Hood ex rel. State Tobacco Litigation, 2006-SA-01088-SCT.

• Decision Date: 14 June 2007
• Docket Number: No. 2006-SA-01088-SCT.,2006-SA-01088-SCT.
• Citation: 958 So.2d 790
• Parties: In re Jim HOOD, Attorney General, ex rel., STATE of Mississippi TOBACCO LITIGATION. The Partnership for a Healthy Mississippi, Intervenor, v. State of Mississippi, by and Through Governor Haley Barbour, The Mississippi Division of Medicaid in the Office of the Governor, and The Mississippi Health Care Trust Fund.
• Court: Mississippi Supreme Court

958 So.2d 790

In re Jim HOOD, Attorney General, ex rel., STATE of Mississippi TOBACCO LITIGATION.

The Partnership for a Healthy Mississippi, Intervenor, v. State of Mississippi, by and Through Governor Haley Barbour, The Mississippi Division of Medicaid in the Office of the Governor, and The Mississippi Health Care Trust Fund.

No. 2006-SA-01088-SCT.

Supreme Court of Mississippi.

June 14, 2007.

James W. Craig, Fred L. Banks, Jr., James W. Shelson, Robert Gregg Mayer, Office of the Attorney General, by Mary Jo Woods, Harold E. Pizzetta, III, attorneys for appellants.

John G. Corlew, Virginia T. Munford, James H. Heidelberg, Stephen Walker Burrow, Bradley S. Clanton, Joan Leigh Lucas, attorneys for appellees.

EN BANC.

CARLSON, Justice, for the Court.

¶ 1. On May 30, 2006, the Jackson County Chancery Court entered an order vacating its previously-entered order of, December 22, 2000, which had allocated $20 million annually out of the tobacco settlement funds to the Partnership for a Healthy Mississippi. Additionally, the order of May 30, 2006, required that the payment made to the Partnership in January, 2006, be deposited into the Mississippi Health Care Trust Fund. Aggrieved by the entry of the chancery court order of May 30, 2006, Attorney General Jim Hood, upon relation or information and on behalf of the State of Mississippi and the Partnership for a Healthy Mississippi, has appealed to us. The Governor, Division of Medicaid, and Mississippi Health Care Trust Fund have cross-appealed, asserting that the chancellor erred in failing to transfer the remaining Partnership funds to the Health Care Trust Fund. Finding the December 22, 2000, court-directed allocation of public monies to a private entity to have been an invalid and unenforceable order and thus void ab initio, we affirm the chancery court's May 30, 2006, order vacating its prior order, though for reasons different from those stated by the chancellor. However, we find that the chancellor erred in failing to direct the Partnership for a Healthy Mississippi to relinquish all funds received from the prior, court-ordered diversion of public monies. In the end, we affirm on direct appeal and reverse and render on cross-appeal.

FACTS AND PROCEEDINGS IN THE TRIAL COURT

¶ 2. On May 23, 1994, the Attorney General for the State of Mississippi, Mike Moore, filed a civil action against the tobacco industry in the Chancery Court of Jackson County. The various tobacco companies specifically named in the original litigation as defendants included: The American Tobacco Company; American Brands, Inc.; R.J. Reynolds Tobacco Company; RJR Nabisco, Inc.; Batus Corporation; Brown & Williamson Tobacco Corporation; Philip Morris Companies, Inc.; Philip Morris Incorporated (Philip Morris U.S.A.); Liggett Group, Inc.; Liggett & Myers, Inc.; Brooke Group, Limited; Loews Corporation; Lorillard Corporation; The Council for Tobacco Research — U.S.A. Inc. (Successor to Tobacco Institute Research Committee); The Tobacco Institute, Inc.; Hill & Knowlton, Inc.; Corr-Williams Tobacco Company; Generic Products Corporation; Laurel Cigar & Tobacco Company, Inc.; Long Wholesale, Incorporated; The Lewis Bear Company; Wigley and Culp, Inc. of Gulfport, Mississippi; "A" Through "Z" Entities (Miss. R. Civ. P. 9(h) defendants) (the tobacco defendants). In the State's Complaint, the Attorney General alleged, inter alia,

[T]he State [of Mississippi] has suffered harm and has incurred significant expenses associated with the provision of necessary health care and other such necessary assistance under various State programs to certain eligible citizens numbering in the thousands who suffer, or who have suffered, from tobacco-related injuries, diseases or sickness. This civil action is founded on principles of equity and is brought under Mississippi law to avoid a multiplicity of lawsuits in recovering such damages, and for such other relief as equitably may be obtained, for the harm thus unjustly, intentionally and wrongfully done and continuing to be done to the State and to its citizens by the various defendants, who have been and continue to be unjustly enriched thereby at the expense of the State.

In paragraph 40 of the Complaint, the State of Mississippi further alleged:

The State spends millions of dollars each year to provide or pay for health care and other necessary facilities and services on behalf of indigents and other eligible citizens whose said health care costs are directly caused by tobacco-induced cardiovascular disease, lung cancer, emphysema and other respiratory and other diseases.

Thus, the Complaint laid out four theories of recovery: restitution/unjust enrichment; indemnity; common law public nuisance; and injunctive relief.

¶ 3. Under the first theory of recovery — restitution/unjust enrichment — the State of Mississippi stated in its Complaint:

In equity and fairness, it is the defendants, not the taxpayers of Mississippi, who should bear the costs of tobacco inflicted diseases. By avoiding their own duties to stand financially responsible for the harm done by their cigarettes, the defendants wrongfully have forced the State of Mississippi to perform such duties and to pay the health care costs of tobacco related disease. As a result, the defendants have been unjustly enriched to the extent that Mississippi's taxpayers have had to pay these costs.

¶ 4. As to the second theory of recovery — indemnity — the State of Mississippi contended:

As a direct and proximate result of the breaches of duty and omissions of the defendants as alleged above, the State was obligated to pay and has paid millions of dollars in the past for the provision of necessary medical care, facilities and services for certain of those aforementioned Mississippi citizens injured by the defendants' cigarettes and unable to afford and otherwise obtain such necessary medical care, facilities and services.

¶ 5. Concerning the third theory of recovery — common law public nuisance — the State of Mississippi alleged:

By their wrongful conduct as alleged above, the defendants have intentionally and unreasonably interfered with the public's right to be free from unwarranted injury, disease and sickness, and have caused damage to the public health, the public safety and the general welfare of the citizens of Mississippi, and have thereby wrongfully caused the State to expend millions of dollars in support of the public health and welfare.

¶ 6. Therefore, under the first three theories of recovery, the State of Mississippi sought relief as follows:

a. for damages in an amount which is sufficient to provide restitution and re-pay the State for the sums the State has expended on account of the defendants' wrongful conduct, with said amount to be determined at trial;

b. for damages in restitution for the sums of money to be paid by the State in the future on account of the defendants' wrongful conduct;

c. for pre-judgment interest, as well as the State's reasonable attorneys' fees, expert witness fees and other costs of this action;

d. for punitive damages in such amount as will sufficiently punish the defendants for their conduct and as will serve as an example to prevent a repetition of such conduct in the future;

e. for such other and further extraordinary equitable, declaratory and/or injunctive relief as permitted by law as necessary to assure that the State has an effective remedy; and

f. for such other and further relief, as the Court deems just and proper, to which the State may be entitled.

¶ 7. Finally, under the fourth and last theory of recovery — injunctive relief — the State of Mississippi asked the chancery court for "a prohibitory injunction to be issued against the defendants to prohibit them from promoting the sale of their cigarettes to minors."

¶ 8. Thereafter, the chancery court set this cause for trial to begin on July 7, 1997. However, on July 2, 1997, the State of Mississippi, represented by the Attorney General, and the tobacco defendants, entered into a Memorandum of Understanding (MOU). On July 15, 1997, the MOU was approved by the chancery court, and this action resulted in a stay of the trial until such time as the parties were able to complete a final and comprehensive settlement agreement.

¶ 9. On October 17, 1997, the State of Mississippi and the tobacco defendants executed a Comprehensive Settlement Agreement and Release (Settlement Agreement).¹ The Settlement Agreement provided that an initial lump-sum payment of $170 million was to be paid into a special escrow account (Escrow Account) "for the benefit of the State of Mississippi." Additionally, the Settlement Agreement contemplated that annual settlement payments were to be made to the State of Mississippi in perpetuity on December 31 of each year. Thus, "paid into a special account for the benefit of the State of Mississippi" each year would be the following approximate amounts (in millions):

                Year: 1998 1999 2000 2001 2002 2003 Subsequent Years
                Amount: $68M    $76.5M  $85M   $110.5M  $110.5M   $136M       $136M
                

These annual payments were likewise to be paid into the Escrow Account, subject to the provisions of the Settlement Agreement and a separate Escrow Agreement. The Settlement Agreement further provided that such payments made to the State of Mississippi by the various tobacco defendants "shall be adjusted upward by the greater of 3% or the Consumer Price Index applied each year on the previous year, beginning with the first annual payment."

¶ 10. Along with the initial lump-sum and installment payments, the Settlement Agreement provided for a two-year pilot program "aimed specifically at the reduction of the use of Tobacco Products by children under the age of 18 years." The pilot program was to be funded by a separate, lump-sum payment by the various tobacco companies in the amount of $61.8 million for the benefit of the State of Mississippi. The Settlement Agreement further established...