State v. American Tobacco Co.

• Decision Date: 04 March 1998
• Docket Number: 96-4193,Nos. 96-3434,s. 96-3434
• Citation: 707 So.2d 851
• Parties: 23 Fla. L. Weekly D626 The STATE of Florida, Lawton M. Chiles, Jr., Individually and as Governor of the State of Florida, Department Of Business and Professional Regulations, and The Agency for Health Care Administration, Appellants, v. The AMERICAN TOBACCO COMPANY; American Brands, Inc.; R.J. Reynolds Tobacco Company; et al., Appellees.
• Court: Florida District Court of Appeals

Page 851

707 So.2d 851

23 Fla. L. Weekly D626

The STATE of Florida, Lawton M. Chiles, Jr., Individually and as Governor of the State of Florida, Department Of Business and Professional Regulations, and The Agency for Health Care Administration, Appellants, v. The AMERICAN TOBACCO COMPANY; American Brands, Inc.; R.J. Reynolds Tobacco Company; et al., Appellees.

Nos. 96-3434, 96-4193.

District Court of Appeal of Florida,

Fourth District.

March 4, 1998.

Robert M. Montgomery, Jr. of Montgomery & Larmoyeux, and Edna L. Caruso and Philip M. Burlington of Caruso, Burlington, Bohn & Compiani, P.A., West Palm Beach, for appellants.

Justus W. Reid of Reid Metzger & Associates, P.A., West Palm Beach, Norman A. Coll, Chris M. McAliley and Christopher N. Johnson of Coll Davidson Carter Smith Salter & Barkett, P.A., Miami, and William J. Crampton of Shook, Hardy & Bacon L.L.P., Kansas City, Missouri, for Appellee-Loews Corporation.

Jane Kreusler-Walsh of Jane Kreusler-Walsh, P.A., West Palm Beach, and Simpson Thacher & Bartlett, New York City, for appellee-B.A.T. Industries P.L.C.

Edward A. Moss of Anderson, Moss, Sherouse & Petros, P.A., Miami, and Kirkland & Ellis, Chicago, IL, for Appellee-Batus Holdings, Inc.

WARNER, Judge.

The state appeals the trial court's order determining that it lacked jurisdiction over three parent corporations of tobacco companies involved in the Tobacco Litigation. While the state claims that it presented sufficient evidence of an agency relationship to sustain jurisdiction, we agree with the trial court that the evidence presented was insufficient and affirm.

This case arises from the state's suit against tobacco companies for damages incurred by the state through payments for tobacco-related illnesses to medicaid patients. In addition to the tobacco companies, the state sued B.A.T. Industries, BATUS Holdings ("BATUS"), and Loews Corporation. B.A.T. Industries is a British corporation and is the parent corporation of its wholly owned subsidiary, Brown & Williamson, a cigarette manufacturer and a defendant in the state's suit. BATUS is another wholly owned subsidiary of B.A.T. Industries operating in the United States and was in charge of managing B.A.T. Industries' business interests in this country. Loews Corporation is a holding company for various corporations, one of which was Lorillard, a tobacco manufacturer and a defendant in the underlying lawsuit.

The state made general allegations that the defendants, including the parent corporations, banded together to prevent the public from becoming fully aware of the health risks of cigarette smoking. They did this by forming allegedly independent research groups such as the Council for Tobacco Research ("CTR") and the Tobacco Institute ("TI"), which in fact the tobacco companies controlled. The state alleged that the defendants also prevented the marketing of safe cigarettes, exploited the addictive powers of nicotine, and targeted minors. The trial court dismissed all but three of the eighteen counts in the second amended complaint. The remaining claims included several for monetary relief and one for injunctive relief, requesting that the companies be enjoined from engaging in consumer fraud; requiring them to disclose and publish all research previously conducted directly or indirectly for them on issues of smoking and health; demanding them to fund a corrective public education campaign on the dangers of smoking; and requiring them to take steps to prevent the sale of cigarettes to minors. The state also sought the following from the defendants: funding for clinical smoking cessation programs in Florida, disgorgement of any profits earned on the sale of the companies' products in Florida, and dissolution of the CTR and the TI.

Subsequent to the hearing of this appeal, the remaining parties settled the underlying suit as to all monetary claims between the parties. The settlement agreement specifically released the parents and affiliates of the settling parties. However, the settlement agreement did not resolve those issues which requested non-economic injunctive relief. Therefore, we construe this as limiting the relief requested against the parent corporations to an injunction prohibiting further consumer fraud, requiring the companies to disclose previous research, ordering the companies to take steps to prevent the sale of cigarettes to minors, and ordering the companies to dissolve the CTR and the TI. As to all other claims, the settlement renders this appeal moot.

After the filing of the complaint, the appellees moved to dismiss the complaint for lack of jurisdiction, filing numerous affidavits contesting jurisdiction. In granting appellees' motions to dismiss, the trial court found as follows:

Whatever allegations the Plaintiffs have made have been controverted by the Defendants in affidavits and/or supporting documentation and evidence shifting to Plaintiffs the burden of proof by a preponderance of the evidence to support jurisdiction. The burden having been shifted, the State has failed to prove in each of the cases that these three entities have transacted business on a regular basis in this state or committed any tort in this state. The facts themselves are not substantially in controversy. The question is whether the facts are sufficient by a preponderance of evidence to support the theories of alter-ego, aiding and abetting, agency, and/or "mere instrumentality" regarding the aforementioned torts. B.A.T. Industries, PLC; Loew's Corporation; and Batus Holdings, Inc., do not market, manufacture, sell, or deliver tobacco products in Florida or place these products in the stream of commerce. These companies are holding companies not actively operating tobacco businesses.

The state appeals from this ruling.

In Venetian Salami Co. v. Parthenais, 554 So.2d 499 (Fla.1989), the supreme court explained the necessity to comply with both the long-arm statute and due process in order to establish personal jurisdiction over a non-resident defendant. The supreme court summarized its Venetian Salami holding in Doe v. Thompson, 620 So.2d 1004, 1005 (Fla.1993):

This Court, in Venetian Salami Co. v. Parthenais, 554 So.2d 499, 502 (Fla.1989), explained the two-step inquiry for determining long-arm jurisdiction over a nonresident defendant. A court first must determine whether the complaint alleges sufficient jurisdictional facts to bring the action within the ambit of our long-arm statute. Id. at 502. A court then must determine whether sufficient minimum contacts exist between our forum state and the defendant to satisfy the Fourteenth Amendment's due process requirements--in short, whether a nonresident defendant "should reasonably anticipate being haled into court" in Florida. Id. at 500 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980)).

We explained in Venetian Salami that a defendant wishing to contest the allegations of the complaint concerning jurisdiction or to raise a contention of insufficient minimum contacts must file an affidavit in support of his or her position. The burden is then placed upon the plaintiff to show by counter-affidavit the basis upon which jurisdiction is obtained. Id. If relevant facts set forth in the respective affidavits are in direct conflict, then the trial judge should hold a limited evidentiary hearing on the issue of jurisdiction. Id. at 503.

Id. In the instant case, the trial court found that the plaintiff's affidavits and proofs were insufficient to show a basis for the assertion of personal jurisdiction. While the state contends that there was sufficient proof to submit the issue to the jury, the determination of jurisdiction is not a jury question but instead must be determined by the court. See Venetian Salami, 554 So.2d at 499; see also John Scott, Inc. v. Munford, Inc., 670 F.Supp. 344, 345-46 (S.D.Fla.1987).

In its pleadings, the state contended that Brown & Williamson and Lorillard were the agents or alter egos for B.A.T. Industries, BATUS, and Loews, respectively. On appeal, the state has abandoned the contention that the subsidiaries are alter egos of the appellees, such that the corporate veil can be pierced, as they have not shown that the subsidiaries were formed for any improper purpose. See Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114 (Fla.1984); Nichols v. Paulucci, 652 So.2d 389 (Fla. 5th DCA), rev. denied, 659 So.2d 1088 (Fla.1995), and cert. denied, -516 U.S. 1046, 116 S.Ct. 707, 133 L.Ed.2d 662 (1996). Instead, the state relies primarily on its claim that the subsidiaries were simply agents for the parent corporations.

Section 48.193, Florida Statutes (1995), provides in pertinent part:

(1) Any person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from the doing of any of the following acts:

(a) Operating, conducting, engaging in, or carrying on a business or business venture in this state or having an office or agency in this state.

(b) Committing a tortious act within this state.

....

(f) Causing injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of the injury, ...

....

2. Products, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of commerce, trade, or...