STATE OF MINNESOTA DISTRICT COURT
COUNTY OF RAMSEY SECOND JUDICIAL DISTRICT
THE STATE OF MINNESOTA, Case Type: Other Civil
BY HUBERT H. HUMPHREY III, Court File No. C1-94-8565
ITS ATTORNEY GENERAL,
and
BLUE CROSS AND BLUE SHIELD
OF MINNESOTA,
Plaintiffs,
vs.
PHILIP MORRIS INCORPORATED,
R.J. REYNOLDS TOBACCO COMPANY,
BROWN & WILLIAMSON TOBACCO
CORPORATION, B.A.T. INDUSTRIES
P.L.C., BRITISH-AMERICAN TOBACCO
COMPANY LIMITED, BAT (U.K. &
EXPORT) LIMITED, LORILLARD
TOBACCO COMPANY, THE AMERICAN
TOBACCO COMPANY, LIGGETT GROUP,
INC., THE COUNCIL FOR TOBACCO
RESEARCH-U.S.A., INC., and THE
TOBACCO INSTITUTE, INC.,
Defendants.
SETTLEMENT AGREEMENT AND STIPULATION
FOR ENTRY OF CONSENT JUDGMENT
THIS SETTLEMENT AGREEMENT AND RELEASE ("Settlement Agreement") is made
as of the date hereof, by and among the parties hereto, as indicated by their
signatures below, to
settle and resolve with finality all claims of the State of Minnesota
relating to the subject matter of this action which have been or could have
been asserted by the State of Minnesota.
WHEREAS, the State of Minnesota, through its Attorney General Hubert H.
Humphrey III, and Blue Cross and Blue Shield of Minnesota, commenced this
action on August 17, 1994, asserting various claims for monetary, equitable
and injunctive relief on behalf of the State of Minnesota and Blue Cross and
Blue Shield of Minnesota against certain tobacco manufacturers and others as
Defendants;
WHEREAS, the Defendants have denied each and every one of Plaintiffs'
allegations of unlawful conduct or wrongdoing and have asserted a number of
defenses to Plaintiffs' claims, which defenses have been contested by
Plaintiffs;
WHEREAS, the parties hereto wish to avoid the further expense, delay,
inconvenience, burden and uncertainty of continued litigation of this matter
(including appeals from any verdict), the State of Minnesota and the Settling
Defendants have agreed to settle this litigation pursuant to terms which will
achieve for the State of Minnesota (and thus for the people of the State of
Minnesota) significant funding for the advancement of public health, the
implementation of important tobacco-related public health measures in
Minnesota, as well as funding for national research dedicated to studying and
significantly reducing the use of Tobacco Products by youth;
WHEREAS, the State of Minnesota and Settling Defendants have agreed to
settle this lawsuit on terms set forth in this Settlement Agreement and
Stipulation for Entry of Consent Judgment and the attached Consent Judgment;
WHEREAS, the parties have further agreed to jointly petition the Court
for approval of the Consent Judgment, on the grounds that settlement would be
in the public interest;
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NOW, THEREFORE, BE IT KNOWN THAT, in consideration of the payments to be
made by the Settling Defendants, the dismissal and release of claims by the
State of Minnesota and such other consideration as described herein, the
sufficiency of which is hereby acknowledged, the parties hereto, acting by
and through their authorized agents, memorialize and agree as follows:
I. GENERAL PROVISIONS
A. Jurisdiction. The State and the Settling Defendants acknowledge
that this Court has jurisdiction over the subject matter of this action and
over each of the parties to this Settlement Agreement, and that this Court
shall retain jurisdiction for the purposes of implementing and enforcing this
Settlement Agreement. The parties hereto agree to present any disputes under
this Settlement Agreement, including without limitation any claims for breach
or enforcement of this Settlement Agreement, exclusively to this Court. The
Court may, upon the State's application, enter a Consent Judgment in the form
attached hereto as Exhibit A. The cumulative terms of this Settlement
Agreement and Stipulation for Entry of Consent Judgment, and the attached
Consent Judgment, may be referred to for convenience as this "Agreement" or
"Settlement Agreement."
B. Voluntary Agreement of the Parties. The State and the Settling
Defendants acknowledge and agree that this Settlement Agreement is
voluntarily entered into by all parties hereto as the result of arm's-length
negotiations during which all such parties were represented by counsel. The
State and Settling Defendants understand that Congress may enact legislation
dealing with some of the issues addressed in this Agreement. Settling
Defendants and their assigns, affiliates, agents, and successors hereby waive
any right to challenge this Agreement or the Consent Judgment, directly or
through third parties, on the ground that any term hereof is
unconstitutional, outside the power or jurisdiction of the Court, preempted
by or in conflict with any current or future
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federal legislation (except where non-economic terms of future federal
legislation are irreconcilable).
C. Definitions.
For the purposes of this Settlement Agreement and attached Consent
Judgment, the following terms shall have the meanings set forth below:
1. "State" or "State of Minnesota" means the State of Minnesota
acting by and through its Attorney General;
2. "Blue Cross" means BCBSM, Inc., d/b/a Blue Cross and Blue
Shield of Minnesota, and all of its administrators, representatives,
employees, directors, officers, agents, attorneys, parents and divisions;
3. "Settling Defendants" means those Defendants in this action
that are signatories hereto;
4. "Defendants" means Philip Morris Incorporated, R.J. Reynolds
Tobacco Company, Brown & Williamson Tobacco Corporation, B.A.T
Industries P.L.C., British-American Tobacco Company Limited, BAT (U.K.
and Export) Limited, Lorillard Tobacco Company, The American Tobacco
Company, The Council for Tobacco Research-U.S.A., Inc., and the Tobacco
Institute, Inc. and their successors and assigns;
5. "Consumer Price Index" shall mean the Consumer Price Index for
All Urban Consumers, for the most recent twelve-month period for which
such percentage information is available as published by the Bureau of
Labor Statistics of the U.S. Department of Labor.
6. "Court" means the District Court of the State of Minnesota,
County of Ramsey, Second Judicial District;
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7. "Market Share" means a Settling Defendant's respective share of
sales of cigarettes by unit for consumption in the United States during
(i) with respect to payments made pursuant to Paragraph II.D. of this
Settlement Agreement, the calendar year ending on the date on which the
payment at issue is due, regardless of when such payment is made, and
(ii) with respect to all other payments made pursuant to this Settlement
Agreement, the calendar year immediately preceding the year in which the
payment at issue is due, regardless of when such payment is made;
8. "Cigarettes" means any product which contains nicotine, is
intended to be burned or heated under ordinary conditions of use, and
consists of or contains (i) any roll of tobacco wrapped in paper or in
any substance not containing tobacco; or (ii) tobacco, in any form, that
is functional in the product, which, because of its appearance, the type
of tobacco used in the filler, or its packaging and labeling, is likely
to be offered to, or purchased by, consumers as a cigarette; or (iii)
any roll of tobacco wrapped in any substance containing tobacco which,
because of its appearance, the type of tobacco used in the filler, or
its packaging and labeling, is likely to be offered to, or purchased by,
consumers as a cigarette described in subparagraph (i) of this paragraph;
9. "Smokeless Tobacco" means any powder that consists of cut,
ground, powdered, or leaf tobacco that contains nicotine and that is
intended to be placed in the oral cavity;
10. "Tobacco Products" means Cigarettes and Smokeless Tobacco;
11. "Billboards" includes billboards, as well as all signs and
placards in arenas and stadiums, whether open-air or enclosed.
"Billboards" does not include (1) any
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advertisements placed on or outside the premises of retail
establishments which sell tobacco products, or any retail point-of-sale;
and (2) billboards or advertisements in connection with the sponsorship
by the Defendants of any entertainment, sporting or similar event, such
as NASCAR, that appears in the State of Minnesota as part of a national
or multi-state tour;
12. "Children" or "youth" means persons under the age of 18;
13. "Depository," unless otherwise specified, means the Minnesota
document depository established by the Court's Order dated June 16,
1995. "Depositories" includes both the Minnesota depository and the
Guildford, U.K. document depository established by the Court's Order
dated September 6, 1995;
14. "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. "Transit Advertisements" does not include any advertisements
placed on or outside the premises of retail establishments licensed to
sell Tobacco Products or any retail point-of-sale;
15. "Special State Counsel" means Robins, Kaplan, Miller & Ciresi
L.L.P. or a successor, if any; and
16. "Final Approval" means the date on which this Settlement
Agreement and the form of State Escrow Agreement are approved by the
Court. At the time of such approval, the settlement between the parties
is final.
II. SETTLEMENT PAYMENTS
A. Settlement Receipts. The payments to be made by the Settling
Defendants under this Settlement Agreement are in satisfaction of all of
the State of Minnesota's claims for damages
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incurred by the State in the year of such payment or earlier years related to
the subject matter of this action, including, without limitation, claims for
equitable and injunctive relief, claims for health care expenditures and
claims for punitive damages, except that no part of any payment under this
Settlement Agreement is made in settlement of an actual or potential
liability for a fine, penalty (civil or criminal) or enhanced damages.
B. Settlement Payments to the State of Minnesota. Each Settling
Defendant severally shall cause to be paid to an account designated in
writing by the State of Minnesota in accordance with and subject to paragraph
II.E. of this Settlement Agreement, the following amounts: the amount listed
for it in Schedule A hereto, such amount representing its share of
$240,000,000, to be paid on or before September 5, 1998; pro rata in
proportion to its Market Share, its share of $220,800,000, to be paid on or
before January 4, 1999; pro rata in proportion to its Market Share, its share
of $242,550,000, to be paid on or before January 3, 2000; pro rata in
proportion to its Market Share, its share of $242,550,000, to be paid on or
before January 2, 2001; pro rata in proportion to its Market Share, its share
of $242,550,000, to be paid on or before January 2, 2002; and pro rata in
proportion to its Market Share, its share of $121,550,000, to be paid on or
before January 2, 2003. The payments made by the Settling Defendants
pursuant to 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 payment due to be made on or before January 3, 2000. The payments
due to be made by the Settling Defendants pursuant to this Paragraph on or
before January 3, 2000, on or before January 2, 2001, on or before January 2,
2002, and on or before January 2, 2003, will also be decreased or increased,
as the case may be, in accordance with the formula for adjustments of
payments as set forth in Appendix A. The payments due to be made by the
Settling
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Defendants pursuant to this Paragraph on or before September 5, 1998, and on
or before January 4, 1999, shall not be subject to inflation escalation and
volume adjustments described in the preceding sentences.
In the event that any of the Settling Defendants fails to make any
payment required of it pursuant to this Paragraph (a "Defaulting Defendant")
by the applicable date set forth in this paragraph II.B. (a "Missed
Payment"), the State of Minnesota shall provide notice to each of the
Settling Defendants of such non-payment. The Defaulting Defendant shall have
15 days after receipt of such notice to pay the Missed Payment, together with
interest accrued from the original applicable due date at the prime rate as
published in the Wall Street Journal on the latest publication date on or
before the date of default plus 3%. If the Defaulting Defendant does not
make such payment within such 15-day period, the State of Minnesota shall
provide notice to each of the Settling Defendants of such continued
non-payment. Any or all of the Settling Defendants (other than the
Defaulting Defendant) shall thereafter have 15 days after receipt of such
notice to elect (in such Settling Defendant's or such Settling Defendants'
sole and absolute discretion) to pay the Missed Payment, together with
interest accrued from the original applicable due date at the prime rate as
published in the Wall Street Journal on the latest publication date on or
before the date of default plus 3%. In the event that the State of Minnesota
does not receive the Missed Payment, together with such accrued interest,
within such additional 15-day period, all payments required to be made by
each of the respective Settling Defendants pursuant to this Paragraph shall
at the end of such additional 15-day period be accelerated and shall
immediately become due and owing to the State of Minnesota from each Settling
Defendant pro rata in proportion to its Market Share; provided, however, that
any such accelerated payments (a) shall all be adjusted upward by the greater
of (i) the
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rate of 3% per annum or (ii) the actual total percent change in the CPI, in
either instance for the period between January 1 of the year in which the
acceleration of payments pursuant to this Paragraph occurs and the date on
which such accelerated payments are due pursuant to this subsection, and (b)
shall all immediately be adjusted in accordance with the formula for
adjustments of payments set forth in Appendix A.
Nothing in this Paragraph shall be deemed under any circumstance to
create any obligation on the part of any Settling Defendant to pay any amount
owed or payable to the State of Minnesota by any other Settling Defendant.
All obligations of the Settling Defendants pursuant to this Paragraph are
intended to be and shall remain several, and not joint.
C. Public Health Foundation. The Attorney General will propose, and
the Settling Defendants have agreed not to oppose, that the Legislature
appropriate to a foundation one-half the payments due in September 1998, and
in January of the years 1999 through 2003, to be used for such activities as
the directors of the foundation may determine will diminish the human and
economic consequences of tobacco use. It is contemplated that the directors
of the foundation will include public representatives, and representatives of
such groups as the American Lung Association, Minnesota Chapter; the
University of Minnesota School of Public Health; the Minnesota SmokeFree 2000
Coalition; the American Cancer Society, Minnesota Division; the American
Heart Association, Minnesota Chapter; the Association for Non-Smokers'
Rights--Minnesota; and the Mayo Clinic Nicotine Dependence Center.
D. Annual Payments. Each of the Settling Defendants agrees that,
beginning on December 31, 1998, and annually thereafter on December 31st of
each year after 1998 (subject to final adjustment within 30 days), it shall
severally cause to be paid to an account designated in
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writing by the State of Minnesota in accordance with and subject to paragraph
II.E. of this Settlement Agreement, pro rata in proportion to its respective
Market Share, its share of 2.55% of the following amounts (in billions):
Year 1998 1999 2000 2001 2002 2003 thereafter
1 2 3 4 5 6
Amount $4B $4.5B $5B $6.5B $6.5B $8B $8B
The payments made by Settling Defendants pursuant to 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 annual payment due on December
31, 1999. Such payments will also be decreased or increased, as the case may
be, beginning with the annual payment due on December 31, 1999, in accordance
with the formula for adjustments of payments set forth in Appendix A.
E. Payment of Settlement Proceeds. Any payment made pursuant to this
Settlement Agreement shall be made to an account designated in writing by the
State of Minnesota or the Court, as applicable; provided that after Final
Approval, if the Court's approval is challenged by any third party, payments
due to be made shall be paid into a special escrow account (the "State Escrow
Account"), and held in escrow pursuant to this Section V.B. and the State
Escrow Agreement.
F. Adjustments in Event of Federal Legislation. The enactment of
federal tobacco-related legislation shall not affect the payments required by
this Agreement except as follows:
1. If federal tobacco-related legislation providing for the
resolution or other disposition of State Attorney General actions
brought against tobacco companies is enacted
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on or before November 30, 2000, and if such legislation provides for
payment(s) by tobacco companies (whether by settlement payment, tax or
any other means), all or part of which is made available to States, the
State of Minnesota shall elect to receive any funds that are (i)
unrestricted as to their use, or (ii) are restricted to any form of
health care or to any use related to tobacco (collectively "Federal
Settlement Funds"), and Settling Defendants shall receive a
dollar-for-dollar offset up to the full amount of payments required
under Section II.D of this Agreement for any and all Settlement Funds
received by the State of Minnesota, until all Federal Settlement Funds
provided however:
a. There shall be no offset to payments required by this
Agreement on account of any federal program, subsidies, payments,
credits or other aid to the State which are not conditioned or tied
to the settlement of a state tobacco-related suit or the
relinquishment of state tobacco-related claims;
b. The State relinquishes no rights or benefits under this
Agreement except for payments subject to the offset;
c. There are no federally imposed preconditions to the
receipt of Federal Settlement Funds other than (i) the settlement
of any state tobacco-related lawsuit or the relinquishment of state
tobacco-related claims, (ii) actions or expenditures related to
tobacco, including but not limited to, education, cessation,
control or enforcement, or (iii) actions or expenditures related
to health care;
d. If Settling Defendants enter into any pre-verdict
settlement agreement (subsequent to the date of this Agreement) of
similar litigation brought by a non-
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federal governmental plaintiff which does not require such an
offset, this Section is null and void;
e. If Settling Defendants enter into any pre-verdict
settlement agreement (subsequent to the date of this Agreement) of
similar litigation brought by a non-federal governmental plaintiff
which has an offset term more favorable to the plaintiff, this
Settlement Agreement shall, at the option of the Office of the
Attorney General of the State of Minnesota, be revised to include a
comparable term.
2. Nothing in this section is intended to or shall reduce the
total amounts payable to the State under this Agreement by Settling
Defendants beyond the amount of Federal Settlement Funds actually
received by the State of Minnesota.
III. DISMISSAL OF CLAIMS AND RELEASES
A. State of Minnesota's Dismissal of Claims. Upon approval of this
Settlement Agreement by the Court, the Court shall enter a Final Judgment
dismissing with prejudice all claims as to all Defendants.
This Agreement resolves all claims between the State and the Defendants,
except for issues pending before the court pertaining to the discoverability
or production of documents for which the Defendants reserve their rights of
appeal.
B. State of Minnesota's Release and Discharge. Upon Final Approval,
the State of Minnesota shall release and forever discharge all Defendants and
their present and former parents, subsidiaries (whether or not wholly owned)
and affiliates, and their respective divisions, organizational units,
officers, directors, employees, representatives, insurers, suppliers, agents,
attorneys and distributors (and the predecessors, heirs, executors,
administrators, successors and
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assigns of each of the foregoing) from any and all manner of civil claims,
demands, actions, suits and causes of action, damages whenever incurred,
liabilities of any nature whatsoever, including civil penalties, as well as
costs, expenses and attorneys' fees, known or unknown, suspected or
unsuspected, accrued or unaccrued, whether legal, equitable or statutory
("Claims") that the State of Minnesota (including any of its past, present or
future administrators, representatives, employees, officers, attorneys,
agents, representatives, officials acting in their official capacities,
agencies, departments, commissions, and divisions, 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, as follows:
a. for past conduct, as to any Claims relating to the subject
matter of this action which have been asserted or could be asserted
now or in the future in this action or a comparable Federal action
by the State; and
b. for future conduct, only as to monetary 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, including without
limitation any future claims for reimbursement for health care
costs allegedly associated with use of or exposure to Tobacco
Products;
(such past and future Claims hereinafter referred to as the "Released
Claims"); provided, however, that the foregoing shall not operate as a
release of any person, party or entity (whether or not a signatory to this
Agreement) as to any of the obligations undertaken in this Agreement in
connection with a monetary breach or default of this Agreement.
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The State of Minnesota hereby covenants and agrees that it shall not
hereafter sue or seek to establish civil liability against any person or
entity covered by the release provided under Paragraph III.B based, in whole
or in part, upon any of the Released Claims, and the State of Minnesota
agrees that this covenant and agreement shall be a complete defense to any
such civil action or proceeding.
C. Settling Defendants' Release and Discharge. Upon Final Approval,
Settling Defendants shall release and forever discharge the State of
Minnesota (including any of its past, present or future administrators,
representatives, employees, officers, attorneys, agents, representatives,
officials acting in their official capacities, agencies, departments,
commissions, and divisions, and whether or not any such person or entity
participates in the settlement) 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, known or unknown, suspected or unsuspected, accrued or
unaccrued, whether legal, equitable or statutory, arising out of or in any
way related to, in whole or in part, the subject matter of the litigation of
this lawsuit, that Settling Defendants (including any of their present and
former parents, subsidiaries, divisions, affiliates, officers, directors,
employees, witnesses (fact or expert), representatives, insurers, agents,
attorneys and distributors and the predecessors, heirs, executors,
administrators, successors and assigns of each of the foregoing, and whether
or not any such person 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.
D. Limited Most-Favored Nation Provision. In partial consideration for
the monetary payments to be made by the Settling Defendants pursuant to this
Settlement Agreement, the State
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of Minnesota agrees that if the Settling Defendants enter into any future
pre-verdict settlement agreement of other similar litigation brought by a
non-federal governmental plaintiff on terms more favorable to such
non-federal 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 shall not
be revised except as follows: to the extent, if any, such other pre-verdict
settlement agreement includes terms that provide (a) for joint and several
liability among the Settling Defendants with respect to monetary payments to
be made pursuant to such agreement; (b) a guarantee by the parent company of
any of the Settling Defendants or other assurances of payment or creditors'
remedies with respect to monetary payments to be made pursuant to such
agreement; or (c) for the implementation of non-economic tobacco-related
public health measures different from those contained in this Settlement
Agreement, then this Settlement Agreement shall, at the option of the Office
of the Attorney General of the State of Minnesota, be revised to include
terms comparable to such terms.
IV. DEFENDANTS' ASSURANCES
A. Settling Defendants agree not to directly or indirectly, including
through any third party or affiliate:
1. Oppose the passage of those future Minnesota legislative
proposals or administrative rules intended by their terms to reduce
tobacco use by children listed on Schedule B. (The foregoing does not
prohibit Settling Defendants from resisting enforcement of, or suing for
declaratory or injunctive relief with respect to any such legislation or
rule on any grounds.)
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2. Facially challenge the enforceability or constitutionality of
existing Minnesota laws or rules relating to tobacco control, including,
but not limited to, Minnesota Statutes Section 461.17 regarding the
disclosure of certain ingredients in cigarettes; Minnesota Statutes
Sections 461.12, et. seq., and 609.685 regarding the sale of tobacco to
minors; Minnesota Statutes Section 325F.77 regarding the distribution
of samples; and Minnesota Statutes Section 144.411 et. seq. regarding
clean indoor air.
3. Support in Congress or any forum, legislation, rules or
policies which would preempt, override, or abrogate or diminish the
State's rights or recoveries under this Agreement. Except as
specifically provided in the foregoing sentence, nothing in this
Agreement shall be deemed to restrain the parties from advocating terms
of any national settlement or taking any other positions on issues
relating to tobacco. The State and its attorneys specifically reserve
the right to continue to litigate or advocate for additional document
disclosure beyond that ordered by the Ramsey County District Court, in
any forum outside of Minnesota.
4. Settling Defendants' obligation to produce documents in
discovery pertaining to enactment or repeal of, or opposition to, state
legislation or state executive action relating to tobacco in Minnesota
is extended beyond August 17, 1994, to the date of this Agreement, with
Settling Defendants required to produce these documents within thirty
(30) days of the date of this Agreement.
B. Disclosure of Payments Likely to Affect Public Policy.
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1. Each Settling Defendant shall disclose to the Office of the
Attorney General and the Office of the Governor, at the times and in the
manner provided below, information about the following payments:
a. Any payment to a "lobbyist" or "principal" within the
meaning of Minnesota Statutes, Section 10A.01, subdivisions 11 and
28, if Settling Defendant knows or has reason to know that the
payment will be used, directly or indirectly, to influence
legislative or administrative action, or the official action of state
or local government in Minnesota in any way relating to Tobacco
Products or their use.
b. Any payment to a third party, if the Settling Defendant
knows the payment is partly in consideration for the third party
attending, offering testimony at, or participating before a state
or local government hearing in Minnesota in any way relating to
Tobacco Products or their use; and
c. Any payment (other than a "political contribution" under
Minn. Stat. Section 10.01, subd. 7, or 2 USC Section 431(8)(A))
to, or for the benefit of, a state or local official in Minnesota,
whether made directly by a defendant or indirectly through an
employee acting in the scope of his employment, affiliate,
lobbyist, or other agent acting under the substantial control of a
defendant.
2. Disclosures required under this section shall be filed with the
Office of the Attorney General and with the Office of the Governor on
the first day of January, April, July and October of each year for any
and all payments made through the first day of the previous month and
shall be transmitted in electronic format or such format as the attorney
general may require, with the following information:
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a. The name, address, telephone number and e-mail address of
the recipient.
b. The amount of each payment described in Paragraph B(1).
c. The aggregate amount of all payments described in
Paragraph B(1) to the recipient in the calendar year.
3. Information filed under this section is "public data" within the
meaning of the Minnesota Government Data Practices Act.
C. Settling Defendants agree to discontinue all Billboards and Transit
Advertisements of Tobacco Products in the State. Settling Defendants shall
use their best efforts in cooperation with the State to identify all such
Billboards that are located within 1000 feet of any public or private school
or playground in the State, and shall provide the State with a preliminary
list of the location of all Billboards and stationary Transit Advertisements
within 30 days from the date hereof, such list to be finalized within an
additional 15 days. Settling Defendants shall, at the earlier of the
expiration of applicable contracts or four months from the date the final
list is supplied to the State, remove all Billboards and Transit
Advertisements for Tobacco Products from within the State, leaving the space
unused or used for advertising unrelated to Tobacco Products; or at the
option of the State of Minnesota, will allow the State, at its expense, to
substitute for the remaining term of the contract, alternative advertising
intended to discourage the use of Tobacco Products by children and their
exposure to second-hand smoke. The parties also agree to secure the
expedited removal of up to 50 Billboards or stationary Transit Advertisements
for Tobacco Products designated by the State within 30 days after their
designation. Each Settling Defendant which has Billboard advertising in the
State shall provide the Court and the Attorney General, or his designee, with
the
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name of a contact person to whom the State may direct inquiries during the
time such Billboards and Transit Advertisements are being eliminated, from
whom the State 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.
D. Settling Defendants shall not make, in the connection with any
motion picture made in the United States, or cause to be made any payment,
direct or indirect, to any person to use, display, make reference to, or use
as a prop any cigarette, cigarette package, advertisement for cigarettes, or
any other item bearing the brand name, logo, symbol, motto, selling message,
recognizable color or pattern of colors, or any other indicia of product
identification identical or similar to, or identifiable with, those used for
any brand of domestic tobacco products.
E. On and after December 31, 1998, Settling Defendants shall
permanently cease marketing, licensing, distributing, selling or offering,
directly or indirectly, including by catalogue or direct mail, in the State
of Minnesota, any service or item (other than tobacco products or any item of
which the sole function is to advertise tobacco products) which bears the
brand name (alone or in conjunction with any other word), logo, symbol,
motto, selling message, recognizable color or pattern of colors, or any other
indicia of product identification identical or similar to, or identifiable
with, those used for any brand of domestic tobacco products.
F. Settling Defendants and the Law Firm of Robins, Kaplan, Miller &
Ciresi L.L.P. ("RKM&C") have reached a separate agreement for the payment of
the State's costs and attorneys fees. In consideration for said agreement,
RKM&C has released the State from its obligation to pay costs and attorneys
fees under the Special Attorney Appointment dated May 23, 1994.
V. MISCELLANEOUS PROVISIONS
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A. Representations of Parties. The respective parties hereto hereby
represent that this Settlement Agreement has been duly authorized and, upon
execution, will constitute a valid and binding contractual obligation,
enforceable in accordance with its terms, of each of the parties hereto. The
State represents that all of its outside counsel that have represented it in
this action are, by and through their authorized representatives, signatores
to this Settlement Agreement.
B. Court Approval. The Parties agree to submit this Settlement
Agreement to the Court for its review and approval on Friday, May 8, 1998. If
the Court declines to approve this Settlement Agreement, the Blue Cross
Settlement Agreement, the form of State Escrow Agreement, and the form of
Blue Cross Escrow Agreement, the matter will be immediately submitted to the
jury. If the Court, as a condition of approval or otherwise, requires any
change in the Agreements which any signatory is unwilling to make, the case
will be immediately submitted to the jury. If before the Court approves the
Agreements, any third-party seeks to intervene for the purpose of opposing
the Settlement Agreement, the Blue Cross Settlement Agreement, the State
Escrow Agreement, and the Blue Cross Escrow Agreement, any Party at its sole
election, may withdraw from this Agreement, after first giving notice to the
Court and all of the Parties before the jury is dismissed, and submit the
case to the jury. If the Court approves the Settlement Agreement as
submitted, the Agreement will be final and binding upon all Parties.
In the event that there is a challenge to any provision of this
Settlement Agreement by anyone other than the Attorney General of the State
of Minnesota as of the date of this Agreement, BCBS or Settling Defendants
("a third-party challenge") after Final Approval, any amounts required to be
paid by Settling Defendants pursuant to this Settlement Agreement shall be
paid into escrow pursuant to the State Escrow Agreement. If, as a result of
such a challenge, any material
20
term of Sections II, III, IV of this Settlement Agreement is modified or
rendered unenforceable, the parties shall negotiate an equivalent or
comparable substitute term or other appropriate credit or adjustment. In the
event that the parties are unable to agree on such a substitute term or
appropriate credit or adjustment, then the parties will submit the issue to
the Court for resolution, subject to any available appeal rights. In the
event that any third-party challenge is made after December 31, 1998, any
payments due under Paragraph II.B. shall be made to the State according to
the terms of this Settlement Agreement, and only those payments due under
Paragraph II.D. shall be placed into escrow as provided above.
In the event that the Court determines that there has been a failure of
consideration legally sufficient to warrant termination of this Settlement
Agreement, then this Settlement Agreement may be terminated by the party
adversely affected. In the event of such termination, the action will be
reinstated and all decisions of the trial court, and any party's appeal or
other rights with respect thereto, will have the same force and effect as if
this Settlement Agreement had never been entered into.
C. Obligations Several, Not Joint. All obligations of the Settling
Defendants pursuant to this Settlement Agreement are intended to be and shall
remain several, and not joint.
D. Headings. The headings of the paragraphs 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.
E. No Determination or Admission. This Settlement Agreement and any
proceedings taken hereunder are not intended to be 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
21
of any party hereto or any person covered by the releases provided under
paragraphs III.B. and C. hereof. The Settling Defendants 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.
F. Non-Admissibility. The settlement negotiations resulting in this
Settlement Agreement have been undertaken by the parties hereto 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.
G. Amendment; Waiver. This Settlement Agreement may be amended only by
a written instrument executed by the Attorney General and the Settling
Defendants. The waiver of any rights conferred hereunder shall be effective
only if made by written instrument 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.
H. Notices. All notices or other communications to any party to this
Settlement Agreement shall be in writing (and shall include telex, telecopy
or similar writing) and shall be given to the respective parties hereto at
the following addresses. Any party hereto may change the name and address of
the person designated to receive notice on behalf of such party by notice
given as provided in this paragraph.
22
For the State of Minnesota:
- ---------------------------
Hubert H. Humphrey III
Attorney General
102 State Capitol
St. Paul, MN 55155
Fax: 612.297.4193
with copies to:
---------------
Michael V. Ciresi
Robins, Kaplan, Miller & Ciresi L.L.P.
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, MN 55402-2015
Fax: 612.339.4181
Chief Deputy Attorney General
State of Minnesota
102 State Capitol
St. Paul, MN 55155
Fax: 612.297.4193
For Philip Morris Incorporated:
- -------------------------------
Martin J. Barrington
Philip Morris Incorporated
120 Park Avenue
New York, NY 10017-5592
Fax: 212.907.5399
With a copy to:
---------------
Meyer G. Koplow
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Fax: 212.403.2000
For R.J. Reynolds Tobacco Company:
- ----------------------------------
Charles A. Blixt
General Counsel
23
R.J. Reynolds Tobacco Company
401 North Main Street
Winston-Salem, NC 27102
Fax: 910.741.2998
With a copy to:
---------------
Arthur F. Golden
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Fax: 212.450.4800
For Brown & Williamson Tobacco Corporation:
- -------------------------------------------
F. Anthony Burke
Brown & Williamson Tobacco Corporation
200 Brown & Williamson Tower
401 South Fourth Avenue
Louisville, KY 40202
Fax: 502.568.7297
With a copy to:
---------------
Stephen R. Patton
Kirkland & Ellis
200 East Randolph Dr.
Chicago, IL 60601
Fax: 312.861.2200
For Lorillard Tobacco Company:
- ------------------------------
Arthur J. Stevens
Lorillard Tobacco Company
714 Green Valley Road
Greensboro, NC 27408
Fax: 910.335.7707
I. Cooperation. The parties hereto 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
24
may be appropriate in connection therewith. Consistent with the foregoing,
the parties hereto agree that they will not directly or indirectly assist or
encourage any challenge to this Settlement Agreement by any other person. All
parties hereto agree to support the integrity and enforcement of the terms of
this Settlement Agreement.
J. Governing Law. This Settlement Agreement shall be governed by the
laws of the State of Minnesota, without regard to the conflicts of law rules
of such state.
K. 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.
L. Severability. Subject to the provisions of Paragraph V.B., the
terms of this Agreement are severable. If any term of this Agreement is found
to be unlawful, the remaining terms shall remain in full force and effect,
and the parties agree to negotiate a substitute term of equivalent value.
M. Intended Beneficiaries. This action was brought by the State of
Minnesota, through its Attorney General, and by Blue Cross to recover certain
monies and to promote the health and welfare of the people of Minnesota. No
portion of this Settlement Agreement shall provide any rights to, or be
enforceable by, any person or entity that is neither a party hereto nor a
person encompassed by the releases provided in paragraphs III.B. and C. of
this Settlement Agreement. Except as expressly provided in this Settlement
Agreement, no portion of this Settlement Agreement shall bind any non-party
or determine, limit or prejudice the rights of any such person or entity.
None of the rights granted or obligations assumed under this Settlement
Agreement by the parties
25
hereto may be assigned or otherwise conveyed without the express prior
written consent of all of the parties hereto.
N. 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.
26
IN WITNESS WHEREOF, the parties hereto, through their fully authorized
representatives, have agreed to this Comprehensive Settlement Agreement and
Release as of this 8th day of May, 1998.
STATE OF MINNESOTA, acting by and through
Hubert H. Humphrey III, its duly elected and
authorized Attorney General
By:
-------------------------------------
Hubert H. Humphrey III
Attorney General
-----------------------------------
Lee E. Sheehy
Chief Deputy Attorney General
-----------------------------------
Eric A. Johnson
Executive Assistant to the Attorney
General
-------------------------------------
Thomas F. Pursell
Senior Counsel to the Attorney General
-------------------------------------
D. Douglas Blanke
Director of Consumer Policy
COUNSEL TO THE STATE OF MINNESOTA
By:
--------------------------------
Michael V. Ciresi
Robins, Kaplan, Miller & Ciresi L.L.P.
PHILIP MORRIS INCORPORATED
27
By:
--------------------------------
Meyer G. Koplow
Counsel
By:
---------------------------------
Martin J. Barrington
General Counsel
R.J. REYNOLDS TOBACCO COMPANY
By:
---------------------------------
D. Scott Wise
Counsel
By:
---------------------------------
Charles A. Blixt
General Counsel
BROWN & WILLIAMSON TOBACCO CORPORATION
By:
----------------------------------
Stephen R. Patton
Counsel
By:
----------------------------------
F. Anthony Burke
Vice President and General Counsel
LORILLARD TOBACCO COMPANY
By:
----------------------------------
Arthur J. Stevens
Senior Vice President & General Counsel
28
SCHEDULE A
AMOUNTS PAYABLE BY SETTLING DEFENDANTS ON OR
BEFORE SEPTEMBER 5, 1998 PURSUANT TO
PARAGRAPH II.B. OF THE SETTLEMENT AGREEMENT
Date 9/5/98
Settling Defendants
- -------------------
Philip Morris Incorporated......................... $163,200,000
R.J. Reynolds Tobacco Company...................... $ 16,320,000
Brown & Williamson Tobacco Corporation............. $ 42,960,000
Lorillard Tobacco Company.......................... $ 17,520,000
Total Amount....................................... $240,000,000
1
SCHEDULE B
Potential Future Legislation to Reduce Tobacco Use by Children
- Legislation to expand the self-service-sale restrictions of the youth
access to tobacco law and to remove the current exception for sales of
cigars.
- Legislation to clarify the current youth access law provision on
vending machines, making clear that machines equipped with automatic
locks or that use tokens are vending machines within the meaning of the
law.
- Legislation providing enhanced or coordinated funding for enforcement
efforts under sales-to-minors provisions of the criminal code or the
youth access statute and ordinances.
- Legislation to encourage or support the use of technology to increase
effectiveness of age-of-purchase laws, such as, without limitation, the
use of programmable scanners or scanners to read drivers' licenses.
- Legislation or rules restricting the wearing, carrying or display of
tobacco indicia in school-related settings, including, without
limitation, in school facilities, on school premises, or in connection
with school-sponsored activities.
- Legislation to create or stiffen non-monetary incentives for youth not
to smoke, such as expansion of youth community service programs.
2
APPENDIX A
FORMULA FOR CALCULATING
STATE OF MINNESOTA VOLUME ADJUSTMENTS
Any payment that by the terms of the Settlement Agreement is to be
adjusted pursuant to this Appendix (the "Applicable Base Payment") shall be
adjusted pursuant to this Appendix in the following manner:
(A) in the event the aggregate number of units of Tobacco Products
sold domestically by the Settling Defendants in the Applicable Year (as
defined hereinbelow) (the "Actual Volume") is greater than the aggregate
number of units of Tobacco Products sold domestically by the Settling
Defendants in 1997 (the "Base Volume"), the Applicable Base Payment
shall be multiplied by the ratio of the Actual Volume to the Base Volume;
(B) in the event the Actual Volume is less than the Base Volume,
(i) the Applicable Base Payment shall be multiplied by the ratio
of the Actual Volume to the Base Volume, and the resulting
product shall be divided by 0.98; and
(ii) if a reduction of the Applicable Base Payment results from the
application of subparagraph (B)(i) of this Appendix, but the
Settling Defendants' aggregate net operating profits from domestic
sales of Tobacco Products for the Applicable Year (the "Actual Net
Operating Profit") is greater than the Settling Defendants'
aggregate net operating profits from domestic sales of Tobacco
Products in 1997 (the "Base Net Operating Profit") (such Base Net
Operating Profit being adjusted upward by the greater of the rate
of 3% per annum or the actual total percent change in the Consumer
Price Index, in either instance for the period between January 1,
1998 and the date on which the payment at issue is made), then the
amount by which the Applicable Base Payment is reduced by the
application of subparagraph (B)(i) shall be reduced (but not below
zero) by 2.55% of 25% of such increase in such profits. For
purposes of this Appendix, "net
3
operating profits from domestic sales of Tobacco Products" shall
mean net operating profits from domestic sales of Tobacco Products
as reported to the United States Securities and Exchange Commission
("SEC") for the Applicable Year or, in the case of a Settling
Defendant that does not report profits to the SEC, as reported in
financial statements prepared in accordance with generally accepted
accounting principles and audited by a nationally recognized
accounting firm. The determination of the Settling Defendants'
aggregate net operating profits from domestic sales of Tobacco
Products shall be derived using the same methodology as was
employed in deriving such Settling Defendants' aggregate net
operating profits from domestic sales of Tobacco Products in 1997.
Any increase in an Applicable Base Payment pursuant to this
subparagraph B(ii) shall be payable within 120 days after the date
that the payment at issue was required to be made.
(C) "Applicable Year" means (i) with respect to the payments made
pursuant to paragraph II.D of the Settlement Agreement, the calendar
year ending on the date on which the payment at issue is due, regardless
of when such payment is made; and (ii) with respect to all other
payments made pursuant to this Settlement Agreement, the calendar year
immediately preceding the year in which the payment at issue is due,
regardless of when such payment is made.
4