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Attorney General Lockyer Announces California Receives $7.15 Million from $55.4 Million Tobacco Settlement with House of Prince and Affliliate

Friday, December 22, 2006
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer today announced California has received $7.15 million from a $55.4 million settlement with House of Prince A/S and Scandinavian Tobacco, S.I.A. to resolve a dispute over enforcement of the 1998 Master Settlement Agreement (MSA).

“I am pleased that the settlement of this longstanding dispute provides the state money it is owed and preserves the MSA’s integrity,” said Lockyer. “House of Prince tried to hide behind an affiliate to escape its clear financial obligations under the MSA. It is vitally important to enforce all provisions of the MSA to help reduce tobacco use and protect consumers from its deadly consequences.”

Of California’s $7.15 million payment, the state and local governments will split evenly $6.8 million, while $309,000 will reimburse the Attorney General’s Office for its litigation costs.

The MSA requires tobacco manufacturers that signed the agreement to make annual payments to the states, in part to compensate the states for billions of dollars in health care costs associated with treating tobacco-related diseases under Medicaid programs. House of Prince signed the MSA as a manufacturer, and Scandinavian Tobacco is an affiliated entity.

The settlement resolved a three-year court dispute over whether cigarettes manufactured by Scandinavian Tobacco and sold in the United States from 1999-2003 were subject to the MSA’s payment requirements and other obligations. No cigarettes manufactured by Scandinavian Tobacco have been imported into the United States since 2003.

The State of California filed a lawsuit in February 2003 to force House of Prince to make MSA payments for Scandinavian Tobacco’s cigarettes. House of Prince argued the MSA did not cover cigarettes made by an affiliate. Lockyer countered that the MSA’s payment provisions clearly applied to products made by affiliates of companies that signed the MSA. Assisted by other states, California won preliminary legal skirmishes. House of Prince subsequently entered settlement discussions that produced a national agreement with all jurisdictions that signed the MSA – 46 states, five territories and Washington D.C.

Aside from its payment provisions, the MSA created a broad array of restrictions on the advertising, marketing and promotion of cigarettes. For example, it prohibits targeting youth in cigarette advertising. It also restricts outdoor advertising of cigarettes, the advertising of cigarettes in public transit facilities, and the use of cigarette brand names on merchandise, among other limitations.

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