STATE EX REL. v. RJ Reynolds
| Decision Date | 30 December 2004 |
| Docket Number | No. 2003-0860.,2003-0860. |
| Citation | 104 Ohio St.3d 559,820 NE 2d 910 |
| Parties | THE STATE EX REL. PETRO, APPELLEE, v. R.J. REYNOLDS TOBACCO COMPANY, APPELLANT, ET AL. |
| Court | Ohio Supreme Court |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Jones Day, Jeffrey J. Jones, Matthew A. Kairis, Columbus, Donald B. Ayer, Daniel H. Bromberg, Jack W. Campbell IV, and Thomas R. McCarthy, Washington, DC, for appellant.
Jim Petro, Attorney General, Douglas R. Cole, State Solicitor, Stephen P. Carney, Senior Deputy Solicitor, Joseph L. Piccin, Susan C. Walker, and Michael D. Allen, Assistant Attorneys General, for appellee.
Vorys, Sater, Seymour & Pease, L.L.P.; J. Scott Jamieson and C. William O'Neill, Columbus, urging reversal for amicus curiae, D.D. Bean & Sons Co.
General; Henry McMaster, South Carolina Attorney General; Lawrence E. Long, South Dakota Attorney General; Paul G. Summers, Tennessee Attorney General; Mark L. Shurtleff, Utah Attorney General; William H. Sorrell, Vermont Attorney General; Christine Gregoire, Washington Attorney General; Darrell V. McGraw, West Virginia Attorney General; Peg Lautenschlager, Wisconsin Attorney General; and Patrick J. Crank, Wyoming Attorney General; amici curiae, urging affirmance.
{¶ 1} The state of Ohio on the relation of appellee, the Attorney General, sued defendant-appellant, R.J. Reynolds Tobacco Company ("RJR"), and other tobacco companies in 1997, alleging deceptive trade practices, antitrust violations, and other claims. The state sought various forms of relief, including recovery of Medicaid expenditures for alleged tobacco-related illnesses resulting from the use of tobacco products by Ohio Medicaid recipients. In November 1998, Ohio, along with the 45 other states and the government territories that had sued tobacco companies, settled the lawsuits with the nation's five largest tobacco companies, including RJR.
{¶ 2} The parties set forth the terms of their settlement in the Master Settlement Agreement ("MSA"). On November 25, 1998, the Court of Common Pleas of Franklin County entered a consent decree approving the MSA.
{¶ 3} Under the MSA, the tobacco companies agreed to pay the states and territorial governments several hundred billion dollars and to accept certain restrictions on their marketing efforts. For example, the companies agreed to refrain from any "advertising, promotion or marketing of Tobacco Products" targeted at youth. In addition, the companies agreed to refrain from certain defined marketing practices, including the "use of cartoons" in advertisements, the display of certain "outdoor advertising and transit advertisements" such as advertising in malls, video arcades, or in or near public transportation, and advertising on billboards and signs larger than 14 square feet, except within an "Adult-Only Facility." The companies further agreed to "bans on youth access to free samples" and gifts to underage persons based on proofs of purchase, and a limitation on tobacco brand-name sponsorships.
{¶ 4} The specific portion of the MSA at issue in this case is Section III(f), which provides:
{¶ 5} "Beginning July 1, 1999, no Participating Manufacturer may, within any Settling State, market, distribute, offer, sell, license or cause to be marketed, distributed, offered, sold or licensed (including, without limitation, by catalog or direct mail), any apparel or other merchandise (other than Tobacco Products, items the sole function of which is to advertise Tobacco Products, or written or electronic publications) which bears a Brand Name."
{¶ 6} This case concerns the distribution of paper matchbooks that contain RJR brand names and whether those matchbooks constitute "merchandise" under Section III(f) of the MSA. Appellee claims that in 2000, more than one billion matchbooks bearing RJR's signature brand names were distributed in the United States. RJR has had three separate matchbook programs in recent years. In one program, RJR purchases matchbooks with advertising promoting its brands and distributes them in bars, nightclubs, and lounges in conjunction with RJR's sponsorship of venues. In another program, RJR distributes matchbooks at musical and sporting events that it may sponsor under the MSA. The venues where RJR distributes matchbooks pursuant to these two programs are restricted to adults, and the state does not now challenge RJR's distribution of matchbooks in those contexts.
{¶ 7} The state challenges RJR in this case for its distribution of matchbooks at venues that are not limited to adults. This distribution was achieved through RJR's relationship with D.D. Bean & Sons Company ("Bean"), a New Hampshire-based matchbook manufacturer and distributor. RJR contracted with Bean, not to purchase matchbooks, but to purchase space on those matchbooks for advertising. Bean has an extensive distribution network through which it sells matchbooks to wholesalers who distribute tobacco products. These distributors sell the matchbooks once again to a variety of retailers like tobacco specialty stores, convenience stores, grocery stores, gas stations, bars, and liquor stores. The branded matchbooks are then generally distributed free to consumers, primarily to people who purchase tobacco products.
{¶ 8} It has been said that "Close cover before striking" is the most printed phrase in the history of the world, and Bean's promotional materials relate the pervasiveness of branded matches, not just to the smoking set, but to millions of other consumers:
{¶ 9}
{¶ 10} Bean also relates that
{¶ 11} RJR claims that the focus of its matchbook marketing effort is adult smokers. To that end, RJR matchbooks have traditionally contained a statement that they are not to be distributed to minors. The wrappers on packs of matchbooks have long contained a similar statement. In 2001, RJR revised its package wrappers to include the statement that the matches are to be distributed "at no extra charge with the purchase of tobacco products."
{¶ 12} RJR matchbooks are given away for their advertising benefit, a practice consistent with the history of matchbooks in this country. In the 1890s, the Diamond Match Company opened a paper-matchbook production facility in Barberton. A Diamond Match salesman, Henry Traute, is not only credited with putting an end to pocket fires — by insisting that the striker be moved from the inside to the outside of the matchbook — but also with sparking the use of matchbooks as an advertising medium. Traute's first customers were the Pabst Brewery in Milwaukee, which bought 10 million matchbooks advertising Pabst Blue Ribbon beer. James Duke, a tobacco tycoon, purchased 30 million books. William Wrigley ordered a billion books advertising Wrigley chewing gum. Over time, match manufacturers began distributing the matchbooks themselves. Consumers have become accustomed to the availability of free paper matchbooks.
{¶ 13} However, while most matchbooks are given away, many are purchased at retail. As the appellate court below observed, the United States Consumer Product Safety Commission has estimated that "12-20 percent of matchbooks are purchased at retail by consumers." Further, Bean manufactures and sells private-label matchbooks for supermarket chains, drug stores, and mass merchandisers, who offer them for sale to consumers. Matches sold at retail account for 40 percent of Bean's total business. Also, even RJR's Winston branded matchbooks have been sold at retail in Ohio.
{¶ 14} In 1999, a number of state attorneys general, including...
To continue reading
Request your trial
-
Cranpark Inc. v. Rogers Group Inc.
... ... is a business that was duly organized and existed under the laws of the State of Ohio and had a principal place of business at 3550 Union Street, Mineral Ridge, Ohio, 44440; ... rel. Petro v. R.J. Reynolds Tobacco Co., 104 Ohio St.3d 559, 820 N.E.2d 910, 915 (2004). “Where the ... ...
-
U.S. v. Philip Morris USA, Inc.
...Reynolds Tobacco Co., 107 Cal.App.4th 516, 132 Cal. Rptr.2d 151 (2003) (same; discussed infra); State ex rel. Petro v. R.J. Reynolds Tobacco Co., 104 Ohio St.3d 559, 820 N.E.2d 910 (2004) (discussed infra; finding RJR violated the MSA with promotional tobacco brand name 4069. Most recently,......
-
Ragen v. Hancor, Inc.
... ... , which prioritizes the parties' choice within a contract over other states unless the chosen state, has no substantial relationship to the parties or the transaction and there is no other reasonable ... Sunoco 953 N.E.2d at 292; see also State ex rel. Petro v. R.J. Reynolds Tobacco Co., 104 Ohio St.3d 559, 820 N.E.2d 910, 915 (2004) (Courts resort ... ...
-
Liang v. Remarketing
... ... to exist in cases in which a defendant's "continuous and systematic" conduct within the forum state renders that defendant amenable to suit in any lawsuit brought against it in the forum Page 4 ... Drydock Coal Co ., 76 Ohio St. 3d 311, 667 N.E.2d 949, 952 (1996); accord State ex. rel Petro v. R.J. Reynolds Tobacco Co ., 104 Ohio St.3d 559, 820 N.E.2d 910, 915 (2004). "Where the ... ...