisiana, Case No. 94-3096.
In November 1994, on the plaintiffs' motion, a motion to consolidate the case
with CASTANO was stayed pending the decision on the issue of class certification
in CASTANO. The case remains inactive.
Following the announcement of the Fifth Circuit's class decertification
decision in CASTANO, lawyers for the plaintiffs announced that they would file
"state-wide" class actions in state courts. Subsequently, class actions based
on claims similar to those in CASTANO (a "nicotine-dependence class action")
and, in some cases, claims of physical injury (a "physical injury class action")
and medical monitoring were filed in a number of states, as described below.
Immediately prior to the Fifth Circuit's decision in the CASTANO case, a
purported nicotine-dependence class action was filed in Indiana state court
against United States cigarette manufacturers, including RJRT, and others,
including RJRN Holdings. In June 1996, defendants removed the case to federal
court. Plaintiffs' motion to remand the case to state court was granted.
NORTON, ET AL. V. RJR NABISCO HOLDINGS CORPORATION, ET AL., Superior Court,
Madison County, Indiana, Case No.48D01-9605-CP-0271.
In May 1996, a purported physical injury and nicotine-dependence class
action was filed in Maryland state court against United States cigarette
manufacturers, including RJRT, and others, including RJRN. The case was removed
by defendants to federal court and was subsequently remanded to state court.
RICHARDSON, ET AL. V. PHILIP MORRIS, INC., ET AL., Circuit Court for
Baltimore City, No. 96145050. On January 28, 1998, the Circuit Court for
Baltimore City granted plaintiffs' motion for class certification.
In May 1996, a purported nicotine-dependence/medical monitoring class
action was filed in Louisiana state court against four United States cigarette
manufacturers, including RJRT, and others, including RJRN. SCOTT, ET AL. V. THE
AMERICAN TOBACCO COMPANY, INC., ET AL., Civil District Court for the Parish of
Orleans, State of Louisiana,
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Docket No. 96-8461. On April 16, 1997, the Civil District Court of Orleans
Parish granted plaintiffs' motion for class certification on behalf of Louisiana
residents who require medical monitoring. In the class certification ruling,
the court also granted the exception of no cause of action on behalf of the
wholesaler defendants and dismissed them from the action. The remaining
defendants removed the case to federal court on April 16, 1997. On December 2,
1997, plaintiffs' motion to remand the case to the Civil District Court of
Orleans Parish was granted.
In June 1996, a purported nicotine-dependence class action was filed in New
York state court against RJRT, RJRN, The Tobacco Institute and The Council for
Tobacco Research. HOSKINS, ET AL., V. R.J. REYNOLDS TOBACCO COMPANY, ET AL.,
Supreme Court of the State of New York, County of New York, Case No. 96110951.
In December 1996, defendants filed motions to dismiss the complaint and to deny
class certification. On October 28, 1997, the trial court denied defendants'
motions to dismiss and granted plaintiffs' motion for class certification. The
class is defined as: "All residents of the State of New York who, on or after
June 19, 1980 have smoked cigarettes manufactured by the manufacturing
defendants, and who bought those cigarettes in New York." Defendants' appeal of
the class certification is pending.
In June 1996, a purported physical injury and nicotine-dependence class
action was filed in the Superior Court of the District of Columbia against
United States cigarette manufacturers, including RJRT, and others, including
RJRN. RJRN has been voluntarily dismissed from this case. REED V. PHILIP
MORRIS INCORPORATED, ET AL., Superior Court of the District of Columbia, Case
No. CA-05070-96. Plaintiffs' motion for class certification was denied on
August 18, 1997. Plaintiffs' motion for leave to file an amended complaint is
pending.
In August 1996, a purported nicotine-dependence class action was filed in
Pennsylvania state court against United States cigarette manufacturers,
including RJRT, and others, including RJRN, and was subsequently removed to
federal court. BARNES/ARCH, ET AL., V. AMERICAN TOBACCO COMPANY, INC., ET AL.,
United States District Court for the Eastern District of Pennsylvania, Case No.
96-5903-CN. Plaintiff filed a renewed motion for class certification on June
17, 1997. Defendants filed opposition. On August 22, 1997, Judge Clarence
Newcomer granted plaintiff's motion for class certification for medical
monitoring. The class definition was: "All current residents of Pennsylvania
who are cigarette smokers as of December 1, 1996 and who began smoking before
age 19 while they were residents of Pennsylvania." Defendants filed a Motion
for Summary Judgment on August 25, 1997 based on plaintiff's claims for medical
monitoring. On October 17, 1997 Judge Newcomer granted defendants' motion for
summary judgment against each of the six class representatives (five on statute
of limitations grounds and one on a medical monitoring issue). Judge Newcomer
also decertified the class, finding that plaintiffs' claims of nicotine
dependence and theories of negligence and strict liability raised too many
individual issues for class certification.
Page 5
Plaintiffs filed a Notice of Appeal to the United States Court of Appeal for the
Third Circuit on 10/17/97. The first named plaintiff, Arch, has been dismissed
from the case and the second named plaintiff (Barnes) has taken his place. The
appeal is pending.
In August 1996, a purported nicotine-dependence class action was filed in
Alabama state court, on behalf of Alabama and North Carolina residents, against
four United States cigarette manufacturers, including RJRT, and others. In
September 1996, the case was removed by defendants to federal court. LYONS, ET
AL., V. THE AMERICAN TOBACCO CO., INC., ET AL., United States District Court for
the Southern District of Alabama, Southern Division, Civil Action No.
96-0881-BH-S. Plaintiffs' motion to remand the case to state court was denied.
In August 1996, a purported nicotine-dependence class action was filed in
Ohio state court against United States cigarette manufacturers, including RJRT,
and others, including RJRN, on behalf of Ohio residents and was subsequently
removed to federal court in September, 1996. CHAMBERLAIN, ET AL., V. THE
AMERICAN TOBACCO CO., ET AL., United States District Court, Northern District of
Ohio, Case No. 1:96CV2005. Plaintiffs' motion to remand the case to state court
was denied. The case is stayed until May 19, 1998.
In September 1996, a purported class action was filed in Tennessee state
court against four United States cigarette manufacturers, including RJRT, and
others, on behalf of all individuals and entities in the United States who have
paid premiums to a Blue Cross or Blue Shield organization for medical insurance.
The complaint alleges that defendants' actions have resulted in increased
medical insurance premiums for all class members and seeks recovery under
various consumer protection statutes as well as under theories of breach of
special duty and unjust enrichment. This case was removed by defendants to
federal court. Plaintiffs' motion to remand the case to state court was granted.
PERRY, ET AL., V. PHILIP MORRIS, INC., ET AL., Circuit Court, Coffee
County, Tennessee, Case No. 27,960.
In September 1996, a purported nicotine-dependence class action was filed
in Minnesota state court against four United States cigarette manufacturers,
including RJRT, and others, including RJRN. The case was removed by defendants
to federal court in September 1996. THOMPSON/MASEPOHL, ET AL. V. THE AMERICAN
TOBACCO CO., INC., ET AL., United States District Court, District of Minnesota,
Third Division, Case No. CV3-96-888. Plaintiffs' motion to remand the case to
state court was denied.
In October 1996, a purported nicotine-dependence class action was filed in
New Mexico state court against four United States cigarette manufacturers,
including RJRT, and others, including RJRN. RJRN has been dismissed from this
case. CONNOR, ET AL., V. THE AMERICAN TOBACCO CO., ET AL., Second Judicial
District Court, County of Bernalillo, State of New Mexico, Case No. CV-96-9422.
Page 6
In October 1996, a purported nicotine-dependence class action was filed in
federal court in Puerto Rico against four United States cigarette manufacturers,
including RJRT, and others. RUIZ, ET AL., V. THE AMERICAN TOBACCO CO., ET AL.,
United States District Court for the District of Puerto Rico, Civil Action No.
96-2300. Plaintiffs' motion for class certification was denied on March 17,
1998.
In November 1996, a purported nicotine-dependence class action was filed in
federal court in Arkansas against United States cigarette manufacturers,
including RJRT, and others, including RJRN. HANSEN/MCGINTY, ET AL., V. THE
AMERICAN TOBACCO CO., ET AL., United States District Court for the Eastern
District of Arkansas, Western Division, Case No. LRC 96-881.
In January 1995, a purported class action was filed in the Ontario Court of
Justice, Toronto, Canada against RJR-MacDonald, Inc. and two other Canadian
cigarette manufacturers. LETOURNEAU V. ROTHMANS ET AL., Ontario Court of
Justice, Toronto, Canada, Court File No. 95-CU-82186 (now captioned CAPUTO V.
IMPERIAL TOBACCO LIMITED, ET AL.). The lawsuit seeks damages in the amount of
$1,000,000 (Canadian) per class member and punitive and exemplary damages and an
order requiring the funding of rehabilitation centers. Plaintiffs seek
certification of a class of persons consisting of all current and former
cigarette smokers in Ontario, their families and the estates of deceased
smokers. Plaintiffs have filed class certification materials, most recently in
January, 1997, but no motion has yet been made for class certification.
In March, 1996, PRO SE prisoners filed a purported class action against
United States cigarette manufacturers including RJRT, and others, seeking class
certification on behalf of prisoners in two Mississippi prisons based on alleged
exposure to ETS. LYLE, ET AL., V. BROWN & WILLIAMSON TOBACCO CORPORATION, ET
AL., United States District Court for the Northern District of Mississippi,
Civil Action No. 3:96-CV-268WS. In October 1996, the court issued an order
dismissing the action. Plaintiff has filed a motion for relief from said
dismissal.
In September 1996, a purported physical injury class action was filed in
Florida state court against United States cigarette manufacturers, including
RJRT, and others. WALTERS, ET AL., V. BROWN & WILLIAMSON TOBACCO CORP., ET AL.,
Circuit Court, Fourth Judicial District, Duval County, Florida. RJRT was not
served within the 120 days that Florida law provides to effect service..
In January 1997, a purported nicotine-dependence class action was filed in
West Virginia state court against United States cigarette manufacturers,
including RJRT, and others, including RJRN. Despite the fact that RJRT and RJRN
had not been served, they joined with other defendants in removing the case to
federal court in February 1997. MCCUNE V. THE AMERICAN TOBACCO COMPANY, ET AL.,
Circuit Court, Kanawha County,
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West Virginia, Case No. 2:97-0204. Plaintiffs' motion to remand the case was
granted on January 30, 1998.
In February 1997, a purported nicotine-dependence class action was filed in
Hawaii state court against United States cigarette manufacturers, including
RJRT, and others, including RJRN. PETERSON V. THE AMERICAN TOBACCO COMPANY, ET
AL., United States District Court for the District of Hawaii. Defendants
removed this case in March, 1997. Plaintiffs' motion to remand is pending.
In February 1997, a purported nicotine-dependence class action was filed in
Kansas state court against United States cigarette manufacturers, including
RJRT, and others, including RJRN. EMIG V. THE AMERICAN TOBACCO COMPANY, ET AL.,
United States District Court, District of Kansas, Case No. 97-1121. This case
was removed to federal court in March, 1997. Plaintiffs' motion for class
certification is pending.
In February 1997, a purported medical monitoring class action was filed in
state court in Michigan against United States cigarette manufacturers, including
RJRT, and others. BAKER V. AMERICAN TOBACCO, ET AL., Circuit Court, Wayne
County, Michigan, Case No. 97-703444.
In March 1997, a purported physical injury class action was filed in state
court in West Virginia against United States cigarette manufacturers, including
RJRT, and others. Defendants removed this case to federal court in April, 1997.
WOODS V. PHILIP MORRIS INC., ET AL. United States District Court for the
Southern District of West Virginia. Plaintiff filed a First Amended Complaint
on September 26 1997, dropping plaintiff Ima Jean Ingle. Plaintiffs' motion to
remand based on an amended complaint is pending.
In March 1997, a purported nicotine dependence class action was filed in
state court in Nevada against United States cigarette manufacturers, including
RJRT, and others. SELCER, ET AL., V. R. J. REYNOLDS TOBACCO COMPANY, ET AL.,
United States District Court, District of Nevada, Case No. CVS-97-00334 PMP.
In April 1997, a purported physical injury class action was filed in
Wisconsin state court against United States cigarette manufacturers, including
RJRT, and others. Defendants removed the case to federal court in May 1997.
Plaintiffs' motion to remand the case to the Circuit Court for Rock County was
granted August 27, 1997. INSOLIA V. PHILIP MORRIS INC., ET AL.,.
Circuit Court, Rock County, Wisconsin. Case No. 97-CV-230J.
In April 1997, a nicotine dependence class action was filed in state court
in New Jersey against United States cigarette manufacturers, including RJRT, and
others, including RJRN. COSENTINO, ET AL., V. PHILIP MORRIS INC., ET
AL., Superior Court, Middlesex County, New Jersey, Case No. L-5135-97.
Page 8
In May 1997, a purported physical injury class action was filed in the
federal court in Texas against United States cigarette manufacturers, including
RJRT, and others. COLE V. THE TOBACCO INSTITUTE, ET AL., United States
District Court for the Eastern District of Texas, Case No. 1:97-CV-0256.
In May 1997, a purported physical injury class action was filed in the
state court in New York against United States cigarette manufacturers, including
RJRT, and others including RJRN. GEIGER, ET AL., V. AMERICAN TOBACCO, ET AL.,
Supreme Court, Queens County, New York, Case No. 010687. In July, 1997, the
court certified an interim class of all New York smokers with lung and/or throat
cancer and their survivors. Defendants' appeal of that decision is pending.
In May 1997, a purported nicotine-dependence class action was filed in
state court in Tennessee against United States cigarette manufacturers,
including RJRT, and others, including RJRN. Defendants removed this case to the
federal court in June, 1997. ANDERSON, ET AL., V. AMERICAN TOBACCO, ET AL.,
United States District Court, Eastern District of Tennessee. Plaintiffs' motion
to remand was denied.
In May 1997, a purported nicotine-dependence class action was filed in
state court in New Jersey against United States cigarette manufacturers,
including RJRT, and others, including RJRN. ENRIGHT V. AMERICAN TOBACCO, ET AL.
Superior Court, Camden County, New Jersey, Case No. 699. On October 14, 1997,
the case was transferred to the Middlesex County Superior Court.
In May 1997, a purported physical injury class action was filed in state
court in Georgia against United States cigarette manufacturers, including RJRT,
and others, including RJRN. LYONS V. BROWN & WILLIAMSON, ET AL., Superior
Court, Fulton County, Georgia, Case No E59346.
In May 1997, a purported nicotine dependence class action was filed in
state court in New Jersey against United States cigarette manufacturers,
including RJRT, and others, including RJRN. TEPPER, ET AL., V. PHILIP MORRIS
INCORPORATED, ET AL., Superior Court, Bergen County, New Jersey, Case No.
L-4983-97-E. On October 14, 1997, the case was transferred to Middlesex County
Superior Court.
In May 1997, a purported physical injury class action was filed in federal
court in Illinois against United States cigarette manufacturers, including RJRT,
and others, including RJRN. CLAY, ET AL., V. AMERICAN TOBACCO, ET AL., Case
No. 97-4167-JPG.
In May 1997, a purported physical injury and nicotine dependence class
action was filed in federal court in Georgia against United States cigarette
manufacturers, including RJRT, and others. MCCAULEY V. BROWN & WILLIAMSON
TOBACCO CORPORATION, ET
Page 9
AL., United States District Court for the Northern District of Georgia, Case
No. 1:97-cv-1744.
In June 1997, a purported physical injury class action was filed in the
Tribal Court of the Lower Brule Sioux Tribe against United States cigarette
manufacturers, including RJRT, and others. LANGDEAU V. AMERICAN TOBACCO, ET AL.,
Tribal Court of the Lower Brule Sioux Tribe, Case No. 97-5-0056.
In June 1997, a purported physical injury/nicotine dependence class action
was filed in state court in New Jersey against United States cigarette
manufacturers, including RJRT, and others, including RJRN. LIPPINCOTT V.
AMERICAN TOBACCO, ET AL., Superior Court, Camden County, New Jersey, Case No.
L-4702-97. On October 14, 1997 the case was transferred to Middlesex County
Superior Court.
In June 1997, a purported physical injury class action was filed in state
court in Iowa against United States cigarette manufacturers, including RJRT, and
others, including RJRN. BRAMMER, ET AL., V. R. J. REYNOLDS TOBACCO COMPANY, ET
AL., District Court, Polk County, Iowa, Case No. 73061. The case is stayed
through April 30, 1998.
In June 1997, a purported physical injury class action was filed in federal
court in Oklahoma against United States cigarette manufacturers, including RJRT,
and others. WALLS, ET AL., V. AMERICAN TOBACCO, ET AL., United States District
Court for the Northern District of Oklahoma, Case No. 97-CV-218-H.
In July 1997, a purported physical injury class action was filed in state
court in Louisiana against United States cigarette manufacturers, including
RJRT, and others, including RJRN. KNOWLES, ET AL., V. AMERICAN TOBACCO, ET AL.,
District Court, Parish of Orleans, Louisiana, Case No. 97-11517.
In July 1997, a purported physical injury class action was filed in state
court in Illinois against United States cigarette manufacturers, including RJRT,
and others, including RJRN. Defendants removed the case to federal court in
December, 1997. DALEY, ET AL., V. AMERICAN BRANDS, INC., ET AL., United States
District Court, Northern District of Illinois, Case No. 97L07963.
In August 1997, a purported physical injury class action including those
who desire to participate in smoking cessation programs was filed in state court
in California against United States cigarette manufacturers, including RJRT, and
others, including RJRN. BROWN, ET AL., V. AMERICAN TOBACCO, ET AL., Superior
Court, County of San Diego, California, Case No. 711400.
In September 1997, a purported physical injury/nicotine-dependence class
action was filed in federal court in Texas against United States cigarette
manufacturers,
Page 10
including RJRT, and others. BUSH V. PHILIP MORRIS, INC., ET AL., United States
District Court for the Eastern District of Texas, Case No. 597CV180. The case
is stayed until May 11, 1998.
In October 1997, a purported physical injury class action was filed in
federal court in Tennessee against United States cigarette manufacturers,
including RJRT, and others. NEWBORN, ET AL., V. BROWN & WILLIAMSON TOBACCO
CORPORATION, ET AL., United States District Court for the Western District of
Tennessee, Case No. 97-2938.
In October 1997, a purported ETS class action on behalf of casino workers
was filed in federal court in Nevada against United States cigarette
manufacturers, including RJRT, and others, including RJRN. BADILLO, ET AL., V.
AMERICAN TOBACCO, ET AL., United States District Court, District of Nevada,
Case No. CV-N-97-00573-DWH.
In November 1997, a purported physical injury class action was filed in
federal court in South Carolina against United States cigarette manufacturers,
including RJRT, and others, including RJRN. AKSAMIT, ET AL., V. BROWN &
WILLIAMSON TOBACCO, ET AL., United States District Court, District of South
Carolina, Case No. 6-97-3636-21.
In December 1997, a purported physical injury, ETS class action was filed
in state court in Louisiana. Defendants removed this case to the United States
District Court for the Eastern District of Louisiana on December 12, 1997.
YOUNG V. AMERICAN TOBACCO COMPANY ET AL., Circuit Court, New Orleans, Louisiana.
The case was remanded to state court on February 2, 1998.
In December 1997, a purported physical injury class action was filed in
federal court in Texas against United States cigarette manufacturers, including
RJRT, and others. MASON, ET AL., V. AMERICAN TOBACCO, ET AL., United States
District Court for the Northern District of Texas, Case No. 7-97CV-293-X.
In February 1998, a purported physical injury class action was filed in
state court in Utah against United States cigarette manufacturers,. including
RJRT and others, including RJRN. HERRERA V. AMERICAN TOBACCO, ET AL., District
Court, Utah County, Utah, Case No. 9804-3567.
In April 1997, a purported class action was filed in state court in
Mississippi against United States cigarette manufacturers, including RJRT and
others, including RJRN. WHITE, HL V. PHILIP MORRIS, INC., ET AL., Chancery
Court, Jefferson County, Mississippi, Case No. 97-0053.
HEALTH CARE COST RECOVERY LITIGATION
Page 11
In certain of the pending proceedings, state and local government entities
and others seek reimbursement for Medicaid and/or other health care expenditures
allegedly caused by tobacco products. The claims asserted in these health care
cost recovery actions vary. Generally, plaintiffs assert the equitable claim
that the tobacco industry was "unjustly enriched" by plaintiffs' payment of
health care costs allegedly attributable to smoking and seek reimbursement of
those costs. The plaintiffs in these various health care cost recovery actions
also assert one or more of the following additional claims: the equitable claim
of indemnity, common law claims of negligence, strict liability, breach of
express and implied warranty, violation of a voluntary undertaking or special
duty, fraud, negligent misrepresentation, conspiracy, public nuisance, claims
under state and federal statutes governing consumer fraud, antitrust, deceptive
trade practices and false advertising, and claims under federal or state RICO
statutes.
Each plaintiff seeks reimbursement of Medicaid and/or other health care
costs. Other relief sought by some but not all plaintiffs includes punitive
damages, treble damages for alleged antitrust law violations, injunctions
prohibiting alleged marketing and sales to minors, disclosure of research,
disgorgement of profits, funding of anti-smoking programs, disclosure of
nicotine yields and payment of attorney and expert witness fees.
Defenses raised by defendants include failure to state a valid claim, lack
of benefit, adequate remedy at law, "unclean hands" (namely, that plaintiffs
cannot recover because they participated in, and benefited from, the sale of
cigarettes), lack of antitrust injury, federal preemption, lack of proximate
cause and statute of limitations. In addition, defendants argue that they
should be entitled to "set-off" any alleged damages to the extent a state
benefits economically from the sale of cigarettes through the receipt of excise
taxes or otherwise.
Defendants also argue that all of these cases are improper because
plaintiffs must proceed under principles of subrogation and assignment. Under
traditional theories of recovery, a payor of medical costs (such as an insurer
or a state) can seek recovery of health care costs from a third party solely by
"standing in the shoes" of the injured party. Defendants argue that plaintiffs
should be required to bring an action on behalf of each individual health care
recipient and should be subject to all defenses available against the allegedly
injured party.
In several states certain cigarette companies, including RJRT have filed
related declaratory judgment actions which challenge the ability of the
plaintiffs to use contingency fee counsel to prosecute these actions and/or the
procedural capacity of the state attorney general to bring the health care cost
recovery action absent the approval of the relevant executive officer charged
with responsibility for certain of the health care programs at issue.
Page 12
The following is a summary of certain developments in each of the health
care cost recovery suits pending against RJRT and, in some cases, RJRN, and the
related declaratory judgment actions filed by certain of the cigarette
manufacturers.
FLORIDA. In February 1995, the State of Florida filed a health care cost
recovery action under a special statute in Florida state court. STATE OF
FLORIDA, ET AL. V. AMERICAN TOBACCO COMPANY, ET AL., Circuit Court of the
Fifteenth Judicial Circuit in and for Palm Beach County, Florida, Case No. CL 95
1466 AO. In September 1996, the trial court dismissed all of the state's claims
except for its negligence and strict liability counts arising from Medicaid
payments made after July 1, 1994, and its count for injunctive relief. The case
was entering the trial phase when, during jury selection, the parties announced
that they had entered into a settlement agreement. (For a description of the
terms of the settlement see the 1997 Form 10-K, Item 1,
"Business-Tobacco-Litigation Affecting the Cigarette Industry -- Interim
Agreements.")
MISSISSIPPI. In May 1994, the Attorney General of Mississippi filed a
health care cost recovery action in Mississippi state court. MOORE V. THE
AMERICAN TOBACCO COMPANY, ET AL., Chancery Court of Jackson County, Mississippi,
Case No. 94-1429. A trial in this case began in June 1997, but on July 2, 1997,
a settlement was agreed to based on a Memorandum of Understanding and subject to
a number of conditions. (For a description of the terms of the settlement see
the 1997 Form 10-K, Item 1, "Business-Tobacco-Litigation Affecting the Cigarette
Industry- Interim Agreements.")
MINNESOTA. In August 1994, the Attorney General of Minnesota and Blue
Cross and Blue Shield of Minnesota filed a health care cost recovery action in
Minnesota state court. MINNESOTA, ET AL. V. PHILIP MORRIS, INCORPORATED, ET
AL., Minnesota District Court, Second Judicial District, County of Ramsey, Case
No. C1-94-8565. In July 1996, the Minnesota Supreme Court ruled that Blue Cross
did not have standing to pursue its tort claims against defendants, but that it
could proceed against defendants for claims brought under antitrust and consumer
protection statutes. The Supreme Court also held that Blue Cross could pursue
directly its equitable claims, but only for injunctive (not monetary) relief.
The trial began in January 1998 and is continuing.
During pre-trial discovery and during the course of the trial to date, the
court in this case made a number of rulings adverse to the defendants. These
rulings, among other things, limit the defenses available to the defendants and
require production by the defendants of thousands of documents for which
privilege had been asserted. The tobacco companies are defending this case
vigorously, but the court's rulings could have an adverse effect on their
ability to present their defenses effectively.
WEST VIRGINIA. In September 1994, the Attorney General of West Virginia
filed a health care cost recovery action in West Virginia state court. MCGRAW
V. THE AMERICAN TOBACCO COMPANY, ET AL., Circuit Court of Kanawha County, West
Virginia, Case No. 94-1707. In October 1995, the court dismissed eight of ten
counts of the complaint and
Page 13
granted defendants' motion to prohibit prosecution of this case pursuant to a
contingent fee agreement with private counsel. In June 1996, the Attorney
General filed a second amended complaint that added the Public Employees'
Insurance Agency as a plaintiff. In November 1996, the Attorney General filed a
third amended complaint that added the West Virginia Department of Health and
Human Resources as a plaintiff, and three law firms as defendants, and asserted
additional counts under theories of indemnity, negligent misrepresentation,
negligence, and strict product liability. In December 1996, the court heard
oral argument on defendants' motion to dismiss common law and equitable claims
contained in plaintiffs' third amended complaint. In a letter ruling issued
February 13, 1997, the court ruled that neither of the West Virginia agencies
had implied or express statutory authority to maintain the challenged causes of
action. Motions to dismiss the remaining counts of the third amended complaint
are pending.
TEXAS. In March 1996, the Texas Attorney General filed a health care cost
recovery action in federal court in Texas. STATE OF TEXAS V. AMERICAN TOBACCO
COMPANY, ET AL., United States District Court, Eastern District of Texas, Civil
No. 5-96CV91. Trial in this action is set for September 1997 and defendants
have filed a number of motions to dismiss it. Defendants and others had
previously filed an action in Texas state court in November 1995, seeking a
declaration that the Texas Attorney General cannot pursue a health care cost
recovery action. PHILIP MORRIS, INC., ET AL. V. DAN MORALES, ATTORNEY GENERAL
FOR THE STATE OF TEXAS, ET AL., District Court of Travis County, Texas, No.
94-14807. A trial in this case had begun when, on January 16, 1998, the parties
entered into a settlement agreement. (For a description of the terms of the
settlement see the 1997 Form 10-K, Item 1, "Business-Tobacco-Litigation
Affecting the Cigarette Industry- Interim Agreements.")
MASSACHUSETTS. In December 1995, the Massachusetts Attorney General filed
a health care cost recovery action in Massachusetts state court. COMMONWEALTH
OF MASSACHUSETTS V. PHILIP MORRIS, INC., ET AL., Superior Court, Middlesex
County, Civil Action No. 95-7378. Defendants have moved to dismiss the
complaint. Defendants had previously filed an action in Massachusetts federal
court in November 1995, seeking to enjoin the Attorney General from prosecuting
a health care cost recovery action. PHILIP MORRIS INCORPORATED, ET AL. V. SCOTT
HARSHBARGER, United States District Court, District of Massachusetts, Case No.
95-12574-GAO. In November 1996, the federal district court denied the Attorney
General's motion to dismiss the complaint and stayed the injunction action.
Trial is scheduled to begin in the Commonwealth case on February 1, 1999.
MARYLAND. In May 1996, the State of Maryland filed a health care cost
recovery action in Maryland state court. STATE OF MARYLAND V. PHILIP MORRIS
INC., ET AL., Circuit Court for Baltimore County, Maryland, Case No.
96-122017/CL211017. Defendants' motion to dismiss the state's complaint was
argued on January 28, 1997. The trial is scheduled for January 1999.
Defendants and others had previously filed a separate action in Maryland state
court seeking to enjoin the Maryland Attorney General from
Page 14
prosecuting a health care cost recovery action pursuant to a contingent fee
arrangement with special counsel. PHILIP MORRIS, ET AL., V. PARRIS N.
GLENDENING, GOVERNOR OF THE STATE OF MARYLAND, ET AL., Circuit Court for
Talbot County, Maryland, Case No. CG 2829. In August 1996, the court granted
the attorney general's motion for summary judgment and dismissed the
injunction action. An appeal of this decision is pending.
LOUISIANA. In March 1996, the Attorney General of Louisiana filed a health
care cost recovery action in Louisiana state court. IEYOUB, ET AL., V. THE
AMERICAN TOBACCO COMPANY, ET AL., 14th Judicial District Court, Parish of
Calcasieu, Louisiana, Case No. 96-1209. In January 1997, the court denied
defendants' motion to dismiss which argued that the Attorney General lacked the
authority to bring this action. Defendants are seeking a supervisory writ of
review of this decision. On March 14, 1997 and again on April 3, 1997, the
State filed a Supplemental and Amending Petition naming over 150 insurance
companies as defendants pursuant to Louisiana Direct Action Statute,
La.R.S.22:655. The State alleged that it was a third-party beneficiary of the
tobacco manufacturer defendants' insurance policies, including certain policies
sold to R. J. Reynolds, and that those policies provide coverage for the damages
claimed by the State of Louisiana. In June, 1997, A.C.E. Insurance Company,
Ltd. filed a notice of removal of the matter to federal court. A.C.E. based its
removal on the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 9 U.S.C. section 205. Also in June 1997, ICAROM, plc, another
insurer-defendant, filed a separate notice of removal based on the Foreign
Sovereign Immunities Act of 1976, 28 U.S.C. section 1330 (a). Plaintiff filed
two motions to remand, one addressed to the removal by A.C.E. and the other
addressed to the removal by ICAROM. On September 11, 1997, the federal district
court denied plaintiff's motion to remand. An appeal of the denial of the
motion to remand is now pending and a stay of the proceeding, pending appeal, is
in effect.
SAN FRANCISCO. In June 1996, the City and County of San Francisco filed
a health care cost recovery action in California federal court and has since
been joined by ten other California counties. CITY AND COUNTY OF SAN
FRANCISCO, ET AL., V. PHILIP MORRIS, INC. ET AL., United States District
Court, Northern District of California, Civil No. C 96-2090. The current
plaintiffs in this matter are various counties of the State of California
seeking, among other things, the recovery of smoking-related costs incurred
by county governments. In January 1997, the court denied defendants' motion
to disqualify plaintiffs' contingency-fee counsel. In February 1997, the
court dismissed all of the plaintiffs' claims. Two clams (implied warranty
and conspiracy) were dismissed with prejudice. Plaintiffs were granted leave
to file an amended complaint with respect to their remaining claims. On
March 3, 1998, the Court granted defendants' motion to dismiss only the
intentional breach of special duty cause of action. Answers are due on March
31, 1998. No discovery has taken place.
In September 1996, plaintiffs in the federal court action, joined by
several medical associations, filed an action in California state court
seeking, among other things, injunctive relief and disgorgement of profits
for alleged violations of California's consumer protection statutes. PEOPLE
OF THE STATE OF CALIFORNIA, ET AL., V. PHILIP MORRIS, INC., ET AL., San
Francisco Superior Court, County of San Francisco, Case No. 980864. In
Page 15
January 1997, the court granted in part defendants' motion to dismiss by
requiring plaintiffs to replead certain causes of action and denied the motion
on other grounds.
WASHINGTON. In June 1996, the Attorney General of the State of Washington
filed a health care cost recovery action in Washington state court. STATE OF
WASHINGTON V. AMERICAN TOBACCO CO., INC., ET AL., Superior Court of Washington,
King County, No. 96-2-15056-8. In November 1996, the court dismissed claims
based on special duty, unjust enrichment and restitution to the state, but did
not dismiss claims brought under Washington's antitrust laws. The State of
Washington recently moved to amend its complaint with the stated intention of
correcting deficiencies found by the court to exist in the special duty and
unjust enrichment claims and to add a claim for restitution under Washington's
consumer protection statute. Trial is scheduled for September 1998.
CONNECTICUT. In July 1996, the State of Connecticut filed a health care
cost recovery action in Connecticut state court. STATE OF CONNECTICUT V. PHILIP
MORRIS INC., ET AL., Superior Court, Judicial District of Litchfield, Case No.
CV-96-01534405. Defendants had previously filed an action in federal district
court in June 1996, seeking to enjoin the Connecticut Attorney General from
bringing the health care cost recovery action. PHILIP MORRIS INC., ET AL. V.
RICHARD BLUMENTHAL, United States District Court, District of Connecticut, Case
No. 396CV01221 (PCD). This injunction action was dismissed in December 1996
and, in January 1997, plaintiffs appealed the dismissal.
UTAH. In September 1996, the Utah Attorney General filed a health care
cost recovery action in federal court in Utah. STATE OF UTAH V. R.J. REYNOLDS
TOBACCO COMPANY, ET AL., United States District Court, District of Utah, Case
No. 2:96CV 0829W. Defendants had previously filed an action in Utah state court
in July 1996, challenging the right of the Attorney General to bring such an
action and to prosecute the case pursuant to a contingent fee arrangement with
special counsel. PHILIP MORRIS INCORPORATED, ET AL. V. JANET C. GRAHAM,
ATTORNEY GENERAL OF THE STATE OF UTAH, ET AL., Third Judicial District Court of
Salt Lake County, Utah, Case No. 960904948CV. The parties have agreed that the
state court action will be stayed while the federal action is proceeding, except
for the challenge to the Attorney General's contingent fee arrangement with
special counsel.
In December 1996, a motion for partial summary judgment challenging the
contingent fee arrangement was argued before the state court. In February 1997,
the court denied the cigarette manufacturers' motion and granted the state's
motion to dismiss three counts of the declaratory judgment action.
Page 16
LOS ANGELES. In August 1996, the County of Los Angeles filed a health care
cost recovery action in California state court. COUNTY OF LOS ANGELES V. R.J.
REYNOLDS TOBACCO COMPANY, ET AL., Superior Court of California, San Diego
County, No. 707651. On February 14, 1996, defendants demurred to four of the
five causes of action asserted by plaintiffs. The court granted defendants'
demurrer and plaintiffs have now filed a Fifth Amended Complaint on January 22,
1998.
ALABAMA. In August 1996, a health care cost recovery action was filed in
Alabama state court as a putative class action on behalf of taxpayers of the
State of Alabama. Following local rules, the state court entered an order
conditionally certifying the class. This action was subsequently removed by
defendants to federal court. CROZIER, ET AL., V. THE AMERICAN TOBACCO COMPANY,
ET AL., Circuit Court, Montgomery County, Alabama, Case No. CV-96-1508.
Plaintiffs' motion to remand to state court was granted on March 25, 1997.
Defendants filed a motion to dismiss based on plaintiffs' lack of standing to
bring this lawsuit on April 14, 1997. On September 29, 1997, Judge Charles
Price granted in part defendants' motion to dismiss, dismissing plaintiffs'
claims asserted on behalf of the State of Alabama. Judge Price denied that
motion to dismiss as it relates to plaintiffs' individual claims and those
claims asserted on behalf of children in the State of Alabama.
KANSAS. In August 1996, the Attorney General of Kansas filed a health care
cost recovery action in Kansas state court. STATE OF KANSAS, EX REL. CARLA J.
STOVALL, ATTORNEY GENERAL, V. R.J. REYNOLDS TOBACCO CO., ET AL., District Court
of Shawnee County, Kansas, Case No. 96-CV-919. Defendants filed a motion to
dismiss this case. On October 15, 1997 the trial court ordered the release of
approximately 2,500 Liggett documents to plaintiff, holding that the joint
defense privilege does not apply. Defendants noticed an appeal on December 12,
1997 to the Kansas Court of Appeal.
MICHIGAN. In August 1996, the Attorney General of Michigan filed a
health care cost recovery action in Michigan state court. FRANK J. KELLEY,
ATTORNEY GENERAL, EX REL. STATE OF MICHIGAN V. PHILIP MORRIS, INC., ET AL.,
Circuit Court for the 30th Judicial Circuit, Ingham County, Michigan, Case
No. 96-84281-CZ. In October 1996, defendants moved to dismiss certain counts
of the complaint and to strike claims for compensatory and punitive damages.
In January 1997, plaintiff filed a motion to summarily dispose of defendants'
affirmative defenses and defendants' claims that assignment and/or
subrogation are the state's exclusive remedies for obtaining reimbursement of
monies spent providing healthcare for Michigan citizens with smoking related
diseases. On May 27 1997, the court issued oral rulings granting the motion
for summary disposition filed by the plaintiff as to subrogation and directed
defendants to file amended affirmative defenses. The Court granted with
prejudice the motion to dismiss filed by defendants as to plaintiffs'
anti-trust claims, claims of breach of special duty and injunctive relief,
Page 17
dismissed plaintiff's punitive damages claim and denied the motion to disqualify
plaintiffs' contingency fee counsel. Plaintiff has leave to amend.
OKLAHOMA. In August 1996, the Attorney General of Oklahoma filed a health
care cost recovery action in Oklahoma state court. STATE OF OKLAHOMA ET AL.
R.J. REYNOLDS TOBACCO CO., ET AL., District Court for Cleveland County,
Oklahoma, Case No. CJ-96-1499-L. Trial is scheduled for November 11, 1998.
Discovery is ongoing.
ARIZONA. In August 1996, the Attorney General of Arizona filed a health
care cost recovery action in Arizona state court. STATE OF ARIZONA, ET AL., V.
AMERICAN TOBACCO CO., INC. ET AL., Superior Court, Maricopa County, Arizona, No.
CV 96-14769. The Governor of Arizona has instructed the Attorney General to
dismiss the case. Subsequently, the Attorney General filed an amended complaint
that abandons claims for Medicaid payments, but seeks recovery of other health
care costs as well as other damages and forms of relief. On July 14, 1997, the
court dismissed count 5 (RICO) of plaintiff's complaint. Both sides filed
motions for reconsideration of the rulings concerning RICO and antitrust claims.
The motions to reconsider are to be heard simultaneously with opposition to the
amended complaint. Discovery is to be completed by July 31, 1998. Trial is
scheduled for October 7, 1998.
HAWAII. In January 1997, the Attorney General of Hawaii filed a health care
recovery action in Hawaii state court. STATE OF HAWAII, ET AL., V. BROWN &
WILLIAMSON TOBACCO CORPORATION, ET AL., Circuit Court of the First Circuit, No.
97-0441-01. In February 1997, the state filed its first amended complaint.
Motions to dismiss have been filed and are to be heard on April 30, 1998.
Discovery is ongoing.
OHIO. In September 1996, two Ohio local officials filed a health care cost
recovery action in Ohio state court, purportedly on behalf of the State of Ohio
and all Ohio taxpayers. Defendants removed the case to federal court in Ohio
and have filed a motion to dismiss challenging the standing of plaintiffs to
bring this action. STATE EX REL. COYNE, JR., ET AL., V. THE AMERICAN TOBACCO
CO., ET AL., United States District Court, Northern District of Ohio, Case No.
96-2247. Plaintiffs' motion to remand this action to state court is pending.
Defendants filed a Motion to Dismiss based on failure to state a claim upon
which relief can be granted on October8, 1997. Trial in this case is scheduled
for May 4, 2000.
In May 1997, the Attorney General of the State of Ohio filed a health care
cost recovery action in Ohio state court. STATE OF OHIO EX REL. BETTY D.
MONTGOMERY V. PHILIP MORRIS, ET AL., Case No. 97-CVH-05-5114. Discovery cut-off
has been scheduled for December 16, 1999. This case is currently scheduled for
trial for May 4, 2000. Motions to dismiss have been filed. Briefing on these
motions was completed on March 17,1998. Oral argument has not been scheduled.
Page 18
NEW JERSEY. In September 1996, the New Jersey Attorney General filed a
health care cost recovery action in New Jersey state court. THE STATE OF NEW
JERSEY V. R.J. REYNOLDS TOBACCO COMPANY, ET AL. Chancery Court, Middlesex
County, Case No. C-254-96. In August 1996, defendants filed a separate suit
challenging the right of the Attorney General to bring such an action and to
prosecute the case pursuant to a contingent fee arrangement with special
counsel. PHILIP MORRIS, INC., ET AL., V. PETER VERNIERO, ATTORNEY GENERAL OF
THE STATE OF NEW JERSEY, ET AL., Superior Court of New Jersey, Chancery
Division, Mercer County, Case No. MER-C-000114-96. Defendants' motion to
dismiss the complaint and plaintiffs' motion for summary judgment are
pending. Plaintiff filed an Amended Complaint on December 3, 1997 adding two
new counts under the state's RICO and antitrust statutes. Defendants
responded to the amended complaint on January 23, 1998 by filing a motion to
strike Counts Five (unjust enrichment/restitution) and Six (indemnity) of
plaintiff's amended complaint and limiting to subrogation plaintiff's common
law right to seek reimbursement of Medicaid expenses.
NEW YORK CITY. In October 1996, the City of New York and the New York City
Health and Hospitals Corporation filed a health care cost recovery action in New
York state court. CITY OF NEW YORK, ET AL., V. THE TOBACCO INSTITUTE, ET AL.,
Supreme Court of the State of New York, County of New York, Case No. 406225/96.
In January 1997, plaintiffs filed an amended complaint. In February 1997, the
case was removed to the United States District Court for the Southern District
of New York, Case No. 97CIV0904(LMM). Plaintiff filed a motion for remand which
was granted .
ILLINOIS. In November 1996, the Attorney General of Illinois filed a
health care cost recovery action in Illinois state court. PEOPLE OF THE STATE
OF ILLINOIS V. PHILIP MORRIS, INC., ET AL., Circuit Court of Cook County,
Illinois, Case No. 96 L 13146. On November 14, 1997 the court dismissed some of
plaintiff's claims, but denied the motion as to plaintiff's negligence, civil
conspiracy, and anti-trust claims. Defendants have filed a motion for
reconsideration, or in the alternative asking the court to certify the order for
interlocutory appeal to the Illinois Court of Appeals. This case has been
consolidated with the COUNTY OF COOK case pending in the same court, for
discovery and pre-trial purposes.
IOWA. In November 1996, the State of Iowa filed a health care cost
recovery action in Iowa state court. STATE OF IOWA, EX REL. THOMAS J. MILLER,
IN HIS CAPACITY AS ATTORNEY GENERAL OF THE STATE OF IOWA, V. R.J. REYNOLDS
TOBACCO CO., ET AL., District Court for Polk County, Iowa, Case No. CL71048.
Defendants filed motions to dismiss. On June 13, 1997, plaintiff filed a First
Amended Petition adding Count X (Iowa Ongoing Criminal Conduct), Count XI (Prima
Facie Tort), and Count XII (Common Law Indemnity). On August 26, 1997, the
court granted defendants' motion to dismiss four counts of the petition, but
denied it with respect to five others. Plaintiffs have appealed
Page 19
this ruling and briefing has been completed. Oral argument was heard on March
19, 1998.
ALASKA. In January 1997, Reynolds and three other cigarette
manufacturers filed suit against the Alaska Attorney General in federal
district court seeking declaratory and injunctive relief to prohibit a
threatened health care cost recovery action by Alaska on grounds that it
would violate federal law. PHILIP MORRIS, INC., ET AL., V. BRUCE BOTELHO,
United States District Court, Alaska, No. A 97-003 Civil (JWS).
ERIE COUNTY. In January 1997, the County of Erie filed a health care cost
recovery action in New York state court. COUNTY OF ERIE V. THE TOBACCO
INSTITUTE, INC., ET AL., Supreme Court of the State of New York, County of Erie,
Case No. I1997/359.
NEW YORK. In January 1997, the Attorney General of New York filed a
health care cost recovery action in New York state court. STATE OF NEW YORK,
ET AL., V. PHILIP MORRIS, INC., ET AL., Supreme Court of the State of New
York, County of New York, Case No. 400306/97. In February 1997, the case was
removed to federal court, but it was remanded to state court on January 5,
1998. Defendants filed motions to dismiss on March 18, 1998.
WISCONSIN. In February 1997, the Attorney General of Wisconsin filed a
health care cost recovery action in Wisconsin state court. STATE OF WISCONSIN
V. PHILIP MORRIS, INC., ET AL., Circuit Court (Dane County), Case No. 97CV0328.
INDIANA. In February 1997, the Attorney General of Indiana filed a health
care cost recovery action in Indiana state court. STATE OF INDIANA V. PHILIP
MORRIS, INC., ET AL., Marion County Superior Court, Case No. 49D079702 CT0236.
In April, 1997 the County of Cook filed a health care cost recovery action
in Illinois state court. COUNTY OF COOK V. PHILIP MORRIS, Circuit Court, Cook
County, Illinois, Case No. 97L01550.
BECKOM Plaintiffs are residents of Tennessee who seek reimbursement of the
funds expended by the state's taxpayers in providing health care for citizens.
Plaintiffs are represented by J. D. Lee, the Tennessee attorney who has filed
several cases against cigarette manufacturers since 1984. BECKOM V. AMERICAN
TOBACCO, ET AL., United States District Court, Knoxville, Tennessee.
ARKANSAS On December 12, 1997, RJRT was served with a reimbursement suit
filed by the Attorney General for the State of Arkansas. ARKANSAS V. AMERICAN
TOBACCO, ET AL., Chancery Court, Little Rock, Arkansas.
Page 20
PENNSYLVANIA In April, 1997 the Attorney General of Pennsylvania filed a
health care cost recovery action in state court. PENNSYLVANIA V PHILIP MORRIS,
INC., ET AL. Court of Common Pleas, Philadelphia County.
SOUTH CAROLINA In May, 1997, the Attorney General of South Carolina filed
a health care cost recovery action in state court. SOUTH CAROLINA V. BROWN &
WILLIAMSON, ET AL., Case No. 97-CP-401686.
MONTANA In May, 1997, the Attorney General of Montana filed a health
care cost recovery action in state court. MONTANA V. PHILIP MORRIS, INC., ET
AL., Montana First Judicial Court, Lewis and Clark County, Montana, Case No.
9700306.
MISSOURI In May, 1997, the Attorney General of Missouri filed a health
care cost recovery action in state court. MISSOURI V. AMERICAN TOBACCO COMPANY,
ET AL., Circuit Court, City of St. Louis, Missouri, Case No. 972-1465.
COLORADO In June 1997, the Attorney General of Colorado filed a health
care cost recovery action in state court. COLORADO V. R. J. REYNOLDS TOBACCO
CO., ET AL., District Court, City and County of Denver, Colorado, Case No
97-CV-3432.
NEW MEXICO In May 1997, the Attorney General of New Mexico filed a health
care cost recovery action in state court. NEW MEXICO V. AMERICAN TOBACCO, ET
AL., District Court, County of Santa Fe, New Mexico, Case No. SF97-1235.
VERMONT In May 1997, the Attorney General of Vermont filed a health care
cost recovery action in state court. VERMONT V. PHILIP MORRIS INC., ET AL.,
Chittenden Superior Court, Case No. 744-97.
IDAHO In June 1997, the Attorney General of Idaho filed a health care cost
recovery action in state court. IDAHO V. PHILIP MORRIS, INC., ET AL. District
Court, County of Ada, Idaho, Case No. CV-970239D.
NEW HAMPSHIRE In June 1997, the Attorney General of New Hampshire filed a
health care cost recovery action in state court. NEW HAMPSHIRE V. R. J.
REYNOLDS TOBACCO COMPANY, ET AL., Superior Court, Merrimack County, New
Hampshire, Case No. 97-E-0165.
OREGON In June 1997, the Attorney General of Oregon filed a health care
cost recovery action in state court. OREGON V. AMERICAN TOBACCO, ET AL.,
Circuit Court, Multnomah County, Oregon, Case NO. 9706-04457.
Page 21
NEVADA In August 1997, , the Attorney General of Nevada filed a health
care cost recovery action in state court. NEVADA V. PHILIP MORRIS, INC., ET
AL., District Court, Wash County, Nevada, Case No.CV-97-03279.
GEORGIA In September 1997, , the Attorney General of Georgia filed a
health care cost recovery action in state court. GEORGIA V. PHILIP MORRIS,
INC., ET AL., Superior Court, Fulton County, Georgia, Case No. E61692.
MAINE In September 1997, the Attorney General of Maine filed a health care
cost recovery action in state court. MAINE V. PHILIP MORRIS, INC., ET AL.,
Superior Court, Kennebec County, Maine, Case No. 97-134.
RHODE ISLAND In October 1997, the Attorney General of Rhode Island filed a
health care cost recovery action in state court. RHODE ISLAND V. BROWN &
WILLIAMSON TOBACCO, ET AL., Superior Court, Providence, Rhode Island, Case No.
97-3058.
SOUTH DAKOTA In February 1998, the Attorney General of South Dakota filed
a health care costs recovery action in state court. SOUTH DAKOTA V. PHILIP
MORRIS, INC., ET AL., Circuit Court, County of Hughes, South Dakota, Case No.
98-65.
PUERTO RICO In June 1997, Pedro Rosello, as Governor of the Commonwealth
of Puerto Rico, filed a health care cost recovery action in federal court.
ROSELLO V. BROWN & WILLIAMSON TOBACCO, ET AL., United States District Court for
the District of Puerto Rico, Case NO. 97-1910.
In four cases, one or more asbestos companies seek reimbursement for a
portion of the expenses, including settlements and judgments, they allege they
have paid as a consequence of tobacco-related diseases. In those cases, they
take the position that though asbestos claimants may have asbestos-related
disease, those diseases are also associated with or caused by cigarettes. The
four asbestos cases are as follows: FALISE, ET AL., V. AMERICAN TOBACCO, ET AL.,
United States District Court for the Eastern District of New York. Case No. CV
97 7640; KEENE CREDITORS TRUST V. BROWN & WILLIAMSON TOBACCO, ET AL., Supreme
Court, County of New York, New York, Case No. 606479/97; RAYMARK INDUSTRIES,
INC. V. R. J. REYNOLDS TOBACCO COMPANY, ET AL., Circuit Court, Duval County,
Florida, Case No. 97-0525; and FIBREBOARD CORPORATION, ET AL., V. AMERICAN
TOBACCO, ET AL., Superior Court, County of Alameda, California, Case No
791919-8
In addition to the actions brought by the various state attorneys general,
lawsuits based on similar theories have been brought by union health and welfare
funds (44 such cases are currently pending), a university and four American
tribes seeking to recover expenses paid on behalf of their members for
smoking-related illnesses.
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UNIONS
THE NORTHWEST LABORERS-EMPLOYERS HEALTH & SECURITY TRUST FUND, ET AL., V.
PHILIP MORRIS INC., ET AL., United States District Court for the Western
District of Washington, Case No. C97-849-WD. On December 24, 1997 United States
District Court Judge William Dwyer granted plaintiffs' motion for class
certification as to "all existing jointly administered and collectively
bargained-for health and welfare trusts in (the State of) Washington, and/or the
trustees of such entities, that have provided or paid for health care and/or
addiction treatment costs or services for employees or other beneficiaries."
Judge Dwyer held that plaintiffs' class certification motion met the various
requirements of Federal Rule of Civil Procedure 23(a) and (b)(3).
IRON WORKERS UNION INSURANCE FUND, ET AL., V. PHILIP MORRIS, INC., ET AL,
United States District Court for the Northern District of Ohio, Case No. 1:97 CV
144
STATIONARY ENGINEERS LOCAL 39 HEALTH & WELFARE TRUST FUND, ET AL., V.
PHILIP MORRIS, INC., et al., United States District Court for the Northern
District of California, Case No. C-97-1519-MMC
KENTUCKY LABORERS DISTRICT COUNCIL HEALTH AND WELFARE TRUST FUND, ET
AL., V. PHILIP MORRIS, INC., ET AL, United States District Court for the
Western District of Kentucky, Case No. 3:97CV-394-H
MASSACHUSETTS LABORERS HEALTH AND WELFARE FUND, ET AL, V. PHILIP MORRIS,
INC., ET AL., United States District Court, District Court of Massachusetts,
Case No. 97-11552-GAO
ARK-LA-MISS LABORERS WELFARE FUND, ET AL., United States District Court for
the Eastern District of Louisiana, Case No. 97-1944 c/w 97-2570
HAWAII HEALTH & WELFARE FUND FOR OPERATING ENGINEERS V. PHILIP MORRIS,
INC., ET AL., United States District Court, District of Hawaii, Case No.
97-00833 This case is currently stayed.
CONNECTICUT PIPE TRADES HEALTH FUND, ET AL., V. PHILIP MORRIS, INC., ET
AL., United States District Court for the District of Connecticut, Case No.
397CV01305
UNITED FED OF TEACHERS WELFARE FUND, ET AL., V. PHILIP MORRIS, INC., United
States District Court for the Southern District of New York, Case No.97CIV4676
LABORERS LOCAL 17 HEALTH & BENEFIT FUND, ET AL., V. PHILIP MORRIS, INC.,
United States District Court for the Southern District of New York, Case Number
97CIV4550
WEST VIRGINIA LABORERS PENSION FUND V. PHILIP MORRIS, INC., ET AL., United
States District Court for the Southern District of West Virginia, Case No.
3:97-0708
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OREGON LABORERS-EMPLOYERS HEALTH & WELFARE TRUST FUND, ET AL., V. PHILIP
MORRIS, INC., ET AL., United States District Court for the District of Oregon,
Case No. 9706-04707 Plaintiffs filed a motion for class certification.
LABORERS' AND OPERATING ENGINEERS' UTILITY AGREEMENT HEALTH & WELFARE TRUST
FUND V. PHILIP MORRIS, INC., ET AL., United States District Court for the
District of Arizona, Case No. 97-1406-PHXSMM This case is currently stayed.
SEAFARERS WELFARE PLAN, ET AL., V. PHILIP MORRIS, INC., ET AL. United
States District Court for the District of Maryland, Case No. MJG-97-2127
TEAMSTERS NO. 142 HEALTH AND WELFARE TRUST FUND, ET AL., V. PHILIP MORRIS,
INC., ET AL., United States District Court for the Northern District of Indiana,
Case No. 3:97CV00667RM
EASTERN STATES HEALTH & WELFARE FUND, ET AL., V. PHILIP MORRIS, INC., ET
AL., United States District Court for the Southern District of New York, Case
No.97CV7346
WEST VIRGINIA-OHIO VALLEY AREA I.B.E.W. WELFARE FUND V. AMERICAN TOBACCO
COMPANY, ET AL., United States District Court for the Southern District of West
Virginia Case No: 97-C-2135
CONSTRUCTION LABORERS OF GREATER ST. LOUIS WELFARE FUND, ET AL., V. PHILIP
MORRIS, INC., ET AL., United States District Court For the Eastern District of
Missouri, Case No. 4:97CV02030ERW
STEAMFITTERS LOCAL UNION 420 WELFARE FUND, ET AL., V. PHILIP MORRIS, INC.,
United States District Court for the Eastern District of Pennsylvania, Case No.
97-CV-5344
NEW JERSEY CARPENTERS HEALTH FUND, ET AL., V. PHILIP MORRIS, INC., United
States District Court for the District of New Jersey, Case No. 97-1728
S. E. FLORIDA LABORERS DISTRICT COUNCIL HEALTH AND WELFARE TRUST FUND V.
PHILIP MORRIS, INC., United States District Court for the Southern District of
Florida, Case No. 97-8715-civRyskamp
RHODE ISLAND LABORERS' HEALTH & WELFARE FUND V. AMERICAN TOBACCO COMPANY,
United States District Court for the District of Rhode Island, Case No. 97-500L
CENTRAL STATES JOINT BOARD HEALTH AND WELFARE TRUST FUND V. PHILIP MORRIS,
INC., United States District Court for the Northern District of Illinois, Case
No. 97C8114
Page 24
TEXAS CARPENTERS HEALTH BENEFIT FUND, ET AL., V. PHILIP MORRIS, INC.,
United States District Court for the Eastern District of Texas, Case No.
97-CV-0625
CENTRAL LABORERS WELFARE FUND, ET AL., V. PHILIP MORRIS, INC., ET AL.,
United States District Court for Southern District of Illinois, Case No.
97-568-WDS
BAC LOCAL 32 INSURANCE TRUST FUND, ET AL., V. PHILIP MORRIS INC., ET
AL., United States District Court for the District of Michigan, Case No.
97-75675
INTERNATIONAL BROTHERHOOD OF TEAMSTERS LOCAL 734 HEALTH AND WELFARE TRUST
FUND V. PHILIP MORRIS, INC., ET AL., United States District Court for the
Northern District of Illinois, Case No. 97C8113
IBEW LOCAL 363 WELFARE FUND V. PHILIP MORRIS, INC., ET AL., United States
District Court for the Southern District of New York, Case No. 97CIV9396
IBEW LOCAL 25 WELFARE FUND V. PHILIP MORRIS, INC., ET AL., United States
District Court for the Southern District of New York, Case No. 97-9395
LOCAL 138, 138A, AND 138B INTERNATIONAL UNION OF OPERATING ENGINEERS
WELFARE FUND V. PHILIP MORRIS, INC., ET AL., United States District Court for
the Southern District of New York, Case No. 97-9402
LOCAL 840, INTERNATIONAL BROTHERHOOD OF TEAMSTERS HEALTH & INSURANCE FUND
V. PHILIP MORRIS, INC., ET AL., United States District Court for the Southern
District of New York, Case No. 97CIV9398
PUERTO RICAN ILGWU HEALTH & WELFARE FUND V. PHILIP MORRIS, INC., ET AL.,
United States District Court for the Southern District of New York, Case No.
97CV9396
LONG ISLAND REGIONAL COUNCIL OF CARPENTERS WELFARE FUND V. PHILIP MORRIS,
INC., ET AL., Supreme Court of New York for the County of New York, Case No.
97/122258
UNITED FOOD & COMMERCIAL WORKERS UNION V. PHILIP MORRIS, INC., ET AL.,
United States District Court for the Northern District of Alabama, Case No.
CV-97-1340
LOCAL 1199 V. PHILIP MORRIS, INC., ET AL., United States District Court for
the Southern District of New York, Case No. 97CV9401
LOCAL 1199 HOME CARE INDUSTRY BENEFIT FUND V. PHILIP MORRIS, INC., ET AL.,
United States District Court for the Southern District of New York, Case No.
97-9401
Page 25
ASBESTOS WORKERS LOCAL 53 HEALTH AND WELFARE FUND, ET AL., V. PHILIP
MORRIS, INC., United States District Court for the Eastern District of
Louisiana, Case No. 97-1944c/w97-2570
SCREEN ACTORS GUILD-PRODUCERS HEALTH & WELFARE FUND PLAN, ET AL. V. PHILIP
MORRIS, INC., ET AL., Superior Court of California, County of Los Angeles, Case
No. BS181603
DAY CARE COUNCIL - LOCAL D.C. 1707 WELFARE FUND V. PHILIP MORRIS, INC., ET
AL., United States District Court for the Southern District of New York, Case
No. 97/606240
OPERATING ENGINEERS LOCAL 12 HEALTH & WELFARE FUND V. AMERICAN TOBACCO
COMPANY, ET AL., United States District Court for the Northern District of
California, Case No. BC177968
STEAMFITTERS LOCAL UNION 614 HEALTH & WELFARE FUND, ET AL., V. PHILIP
MORRIS, INC., ET AL., Circuit Court of Tennessee at Memphis, Case No. 92260-2
ARKANSAS CARPENTERS HEALTH & WELFARE FUND V. PHILIP MORRIS, INC., ET AL.,
United States District Court for the District of Arkansas, Case No. LR-C-97-0754
CARPENTERS & JOINERS WELFARE FUND, ET AL V. PHILIP MORRIS, INC., ET AL.,
United States District Court for the District of Minnesota, Case No.
98-515JMR/FLN
NEW MEXICO AND WEST TEXAS MULTI-CRAFT HEALTH & WELFARE FUND, ET AL., V.
PHILIP MORRIS, INC., ET AL., United States District Court for the District of
New Mexico, Case No. CV-97-0009118
UNIVERSITIES
UNIVERSITY OF SOUTH ALABAMA V. THE AMERICAN TOBACCO COMPANY, ET AL.,
United States District Court for the District of Alabama, Case No. 97-0552-BH-S.
INDIAN TRIBES
MUSCOGEE CREEK NATION V. THE AMERICAN TOBACCO COMPANY, ET AL., Muscogee
Creek Tribal Court, Case No. CV 97-27.
CROW CREEK SIOUX TRIBE V. THE AMERICAN TOBACCO COMPANY, ET AL., Tribal
Court of the Crow Creek Sioux, Case No. CV 97-09-082.
THE CROW TRIBE V. THE AMERICAN TOBACCO COMPANY, ET AL., Crow Tribal Court,
Case No. 97-181.
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LOWER BRULE SIOUX NATION V. THE AMERICAN TOBACCO COMPANY, Lower Brule Sioux
Tribal Court, Case No. 97-5-0057.
Other state and local government entities have announced that they are
considering filing similar health care cost recovery actions.
Page 27