State ex rel. Goddard v. RJ Reynolds Tobacco Company

• Decision Date: 09 September 2003
• Docket Number: No. 1 CA-CV 02-0238.,1 CA-CV 02-0238.
• Citation: 75 P.3d 1075,206 Ariz. 117
• Parties: STATE of Arizona ex rel., Terry GODDARD, Attorney General, Plaintiff-Appellee, v. R.J. REYNOLDS TOBACCO COMPANY, a New Jersey corporation, Defendant-Appellant.
• Court: Arizona Court of Appeals

75 P.3d 1075

206 Ariz. 117

STATE of Arizona ex rel., Terry GODDARD, Attorney General, Plaintiff-Appellee, v. R.J. REYNOLDS TOBACCO COMPANY, a New Jersey corporation, Defendant-Appellant.

No. -0238.

Court of Appeals of Arizona, Division 1, Department D.

September 9, 2003.

Terry Goddard, Attorney General, By Craig W. Soland, Chief Tobacco Counsel, Douglas E. Lau, Assistant Attorney General, Phoenix, Attorneys for Plaintiff-Appellee.

Shughart Thomson Kilroy Goodwin Raup, P.C., By Brian M. Goodwin, Lori V. Berke, Phoenix, and Howard, Rice, Nemerovski, Canady, Falk & Rabkin, By H. Joseph Escher III, Pamela K. Fulmer, Evan S. Nadel, San Franciso, CA, Attorneys for Defendant-Appellant.

Bill Lockyer, Attorney General of California, Richard M. Frank, Chief Assistant Attorney General, Dennis Eckhart, Senior Assistant Attorney General, Amy J. Hertz, Deputy Attorney General, Michelle Fogliani, Deputy Attorney General, San Diego, CA, Attorneys for Amici Curiae.

OPINION

WEISBERG, Judge.

¶ 1 R.J. Reynolds Tobacco Co. ("Reynolds") appeals from the grant of summary judgment to the State of Arizona and the denial of its own motion for summary judgment. At issue is the interpretation of a provision in a Master Settlement Agreement entered into by the parties. We affirm.

BACKGROUND

¶ 2 In 1998, the State of Arizona, along with forty-five states, the District of Columbia, and five territories, entered into a Master Settlement Agreement ("MSA") with Reynolds and four other tobacco companies. The MSA ended litigation brought by the various governments seeking to restrict advertising of tobacco products and to secure funding for various public health purposes.

¶ 3 For many years, Reynolds sponsored the NASCAR Winston Cup Series of stock car racing events and has continued to do so as its single permitted Brand Name Sponsorship under the MSA. The Winston Cup involves a number of races at twenty-three different sites across the country held between February and November during each calendar year. The races last up to several days at each site. ¶ 4 Based on the length of the racing season, and applying its own interpretation of a key provision in the MSA, Reynolds placed year-round advertising at Phoenix International Raceway ("PIR"), the site of a NASCAR Winston Cup race, and at Firebird International Raceway ("FIR"), the site of hot rod racing events also sponsored by Reynolds. Reynolds refused to remove the advertising signs at either site despite demands from the State to do so. The State thereupon filed a complaint asserting that Reynolds' permanent outdoor advertising violated the MSA.¹ After both sides filed cross-motions for summary judgment, the trial court granted the State's motion and denied Reynolds' motion. Reynolds timely appealed.

DISCUSSION

A. STANDARD OF REVIEW

¶ 5 The material facts here are undisputed. The only issue is the appropriate interpretation of the MSA. The latter is a question of law, which we independently decide. See Horton v. Mitchell, 200 Ariz. 523, 527,

¶ 14, 29 P.3d 870, 874 (App.2001). We turn first to a brief overview of the MSA.

B. THE MSA

¶ 6 The recitals in the MSA reflect the parties' "commit[ment] to reducing underage tobacco use by discouraging such use and by preventing Youth access to Tobacco Products." The parties settled their original lawsuit on terms that would "achieve for the Settling States and their citizens significant funding for the advancement of public health, the implementation of important tobacco-related public health measures, including the enforcement of ... restrictions related to such measures, as well as funding for a national Foundation dedicated to significantly reducing the use of Tobacco Products by Youth."

¶ 7 To achieve these ends, the MSA permanently bans any settling manufacturer from directly or indirectly targeting youth "in the advertising, promotion or marketing of Tobacco Products" or from doing anything to "initiate, maintain or increase the incidence of Youth smoking." Part III(a). It completely prohibits "Tobacco Brand Name Sponsorships" of concerts or events at "which the intended audience is comprised of a significant percentage of Youth" and limits tobacco manufacturers to one "Brand Name Sponsorship ... in any twelve-month period." Part III(c)(1), (2).²

¶ 8 The MSA also forbids the advertising of tobacco products in conjunction with the advertising of manufacturer-sponsored events and bans all references to the sponsorships when advertising tobacco products. Part III(c)(3)(A),(B). It further requires manufacturers to "discontinue Outdoor Advertising and Transit Advertisements advertising Tobacco Products within the Settling States" and requires the removal of all billboards, signs, and placards advertising tobacco products "in arenas, stadiums, shopping malls, and Video Game Arcades." Part III(d). But, with respect to brand name sponsorships, the mandate to discontinue outdoor advertising does not "apply to Outdoor Advertising advertising the Brand Name Sponsorship, to the extent that such Outdoor Advertising is placed at the site of a Brand Name Sponsorship no more than 90 days before the start of the initial sponsored event, is removed within 10 days after the end of the last sponsored event, and is not [otherwise] prohibited." Part III(c)(3)(E)(ii) (emphasis added).³

C. THE PARTIES' DISPUTE

¶ 9 The parties dispute the meaning of the above emphasized language (the "disputed provision") as it applies to Reynolds' advertising at sites like PIR. The State brought this lawsuit to force Reynolds to remove the outdoor advertising that it claimed had exceeded the window permitted by the MSA. It asserted that the permitted advertising window is to be measured by the events held at each site. It argued that Reynolds' interpretation of the disputed provision violated both the plain language and the stated intent of the MSA.

¶ 10 Reynolds responded that the disputed provision permits it to post signs at each and every Winston Cup site within 90 days before the "initial sponsored event" of the season, which usually occurs in February, regardless of the event's location. It reasoned below, as it continues to do on appeal, that because the racing season lasts well into November, a new "90 days before" period begins for the next racing season before the completion of the present season, which makes the signs continuously permissible. Consequently, according to Reynolds, the disputed provision allows its signs to be posted at PIR every day of every year that it sponsors the Winston Cup series.

¶ 11 The trial court agreed with the State. From the MSA's plain meaning and context, it concluded that

NASCAR events take place for several days at each site. The reference to the initial and last sponsored event refers to the events at each site. Had the agreement been intended to allow [Reynolds] to advertise the Brand Name Sponsorship at all the sites throughout the race season, the term "sites" rather than site would have been used. Finally, to conclude otherwise would strip the "90 days before and 10 days after" language of all meaning.

(Emphasis added.) Accordingly, the court granted summary judgment to the State and ordered the removal of all outdoor advertising signs that exceeded the authorized event-related window at either PIR or FIR.

D. OUR INTERPRETATION

¶ 12 A number of principles guide our interpretation of this contract. Generally, we "attempt to enforce a contract according to the parties' intent." Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152, 854 P.2d 1134, 1138 (1993). We also "apply a standard of reasonableness" to contract language. Chandler Med. Bldg. v. Chandler Dental Group, 175 Ariz. 273, 277, 855 P.2d 787, 791 (App.1993). We construe a contract "in its entirety and in such a way that every part is given effect." Cardon v. Cotton Lane Holdings, Inc., 173 Ariz. 203, 207, 841 P.2d 198, 202 (1992). Words are "ambiguous only when [they] can reasonably be construed to have more than one meaning." Id. A contract is not ambiguous if the parties' intent is clear from the contract's language and "in view of all the circumstances." Smith v. Melson, 135 Ariz. 119, 121, 659 P.2d 1264, 1266 (1983).

¶ 13 Additionally, we read words "in the context in which they are used, and [considering] the purposes sought ... by the agreement." Employmt. Sec. Comm'n v. Amalg. Meat Cutters & Butcher Workmen of N. Am., 22 Ariz.App. 54, 58, 523 P.2d 105, 109 (1974); see also United Cal. Bank v. Prudential Ins. Co., 140 Ariz. 238, 259, 681 P.2d 390, 411 (App.1983)

(to ascertain intent, we look at words in the context of the entire contract). Our courts further have recognized that if the preamble of an agreement "is an expression of the reasons for [the agreement]," it may be considered in determining the parties' intent. Maddux & Sons v. Trustees of Ariz. Laborers, 125 Ariz. 475, 478, 610 P.2d 477, 480 (App.1980).

¶ 14 On appeal, the State asks us to uphold the trial court's construction because it is consistent with the MSA's plain language and the agreed-upon goals of improving public health and reducing the exposure of young people to tobacco products and tobacco advertising. It argues that, if the MSA had intended to permit simultaneous tobacco brand name advertising at every NASCAR site, the disputed provision would have permitted such signs "at the sites of a Brand Name Sponsorship." The State also asserts that the MSA's purposes will be furthered only if the window for advertising signs is applied on a site-by-site basis. Thus, the exception to the total ban on outdoor advertising ought to be read as allowing the placement of signs at a site like PIR 90 days before a race at that site and requiring the removal of such signs within 10 days after the race or event at that site has ended.

¶ 15 The State points out that, if we were to accept Reynolds' unconstrained interpretation, thousands of young people who attend...