Prohibition of Cartoons
Both the Master Settlement Agreement (MSA) § III(b) and the Consent Decree § V.B. prohibit the use of cartoons in tobacco advertising. The term "Cartoon" is defined as: "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).
Through protracted litigation, the Attorney General successfully enforced the cartoon ban against R.J. Reynolds’ "Farm Rocks" advertising campaign. This campaign used cartoons in its advertising of Camel cigarettes in magazines, newspapers, posters, flyers, projections and videos at musical events. In April 2009, the California Superior Court ruled that Reynolds had used cartoons in its Farm Rocks ad campaign in violation of the MSA’ cartoon ban. This ruling was later affirmed on appeal. The appellate court found that Reynolds' Farm Rocks images were "cartoons" under the Consent Decree and MSA. It held that the definition includes objects with unnatural abilities like tractors and radios that fly and televisions that grow on plant stems. The court also noted that the fanciful Farm Rocks images would appeal to youth. The trial and appellate court decisions regarding the merits are available here.
The People also were awarded $3 million in attorneys fees for their work in the case. The trial court initially awarded the People $2.9 million in attorneys’ fees. On appeal, the appellate court ruled that the People are entitled to market rates if they were the prevailing party under Civil Code Section 1717 and remanded the case to determine whether they were the prevailing party under this standard. On remand, the superior court found that they were the prevailing party and ordered Reynolds to pay the full $2.9 million fee award. This ruling was affirmed on appeal. The trial and appellate decisions regarding the attorneys’ fee awards are available here.
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.
- March 2010 - Vermont court rules R.J. Reynolds lacked scientific basis for health claims in marketing Eclipse brand cigarettes.
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 (combustible) cigarettes. Reynolds further claimed that it had scientific studies supporting these health claims. The Vermont Attorney General, with assistance from the Attorneys General from California and seven other states, 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 court 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 a 116 page opinion, the judge found that there was no evidence that a reduction in certain toxins produced any reduced risk of disease. 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 MSA’s prohibition against making any material misrepresentations of fact regarding the health consequences of using any tobacco product, and also violated the Vermont Consumer Fraud Act.
- March 2010 - Santa Fe Natural Tobacco Company agrees to use disclaimers in advertisements for organic tobacco.
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 MSA 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."
Restrictions on Brand Name Sponsorship
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. (See MSA §II(j).) 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 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).)
- February 2009 - U.S. Smokeless Tobacco Company agrees to stop promoting Copenhagen brand at more than one professional bull riding tour.
The San Diego Superior Court entered a stipulated judgment settling California’s dispute with U.S. Smokeless Tobacco Company (USSTC) 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 under 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.
- August 2007 - California settles suit with U.S. Smokeless Tobacco Co. for promoting the Skoal brand name at National Hot Rod Association drag races.
The Attorney General's Office reached a settlement with U.S. Smokeless Tobacco Company (USSTC), resolving California's lawsuit alleging that USSTC violated the 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 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 agreed never to expand its brand name sponsorship beyond the one series, one competition and one car, that it now sponsors.
- March 2003 - Supreme Court denies R.J. Reynolds’ request for review of case involving outdoor advertising restrictions.
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 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. (See People of the State of California v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 132 Cal. Rptr. 2d. 151.)
- July 2002 - California reaches agreement with U.S. Smokeless Tobacco Company regarding adult-only facilities, free sampling restrictions, and inappropriate signage.
The Attorney General entered into a Memorandum of Understanding with U.S. Smokeless Tobacco Company (USSTC). The agreement resolved 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 required USSTC 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.
- November 2001 - Court rules against R.J. Reynolds for advertising at outdoor sporting events.
The court ruled against R.J. Reynolds in the Outdoor Advertising at Sporting Events case.
- May 2000 - California reaches settlement agreement with R.J. Reynolds regarding brand name sponsorship events.
The Attorney General entered into a Settlement Agreement with R.J. Reynolds concerning activities at Brand Name Sponsorship Events.
Prohibition Against Free Sampling
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.
- May 2006 - R.J. Reynolds to pay $5 million to settle free-sampling lawsuit.
The Attorney General announced that R.J. Reynolds Tobacco Company (RJR) will pay $5 million to resolve a lawsuit in which the California Supreme Court found RJR liable for violating state law when it distributed 108,155 free packs of cigarettes on public grounds. Under the settlement, RJR agreed to 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.
- December 2005 - California Supreme Court finds R.J. Reynolds liable for violating state free-sampling ban.
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. The Court sent the case back to the trial court for further proceedings regarding the size of the fine Reynolds would pay.
- March 2004 - Court orders R.J. Reynolds to pay settlement fee to help fund projects for tobacco control for California youth and young adults.
The San Diego Superior Court approved a settlement of claims against R.J. Reynolds and its marketing agent for distributing free cigarettes in violation of the MSA and California law. The court required payment of $60,000 to fund projects to support youth and young adult tobacco control .
- October 2003 - Court of Appeal upholds $14.8 million judgment against R.J. Reynolds.
The Court of Appeal upheld a trial court decision that R.J. Reynolds violated California's tobacco sampling law, and confirmed a $14.8 million civil penalty against R.J. Reynolds.
- January 2001 - Settlement reached with R.J. Reynolds over free cigarette mailings.
The Attorney General reached a settlement with R.J. Reynolds over free cigarette mailings and Reynolds agreed to take further steps to protect against marketing to children.
- June 2001 - Final Judgment and permanent injunction ordered against Swedish Match North America, Inc.
A judgment and permanent injunction were entered against Swedish Match North America, Inc. for violating the prohibition against free sampling of smokeless tobacco.
- December 2000 - California reaches settlement with U. S. Tobacco Company.
The Attorney General reached a settlement with United States Tobacco Company over alleged advertisement violations, and U.S. Tobacco agreed to run ads against tobacco use.
Litigation Regarding Electronic Cigarettes and "Vape" Devices
Electronic cigarettes (also known as e-cigarettes and e-cigs) are battery powered devices designed to look and feel like regular cigarettes, but they emit aerosol rather than smoke. The cartridges typically contain liquid nicotine and various flavors. To date, no e-cigarettes or vape devices have been approved by the FDA. Preliminary tests by the FDA, the California Department of Health, and many other entities, indicate that e-cigarettes contain many impurities and some contain dangerous chemicals. E-cigarettes are not governed by the Master Settlement Agreement or by most 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, benefits, or effectiveness. The Office is also concerned about the use of flavors, many of which are likely to be appealing to youth. Many e-cigarettes are in violation of California’s Proposition 65 which requires health warnings about dangerous chemicals.
The sale of e-cigarettes to minors is forbidden in California. (Health & Safety Code § 119405).
The Office has sent out hundreds of cease and desist letters or investigatory letters to e-cigarette and vape manufacturers, distributors and retailers, and is investigating a number of electronic cigarette companies selling e-cigarette products on the Internet to ensure compliance with the statute prohibiting sales to minors as well as other consumer protection provisions. Many companies have come into compliance voluntarily.
- November 2010 - Settlement with Smoking Everywhere approved by Court.
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 settled the lawsuit against Smoking Everywhere and in November 2010, the Alameda County Superior Court entered a consent judgment against Smoking Everywhere very similar to the agreement reached with Sottera/NJOY (below). 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.
- August 2010 – Attorney General settles claims against Sottera/NJOY.
The Alameda County Superior Court 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.
Responsible Tobacco Retailing -- Preventing Sales to Minors
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:
- Train employees on state and local laws and company policies prohibiting tobacco sales to minors, including explaining the health-related reasons for laws that restrict youth access to tobacco;
- Check the ID of any person purchasing tobacco products when the person appears to be under the age of 27, and accept only valid government-issued photo ID as proof of age;
- Use cash registers programmed to prompt ID checks on all tobacco sales;
- Prohibit self-service displays of tobacco products, the use of vending machines to sell tobacco products and the distribution of free samples;
- Prohibit the sale of smoking paraphernalia to minors;
- Hire an independent entity to conduct unannounced and random compliance checks;
- Limit tobacco advertising to product display areas and to brand names, logos, and prices; and
- Take various steps to promote responsible tobacco retailing by the company’s franchisees.
The Attorney General has entered into 13 multi-state agreements on behalf of the State of California, with Circle K, 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:
California Department of Public Health, Stop Tobacco Access to Kids Enforcement (STAKE):
U.S. Food and Drug Administration, Center for Tobacco Products Retail Information:
Campaign for Tobacco Free Kids:
- July 2011 - Attorneys General reach agreement with Circle K Stores, Inc. and Mac’s Convenience Stores, LLC, to adopt new procedures to reduce tobacco sales to minors.
- April 2010 — Valero Retail Holdings, Inc. and Valero Marketing Supply Co. to adopt new procedures to reduce tobacco sales to minors.
- September 2008 - Motiva Enterprises, LLC and Shell Oil Products US, to adopt new procedures to reduce tobacco sales to minors.
- October 2007 - Attorney General reaches agreement with Kroger (including Ralphs, Food 4 Less, Foods Co. and Quik Stop), the nation’s largest grocery chain, to adopt new procedures to reduce tobacco sales to minors.
- June 2006 - Chevron Products Company to adopt new procedures to reduce sales of tobacco products to minors.
- February 2006 – CVS Pharmacy, Inc., the nation’s largest retail pharmacy, to adopt new procedures to reduce tobacco sales to minors.
(CVS has since that date ceased sales of tobacco products.)
Assurance of Voluntary Compliance, pdf
- December 2005 - ConocoPhillips Co. to adopt new procedures to reduce tobacco sales to minors.
- August 2005 - 7-Eleven, the world’s largest convenience store chain, to adopt new procedures to reduce tobacco sales to minors.
- December 2004 - The Attorney General and the City of Los Angeles enter into a Stipulated Final Judgment with Safeway, Inc. to adopt new procedures for personnel practices relating to the sale of tobacco to minors, tobacco retailing practices and policies and compliance checks regarding the sale of tobacco products.
- September 2004 - Rite Aid Corporation to adopt new procedures to reduce tobacco sales to minors.
- September 2003 - Wal-Mart, the world’s largest retailer, to adopt new procedures to reduce tobacco sales to minors.
- July 2003 - ARCO to adopt new procedures to reduce tobacco sales to minors.
- August 2002 - ExxonMobil to adopt new procedures to reduce tobacco sales to minors.
- February 2002 - Walgreens to adopt new procedures to reduce tobacco sales to minors.
- July 2002 - California wants "Tobacco Candy" project regulated.
The Office of the Attorney General Calls on FDA to Regulate New "Tobacco Candy" Product.
Office of the Attorney General Press Release
Restrictions on Internet Tobacco Sales
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."
- June 2012 - California and 39 states sign onto Amicus Brief re PACT Act.
California, 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, 826 F. Supp. 2d 279 (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-appealed. (See Gordon v. Holder (D.C. Cir. 2013) 721 F.3d 638.)
California also signed onto an amicus brief in Red Earth LLC v. United States, 728 F. Supp. 2d 238 (W.D.N.Y. 2010), involving virtually identical legal issues as those in Gordon v. Holder. (See Red Earth LLC v. United States (2d Cir. 2011) 657 F.3d 138, vacated by Red Earth LLC v. United States, 2013 WL 3810516 (W.D.N.Y.).)
- September 2009 - Attorney General enters into a stipulated judgment with the Hemi Group.
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 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.
- August 2008 through January 2009 - Attorney General enters into assurances of discontinuance with a California bank and a California third party processor.
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.
- June 2008 - Attorney General sues Internet cigarette seller, Scott Maybee, for selling cigarettes illegally over the Internet and by mail order to California consumers.
The Attorney General sued Scott Maybee, a member of the New York Seneca Tribe, in 2005, seeking injunctive relief and civil penalties. The Attorney General alleged that Maybee engaged in at least 166,716 transactions with California consumers in which he violated Rev. & Tax §30165.1 (tobacco directory law), Health & Saf. Code §14951(fire-safe cigarettes), Bus. & Prof. Code § 22963 and Rev. & Tax Code § 30101.7 (California’s remote cigarette sales laws), and Bus. & Prof. Code § 17200 (unfair competition law).
The court granted the People’s motion for summary adjudication on three causes of action—Bus. & Prof. Code §§ 22963 and 17200, and Rev. & Tax Code § 30101.7. The court denied the 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 and costs of $7,679.11. Neither side appealed the judgment. The court awarded California $242,868.00 in attorneys’ fees and denied California’s request for expert fees and additional costs.
- January 2006 - Tobacco manufacturer adopts protocols to reduce illegal sales of cigarettes over the Internet and through the mail.
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.
- January 2004 through December 2005 - Attorney General enters into stipulated judgments with five Internet tobacco sellers and obtains a default judgment against a sixth retailer.
The Attorney General entered into stipulated judgments with five retailers, Dirt Cheap Cigarettes, eSmokes, Inc., Cyco.net, Inc., LLP Enterprises and eCommerce Today, Ltd., that were 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 to 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.
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.
Defending the Master Settlement Agreement
- September 2007 - Ninth Circuit rejects antitrust challenge to the MSA.
In Sanders v. Brown (9th Cir. 2007) 504 F.3d 903, the U.S. Court of Appeals for the Ninth Circuit upheld dismissal of a case brought by Steve Sanders on behalf of all California smokers. Sanders alleged that the MSA 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.
Court's Opinion, pdf.
Enforcing Master Settlement Agreement Payments
- 2013 - California recovers $375 million in disputed MSA settlement payments.
- In April 2013 California received over $373 million and in October 2013 California received $2.3 million pursuant to a multi-state settlement of a major dispute arising under the Master Settlement Agreement. The dispute involved the Non-Participating Manufacturer Adjustment, which allows Participating Manufacturers to reduce their MSA settlement payments to any State that does not diligently enforce a state escrow law applicable to Non-Participating Manufacturers. The settlement resolved NPM Adjustment disputes for sales that occurred between 2003-2014. Pursuant to a long-standing side agreement, one half of the settlement funds were disbursed to local government. The settlement Term Sheet and spreadsheet showing the amount disbursed to each county and eligible city can be viewed here.
- December 2006 - Attorney General wins $55.4 million settlement against Danish cigarette maker.
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. California's share of the settlement was $7.15 million and included $309,000 as reimbursement for attorneys' fees and costs. Here is a complete listing of payments received by State and local Governments.
Defending Proposition 99
- May 2004 - 9th Circuit upholds lower court decision dismissing tobacco companies' challenge to state's anti-industry ads.
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. (See R.J. Reynolds Tobacco Co. v. Shewry (9th Cir. 2004) 384 F.3d 1126 opinion amended and superseded on denial of reh'g, (9th Cir. 2005) 423 F.3d 906.)
- July 2003 - Court dismisses lawsuits filed by tobacco giants, R.J. Reynolds and Lorillard.
The Federal district court dismissed a lawsuit filed by R.J. Reynolds and Lorillard which challenged the 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. (See R.J. Reynolds Tobacco Co. v. Bonta (E.D. Cal. 2003) 272 F.Supp.2d 1085 aff'd sub nom. R.J. Reynolds Tobacco Co. v. Shewry (9th Cir. 2004) 384 F.3d 1126 opinion amended and superseded on denial of reh'g, (9th Cir. 2005) 423 F.3d 906.)
- March 2007 - Comments filed by States on proposed federal regulations governing tax classifications for cigars and cigarettes.
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.
- May 2006 - States file petition asking the federal Alcohol Tobacco Tax and Trade Bureau for clarification of the definitions of cigars, cigarettes and little cigars.
The Attorney General and 38 other state attorneys general 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.
Youth Access to Alcohol
- The Attorney General's office has been actively involved in issues concerning youth access to alcohol since the formation in 2005 of the Youth Access to Alcohol Committee of the National Association of Attorneys General. We negotiated a commitment from Beam Global in 2007 to adopt standards to limit youth exposure to its alcohol advertising, which standards were endorsed by other manufacturers and the National Alcohol Beverage Control Association (NABCA). Working with our colleagues in other states, in 2008 we helped lead a multi-state effort that resulted in Assurances of Voluntary Compliance with Anheuser-Busch and with MillerCoors to cease the manufacture and distribution of alcoholic energy drinks. We continue to investigate the marketing of these dangerous products, as well as other flavored malt beverages which research has shown are particularly appealing to underage drinkers and the placement of alcohol advertising that disproportionately exposes youth.
- May 2007 - Beam Global Spirits and Wine, Inc. praised for adopting standards to reduce underage drinking.
The Attorney General, 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.
- September 2002 - Study claims drug, alcohol and tobacco use remains steady among high school students; use of ecstasy also considered.
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.
- December 2004 – Court approves settlement with RJR Tobacco concerning youth targeting in print advertising.
The San Diego Superior Court approved the settlement of California’s litigation against RJR Tobacco Company for unlawfully targeting minors in its print advertising. The settlement resolved claims that RJR’s advertising placement practices violated the prohibition against targeting youth in advertising contained in the MSA and accompanying Consent Decree. The settlement required RJR to refrain from advertising in magazines with high youth readerships and to ensure that its advertising reaches mainly adults. The settlement also required RJR to report on its advertising placements and to pay $17.25 million in sanctions and attorneys’ fees.
- March 2004 - Court of Appeal publishes decision against R.J. Reynolds.
- The Court of Appeal affirmed the trial court decision that Reynolds violated the prohibition against youth targeting. (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal.App.4th 1253, as modified on denial of reh'g (Mar. 19, 2004).) This decision was the first in the nation to enforce the MSA’s prohibition against youth targeting.
- November 2003 - Attorney General spearheads removal of tobacco ads from magazines in high schools.
The Attorney General announced an agreement to remove tobacco ads from news magazines sent to high schools and middle schools.
- June 2002 - $20 million fine against R.J. Reynolds for targeting minors with ads.
- See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (Cal. Super. Ct., June 6, 2002, GIC 764118) 2002 WL 1292994, at *1, as modified on denial of reh'g (Mar. 19, 2004) aff'd in part, rev'd in part, (2004) 116 Cal.App.4th 1253
- April 2001 - Attorney General demands that Philip Morris cease distribution of book cover "Think. Don't Smoke." to California schools.
The Attorney General sent a letter to Philip Morris U.S.A. regarding the discontinuation of distribution of the "Think. Don't Smoke." book cover to California schools.
- April 2001 - Attorney General teams up with Superintendent of Public Instruction to stop book cover campaign "Think. Don't Smoke."
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 distribution of "Think. Don't Smoke." book covers from Philip Morris.
- March 2001 - California files print advertising lawsuit against R.J. Reynolds Tobacco Company.
The office of the Attorney General filed a complaint against R.J. Reynolds Tobacco Company regarding youth targeting through print advertising placement.
- March 26, 2001 - California files amicus curiae brief in Lorillard suit.
The Attorney General filed an amicus brief in Lorillard Tobacco Co. v. Reilly (2001) 533 U.S. 525. States joined the brief urging the United States Supreme Court to uphold Massachusetts’ regulation restricting outdoor advertising of tobacco products.
Tobacco Directory and Cigarette Fire-Safety Enforcement
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 constitutes an unlawful business practice, and violators may be subject to stiff fines and injunction. 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, injunction, and attorney’s fees. The Attorney General enforces the fire-safe-cigarette law throughout the state.
- January 2015 – Court grants People's Motion for Summary Adjudication, denies Defendant's Motion for Summary Judgment, and enters permanent injunction against distributor and retailer of unlawful cigarettes.
The Humboldt County Superior Court granted the People's motion for summary adjudication against a tobacco distributor and retailer for the sale of illegal cigarettes. The Court ruled that Defendant Ardith Huber, individually and doing business as Huber Enterprises, had violated several state laws by selling cigarettes that were not listed on the California Tobacco Directory or certified as fire-safe by the State Fire Marshal, and by not collecting state excise tax due on these cigarettes. Defendant claimed various exemptions based on her membership in a federally recognized Indian tribe and the business’s location in Indian Country. The trial court rejected Defendant's arguments and permanently enjoined Defendant from selling any untaxed cigarettes that are not listed on the California Tobacco Directory or certified as fire-safe to persons who are not members of the Wiyot Tribe
- April 2014 – Court grants in part People’s Motion for Summary Adjudication against retailer of unlawful cigarettes and permanently enjoins retailer.
The Shasta County Superior Court granted the People’s motion for summary adjudication. Defendant Darren Rose, with stores in Yreka and Ono, California, was selling to the general public cigarettes that were not lawful for sale in California, untaxed, and not certified as fire-safe. Defendant claimed various exemptions based on his membership in a federally recognized Indian tribe and the businesses’ location in Indian Country. The court rejected Defendant’s arguments that his membership in a federally recognized Indian tribe and the businesses’ location in Indian Country barred the People’s suit. The court permanently enjoined Defendant from selling any cigarettes that are not on the State’s tobacco directory and certified as fire-safe to non-members of any federally recognized Indian tribe in California.
- November 2013 - Court grants in part People’s Motion for a Preliminary Injunction against retailer and distributor of unlawful cigarettes.
The Humboldt County Superior Court granted in part the Attorney General’s motion for a preliminary injunction against a tobacco retailer prohibiting the sale of non-fire-safe cigarettes to the general public. Defendant Ardith Huber, individually and doing business as Huber Enterprises, was selling to the general public cigarettes that were not lawful for sale in California. The trial court found that the Attorney General was likely to prevail on the merits of the case and preliminarily enjoined Defendant from selling any cigarettes that are not certified as fire-safe to persons who are not members of the Wiyot Tribe.
In April 2014, the Humboldt County Superior Court granted the People’s request for monetary sanctions after determining that Defendant had violated the preliminary injunction (above) by possessing for sale and selling cigarettes not certified as fire-safe to a person who was not a member of Defendant’s tribe. The court also granted the People’s motion to modify the preliminary injunction on the basis that modification was necessary to prevent future violations.
- July 2013 - Court awards Attorney General almost $500,000 in attorney’s fees in Nativebuy case.
The Riverside County Superior Court concluded that the Attorney General had prevailed on all claims against a retailer that sold unlawful cigarettes, and was entitled to a fee award based on all hours reasonably expended at prevailing market rates for private attorneys in similar cases.
- December 2012 - Court assesses $5 million penalty against Nativebuy smoke shop.
The Riverside County Superior Court found that Nativebuy had sold contraband cigarettes almost 190,000 times before the shop shut down in November 2010. Nativebuy marketed an illegal exemption from state tobacco taxes and sold cigarettes that were not listed on the State Tobacco Directory and had not been certified to the California Fire Marshal as "fire-safe."
- November 2012 - Court orders tobacco seller to pay Attorney General's attorney’s fees and costs.
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 court concluded that the Attorney General was entitled to reasonable attorney’s fees and costs.
- July 2012 - Court assesses $3.5 million fine and appellate court upholds permanent injunction against tobacco seller.
In July 2012, the Riverside County Superior Court 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. (See People ex rel. Brown v. Black Hawk Tobacco, Inc. (2011) 197 Cal.App.4th 1561.) 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 the People sought to enforce and that state interests outweighed any countervailing federal or tribal interests. The Tribe was supportive of the People’s action. The People 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.
- February 2011 – California obtains permanent injunction against Cathedral City Ventures, LLC dba 7 Leaf Trading Post.
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.
- February 2011 - California obtains permanent injunction against Rhonda R. Gasaway and Native Made Tobacco.
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.