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[Editors note: The following is the full text of Florida's $11.3 billion out-of-court settlement reached with the tobacco industry August 25.]
Florida Settlement
IN THE CIRCUIT COURT OF THE FIFTEENTH JUDICIAL CIRCUIT, IN AND FOR PALM
BEACH COUNTY, FLORIDA
THE STATE OF FLORIDA, et al., Plaintiffs, v. THE AMERICAN TOBACCO
COMPANY, et al., Defendants. Civil Action No. 95-1466 AH
SETTLEMENT AGREEMENT
This Settlement Agreement is made as of this 25th day of August, 1997,
by and among the undersigned, and is intended to settle and resolve with
finality all present and future civil claims against all parties to this
litigation relating to the subject matter of this litigation, which have
been or could have been asserted by any of the parties hereto.
WHEREAS, the State of Florida commenced this action in February, 1995,
asserting various claims for monetary and injunctive relief on behalf of
the State of Florida against tobacco manufacturers and other defendants;
WHEREAS, Defendants have contested the claims in Florida¹s complaint and
amended complaints and Plaintiffs have contested the claims in
Defendants¹ counter and cross claims against the Florida Department of
Corrections and deny each and every one of the Defendants¹ allegations;
WHEREAS, the State of Florida has, through its Governor, the Honorable
Lawton M. Chiles, Jr. and its Attorney General, the Honorable Robert A.
Butterworth, had a leadership role among the various states in
maintaining civil litigation against the tobacco industry and in seeking
to forge an unprecedented national resolution of the principal issues
and controversies associated with the manufacture, marketing and sale of
tobacco products in the United States;
WHEREAS, through the efforts of the State of Florida and others a June
20, 1997 Memorandum of Understanding and attached Proposed Resolution
("Proposed Resolution") has been agreed to by members of the tobacco
industry, state attorneys general, private litigants and representatives
of public health groups which would provide for unprecedented and
comprehensive regulation of the tobacco industry while preserving the
right of individuals to assert claims for compensation;
WHEREAS, the Proposed Resolution contemplates action by the United
States Congress and the President to enact and sign a new federal law
with respect to the tobacco industry, which action the tobacco industry
has agreed to support and which will require study and analysis by
Congress and the President;
WHEREAS, jury selection in this action commenced on August 1, 1997, and
trial of the action is anticipated to last several months and a
continuance of such trial could prejudice the State of Florida. The
State of Florida and the undersigned defendants have agreed to settle
independently the litigation commenced by the State of Florida pursuant
to financial terms comparable to the Proposed Resolution, which terms
will achieve for Florida immediately the financial benefits it would
receive pursuant to the national Proposed Resolution, should it become
law;
NOW THEREFORE, it is hereby agreed as follows:
I. GENERAL PROVISIONS
A. JURISDICTION
The Settling Defendants and Plaintiffs acknowledge that this Court has
jurisdiction over the subject matter of this action and over each of the
parties to this Settlement Agreement. Jurisdiction is retained by the
Court for the purposes of enabling any party to this Settlement
Agreement to apply to the Court at any time for further orders and
directions as may be necessary and appropriate to implement or enforce
this Settlement Agreement, and the parties hereto agree to present any
disputes under this Settlement Agreement to this Court.
Notwithstanding the dismissal of claims provided for herein, the parties
hereto agree that the Court will retain jurisdiction over the State of
Florida¹s claims for non-economic injunctive relief provided by the
Proposed Resolution. The parties hereto jointly request the Court to set
a trial date for the first Monday in August, 1998, or such later date as
the Court may direct, said trial to proceed only if the Proposed
Resolution or a substantially equivalent federal program has not been
enacted. If the Proposed Resolution or a substantially equivalent
federal program is not enacted by June 1, 1998, the parties may, with
the Court¹s permission, commence any appropriate pre-trial proceedings
relevant to the trial of such issues. If the Proposed Resolution or a
substantially equivalent federal program is enacted, any remaining
claims shall be dismissed with prejudice.
B. APPLICABILITY
This Settlement Agreement shall be binding upon all Settling Defendants
and their successors and assigns in the manner expressly provided for
herein and shall inure to their benefit and to that of their respective
directors, officers, employees, attorneys, representatives, insurers,
suppliers, distributors, agents and of any of their present or former
parents, subsidiaries, affiliates, divisions, or other organizational
units of any kind. This Settlement Agreement shall be binding on and
inure to the benefit of the State of Florida, the named Plaintiffs,
their administrators, representatives, employees, officers, agents,
legal representatives; all Agencies, Departments, Commissions, and
Divisions of the State; all subdivisions, public entities, public
corporations, instrumentalities, and educational institutions over which
the State has control; and their predecessors, successors and assigns.
C. VOLUNTARY AGREEMENT OF PARTIES
Settling Defendants understand and acknowledge that certain provisions
of this Settlement Agreement impose certain requirements on them that
could give rise to challenges under federal and State constitutions if
the State of Florida unilaterally imposed them. The parties hereto
acknowledge and agree that this Settlement Agreement is voluntarily
entered into by all parties hereto as the result of arms length
negotiations during which all parties were represented by counsel. None
of the parties hereto will seek to void this Settlement Agreement based
on any constitutional challenge to the provisions contained herein.
D. DEFINITIONS
1. "Plaintiffs" means collectively the Plaintiffs, State of Florida,
Lawton M. Chiles, Jr., individually and as Governor of the State of
Florida, the Department of Business and Professional Regulation, the
Agency for Health Care Administration and the Department of Legal
Affairs.
2. "State" or "State of Florida" means collectively the Plaintiffs,
State of Florida, Lawton M. Chiles, Jr., individually and as Governor of
the State of Florida, the Department of Business and Professional
Regulation, the Agency for Health Care Administration, and the
Department of Legal Affairs, all of its officers acting in their
official capacities and any other department, subdivision or agency of
the State, regardless of whether a named Plaintiff.
3. "Settling Defendants" means those Defendants in this Action that are
signatories to this Settlement Agreement.
4. "Non-Settling Defendants" means those Defendants that are not
signatories to this Settlement Agreement.
5. "Market Share" means, for each year, a Settling Defendant¹s
respective share of sales of cigarettes for consumption in the United
States.
6. "Tobacco Products" shall be defined in the same manner as in the Food
and Drug Administration Rule and shall include Roll-Your-Own, Little
Cigars and Fine Cut.
7. "Billboards" includes billboards, as well as all signs and placards
in arenas and stadia, whether open-air or enclosed. "Billboards" does
not include: (1) any advertisements placed on or outside the premises of
retail establishments licensed to sell Tobacco Products or any retail
point-of-sale; and (2) billboards or advertisements in connection with
the sponsorship by the Settling Defendants of any entertainment,
sporting or similar event, such as NASCAR, that appears in the State of
Florida as part of a national or multi-state tour.
8. "Transit Advertisements" means advertising on private or public
vehicles and all advertisements placed at, on or within any bus stop,
taxi stand, waiting area, train station, airport or any similar
location.
9. "Final Approval" means the date on which all of the following shall
have occurred:
a. The Settlement Agreement is approved by the Court;
b. Entry is made of an order of dismissal of claims or a final judgment
as provided herein; and
c. The time for appeal or to seek permission to appeal from the Court¹s
approval as described in (a) hereof, and entry of such final judgment or
order of dismissal as described in (b) hereof has expired or if
appealed, the appeal has been dismissed or the approval and judgment or
order have been affirmed by the court of last resort to which such
appeal has been taken and such affirmance has become no longer subject
to further appeal or review.
II. OBLIGATIONS OF PARTIES
A. NON-MONETARY PROVISIONS
1. Elimination of Billboards and Transit Advertisements. Settling
Defendants agree to discontinue all Billboards and Transit
Advertisements of Tobacco Products in the State of Florida. Settling
Defendants agree to exercise their best efforts in cooperation with the
State of Florida to identify all Billboards that are located within 1000
feet of any public or private school or playground in the State of
Florida. Settling Defendants will remove such Tobacco Product
advertisements (leaving the space unused or used for advertising
unrelated to Tobacco Products) or, at the option of the State of
Florida, will allow the State of Florida, at its expense, to substitute
for the remaining term of the contract alternative advertising intended
to discourage the use of Tobacco Products by children under the age of
18. Settling Defendants agree to provide the State of Florida with a
preliminary list of the location of all Billboards and Stationary
Transit Advertisements within 30 days from the date of execution of this
Settlement Agreement, such list to be finalized within an additional 15
days, and to remove all Billboards and Transit Advertisements for
Tobacco Products within the State of Florida at the earlier of the
expiration of applicable contracts or 4 months from the date the final
list is supplied to the State of Florida. The parties hereto also agree
to cooperate to secure the expedited removal of up to 50 Billboards or
stationary Transit Advertisements designated by the State of Florida,
within 30 days after their designation.
Each Settling Defendant shall provide the Court and the Attorney
General, or his designee, with the name of a contact person to whom
Plaintiffs may direct inquiries during the time such Billboards and
Transit Advertisements are being eliminated, from whom the Plaintiffs
may obtain periodic reports as to the progress of their elimination and
who will be responsible for ensuring that appropriate action is taken to
remove any Billboards that have not been timely eliminated.
2. Support of Legislation and Rules. Following Final Approval of this
Settlement Agreement, Settling Defendants agree to support legislative
initiatives to enact new laws and administrative initiatives to
promulgate new rules intended to effectuate the following:
a. The prohibition of the sale of cigarettes in vending machines, except
in adult-only locations and facilities;
b. The strengthening of civil penalties for sales of Tobacco Products to
children under the age of 18, including the suspension or revocation of
retail licenses; and
c. The strengthening of civil penalties for possession of Tobacco
Products by children under the age of 18.
3. Document Disclosure. Settling Defendants and the State of Florida
agree to cooperate to secure the expedited review of any decisions
issued prior to the date of this Settlement Agreement regarding the
inapplicability of any assertion of privilege with respect to documents
or other material. The documents covered by this provision are those
documents and materials which have been presented to the Special Master,
the Honorable R. William Rutter, Jr., and as to which a Report and
Recommendation has been issued requiring the disclosure and production
of such documents or materials, for whatever reason.
B. MONETARY PROVISIONS
1. Initial Payment -- General. On or before September 15, 1997, Settling
Defendants shall, pursuant to a mutually acceptable Escrow Agreement,
cause to be paid into a special escrow account (the "Escrow Account"),
for the benefit of the State of Florida, to be held in escrow pending
Final Approval, the sum of $550 million; that being Plaintiffs¹ good
faith estimate of the portion Florida would receive of the $10 billion
payment provided for in Paragraph A on page 34 of the June 20, 1997
Memorandum of Understanding and attached Proposed Resolution.
2. Initial Payment -- Pilot Program. In support of Florida¹s
demonstrated commitment to the meaningful and immediate reduction of the
use of Tobacco Products by children under the age of 18, Settling
Defendants also agree to support a pilot program (the "Pilot Program")
by the State of Florida, the elements of which shall be aimed
specifically at the reduction of the use of Tobacco Products by persons
under the age of 18 years. Accordingly, on or before September 15, 1997,
the Settling Defendants shall, pursuant to the Escrow Agreement, cause
to be paid into a second special escrow account (the "Second Escrow
Account"), for the benefit of the State of Florida, to be held in escrow
pending Final Approval of this Settlement Agreement, the sum of $200
million. The Pilot Program will commence upon Final Approval of this
Settlement Agreement and last for a 24-month period following such date.
The $200 million amount payable by Settling Defendants in support of the
Pilot Program shall be used only after approval by the Court and at the
rate of approximately $100 million per 12-month period for general
enforcement, media, educational and other programs directed to the
underage users or potential underage users of Tobacco Products, but
shall not be directed against the tobacco companies or any particular
tobacco company or companies or any particular brand of Tobacco
Products.
3. Annual Payments. On September 15, 1998, (subject to adjustment for
actual market share by January 30, 1999), and annually thereafter, on
December 31st (subject to final adjustment within 30 days), each of the
Settling Defendants agrees, severally and not jointly, that it shall
cause to be paid into a special account for the benefit of the State of
Florida (the "Account"), pro rata in proportion equal to its respective
Market Share, its share of 5.5% of the following amounts (in billions):
Year 1 2 3 4 5 6 thereafter
Amount $4B $4.5B $5B $6.5B $6.5B $8B $8B
The payments made
to the Account by the Settling Defendants pursuant to the calculation
set forth in this paragraph shall be adjusted upward by the greater of
3% or the Consumer Price Index applied each year on the previous year,
beginning with the first annual payment. Such Payments will also be
decreased or increased, as the case may be, in accordance with decreases
or increases in volume of domestic tobacco product volume sales as
provided in Paragraph B.5 on pages 34-35 of the Proposed Resolution. Any
payment pursuant to this paragraph that is due to be paid before Final
Approval of this Settlement Agreement shall be paid into the Escrow
Account and shall be disbursed only as provided by the terms of the
Escrow Agreement. On September 15, 1998, Settling Defendants shall pay
$220 million without any adjustment, that being Settling Defendants¹ and
the State¹s best estimate of the first such annual payment (in respect
of 1998).
4. Use of Funds. The monies received under this Settlement Agreement
constitute not only reimbursement for Medicaid expenses incurred by the
State of Florida, but also settlement of all of Florida¹s other claims,
including those for punitive damages, RICO and other statutory theories.
In consonance with the Proposed Resolution, other than the Pilot Program
and legal expense reimbursement, the parties hereto anticipate that
funds provided hereunder, only after approval by the Court, will be used
for children¹s health care coverage and other health-related services,
to reimburse the State of Florida for medical expenses incurred by the
State, for mandated improvements in State enforcement efforts regarding
the reduction of sales of Tobacco Products to minors, and to ensure the
Proposed Resolution¹s performance targets. The funds provided hereby may
be used for such purposes as the State match required to draw federal
funds to provide children¹s health care coverage and for enhancement of
children¹s and adolescents¹ substance abuse services, substance abuse
prevention and intervention and children¹s mental health services.
5. Adjustments in Event of Federal Resolution. In the event that the
Proposed Resolution is enacted as federal legislation, or if any
substantially equivalent federal program is enacted, the settlement
provided herein shall remain in place, but the terms of such Proposed
Resolution or federal program shall supersede the provisions of this
Settlement Agreement, except for the Pilot Program and to the extent
that the parties hereto have otherwise expressly agreed. In order to
provide the Settling Defendants with a full credit for all payments made
hereunder pursuant to paragraphs II.B.1 and II.B.3 of this Settlement
Agreement in the event of the enactment of the Proposed Resolution or
substantially equivalent federal program, and to the extent that the
payments made pursuant to paragraphs II.B.1 and II.B.3 of this
Settlement Agreement shall differ from the amounts to be received by the
State of Florida pursuant to such Proposed Resolution or substantially
equivalent federal program, the parties hereto shall take whatever steps
are necessary to ensure that the principal amount of payments received
by the State of Florida will be the same as the amounts it would receive
pursuant to the Proposed Resolution or substantially equivalent federal
program.
C. DISMISSAL, WAIVER AND RELEASE OF CLAIMS
1. Dismissal of Plaintiffs¹ Claims. Upon approval of this Settlement
Agreement by the Court, Plaintiffs shall dismiss, with prejudice as to
Settling Defendants (including their parents and affiliates), and
without prejudice as to other Non-Settling Defendants, all claims in
this Action, except to the extent such claims seek non-economic
injunctive relief provided by the Proposed Resolution. In the event any
Non-Settling Defendants agree to comply with the non-economic terms
contained in this Settlement Agreement, Plaintiffs shall dismiss with
prejudice all claims against any such Non-Settling Defendants, except to
the extent such claims seek non-economic injunctive relief provided by
the Proposed Resolution.
2. Plaintiffs¹ Waiver and Release. On the Final Approval Date, the State
of Florida shall release and forever discharge all Defendants and their
present and former parents, subsidiaries, divisions, affiliates,
officers, directors, employees, representatives, insurers, agents,
attorneys and distributors (and the predecessors, heirs, executors,
administrators, successors, and assigns of each of the foregoing) (the
"Released Parties"), from any and all manner of civil claims, demands,
actions, suits, and causes of action, damages whenever incurred,
liabilities of any nature whatsoever, including costs, expenses,
penalties and attorneys¹ fees ("Claims"), known or unknown, suspected or
unsuspected, accrued or unaccrued, whether legal, equitable or
statutory, both past, as to any claims that were or could have been made
in this action or any comparable federal action, and as to the future,
as to all Claims directly or indirectly based on, arising out of or in
any way related to, in whole or in part, the use of or exposure to
Tobacco Products manufactured in the ordinary course of business, that
the State of Florida (including any of its past, present or future
agents, officials acting in their official capacities, legal
representatives, agencies, departments, commissions, divisions,
subdivisions (political and otherwise), public entities, corporations,
instrumentalities, and educational institutions, and whether or not any
such person or entity participates in the settlement), whether directly,
indirectly, representatively, derivatively or in any other capacity,
ever had, now has or hereafter can, shall or may have (hereinafter,
collectively, the "Released Claims"). Notwithstanding any provision
herein, Plaintiffs do not release the claims for non-economic relief
reserved under this Settlement Agreement, and Defendants retain all
defenses thereto.
The State of Florida hereby covenants and agrees that it shall not,
hereafter, sue or seek to establish civil liability against any Released
Party based, in whole or in part, upon any of the Released Claims. The
State of Florida agrees that this covenant and agreement shall be a
complete defense to any such civil action or proceeding; provided,
however, that those Non-Settling Defendants which are not parents or
affiliates of the Settling Defendants shall be entitled to the foregoing
release and covenant not to sue only upon their assent to comply with
the non-economic provisions of this Settlement Agreement and the Waiver
of Claims.
3. Settling Defendants¹ Waiver and Dismissal of Claims. Upon Final
Approval, Settling Defendants shall waive any and all claims against any
of the Plaintiffs in this action including the State, or against any of
their officers, employees, agents, counsel, witnesses (fact or expert),
whistle-blowers or contractors, relating to or in connection with this
litigation and shall dismiss, with prejudice, any pending claims or
actions against such persons or entities that arise out of this
litigation of this lawsuit.
IV. MOST FAVORED NATION
The Settling Defendants agree that if they enter into any future
pre-verdict settlement agreement of other litigation brought by a
non-federal governmental plaintiff on terms more favorable to such
governmental plaintiff than the terms of this Settlement Agreement
(after due consideration of relevant differences in population or other
appropriate factors), the terms of this Settlement Agreement will be
revised so that the State of Florida will obtain treatment at least as
relatively favorable as any such non-federal governmental entity.
V. COSTS AND FEES
On or before September 30, 1997, the Settling Defendants shall cause to
be paid to the Attorney General of Florida $10 million for the best
estimate of costs and expenses attributable to his office and other
appropriate state agencies or entities in connection with this
litigation (cost for public employees shall be at prevailing market
rates); and on or before September 30, 1997, the Settling Defendants
shall further cause to be paid $12 million to the Plaintiffs¹ private
counsel for their best estimate of their costs and expenses. Thereafter
the Attorney General¹s Office, the appropriate state entities and
Florida¹s private counsel shall provide the Settling Defendants with an
appropriately documented statement of their costs and expenses. The
Settling Defendants shall promptly pay the amount of such costs and
expenses in excess of the above $22 million, or shall receive a refund
or a credit against other payments due hereunder if the total of such
costs and expenses shall be less than $22 million. Any dispute as to the
nature or amount of reimbursable costs and expenses shall be decided
with finality by the persons selected to award fees, as provided below.
Settling Defendants agree to pay, separately and apart from the above,
reasonable attorneys¹ fees to private counsel. If the Proposed
Resolution or substantially equivalent federal program is enacted, the
amount of such fees will be set by a panel of independent arbitrators
with finality, subject to an appropriate annual cap on all such payments
and other conditions. In the absence of any such legislation enacting
the Proposed Resolution or a substantially equivalent federal program,
attorneys¹ fees in connection with this litigation will be awarded in
the same manner (subject to the appropriate annual cap and other
conditions) by three independent arbitrators selected by the parties
hereto.
In addition to the foregoing, in the event of the enactment of the
Proposed Resolution or other substantially equivalent federal program,
the parties hereto contemplate that the State of Florida and any other
similar state which has made an exceptional contribution to secure the
resolution of these matters may apply to the panel of independent
arbitrators for reasonable compensation for its efforts in securing the
Proposed Resolution, subject to an appropriate separate annual cap on
all such payments.
VI. MISCELLANEOUS
A. HEADINGS. The headings of the paragraphs and sections of this
Settlement Agreement are not binding and are for reference only and do
not limit, expand, or otherwise affect the contents of this Settlement
Agreement.
B. NO ADMISSION. This Settlement Agreement and any proceedings taken
hereunder are not intended and shall not in any event be construed as,
or deemed to be, an admission or concession or evidence of any liability
or any wrongdoing whatsoever on the part of any party or any Released
Party. The parties hereto and Released Parties specifically disclaim and
deny any liability or wrongdoing whatsoever with respect to the
allegations and claims asserted against them in this action and enter
into this Settlement Agreement solely to avoid the further expense,
inconvenience, burden and uncertainty of litigation.
C. NON-ADMISSIBILITY. These settlement negotiations have been undertaken
by the parties in good faith and for settlement purposes only, and
neither this Settlement Agreement nor any evidence of negotiations
hereunder, shall be offered or received in evidence in this Action, or
any other action or proceeding, for any purpose other than in an action
or proceeding arising under this Settlement Agreement.
D. AMENDMENT. This Settlement Agreement may be amended only by a writing
executed by all signatories hereto and any provision hereof may be
waived only by an instrument in writing executed by the waiving party.
The waiver by any party of any breach of this Settlement Agreement shall
not be deemed to be or construed as a waiver of any other breach,
whether prior, subsequent, or contemporaneous, of this Settlement
Agreement.
E. COOPERATION. The parties to this Settlement Agreement and their
attorneys agree to use their best efforts and to cooperate with each
other to cause this Settlement Agreement to become effective, to obtain
all necessary approvals, consents and authorizations, if any, and to
execute all documents and to take such other action as may be
appropriate in connection therewith. The parties hereto may agree,
without further order of the Court, to reasonable extensions of time to
carry out any of the provisions of this Settlement Agreement.
F. GOVERNING LAW. This Settlement Agreement shall be governed by the law
of the State of Florida.
G. CONSTRUCTION. None of the parties hereto shall be considered to be
the drafter of this Settlement Agreement or any provision hereof for the
purpose of any statute, case law or rule of interpretation or
construction that would or might cause any provision to be construed
against the drafter hereof.
H. INTENDED BENEFICIARIES. This Action was brought by the State of
Florida, through its Governor and Attorney General, to recover certain
monies and to promote the health and welfare of the people of Florida.
No portion of this Settlement Agreement shall provide any rights to, or
be enforceable by, any person or entity that is not a party hereto or a
Released Party.
I. COUNTERPARTS. This Settlement Agreement may be executed in
counterparts. Facsimile or photocopied signatures shall be considered as
valid signatures as of the date hereof, although the original signature
pages shall thereafter be appended to this Settlement Agreement.
ENTERED INTO THIS 25th DAY OF AUGUST, 1997.
WEST PALM BEACH,
STATE OF FLORIDA
By:
___________________________________ ___________________________________
Lawton M. Chiles, Jr., Robert A. Butterworth,
Governor Attorney General
PHILIP MORRIS INCORPORATED R.J. REYNOLDS TOBACCO COMPANY
By: By:
___________________________________ ___________________________________
BROWN & WILLIAMSON TOBACCO LORILLARD TOBACCO COMPANY
CORPORATION
By: By:
_________________________________ ____________________________________
UNITED STATES TOBACCO COMPANY
By:
_________________________________
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