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Both the MSA § III(b) and the Consent Decree § V.B. prohibit the use of cartoons in tobacco advertising. The term “Cartoon” is specifically defined to be much broader than what people usually think of as cartoons.
“Cartoon” means any drawing or other depiction of an object, person, animal, creature or any similar caricature that satisfies any of the following criteria:
"The term 'Cartoon' includes 'Joe Camel. . . .
MSA § II(l).
Even cartoons specifically intended for adults are prohibited.
On April 26, 2013, The People were awarded $3 million in attorneys' fees from R.J. Reynolds Tobacco Co. by the California Court of Appeal. The appellate court upheld the trial court's determination that the People prevailed in the action, and that they are entitled to Bay Area market rates for their fees incurred enforcing the ban on using cartoons in tobacco advertisements. The Appellate Court’s decision can be viewed by clicking on the link below.
The People requested $2.9 million in attorneys’ fee from R.J. Reynolds for the extensive litigation in the case over the Farm Rocks cartoon campaign. The case included numerous pre trial motions, discovery, a two week trial and two appeals – one on the merits and another on the People’s entitlement to attorneys’ fees. The court awarded the state the full fee award, finding that the People had prevailed in the case. The appellate court had ruled that the People were entitled to market rates if they prevailed under the “greater relief” standard of Civil Code § 1717. (In re Tobacco Cases I (2011) 193 Cal. App. 1591.) The Court of Appeal remanded for the trial court to re-determine whether the People had prevailed. The trial court found that they did and ordered Reynolds to pay the full $2.9 million fee requested. Reynolds has appealed these rulings as well.
The Court of Appeal, Fourth Appellate District, affirmed the trial court decision ruling on R.J. Reynolds Tobacco Co's Farm Rocks campaign which used cartoons in its advertising of Camel cigarettes in Rolling Stone magazine, local newspapers, and at musical events on posters, flyers, projections and videos. The Court found that Reynolds' Farm Rocks images were "cartoons" under the Consent Decree and MSA. The court held that the definition was unambiguous and includes objects with unnatural abilities like tractors and radios that fly and televisions that grow on plant stems. The court noted that Reynolds and other tobacco companies have a history of targeting youth in their advertising, and that Reynolds' fanciful Farm Rocks images would appeal to youth.
Although Reynolds appealed the trial court ruling that sanctions could be awarded under the Consent Decree, the appellate court declined to rule on the issue finding that the issue was moot since sanctions were not actually awarded.
The California Superior Court ruled that Reynolds had used cartoons in its campaign in violation of the Master Settlement Agreement with the states which has prohibited the use of cartoons in tobacco advertising for more than ten years. This matter commenced in December 2007, when the California Attorney General filed suit against R. J. Reynolds Tobacco Co. for using cartoons in a Camel cigarette promotion called Farm Rocks. Eight other states simultaneously filed lawsuits in their own states regarding the national Camel campaign. During a court hearing in California, Reynolds agreed to suspend the campaign pending the lawsuit and stopped all magazine and newspaper advertisements, musical events and CDs using the Farm Rocks cartoon imagery. On April 20, 2009 the California Superior Court ruled that Reynolds had used cartoons in its campaign in violation of the Master Settlement Agreement with the states which has prohibited the use of cartoons in tobacco advertising for more than ten years. The court declined to award sanctions against Reynolds, but ruled that the People are entitled to their attorneys’ fees for prosecuting the action.
In a court filing on December 4, coordinated with several other states, the Attorney General's Office sought an order to show cause preventing Reynolds from any further use of cartoon imagery in promoting cigarettes through the company’s Camel “Farm Rocks” campaign. The centerpiece of the suit is a nine-page, special fold-out section in the November 15 edition of Rolling Stone magazine, which contained Farm Rocks ads and numerous cartoon images that are prohibited by the Master Settlement Agreement. During a hearing in open court on December 4, Reynolds committed to shut down its Farm Rocks web site by December 5, to not use any Farm Rocks images in print advertising or at live events until the litigation is resolved, and to not distribute any Farm Rocks music CDs. Hearings in several other states’ cases against Reynolds were postponed when Reynolds agreed to nationwide relief pending settlement discussions.
Section III (r) of the MSA provides that “No Participating Manufacturer may make any material misrepresentation of fact regarding the health consequences of using any Tobacco Product, including any tobacco additives, filters, paper or other ingredients. Nothing in this subsection shall limit the exercise of any First Amendment right or the assertion of any defense or position in any judicial, legislative or regulatory forum."
The Consent Decree and Final Judgment has an identical provision in section V. I.
In 2003, R.J. Reynolds Tobacco Company began marketing its Eclipse brand of cigarettes. In a national advertising campaign, Reynolds claimed that Eclipse, which heats rather than burns tobacco, may present less risk of cancer, chronic bronchitis, and emphysema than other brands of cigarettes. Reynolds further claimed that it had scientific studies supporting these health claims. The Vermont Attorney General, with assistance from the Attorneys General from eight other states, including California, filed a complaint against Reynolds, alleging that the company did not have adequate substantiation for its health claims.
After a 26 day trial involving more than 20 expert witnesses and thousands of exhibits, the Chittenden Superior Court in Vermont agreed with the states, finding that Reynolds engaged in deceptive advertising in marketing Eclipse as a reduced risk product. Reynolds had hundreds of studies, many of which found a reduction of some of the toxic components of the smoke from Eclipse. However, in his 116 page opinion, Judge Pearson found that there was no evidence that a reduction in certain toxins produced any reduced risk of disease. As the court found, the consensus among the scientific community, including many of Reynolds’ own scientists, was that Reynolds needed to have long-term epidemiological studies to support its claims. Thus, Reynolds’ ads violated the Tobacco Master Settlement Agreement’s prohibition against making any material misrepresentations of fact regarding the health consequences of using any tobacco product and the Vermont Consumer Fraud Act. The court bifurcated the trial, so remedies and damages will be addressed in future proceedings.
Effective March 1, 2010, Santa Fe Natural Tobacco agreed to add disclaimers to all of its advertisements for cigarettes or roll your own tobacco which use organic tobacco. California negotiated a voluntary agreement with Santa Fe which was signed by 33 states and the District of Columbia. The states were concerned that consumers would be misled by Santa Fe’s advertisements for its Natural American Spirit organic tobacco in violation of the Master Settlement Agreement and consumer protection laws. Consumers reading the ads which say “organic tobacco” or “100% tobacco” may believe that the tobacco or the cigarettes are safer when there is no evidence that is the case. Santa Fe agreed to add a disclaimer to all of their organic tobacco ads which states in a large clear box that “organic tobacco does not mean safer tobacco.” The Agreement is attached.
Section III(c)(2)(A) of the MSA limits Participating Manufacturers to one Brand Name Sponsorship in any 12 month period. Section II(j) of the MSA broadly defines a Brand Name Sponsorship as “an athletic, musical, artistic, or other social or cultural event as to which payment is made (or other consideration is provided) in exchange for use of a Brand Name or Names” either as a part of the name of the event, or to promote the event or an entrant, participant or team in the event. A single Brand Name Sponsorship may consist of multiple events. For example, a Participating Manufacturer may sponsor one national or multi-state series or tour (such as a car-racing series or tour) which is made up of more than one event, but still constitutes only one Brand Name Sponsorship. (See MSA §II(j).) Additionally, the MSA allows Participating Manufacturers to sponsor one entrant, participant or team in any event that is part of its Brand Name Sponsorship. (MSA §II(j).) Events in “Adult-Only Facilities” are not considered Brand Name Sponsorships. (MSA §II(j) & (c).) There are also restrictions on the events which may be sponsored. For example, Participating Manufacturers may not sponsor events for which the audience is comprised of a “significant percentage” of Youth, or events in which” paid participants” or “contestants” are Youth. (See MSA § III(c)(1)(A-D).) There are also restrictions on advertising done in connection with Brand Name Sponsorship such as a ban on combining advertisement of Tobacco Products with advertisement of the Brand Name Sponsorship. (See MSA §III(c)(3)
The San Diego Superior Court entered a stipulated judgment settling California's dispute with U.S. Smokeless Tobacco Company related to the promotion of its Copenhagen brand name through multiple Professional Bull Riders ("PBR") series and tours. USSTC agreed to limit its Copenhagen brand name sponsorship to Built Ford Tough series events in California. In addition, it agreed that at those Built Ford Tough events, it will sponsor no more than three bull riders in its Copenhagen brand name. Should Copenhagen-sponsored bull riders compete in other PBR series or tour events in California, they will not wear any Copenhagen branded clothing.
The California Attorney General's Office has reached a settlement with U.S. Smokeless Tobacco Company (USSTC). The settlement, which was approved by the San Diego Superior Court on August 17, resolves California's lawsuit alleging that USSTC violated the landmark 1998 Smokeless Tobacco Master Settlement Agreement by, among other things, promoting its Skoal brand name through sponsorship of National Hot Rod Association (NHRA) drag racing events at which minors compete. Central to the settlement was the NHRA's recent decision to change its official rules starting in 2008 so that persons under 18 can no longer compete in any race at the national events Skoal sponsors. USSTC, without admitting any liability, agreed to pay $1.5 million in costs to the state, and further agreed to withdraw its brand name sponsorship of national events if at any time the NHRA changes it rules to again permit minors to race. Finally, USSTC has agreed never to expand its brand name sponsorship beyond the one series, one competition and one car that it now sponsors.
The California Supreme Court denied R.J. Reynolds’s request for review of the March 2003 Court of Appeal's decision in a case involving outdoor advertising restrictions imposed by MSA. The lower court decision is now final. The company may not post billboards or other signs advertising its Winston sponsorships at auto race tracks more than 90 days before and 10 days after a sponsored event at the site. People of the State of California v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 132 Cal. Rptr. 2d. 151.
The Attorney General entered into a Memorandum of Understanding with U.S. Smokeless Tobacco Company ("USSTC"). The agreement resolves some disputes with USSTC about its compliance with the 1998 Smokeless Tobacco Master Settlement Agreement, relating to the configuration of Adult-Only Facilities (AOFs) (where USSTC gives away free samples) and the Brand Name signs that USSTC uses to identify its AOFs. In May 2002 the Tobacco Enforcement Committee of the National Association of Attorneys General reviewed and endorsed the MOU. The MOU requires USSTC, within 120 days, to enclose all its AOFs in California with an opaque barrier that is at least six feet high, and to instruct its security personnel to discourage people from loitering around the entrances and exits. This part of the agreement implements the provision of the MSA which defines an AOF as a place where persons under the age of 18 are "not present." The agreement also spells out how USSTC may identify its AOFs by using a Brand Name, such as Copenhagen, Skoal, or Rooster, under a limited exception to the MSA's general ban on outdoor advertising of tobacco products.
The court rules in telephonic ruling against R.J. Reynolds in the Outdoor Advertising at Sporting Events case.
The Office of the Attorney General Wins Major Court Ruling Against R.J. Reynolds Tobacco Company Violates Restrictions on Outdoor Advertising at Sporting Events.
The Office of the Attorney General files its complaint in the matter People of the State of California ex rel. Bill Lockyer, Attorney General of the State of California, v. R.J. Reynolds Tobacco Company regarding Outdoor Advertisements at Racetracks.
The Office of the Attorney General entered into a Settlement Agreement with R.J. Reynolds concerning activities at Brand Name Sponsorship Events.
Cal. Health and Safety Code section 118950 prohibits, with some specific exceptions, the “non-sale” (that is, free or at nominal cost) distribution of cigarettes or smokeless tobacco on any publicly owned or leased property or on any private property that is open to the general public, except in an enclosed, adult-only area.
Section III (g) of the MSA provides that “no Participating Manufacturer may . . . distribute or cause to be distributed any free samples of Tobacco Products except in an Adult Only Facility. For purposes of this Agreement, a "free sample" does not include a Tobacco Product that is provided to an Adult in connection with (1) the purchase, exchange or redemption for proof of purchase of any Tobacco Products (including, but not limited to, a free offer in connection with the purchase of Tobacco Products, such as a "two for one" offer), or (2) the conducting of consumer testing or evaluation of Tobacco Products with persons who certify that they are Adults.”
The Consent Decree and Final Judgment has an identical provision in section V. E.
The Office of the Attorney General announced R.J. Reynolds Tobacco Company (RJR) will pay $5 million to resolve a lawsuit in which the California Supreme Court, last December, found RJR liable for violating state law when it distributed 108,155 free packs of cigarettes on public grounds. Under the settlement, RJR will pay $1 million to the Public Health Institute, a nonprofit organization that administers the Public Health Trust and will use the money to fund tobacco control advocacy and education programs. Additionally, RJR will pay a $3.1 million civil penalty, and $900,000 to cover the Attorney General’s cost and fees. The settlement was filed today in Los Angeles County Superior Court. The court must approve the settlement before it becomes final.
In a unanimous decision, the Supreme Court upheld the constitutionality of the state’s ban on cigarette and smokeless tobacco giveaways on public property. The Court rejected Reynolds’ argument that the ban was preempted by federal law. But, the Court sent the case back to the trial court for further proceedings regarding the size of the fine Reynolds would pay.
The Court approves a settlement of claims against R.J. Reynolds and its marketing agent for distributing free cigarettes in violation of tobacco Master Settlement Agreement and California law. Court order requires payment of $60,000 to fund projects to support youth and young adult tobacco control advocacy in California.
The Court upholds trial court decision that R.J. Reynolds violated California's tobacco sampling law. Confirms $14.8 million civil penalty against R.J. Reynolds.
The Attorney General announces that the superior court has ordered R.J. Reynolds to pay $14.8 Million Fine.
The Attorney General Reaches a Settlement with R.J. Reynolds over Free Cigarette Mailings. Reynolds Agrees to Further Protect Against Marketing to Children.
In the matter People of the State of California ex rel. Bill Lockyer, Attorney General of the State of California v. Swedish Match North America Inc. regarding Free Smokeless Tobacco Sampling on Public Property in California, a Stipulation for Order and Order for Entry of Final Judgment and Permanent Injunction was executed by Judge Robert B. Yonts Jr. on June 27, 2001.
The Office of the Attorney General Reaches Settlement with United States Tobacco Company over Alleged Advertisement Violations, U.S. Tobacco Agreed to Run Anti-Tobacco-Use Ads.
Anti-Tobacco-Use Advertisement that US Tobacco Company agreed to Run as Part of Their Settlement With the Attorney General's Office Over Smokeless Ads
Electronic cigarettes are battery powered devices designed to look and feel like regular cigarettes, but they emit water vapor rather than smoke. The cartridges contain liquid nicotine and various flavors. Known as e-cigarettes or e-cigs, the products have become popular in the past couple of years. The U.S. Food and Drug Administration consider e-cigarettes “drugs or devices” and claims the products must be approved by the FDA before they can be sold in the U.S. To date, no e-cigarettes have been approved by the FDA. Preliminary tests by the FDA found that e-cigarettes contain many impurities and some contain dangerous chemicals. FDA’s jurisdiction to regulate e-cigarettes is in litigation, however. E-cigarettes are not governed by the Master Settlement Agreement or by many of California’s tobacco laws.
The California Attorney General’s Office is concerned that e-cigarettes are being sold in the state without appropriate quality control and with many false or misleading claims about their safety or effectiveness. Many are also in violation of California’s Proposition 65 which requires health warnings about dangerous chemicals.
California passed a statute prohibiting the sale of electronic cigarettes to minors. (Health & Safety Code § 119405). The office is investigating a number of electronic cigarette companies selling e-cigarette products on the Internet to ensure compliance with the statute as well as other consumer protection provisions. Many companies are coming into compliance voluntarily.
In January 2010, The Attorney General sued Smoking Everywhere, one of the largest electronic cigarette retailers in the U.S., alleging it made false claims about its products, failed to warn consumers of dangerous reproductive toxins, marketed to minors and failed to have adequate quality control in place to protect consumers. The Attorney General's office settled its lawsuit against Smoking Everywhere in the fall, and in November 2010, the Alameda County Superior Court entered a consent judgment against Smoking Everywhere very similar to the agreement reached with Sottera. Smoking Everywhere agreed to make their web sites age-restricted so that they will not sell any electronic cigarette products to minors, and not to sell flavors attractive to young people. Smoking Everywhere also agreed to stop making false or misleading claims concerning the safety or effectiveness of their products. They agreed to put systems for quality control in place and to place warnings on their products in compliance with Proposition 65, warning consumers that their electronic cigarettes contain a toxin which could cause reproductive harm. Finally, the company agreed to pay to the state monetary penalties, attorneys’ fees and costs.
The Alameda County Superior Court has entered a consent judgment against Sottera, the company that sells NJoy electronic cigarettes. Sottera agreed to make their websites age-restricted so that they will not sell any electronic cigarette products to minors, and not to sell flavors attractive to young people. Sottera also agreed to stop making false or misleading claims concerning the safety or effectiveness of their products. They agreed to put systems for quality control in place and to place warnings on their products in compliance with Proposition 65, warning consumers that their electronic cigarettes contain a toxin which could cause reproductive harm. Finally, the company agreed to pay to the state monetary penalties, attorneys’ fees and costs.
The State of California is dedicated to reducing youth access to tobacco products by ensuring that retailers comply with state laws concerning the sale and marketing of tobacco products. The Attorney General has entered into agreements (Assurances of Voluntary Compliance or AVCs) with numerous national retail chains whereby the company agrees to adopt certain standards and practices for their sale and marketing of tobacco products to help reduce the number of tobacco sales to minors.
The AVCs are the result of an ongoing, multi-state enforcement effort among state attorneys general. The agreements incorporate "best practices" to reduce sales to minors, developed by the attorneys general in consultation with retailers, researchers, and state tobacco control officials.
While the terms of each agreement vary depending upon circumstances unique to the chain, the agreements generally contain the following requirements:
Companies agree to:
The Attorney General has entered into 13 multi-state agreements on behalf of the State of California, with 7-Eleven, ARCO, BP North America, Chevron, ConocoPhillips, CVS, ExxonMobil, Kroger, Rite-Aid, Shell, Valero, Wal-Mart, and Walgreens, and a litigation settlement agreement with Safeway. Nationwide, these agreements cover over 100,000 retail outlets at which cigarettes are sold. Our office has taken the lead in the negotiations resulting in each of these agreements. Please look below for details and copies of the agreements.
More information about retail tobacco sales and preventing illegal sales to minors can be found on these web sites:
California Tobacco Control Program, Retailer Information Page:
California Department of Public Health, Stop Tobacco Access to Kids Enforcement (STAKE) Page:
U.S. Food and Drug Administration, Center for Tobacco Products Page:
Campaign for Tobacco Free Kids Page: http://www.tobaccofreekids.org/
The Attorney General has joined 38 other attorneys general in an agreement with Valero concerning the sale and marketing of tobacco products. Valero has agreed to adopt comprehensive training for its retail personnel, including instruction on the health risks associated with childhood tobacco use, compliance checks to monitor sales practices, policies on checking IDs and in-store advertising, and supervision of store conduct concerning sales to minors. Valero does not own and operate the convenience stores at many of the more than 900 Valero gas stations in California, but it has agreed to adopt tobacco retailing “best practices” designed to reduce tobacco sales to minors at all of its outlets.
The Attorney General joined 41 other attorneys general in an agreement with Kroger, the nation’s largest grocery chain with 2,468 supermarkets in 31 states under two dozen banners and 779 convenience stores in 15 states under 5 banners. All but 92 of the convenience stores are company-owned. Nearly 500 Kroger stores are operating in California under the Ralph’s, Food 4 Less, Foods Co., and Quik Stop names. The agreement requires Kroger to implement comprehensive youth prevention tobacco retailing practices in its company-owned stores. The company will also take a number of steps to prevent youth access to tobacco in its franchise outlets.
CVS Pharmacy, Inc., the nation’s largest retail pharmacy, agreed to adopt new procedures to reduce sales of tobacco products to minors at its 5,400 stores across the country, under an agreement reached with California, 42 other states and Washington D.C. CVS operates 5,400 pharmacies in 37 states and Washington D.C., including 21 stores in California. Attorneys General in six states without CVS outlets signed the agreement. If the company opens pharmacies in those jurisdictions, the outlets will be covered by the agreement.
The Office of the Attorney General announced an agreement with 7-Eleven, Inc. under which the nation’s largest retailer of tobacco products will implement new procedures to reduce such sales to minors at its 1,224 California stores, and 4,633 outlets in 30 other states and Washington D.C. Among other provisions, the 7-Eleven AVC restricts marketing by prohibiting in-store advertising of tobacco products adjacent to products popular with minors, and banning within 500 feet of schools or playgrounds outdoor tobacco ads and outward-facing tobacco ads in store windows. The provisions of the 7-Eleven AVC apply to all company-owned stores. The agreement, however, calls for 7-Eleven to take steps to ensure its franchisees comply both with the AVC and state laws governing the sale of tobacco products.
The Office of the Attorney General Praises New State Campaign to Combat Tobacco Sales to Children; Cites His Office's Success in Curbing Retailer Sales, Fighting Industry Practices.
Attorney General announces agreement to curb tobacco sales to minors in Wal-Mart Stores. Youth Smoking Deals Now Cover Top Retailer, Drug Store and Oil Company.
Office of the Attorney General announces Agreement to Curb Tobacco Sales to Minors at ARCO Stations Deal Reduces Youth Access to Cigarettes at 1,250 Retail Outlets in California.
Attorney General Announces Agreement with Exxon Mobil to Curb Tobacco Sales to Minors Calls Agreement Important Model for Retailers in Fight Against Underage Smoking. View the ExxonMobil Corporation Assurance and Press Release.
Attorney General Announces Agreement With Walgreens to Curb Tobacco Sales to Minors Calls Drug Store Chain's Policy a National Model in Fight Against Underage Smoking.
The Office of the Attorney General Calls on FDA to Regulate New "Tobacco Candy" Product.
The Attorney General enforces two state laws that prohibit the sale of cigarettes by “remote” means, that is, whenever the seller and the buyer are not face-to-face, as in a retail store. Remote sales include sales made via the Internet, as well as telephone and mail orders. However, a person may sell cigarettes remotely if the person complies with certain conditions specified in the law.
Section 22963 of the Business and Professions Code is primarily directed at preventing the sale of cigarettes and tobacco products to minors. This law requires a “remote” seller to verify that every customer is at least 18 years old by either matching the customer’s name, address and date of birth to a database of government records or by requiring the customer to attest in writing that he or she is at least 18 years old and provide a copy of a government-issued identification, such as a driver’s license or passport. In addition, the seller may not fill an order for less than two cartons of cigarettes; he must contact the purchaser by phone after 5:00 p.m. to confirm the order; and he must deliver the cigarettes or tobacco to a verified mailing address, not a Post Office box.
Section 30101.7 of the Revenue and Taxation Code is primarily directed at making sure applicable state taxes are paid on cigarettes sold by “remote” means. This law requires a “remote” seller to fully comply with the Jenkins Act, which is a federal law that mandates anyone who ships cigarettes from out of state to a consumer in California to report the sale to the California Board of Equalization. (The Board collects the taxes owed from the purchasers.) In addition, the seller must either pay the state excise tax on the cigarettes (currently $8.70 per carton) or put a notice on the outside of the shipping package that says:
“IF THESE CIGARETTES HAVE BEEN SHIPPED TO YOU FROM A SELLER LOCATED OUTSIDE OF THE STATE IN WHICH YOU RESIDE, THE SELLER HAS REPORTED PURSUANT TO FEDERAL LAW THE SALE OF THESE CIGARETTES TO YOUR STATE TAX COLLECTION AGENCY, INCLUDING YOUR NAME AND ADDRESS. YOU ARE LEGALLY RESPONSIBLE FOR ALL APPLICABLE UNPAID STATE TAXES ON THESE CIGARETTES."
CA, 39 states and the District of Columbia signed onto an amicus brief in support of the United States as Appellant/Cross-Appellee in Gordon v. Holder,__F. Supp. 2d__, 2011 U.S. Dist. LEXIS 139201 (D.D.C. Dec. 5, 2011). Cross appeals arose out of constitutional challenges to the Prevent All Cigarettes Trafficking (PACT) Act, Pub.L. No.111-154, 124 Stat. 1087 (2010). On due process grounds, the district court enjoined the portion of the PACT Act that requires internet and other remote cigarette sellers to comply with the laws of the jurisdiction to which they deliver their products, including tax laws. The district court upheld the Act against an equal protection challenge to the portion of the Act that declares cigarettes and smokeless tobacco to be non-mailable, and a Tenth Amendment challenge, from which plaintiff cross-appeals.
CA also signed onto an amicus brief in Red Earth LLC, 728 F. Supp. 2d 238 (W.D.N.Y.) 2010, involving virtually identical legal issues as those in Gordon v. Holder.
The Attorney General entered into a Stipulated Judgment with the Hemi Group, a retailer selling cigarettes illegally over the Internet. The purpose of this Stipulated Judgment is to require the Hemi to permanently cease and desist from shipping tobacco products via the Internet to consumers, unlicensed distributors, wholesalers and tribal entities located in California in violation of the following statutes: (1) The Jenkins Act, 15 U.S.C. §§ 375-378 (requires out-of-state seller to report shipments of cigarettes to taxing entity in the state where shipped); (2) Revenue and Taxation Code section 30101.7 (requires cigarette seller to either pay all applicable cigarette taxes or, alternatively, place specified warning on outside of cigarette container advising that buyer must pay taxes); (3) Business and Professions Code section 22963 (prohibiting non-face-to-face tobacco sales to minors; and (4) Business and Professions Code § 17200 (unlawful business practices). Additionally, Hemi is required to produce information concerning shipments made since January 1, 2005, constituting over 100,000 illegal transactions.
The Attorney General, along with two other states, entered into Assurances of Discontinuance with First Regional Bank and ECHO, a third party processor. Both companies agreed to stop facilitating illegal tobacco sales and implement “due diligence” policies, such as conducting background checks and obtaining basic information about retailers, and training their employees so that the companies do not inadvertently facilitate illegal Internet sales. These companies were suspected of facilitating hundreds of thousands of illegal tobacco sales. Under the terms of the agreement with First Regional, the bank is required to pay $60,000 for civil penalties and fees and costs.
The CA AGO filed a Complaint against Maybee, a member of the New York Seneca Tribe, in 2005 seeking injunctive relief and civil penalties contending that Maybee engaged in at least 166,716 transactions with California consumers in which he violated Rev & Tax §30165.1 (tobacco directory law), Health 7 Saf. §14951(fire-safe cigarettes), Bus. & Prof. Code § 22963, and Rev. & Tax 30101.7 (California’s two remote cigarette sales laws), and Bus. & Prof. Code § 17200.
Maybee admitted that he violated the above statutes but contended that California was preempted from enforcing its regulatory statutes against him for the following reasons: (1) he possesses, offers and sells cigarettes outside of California, (2) the Indian Commerce Clause preempts application of these laws from an out-of-state tobacco seller that sells and ships cigarettes from an out-of-state Indian Reservation, and (3) these statutes discriminate against out-of-state sellers such as Maybee, and therefore violate the Dormant Commerce Clause. In addition to these constitutional defenses, Maybee claimed that pursuant to Commercial Code § 2401(2)(a) title to the cigarettes passed from Maybee to the California consumers when Maybee delivered the goods to the Post Office. Therefore, according to Maybee, his cigarette sales did not take place in California.
We contended that Maybee’s defenses were baseless because: (1) the conduct that California seeks to regulate extends beyond the boundaries of the Seneca Reservation into California, and therefore California law applies, (2) Even assuming that Maybee’s cigarette sales occurred within the boundaries of the Seneca Reservation, California’s laws are not preempted because no federal law or policy preempts California’s regulatory authority, California’s regulations do not infringe on the Seneca’s Tribal sovereignty and California has a substantial interest in regulating the health and safety of its citizens by means of non-discriminatory tobacco laws that impose a minimal burden on the tribe, and (3) the Commercial Code is not applicable to regulatory statutes enacted pursuant to the state’s police powers.
After Maybee brought and lost his motion to dismiss the Complaint based on the court’s lack of subject matter jurisdiction, both parties filed cross-motions for summary judgment, and we filed an alternative motion for summary adjudication. After four hearings on the matter the court denied both parties’ motions for summary judgment and granted our motion for summary adjudication on three causes of action—Bus. & Prof. Code §§22963 and 17200, and Rev. & Tax Code § 30101.7. The court denied our tobacco directory and fire-safe claims. The court enjoined defendants from violating sections 22963, 30101.7 and 17200 and awarded civil penalties in the amount of $130,000. The court also awarded the CA AGO $7,679.11 in costs pursuant to our memorandum of costs. Neither side appealed the judgment. The CA AGO filed a motion for attorneys’ fees and costs including investigative costs and the costs of prosecuting the action, including expert fees. The court awarded California $242,868.00 in attorneys’ fees and denied California’s request for expert fees and additional costs that we had requested pursuant to Code of Civ. Proc. Section 1021.8.
Philip Morris USA agreed to implement landmark protocols to reduce the illegal sale of its cigarettes over the Internet and through the mail. Philip Morris voluntarily adopted the protocols pursuant to an agreement reached with the Office of the Attorney General and Attorneys General in 32 other states, Washington D.C. and three territories. Under the protocols, Philip Morris will terminate shipments of cigarettes to any of its direct customers that Attorneys General have found to be engaging in illegal Internet and mail order sales; reduce the amount of products made available to direct customers found by the Attorneys General to be engaged in the illegal resale of Philip Morris cigarettes to Internet vendors; and suspend from the company’s incentive programs any retailer found by the Attorneys General to be engaging in such illegal sales.
In 2004 and 2004 the Attorney General entered into stipulated judgments with five retailers, Dirt Cheap Cigarettes, eSmokes, Inc., Cyco.net, Inc., and eCommerce Today, Ltd., selling cigarettes illegally over the Internet to hundreds of thousands of California consumers. These Internet retailers agreed not to do business in California and to pay penalties, costs, and attorneys’ fees totaling more than $ 1 million. Additionally, the two biggest retailers, Dirt Cheap Cigarettes and eSmokes agreed file reports with the California Board of Equalization providing the Board with information concerning approximately 350,000 California customers who purchased their cigarettes since January 1, 2000. Those records will provide the Board with the necessary information to attempt to collect the more than $11.5 million in taxes owed to the State of California from those customers. The Attorney General also obtained a $4.3 default judgment, plus attorneys’ fees and costs against the remaining Internet cigarette seller, Smokin4Less. The Attorney General filed lawsuits against these 6 retailers in April, 2003, charging them with unfair and deceptive business practices, and California’s two non-face-to-face statutes enacted to prohibit Internet cigarette sales to children and to prevent tax evasion.
eSmokes, Inc. Stipulated Final Judgment and Permanent Injunction dated January 3, 2005, pdf,
LLP Enterprises Stipulation for Entry of of Final Judgment dated May 7, 2004, pdf,
Dirtcheapcig.com Stipulated Consent Judgment and Permanent Injunction dated September 17, 2004, pdf, and
E-Commerce Today Stipulated Final Judgment and Permanent Injunction dated April 21, 2004, pdf.
In a unanimous, published decision issued on September 26, 2007, the U.S. Court of Appeals for the Ninth Circuit upheld a U.S. District's Court's dismissal of a case brought by Steve Sanders on behalf of all California smokers. Sanders alleged that the 1998 tobacco Master Settlement Agreement created a cartel of the major U.S. cigarette makers, allowing them to charge "supra competitive" prices for their product. The appellate court concluded that Sanders had not alleged sufficient facts to show that the MSA and two related state laws violated the federal Sherman Act. The court also held that the state Attorney General and the tobacco company defendants are immune from liability under the Sherman Act because the MSA is a litigation settlement that was approved by a state court and the two state laws are acts of the state legislature.
In People v. House of Prince, San Diego Superior Court, the Attorney General announced a $55.4 million settlement of this MSA enforcement action against a Danish cigarette maker. Despite the fact that the MSA's terms apply to entities that act "in concert or participation with" MSA signatories, like House of Prince, billions of cigarettes manufactured by a Latvian subsidiary and later affiliate of House of Prince were sold in the U.S. without the required MSA payments being made. The cigarettes, which were sold by two U.S. importers, counted as non-participating manufacturer (NPM) cigarettes and, as such, contributed to the market share lost by participating manufacturers in 2000 to 2003 and the resulting NPM adjustment to MSA payments. We won a significant procedural victory in 2004, when the 4th DCA affirmed, in a published decision, that the trial court had properly denied House of Prince's motion to refer the dispute to arbitration. California's share of the settlement is $7.15 million and includes $309,000 as reimbursement for our attorneys' fees and costs. Find a complete listing of payments received by State and local Governments.
With one judge dissenting, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit concluded that the state media campaign did not violate the companies' rights under the First, Fifth and Seventh Amendments to the U.S. Constitution by using cigarette taxes to pay for ads that put the tobacco industry in an unflattering light. (The 9th Circuit later denied a rehearing in the case, and the U.S. Supreme Court declined to review the decision.)
The Federal court dismisses lawsuit filed by tobacco giants R. J. Reynolds and Lorillard which challenged constitutionality of California tobacco education media campaign. Using tobacco excise taxes to fund tobacco control media campaign does not violate companies' rights to freedom of speech, fair jury, and due process. R.J. Reynolds Tobacco Company and Lorillard Tobacco Company v. Diana M. Bonta, Director of the California Department of Health Services and Dileep G. Bal, Acting Chief of the Tobacco Control Section of the California Department of Health Services Case No. CIV S-03-659 LK/GHH
The California Attorney General's Office and the attorneys general of 38 other states and the District of Columbia filed comments on proposed federal regulations governing the tax classification of cigars and cigarettes. Last May the states petitioned the federal government to close a regulatory loophole that has increased youth and adult smoking of “brown” cigarettes. The petition points out a regulatory loophole that allows manufacturers to evade marketing restrictions and higher taxes applying to cigarettes. In proposed regulations, the federal Alcohol and Tobacco Tax and Trade Bureau proposes revised definitions for cigars and cigarettes to ensure that mislabeled “little cigars” –which are actually cigarettes wrapped in brown paper—are classified, taxed and priced as cigarettes.
The Office of the Attorney General and 38 other state attorneys general have petitioned the federal government to close a regulatory loophole that has increased youth and adult smoking of cigarettes disguised as "little cigars." The petition announced May 16 notes that the regulatory loophole allows manufacturers to evade marketing restrictions and higher taxes that apply to cigarettes. The federal Alcohol Tobacco Tax and Trade Bureau (TTB) is being asked to adopt rules revising the definitions of cigars and cigarettes to ensure that "little cigars" – which actually are cigarettes wrapped in brown paper – are classified, taxed and priced as cigarettes.
See also the Marin Institute's report on alcoholic energy drinks at:
The California Attorney General's Office, joined by 36 other attorneys general, praised Beam Global Spirits and Wine, Inc., for adopting new advertising standards intended to reduce exposure to underage persons. Breaking from its competitors, the largest distiller in the U.S., announced that it will make sure that no more than 25% of the audience for any of its TV, radio or print advertisements is under 21 (the current industry standard is 30%) and that no more than 15% of the annual average audience for its TV, radio, and print advertising is underage. Beam's voluntary commitment comes after more than a year of meetings between representatives of Beam and the California Attorney General's Office. Over two years ago the attorneys general called on the alcohol industry to stop overexposing youth to alcohol ads, as the Institute of Medicine had recommended in 2003. In March 2007, acting Surgeon General Kenneth Moritsugu urged the industry to adopt voluntary ad placement standards so as to stop disproportionately exposing youth to ads for alcoholic beverages. In addition, Beam will not introduce or market any flavored malt beverages (sweetened, flavored alcoholic drinks, also known as alcopops, which the AMA and others have found to be particularly popular with teenage girls), will not advertise within 500 feet of schools, playgrounds, or places of worship, will not market its products on college campuses or in connection with Spring Break events, and will adopt enhanced standards for advertising at promotional events and restrictions on brand name merchandise.
Attorney General Announces drug, alcohol and tobacco use among high school students remains steady; study measures Ecstasy use for first time.
Section III (a) of the MSA provides that "No Participating Manufacturer may take any action, directly or indirectly, to target Youth within any Settling State in the advertising, promotion or marketing of Tobacco Products, or take any action the primary purpose of which is to initiate, maintain or increase the incidence of Youth smoking within any Settling State."
The Consent Decree and Final Judgment has an identical provision in section V. A.
The Court of Appeal Published a Decision Affirming Reynolds’ Violation of the Prohibition Against Youth Targeting. This decision is the first in the Nation to enforce the Master Settlement Agreement’s Prohibition Against Youth Targeting.
Attorney General announces, an agreement to remove tobacco ads from news magazines sent to high schools and middle schools.
Attorney General sent a letter to Philip Morris U.S.A. regarding the Discontinuation of "Think. Don't Smoke." Book Cover Distribution to California Schools.
A joint letter from the Office of the Attorney General and Superintendent of Public Instruction Delaine Eastin was sent to California County and District Superintendents Regarding "Think. Don't Smoke" Book Covers from Philip Morris.
The office of the Attorney General filed its complaint in the matter People of the State of California ex rel. Bill Lockyer, Attorney General of the State of California, v. R.J. Reynolds Tobacco Company regarding youth targeting through print advertising placement.
The Attorney General’s Office, in the United States Supreme Court, files its Amicus Curiae Brief for the State of California et al., in Lorillard Tobacco Company v. Reilly. States joined the brief urging the Court to uphold Massachusetts’ tobacco regulatory.
Effective January 1, 2004, the Attorney General must create and maintain a directory of tobacco product manufacturers and their cigarette brands that are lawful for sale in California. (Rev. & Tax. Code, § 30165.1.) For any of its brands to be listed on the directory, a manufacturer must certify annually to the Attorney General that it is either a “Participating Manufacturer” under the 1998 Tobacco Master Settlement Agreement or a “Non-Participating Manufacturer” that is in compliance with certain financial responsibility laws applicable to manufacturers choosing not to join the MSA. The directory is posted on the Attorney General’s public website.
It is illegal in California to sell or distribute brands of cigarettes and roll-your-own (RYO) tobacco brands that are not listed on the directory. A violation of the tobacco directory law may constitute an unlawful business practice, and violators may be subject to stiff fines. The Attorney General enforces the tobacco directory law throughout the state.
It is also illegal in California to sell cigarettes that do not comply with the product-testing, certification, and package-marking requirements of the Cigarette Fire Safety and Firefighter Protection Act. (Health & Saf. Code, §§ 14950-14960.) The purpose of this law is to prevent fires and the death and destruction they cause. A violation of this law may constitute an unlawful business practice, subjecting violators to monetary penalties. The Attorney General enforces the fire-safe-cigarette law throughout the state.
The Riverside County Superior Court awarded $890,391.25 to the Attorney General's Office for attorney and paralegal work, plus the costs of hiring investigators and expert witnesses. Having previously won a $3.5 million judgment and a permanent injunction against Black Hawk Tobacco, Inc., and its owner Frederick McAllister (see July 2012 item, below), the Attorney General is entitled to reasonable attorneys' fees and costs.
In July 2012, a superior court judge in Indio, Riverside County, granted the Attorney General’s motion for summary judgment in this unfair business practices case against a Palm Springs tobacco retailer. The defendants, Black Hawk Tobacco, Inc., and its owner, Frederick McAllister, sold contraband cigarettes (untaxed, off-directory, non-fire-safe-certified brands) in four smoke shops and by mail order until May 2009, when the court preliminarily enjoined them from further illegal sales. That injunction was upheld on appeal in July 2011. Defendants claimed various exemptions based on McAllister’s membership in a federally recognized Indian tribe and on the business's location on the Aqua Caliente Indian Reservation. The court rejected those claims, holding that no federal law preempted the state laws we sought to enforce and that state interests outweighed any countervailing federal or tribal interests. The Tribe was supportive of our action. We then sought summary judgment on five causes of action, and the trial court granted the motion in full, awarding over $3.5 million in civil penalties and entering a permanent injunction.
On February 18, 2011, the California Attorney General’s Office entered into a Stipulated Judgment and Permanent Injunction with Cathedral City Ventures, LLC dba 7 Leaf Trading Post. The Court found that Cathedral City Ventures, LLC dba 7 Leaf Trading Post violated the California tobacco directory law, the Cigarette Fire-Safety and Firefighter Protection Act, and the Contraband Cigarette Trafficking Act. The retailer was selling cigarettes that were untaxed, unstamped, and not certified as fire-safe to the general public. If Cathedral City Ventures, LLC dba 7 Leaf Trading Post violates this stipulation, the Court will order penalties of $5,000 for each violation.
On February 14, 2011, the California Attorney General’s Office entered into a Stipulated Judgment and Permanent Injunction with Rhonda R. Gasaway, individually and Native Made Tobacco. The Court found that Rhonda R. Gasaway and Native Made Tobacco violated the California tobacco directory law, the Cigarette Fire-Safety and Firefighter Protection Act, and the Contraband Cigarette Trafficking Act. The retailer was selling cigarettes that were untaxed, unstamped, and not certified as fire-safe to the general public. If Rhonda R. Gasaway or Native Made Tobacco violates this stipulation, the Court will order penalties of $5,000 for each violation.