People ex rel. Lockyer v. Reynolds Tobacco

• Decision Date: 25 February 2004
• Docket Number: No. D040854,D040854
• Citation: 11 Cal.Rptr.3d 317,116 Cal.App.4th 1253
• Court: California Court of Appeals Court of Appeals
• Parties: The PEOPLE ex rel. Bill LOCKYER, as Attorney General, etc., Plaintiff and Respondent, v. R.J. REYNOLDS TOBACCO COMPANY, Defendant and Appellant.

11 Cal.Rptr.3d 317

116 Cal.App.4th 1253

The PEOPLE ex rel. Bill LOCKYER, as Attorney General, etc., Plaintiff and Respondent, v. R.J. REYNOLDS TOBACCO COMPANY, Defendant and Appellant.

No. D040854

Court of Appeal, Fourth District, Division 1

February 25, 2004

As Modified on Denial of Rehearing March 19, 2004

Review Denied June 9, 2004

Paul, Weiss, Rifkind, Wharton & Garrison, Jeh Charles Johnson, Marc Falcone, Paul H. Cohen, Amelia A. Cottrell; Howard, Rice, Nemerovski, Canady, Falk & Rabkin, and H. Joseph Escher III, for Defendant-Appellant.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Dennis Eckhart, Senior Assistant Attorney General, Laura Kaplan, Alan Lieberman and Karen Leaf, Deputy Attorneys General, for Plaintiff and Respondent.

G. Steven Rowe, Attorney General, and Melissa Reynolds O'Dea, Assistant Attorney General (Maine), Christine O. Gregoire, Attorney General, and David M. Horn, Assistant Attorney General (Washington), for 38 states, the District of Columbia and Puerto Rico as Amici Curiae on behalf of Plaintiff and Respondent.

McDONALD, J.

Defendant R.J. Reynolds Tobacco Company (Reynolds) appeals a judgment in favor of plaintiff the People of the State of California on the People's complaint for an enforcement order of a consent decree (Consent Decree) entered on a master settlement agreement (MSA). Reynolds contends the court erred by (1) concluding Reynolds violated an MSA provision incorporated into the Consent Decree prohibiting Reynolds from targeting youth in its print advertising of tobacco products, (2) issuing an impermissibly vague injunction, and (3) imposing $20 million in sanctions on Reynolds. We reverse the imposition of sanctions and otherwise affirm the judgment.

I INTRODUCTION

We state the facts and reasonable inferences drawn from the evidence most favorably to the People as the party prevailing at trial. (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 544, 138 Cal.Rptr. 705, 564 P.2d 857, disapproved on another point in Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 581, 34 Cal.Rptr.2d 607, 882 P.2d 298; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362; Shapiro v. San Diego City Council (2002) 96 Cal.App.4th 904, 912, 117 Cal.Rptr.2d 631; Passante v. McWilliam (1997) 53 Cal.App.4th 1240, 1243, fn. 2, 62 Cal.Rptr.2d 298.)

"Tobacco manufacturer Reynolds promoted its tobacco products in California." (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 520, 132 Cal.Rptr.2d 151, fn. omitted (Lockyer).) In doing so, Reynolds and its media planner developed plans for advertising its products in print media, including magazines. Reynolds's media plans identified the magazines in which to place advertisements, formed its magazine approval policy and created media advertising schedules¹ by reference to survey data measuring magazine readership collected and analyzed by national research services, MediaMark Research Inc. (MRI) and, to a lesser extent, Simmons Market Research Bureau (Simmons). MRI's data do not show how many people have seen an advertisement in a magazine but instead simply quantify the people who read or looked at an issue of the magazine. Young adult smokers age 21 to 34 were generally the stated target of Reynolds's magazine tobacco advertising.

"In November 1998 Reynolds and the People signed the MSA that settled the People's litigation against various tobacco product manufacturers, including Reynolds." (Lockyer, supra, 107 Cal.App.4th at p. 520, 132 Cal.Rptr.2d 151, fn. omitted.) "Further, the parties stipulated to entry of a consent degree and final judgment. As part of the consent decree, the Superior Court of San Diego County approved the MSA (People v. Philip Morris, Inc. (1998, No. JCCP4041, 2000 WL 34016276)) [and] retained exclusive jurisdiction for purposes of implementing and enforcing the MSA." (Lockyer, at p. 520, 132 Cal.Rptr.2d 151.)

"The MSA placed ... detailed express restrictions on Reynolds's advertising and marketing practices." (Lockyer, supra, 107 Cal.App.4th at p. 520, 132 Cal.Rptr.2d 151.) MSA, subsection III(a), entitled "Prohibition on Youth Targeting," provided: "No Participating Manufacturer may take any action, directly or indirectly, to target Youth within any Settling State [including California] in the advertising, promotion or marketing of Tobacco Products...."² Consent Decree, section V(A) permanently enjoined Reynolds from "[t]aking any action directly or indirectly, to target Youth within the State of California in the advertising, promotion or marketing of Tobacco Products...."

The People's litigation settled under the MSA included allegations that Reynolds had targeted its advertising to youth. However, after entering into the MSA, Reynolds initially made no changes to its media advertising schedules, did not include in its media plans the goal of reducing exposure of its advertising to youth and did not determine the extent its advertising was exposed to youth. Although Reynolds eventually made changes to its media advertising schedules, those changes had minimal impact in reducing exposure of its advertising to youth. After the MSA was signed, Reynolds was more likely to advertise in magazines known to have a higher level of exposure to youth than before the MSA was signed. After the MSA was signed, Reynolds's print media advertising policy did not significantly avoid exposure of its advertising to youth.

Although the MSA was signed in 1998, during 1999 through 2001 Reynolds's tobacco print advertising was exposed to youth at levels virtually identical to the levels of its targeted group of young adult smokers. Those comparable exposures suggested Reynolds's print advertising was aimed at two audiences. If Reynolds had been aiming exclusively at young adult smokers, the exposure of its advertising to that group would have been higher than to youth. Because the MRI and Simmons data were available to Reynolds, Reynolds could have reasonably anticipated the comparable exposures of its print advertising to young adult smokers and youth. Alternative advertising strategies were available to Reynolds. Reynolds could have modified its existing advertising policies and practices and created alternative media advertising schedules to reduce the exposure of magazines containing Reynolds's advertising to youth while retaining a reasonably good exposure to young adult smokers. The advertiser's selection of the magazines and the number of advertising insertions into those magazines determine the number of people exposed to the advertising within and outside the stated target group. An advertiser can target specific smoker demographic groups by selecting the magazines into which its advertisements are placed. The key to reducing advertising exposure to youth without a commensurate reduction in exposure to adult smokers is to select magazines with high adult-smoker-to-youth audience ratios and magazines with audiences containing a low composition of youth. Further, advertising in numerous magazines results in a cumulative effect of advertising exposure to youth. Reynolds could have reduced the number of magazines in which it advertised to avoid those with a high youth audience while continuing its advertising exposure to young adult smokers. Although Reynolds was aware it could adopt media advertising schedules less likely to expose its advertising to a high number of youth while maintaining a strong exposure of its advertising to young adult smokers, it chose not to do so.

A dispute arose between the parties about whether Reynolds was complying with subsection III(a) of the MSA and subsection V(A) of the Consent Decree. The People demanded that Reynolds modify its advertising practices. Communications between the parties did not resolve the matter, and in March 2001 the People filed this lawsuit alleging Reynolds violated the MSA and Consent Decree by targeting youth through placement of its tobacco advertisements in national consumer magazines in the years 1999, 2000 and 2001.³ THE PEOPLE'S LAWSUit Sought enforcement of the msa and consent dECRee and sanctions for Reynolds's alleged violation of the Consent Decree provisions prohibiting the targeting of tobacco advertising to youth.

Before and during trial, Reynolds moved to exclude evidence of MRI's survey data, including its teenage audience data. Reynolds also moved to preclude the People's experts from offering opinion testimony based on those data. At trial, the parties litigated the accuracy and admissibility of MRI's data. The trial court overruled Reynolds's foundational objections to evidence of those data, concluding the People established an adequate foundation for admissibility of that evidence.

The trial court found that after "the MSA was signed, [Reynolds] ... exposed Youth to its tobacco advertising at levels very similar to those of targeted groups of adult smokers." The court also found that between 1997 and 2001, "the delivery of print media advertising by [Reynolds] to its stated target audience of young adult smokers and to Youth age 12 to 17 is essentially the same." Based on those findings, the court concluded Reynolds violated the MSA and Consent Decree's prohibition against targeting youth. The court entered judgment permanently enjoining Reynolds from continuing to violate MSA, subsection III(a) and Consent Decree, section V(A) "by exposing Youth to its tobacco advertising at levels similar to the levels of exposure of adult smokers." The judgment also ordered Reynolds to (1) adopt reasonable measures designed to reduce exposure of its advertising to youth to a level significantly lower than the exposure level of its advertising to its stated target of young adult smokers, and (2) use reliable means such as the MRI and Simmons data to measure and demonstrate whether Reynolds was achieving success toward that goal. Further, based on...