Archive for the ‘Tobacco’ Category
R.J. Reynolds’ Shareholder’s Report from Winston-Salem: A “Good Year,” a Proposal to Merge and a Death Toll that Must Not Be Acknowledged
Monday, May 18th, 2015
By Edward L. Sweda, Jr.
Like clockwork, the 2015 Reynolds American (RAI) Annual Shareholders Meeting started precisely at 9:00 A.M. on Thursday May 7, 2015 at the company’s headquarters in Winston-Salem, North
Carolina. Seventy-five minutes later, the meeting was adjourned.
Before I could attend the meeting, I had to proceed through intense security, with machines provided by Security Detection, empty my pockets and hand over my camera to the RAI staff.
The meeting was held again in the company’s main auditorium that seats around 200 people. On the dais were the following representatives of RAI management: Thomas C. Wajnert, the Non-Executive Chairman of the Board, who ran the meeting; Dara Folan, Senior Vice President, Deputy General Counsel and Secretary; Mark Holton, Executive Vice President and General Counsel; Andrew Gilchrist, the Chief Financial Officer and Executive Vice President; and Susan M. Cameron, RAI’s President and Chief Executive Officer. After announcing the rules of conduct for the meeting and potential penalty for violation of the rules, Mr. Wajnert turned to Ms. Cameron for an overview of the company’s business performance for 2014. Curiously, Ms. Cameron began by noting that 2014, while being a “good year” for RAI, “seems a long time ago.” She cited some specifics of RAI’s 2014 performance, including Camel’s high market share and VUSE’s “successful national expansion.” She described RAI’s plans to acquire Lorillard Tobacco Company as the “Right Decision at the Right Time” that is still awaiting regulatory approval by the U.S. Federal Trade Commission. She also called on the U.S. Food and Drug Administration to adopt different regulations for e-cigarettes than for combustible cigarettes. Ms. Cameron made no mention of any of the company’s customers who died during 2014 from smoking-caused diseases.
Much of the remainder of the meeting dealt with farm labor issues. Many members of FLOC (the Farm Labor Organizing Committee of the AFL-CIO) were in the audience; they dominated the 30-minute question-and-answer session. While Mr. Wajnert admitted that “bad conditions exist” on tobacco farms in North Carolina, he claimed that “we are working with our growers” to try to remedy those conditions. FLOC representatives cited ongoing violations of child labor laws in the tobacco fields and emphasized that many of the farm workers were doing extremely hard and dangerous work for a minimum wage salary of $7.25 per hour. Another major grievance was the fact that RAI, despite its claims of transparency, continues to refuse to provide FLOC with a list of tobacco growers with which RAI has contracts to provide it the tobacco for its cigarettes.
During the question-and-answer session, I asked the following question on ongoing tobacco litigation.
“During last month’s RAI First Quarter Earnings Conference Call, Chief Financial Officer and Executive VP Andrew Gilchrist said that ‘a significant portion of our legal budget at this point is being spent on Engle.’ The Engle verdicts in Florida keep on coming. Just last week, a Florida jury returned a verdict of over $6 million for a plaintiff. Meanwhile the Boston Globe last month reported on an upsurge in tobacco product liability lawsuits being filed in Massachusetts – an upsurge that was spurred on by a recent state supreme court ruling that is favorable to plaintiffs.
“I have a two-part question. Would you clarify that when Mr. Gilchrist or other executives refer to the company’s legal budget, that it includes not just salaries of company lawyers and payments to local counsel but also the payment of judgments in cases where plaintiff verdicts have survived all appeals?
“Secondly, instead of using broad adjectives like ‘significant,’ would you give shareholders the specific dollar amount of the company’s legal budget and a breakdown by category of cases?”
In response, Mr. Holton said that the amount paid in judgments is not included in the “legal budget” category. He also said that the company provides overall amounts for the legal budget, though not broken down by category of cases, to the U.S. Securities and Exchange Commission.
Two shareholder resolutions were defeated. The first, supported by the North Carolina AFL-CIO, called on RAI’s Board of Directors to prepare a report “on the steps the Company has taken to reduce the risk of acute nicotine poisoning (‘Green Tobacco Sickness’) for farmworkers in the Company’s supply chain for tobacco. The report should include a quantitative summary of the results of the Company’s inspections of its suppliers.” The supporters of the resolution noted that children “who are under age 18 work as tobacco farmworkers in the United States and are exposed to Green Tobacco Sickness as an occupational risk. A 2014 Human Rights Watch report described symptoms of Green Tobacco Sickness in nearly three-quarters of 141 child tobacco workers, ages 7 to 17, who were interviewed and worked in North Carolina, Kentucky, Tennessee and Virginia in 2012 or 2013.”
The second resolution, which dealt with issue of forced labor in tobacco fields, was sponsored by the Province of St. Joseph of the Capuchin Order in Milwaukee, Wisconsin. Specifically, the proposal noted that, “with U.S. immigration reform stymied, undocumented workers (often the main workforce in many agricultural areas) can be exploited. In their country of origin they often must pay contract labor brokers thousands of dollars to cross our borders; once here, they often are under the control of other labor contractors in order to work on U.S. farms. This practice results in forms of forced and compulsory labor on many, if not most, U.S. farms, including tobacco farms.”
The proposal called on RAI’s Board of Directors to “create a policy that all its suppliers throughout its tobacco procurement supply chain verify (with independent monitoring) their commitment and compliance regarding non-employment, directly or indirectly, of laborers who have had to pay to cross the U.S. border to work or, once here, to work on U.S. farms.”
Father Michael Crosby presented the proposal and noted that currently RAI is financially benefitting from forced labor. That is a fundamental moral issue that must be addressed, he added.
In seconding this resolution, I noted that RAI’s opposition statement that the issue of forced labor is “an issue that should be addressed in a comprehensive manner as part of immigration reforms and policies at the national level” was technically true but amounted to an excuse to pass the buck since there is no likelihood that the current Congress will allow a comprehensive immigration reform bill to be voted upon, given the track record of the House majority in the last Congress.
So, in this regard as in so many other aspects of Reynolds American’s business, the status quo continues.
Friday, May 1st, 2015
On April 23, 2015, the Public Health Advocacy Institute submitted the following written comments concerning proposed regulations for electronic cigarettes issued by Massachusetts Attorney General Maura Healey:
April 23, 2015
Amber Villa, Assistant Attorney General
Consumer Protection Division
Office of the Attorney General
One Ashburton Place
Boston, MA 02108
Re: Massachusetts Attorney General Proposed Regulations of E-Cigarettes Retail Sales
Dear Assistant Attorney General Villa:
On behalf of the Public Health Advocacy Institute at Northeastern University School of Law (PHAI), I am writing in response to Attorney General Maura Healey’s
request for comment on the proposed regulation of e-cigarettes sales. We at PHAI are dedicated to protecting and improving public health through law and legal policy. We enthusiastically support the proposed regulations to reduce youth access to e-cigarettes.
The three-fold increase in e-cigarette use among middle and high school age youth from 2011 to 2013 demands a response.  Now a quarter of all high school age children and eight percent of middle school age children use e-cigarettes and do so regularly.  We appear to be watching tobacco become ‘cool again’ among youth, and this time it is e-cigarettes.
This alarming trend sadly is not surprising. E-cigarette advertisements appear everywhere, promoting brands like Blu, which suddenly have become as recognizable as Marlboro and Camel. Additionally, candy and other exotic flavored e-cigarettes are contributing to the growing popularity among youth. Tobacco industry documents discovered through litigation tell us that manufacturers used such flavors in the past to target sales at children.  Today, e-cigarette manufacturers may be doing the same thing with flavors like Cotton Candy, Sweet Tart and even Unicorn Puke.  Unicorn Puke is a mash-up of candy flavors.
PHAI applauds Attorney General Healey’s effort to stop the sale of e-cigarettes to children. Although some municipalities already established similar youth access
protections, many have not.  The thousands of retailers in these municipalities can legally sell to children of any age. Unattended vending machines and self-services displays, which lead to youth acquisition of tobacco products, are allowed. Even online retailers do not need to verify a buyer’s age, if the product is delivered anywhere in these cities and towns. Attorney General Healey’s proposed regulation would stop these retail practices.
The leadership shown by Attorney General Healey also challenges others to join her and develop a more comprehensive public health response to e-cigarette use. Our state legislators, state agencies, and public health partners working at the municipal level must also respond in a coordinated and sustained manner. The e-cigarette industry appears to be acting just like tobacco manufacturers did decades ago. Partly, this similarity can be explained by the fact that many cigarette manufacturers also manufacture e-cigarettes.  Another, perhaps more important reason we appear to be reliving the tobacco industry’s past is because we are letting it happen through our own inaction.
Consider just some of the differences in regulatory oversight. E-cigarette advertisements are on television and cable. Other tobacco products are not because it would be illegal. The 1998 Master Settlement Agreement, which prohibits the use of cartoons in tobacco advertising and tobacco brand sponsorships at youth oriented events, is not applied to e-cigarettes.  Candy and fruit-flavored cigarettes are prohibited,  but exotic flavored e-cigarettes are heavily promoted and sold in Massachusetts. We tax tobacco products to dissuade use and help pay for tobacco prevention programs.  There is no tax on e-cigarettes. We passed smoke-free workplace laws to protect against secondhand smoke exposure and to de-normalize smoking.  Except for a few municipalities,  no such equivalent protection exists for e-cigarette emissions.
Attorney General Healey takes a strong first step in establishing at least some proportionality in e-cigarette regulation compared to other tobacco products. Although initial research suggests that e-cigarettes are a less harmful alternative to traditional cigarettes, scientific research also tells us that e-cigarettes are not safe. Just last week, CDC Director Dr. Thomas Frieden stated that e-cigarettes are not safe, in part, because “research had found that nicotine harms the developing brain.”  In addition to a lifelong addiction to nicotine, exposing the young, developing brain to nicotine acts as a ‘gateway’ to other drug addictions. 
Additionally, e-cigarettes emit other constituents that should raise concerns for the public’s health. Monitoring of e-cigarette emissions has found varying levels of toxins and carcinogens in different brands and product types.  The range is broad. Some brands emit trace amounts of carcinogens, while other e-cigarette products, like refillable tank systems for example, can produce levels of formaldehyde comparable to combusted tobacco products.  Currently, there is no regulation of liquid or gel solution in e-cigarettes or how they are vaporized. Put simply, e-cigarettes are not a cessation product designed to end the harm caused by tobacco use or nicotine addiction.
PHAI would recommend one technical change in the proposed regulation. The regulations should not set “18 years of age” as the minimum sales age. Instead, the proposed regulations should use the minimum sales age set by the Legislature. Currently, that age is 18, but proposed state legislation would raise it to 21.  Several municipalities have already taken this step. 
Christopher Banthin, Esq.,
1 Intentions to Smoke Cigarettes among Never-Smoking U.S. Middle and High School Electronic Cigarette Users, National Youth Tobacco Survey, 2011-13, Nicotine & Tobacco Research, April 2015.
3 United States v. Phillip Morris, Inc., RJ Reynolds Tobacco Co., et al., 449 F.Supp.2d 1 (D.D.C. 2006).
4 Sabrina Tavernise, Use of E-Cigarettes Rises Sharply Among Teenagers Report Says, New York Times, April 17, 2015.
5 Donald Wilson, Municipal Tobacco Control Technical Assistance Program, Mass Municipal Ass’n (March 2015).
6 Big Tobacco Companies are Putting Big Warning Labels on Their E-Cigarettes, Washington Post, Sept. 29, 2014.
7 http://www.naag.org/naag/about_naag/naag-center-for-tobacco-and-public-health.php, visited on April 19, 2015.
8 21 U.S.C. § 387g.
9 Mass Gen Law. Ch 64C.
10 Mass. Gen Law. Ch. 270, Sec. 22.
11 Donald Wilson, Municipal Tobacco Control Technical Assistance Program, Mass Municipal Ass’n (March 2015).
12 Tavernise, supra, n. 4.
13 Eric Kandel, et al., A Molecular Basis for Nicotine as a Gateway Drug, New England Journal of Medicine, Vol. 371, Pp. 932-41 (2014).
14 US Food and Drug Administration. Final Report on FDA Analyses, May 4, 2009, available at http://www.fda.gov/downloads/Drugs/ScienceResearch/UCM173250.pdf
15 Matt Richtel, Some E-Cigarettes Deliver a Puff of Carcinogens, New York Times, May 3, 2014.
16 House Bill 2021, An Act Further Regulating the Sale of Tobacco Products to Teenagers, 189 General Court 2015.
17 Wilson, supra, n. 5.
Thursday, March 26th, 2015
For Immediate Release
Contact: Mark Gottlieb – 617-373-2026
The Public Health Advocacy Institute (“PHAI”) announced today that its newly formed Center for Public Health Litigation has filed lawsuits against two major tobacco companies and several local distributors on behalf of the families of two former smokers who suffered devastating disease from smoking cigarettes.
“This is the first time a non-profit organization has directly taken on the tobacco industry in court,” said Richard Daynard, University Distinguished Professor at Northeastern University School of Law and the President of PHAI. “Big Tobacco kills more than 50% of the people who buy its products, and it has for years tried to deny its legal responsibility for this public health calamity. The Center for Public Health Litigation is going to ask the Massachusetts courts to hold the tobacco companies accountable in these two cases, and in more cases to be filed soon.”
The two cases were filed yesterday afternoon in the Middlesex Superior Court in Woburn. The first was brought for the family of James E. Flavin, Jr., a former executive of Filene’s and Staples, who died of lung cancer in 2012 after smoking Newport cigarettes for over 40 years. Mr. Flavin had tried repeatedly to quit smoking, using almost every method he could find, including
nicotine patches, hypnosis, and numerous other cessation products. The companies named as defendants in Mr. Flavin’s case are Lorillard Tobacco Company, manufacturer of Newport cigarettes, and two local distributors, Garber Bros, Inc. of Stoughton and Albert H. Notini & Sons, Inc. of Lowell.
The second case was brought for Patricia Greene, a Newton realtor, who was diagnosed with lung cancer in 2013, even though she had stopped smoking 25 years earlier. Ms. Greene, like many others, had begun smoking as a result of being given free Marlboro cigarettes in downtown Boston when she was a teenager. The companies named as defendants in Ms. Greene’s case are Philip Morris USA, Inc., manufacturer of Marlboro, and Star Markets Company, Inc. of West Bridgewater, owner of the store where Ms. Greene bought her cigarettes for years.
According to Andrew Rainer, the Director of the Center for Public Health Litigation, “Massachusetts is now the best state in the country in which to bring suit against the manufacturers and sellers of cigarettes, because of a 2013 ruling by the Massachusetts Supreme Judicial Court.” In that 2013 case, Evans v. Lorillard Tobacco Co., the Court ruled that a manufacturer of cigarettes could be held responsible for the death of one of its customers, because it could have manufactured a cigarette that was safer and less addictive, but chose not to. The high Court’s decision also upheld an award of damages to the deceased customer’s family of $35 million plus interest. The case was later settled for $79 million.
Friday, October 31st, 2014
On October 30, 2014 at Northeastern University School of Law in Boston, the Public Health Advocacy Institute (PHAI), in association with the Boston Alliance for Community Health (BACH), hosted a forum focusing on common tactics and strategies of two predatory industries: tobacco and casino gambling. It featured Northeastern University Distinguished Professor Richard Daynard, David Aronstein, Director of BACH, and PHAI’s Executive Director Mark Gottlieb. The featured speaker was PHAI’s Senior Staff Attorney Lissy Friedman, who presented powerful evidence demonstrating eerie similarities between the two industries.
The forum was especially timely in Massachusetts as voters there are about to weigh in on a first-in-the-nation ballot initiative to repeal the legalization of casinos in the state.
The proceedings were recorded and are presented here:
Friday, October 10th, 2014
The Center for Public Health Litigation, a project of the Public Health Advocacy Institute at Northeastern University School of Law, has launched an advertising campaign in Massachusetts to help inform victims of cigarette companies of their legal rights. While Massachusetts is the best state in the nation to hold cigarette makers responsible in court for the decades of damage they have done after two landmark rulings from the state’s highest court, few Massachusetts victims realize that they are in a position to find some measure of justice in the courtroom.
The Center for Public Health Litigation seeks to inform victims of their rights and, where possible, provide or find legal representation to hold the industry liable. The ad, reproduced below, will appear in newspapers and other media over the next several weeks. It makes references to the $79 million payment by Lorillard Tobacco Company to the family of lung cancer victim Marie Evans.
Unlike other advertising by trial lawyers, this is an effort by a non-profit public health-committed organization. It is one of several public health legal initiatives being undertaken by PHAI’s new Center for Public Health Litigation.
Thursday, September 25th, 2014
On September 16, 2014, a jury in the U.S. District Court for the Middle District of Florida returned a verdict of $27,010,000.14 against Philip Morris USA on behalf of Judith Berger, who started smoking in 1958 at the age of 14. Clearly outraged by evidence of Philip Morris’ conduct in targeting children, the jury awarded over $20 million in punitive damages and added fourteen cents to the total. Judith Berger, as did her now-deceased twin sister, developed severe chronic obstructive pulmonary disease (COPD) from smoking.
Kenny Byrd, the lead trial counsel for Lieff Cabraser, which represented the plaintiff, was delighted with the verdict. “We are pleased that the jury held Philip Morris accountable for their calculated choice to target children, such as Mrs. Berger, to take up smoking. The addition of the 14 cents is just as meaningful as the $20 million before it. The jury understood our society should protect 14-year-olds, not target them for profits as the cigarette industry does.”
One of the pieces of evidence presented to the jury was a Philip Morris memo that said “today’s teenager is tomorrow’s regular customer.”
This case in federal court is one of thousands of “Engle Progeny” lawsuits that were filed following the Supreme Court of Florida’s 2006 ruling in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). The trials in these lawsuits, which began in February 2009, have resulted in plaintiff verdicts in approximately two-thirds of the 120 such trials that have reached a jury verdict. While most of these cases are being tried it state court, it is encouraging to see plaintiff victories occurring in federal court as well.
Not surprisingly, Philip Morris relied on its well-worn “personal responsibility” defense as its main attempt to evade accountability. Plaintiff co-counsel Lance Oliver of Motley Rice LLC, commented that, at trial, “Philip Morris attempted to lay all the blame on Mrs. Berger for choices she made as a kid. Thankfully, the jury saw through this and held Philip Morris accountable for its choices.”
When juries learn the details of outrageous tobacco industry behavior, the end result will be more verdicts – including punitive damages – comparable in size and scope as the one in this case. After the verdict, Mrs. Berger reacted as follows: “I am so grateful that the jury held Philip Morris accountable for its actions over the past 60 years. Before this lawsuit, I had no idea that the tobacco industry deliberately designed cigarettes to make them addictive and then conspired to lie to the public about their deadly effects. I fought this battle in part for my twin sister Josephine – may she rest in peace – who died from the same disease that will take my life in the next few years. I encourage anyone whose rights are violated by Philip Morris – or any corporation – to stand up, fight for justice and hold them accountable for their actions.”
Achieving justice and holding powerful corporations accountable for their wrongdoing: that’s what the Engle Progeny litigation is all about.
Friday, August 8th, 2014
Today the Public Health Advocacy Institute submitted comments to the U.S. Food and Drug Administration on its proposed rule to include cigars, little cigars, electronic cigarette products, and tobacco for hookah smoking among the products for which it can legally issues rules and regulations. This is known as a “deeming rule.” The deeming rule is a first step toward regulating tobacco products beyond the cigarettes, smokeless tobacco, and roll-your-own products that the agency now regulates through its Center for Tobacco Products.
The Center for Tobacco Products solicited a wide range of comments and posed many questions to stakeholders and the public in its proposed rule. PHAI focused its comments on the question of how best to regulate electronic cigarettes once they have been deemed tobacco products and are regulated by the FDA.
PHAI found that the vast majority of the American public believes that electronic cigarettes are a reduced risk product and that manufacturers and sellers of electronic cigarettes have marketed their products directly and indirectly as safer products. Only tobacco products that are approved as “modified risk tobacco products” are permitted to advertise and market their products as posing a reduced risk to users. As a result, electronic cigarette advertising focuses on other sorts of appeals such as sex appeal and conceptual themes that may attract new users and result in youth initiation. Electronic cigarettes are supposed to be an alternative to the most dangerous tobacco product, cigarettes, not a new pathway to addiction and eventual cigarette use for young people.
Electronic cigarette companies are benefiting from the perception that these are reduced risk products without going through the necessary approval process to attain that status from the FDA.
1. Electronic cigarettes should not be approved as “new tobacco products” because the public already believes that they are reduced risk products.
2. Electronic cigarette manufacturers should apply for approval by FDA under the “modified risk tobacco product” category and demonstrate that their products will be a real benefit to public health.
3. FDA should require a statement in all electronic cigarette advertising stating that the agency has approved the product as a “modified risk tobacco product.” If electronic cigarettes were approved only as “new tobacco products,” they could not advertise because they could not carry the statement required on all advertising. This would ensure that there would only be advertising for electronic cigarettes that were demonstrated to be beneficial to public health and drive consumers to purchase those products that carry the proposed required FDA statement.
4. In addition, PHAI urged the agency to include premium cigars in its regulatory authority by deeming them to be tobacco products. Even if there is no need to impose new rules on premium cigars at this time, if the need did arise, having already deemed these tobacco products as “tobacco products” for regulatory purposes would allow the FDA to issue rules and regulation should evidence indicate such a need.
5. PHAI urged the FDA to develop comprehensive regulations for flavors in all newly deemed tobacco products. Candy flavors should be banned and any other flavors proposed to be retained by manufacturers should only be approved upon a showing that the flavor contributes to improving public health.
The Reynolds American, Inc. 2014 Annual Shareholders Meeting: Change of CEO, change of demeanor, “Transformation” to the status quo.
Tuesday, June 24th, 2014
By Edward Sweda
As I entered the Reynolds American Corporate Offices (photo) at 401 North Main Street in Winston-Salem, North Carolina just after 8 A.M. on Thursday, May 8, the company’s “Welcome Shareholders” sign was perched directly above the building’s main entrance. Having cleared through the metal detector, I proceeded to the registration table, where I received my admission ticket to the 2014 Annual Shareholders Meeting of Reynolds American, Inc. (RAI).
Since the doors to the meeting room would not be opened until 8:30, I had a few minutes to observe my surroundings inside RAI headquarters.
Banners touting Camel, Pall Mall, American Spirit, Grizzly Long Cut, and ZONNIC (the company’s nicotine gum).
Another banner with the alliterative slogan “Transforming Tobacco,”
One more banner, entitled “Living Our Core Values,” with four adjectives: principled, creative, dynamic and passionate.”
As I proceeded toward the men’s room, I encountered RAI’s cafeteria, which is named the “Golden Leaf Cafe” and contains black plastic chairs. The back of each of those chairs has a cutout in the shape of a camel. Prominently positioned in the lobby was a large portrait of Richard Joshua Reynolds (whose statue can be found a few blocks south on Main Street — see photo), the company’s founder.
I entered the meeting room just after 8:30 and sat in an aisle seat near one of two microphones. After having been personally greeted by several RAI employees, I got a chance to read a two-sided blue handout entitled “Rules of the Annual Meeting.” The closing part of the tenth of the twelve rules caught my attention: “Failure to observe the rules is cause for expulsion from the meeting. Shareholders and their representatives who refuse to leave the meeting upon request could be arrested and charged with criminal trespassing.” I remembered my experience at the 2013 RAI Annual Shareholders Meeting.
The 2014 meeting started precisely at 9:00 A.M. and featured the return of Susan Cameron as CEO. Tom Wajnert, the Non-Executive Chairman of the Board, began by citing his desire for a “productive and orderly meeting” and his opposition to disruptions under the “guise of points of information.” He then turned to Tom Adams, Executive Vice President and Chief Financial Officer, for a report on business. Mr. Adams noted that 2014 marks the tenth anniversary of RAI and that the company had made “much progress since 2004.” Key phrases from his report included: “leading the transformation of the tobacco industry”; “Stronger than ever”; “shareholder return of 27%”; “record profits”; “brand milestones”; and “highest market share for Camel since 1967.” Mr. Adams made no mention of any developments in tobacco litigation over the past decade (see, e.g., http://www.phaionline.org/2010/02/19/all-parties-seek-supreme-court-review-of-racketeering-trial-us-v-philip-morris/ and http://www.phaionline.org/2012/03/26/supreme-court-rejects-key-tobacco-industry-appeal-leaving-massive-liability-with-no-end-in-sight/ ). The premature deaths of millions of the company’s customers and bystanders to the use of the company’s tobacco products were once again excluded from RAI’s business presentation.
The Question and Answer session’s allotted time was increased slightly from the 25 minutes at the 2013 meeting to 30 minutes. As it turned out, Mr. Wajnert twice extended the period for shareholders’ questions and everyone who had lined up at the microphones had the opportunity to ask a question. The Q&A session lasted 45 minutes, from 9:40 to 10:25.
My question, which dealt with the ongoing Engle Progeny litigation in Florida, drew the meeting’s only mention of tobacco litigation from RAI. I called attention to the fact that, in February 2014, the website Law360.com reported that a leading litigation finance company — Law Finance Group — “has decided to throw its weight behind the plaintiffs in what experts say is the latest sign that the scales may be tipping toward eventual settlement.” Law Finance Group is offering appeal funding in Engle Progeny cases and advancing payment to plaintiffs of an appealed award. In October 2013, the U.S. Supreme Court declined to consider ( http://www.phaionline.org/2013/10/07/us-supreme-court-deals-devastating-blow-to-the-cigarette-industry-and-settlement-value-of-nearly-8000-pending-engle-cases-rises-dramatically/ ) the tobacco companies’ appeal of the Florida Supreme Court’s March 2013 ruling in the Douglas case ( http://www.phaionline.org/2013/03/18/big-victory-at-florida-supreme-court-is-bad-news-for-cigarette-manufacturers/ ). This development was a significant factor in Law Finance Group’s decision to support the Engle Progeny plaintiffs. My question to the RAI Board was: “What, if anything, has management done to inform its shareholders about this important new development regarding the Engle Progeny litigation?”
In response, Mr. Wajnert turned to Martin L. “Mark” Holton III, Executive Vice President, General Counsel and Assistant Secretary. Mr. Holton chose not to address whether RAI had ever informed shareholders of the Law Finance Group’s decision. Instead, he declared that he and the company are “comfortable” with RAI’s litigation position, including at the appellate level, with regard to these cases in Florida. [Just a month later, the U.S. Supreme Court gave RAI another major setback when it refused to consider the company’s appeal of several plaintiff verdicts in the Engle Progeny litigation in Florida.
Dr. Sharon Brown, who had been ejected from the 2013 RAI Annual Shareholders Meeting, noted that RAI had resumed cigarette advertising in certain magazines, including Glamour, and expressed additional concern that a Spanish-language version of the company’s “Right Decisions, Right Now” program could help introduce Spanish-speaking youth to RAI’s tobacco products.
Many of the questions dealt with farm labor issues, especially the working conditions of workers who toil for companies that supply tobacco to RAI. Mr. Wajnert refused to answer a direct question as to whether he believed a farm worker’s minimum wage of $7.25 per hour is a fair wage. Many supporters of the Farm Labor Organizing Council, AFL-CIO (FLOC) (see http://www.floc.com/wordpress/ ) attended the meeting while others demonstrated outside company headquarters. (photo courtesy of Dr. Sharon Brown).
Two shareholder resolutions were defeated. The first, calling for more transparent reporting to shareholders of the company’s lobbying expenditures, received 47.7 million “Yes” votes compared to 393.9 million “No’ votes. The second resolution, calling for an end to virtually all animal testing, received 3.3 million “Yes” votes and 433.8 million “No” votes.
Tuesday, June 24th, 2014
By Edward Sweda
Opening the company’s 2014 Annual Shareholders Meeting at precisely 9:00 A.M., Martin J. Barrington, Chairman and Chief Executive Officer of Altria Group, Inc., had plenty of good news to report to shareholders who had assembled at the Greater Richmond Convention Center on the morning of Wednesday, May 14. During his report on business, Barrington said that 2013 was a “strong year” for Altria, that dividend growth was positive and that total shareholder return was 28.6%. Marlboro’s share in 2013 was 43.7% — greater than the next ten brands combined. Altria’s Copenhagen and Skoal brands combined for a 50.7% share of the smokeless tobacco market in the United States.
The company also pledged to continue to follow its four “core strategies”:
- Invest in Leadership (“We will invest in excellent people, leading brands and external stakeholders important to our businesses’ success.”)
- Align with Society (We will actively participate in resolving societal concerns that are relevant to our businesses.)
- Satisfy Adult Consumers (“We will convert our deep understanding of adult tobacco and wine consumers into better and more creative products that satisfy their preferences.”)
- Create Substantial Value for Shareholders (“We will execute our business plans to create sustainable growth and generate substantial returns for shareholders.”)
But there was also bad news for Altria and its shareholders. Just fifteen days earlier, a panel of Illinois’ Fifth District Court of Appeals had unanimously reinstated a $10.1 billion bench verdict in a light cigarette class action, the Price case. Barrington did bring up this ruling during his business presentation, but only after claiming that Altria had had “success in managing litigation” during 2013. While acknowledging that “substantial litigation challenges” remain, Barrington expressed satisfaction over two company victories, the rejection of a light cigarette case in California, the Brown case, and a New York Court of Appeals ruling against the plaintiffs in a medical monitoring case, the Caronia case.
During the question and answer session, I cited the recent ruling in Price. “In 2005, the Illinois Supreme Court overturned the $10.1 billion bench verdict on what we now know is the false premise that the U.S. Federal Trade Commission (FTC) had authorized the conduct that was the basis for the company’s liability. Subsequently, the FTC itself and the U.S. Supreme Court in its 2008 ruling in the Good case both made that clear. While the company will appeal that April 29th ruling by the Fifth District Court of Appeal, my question is: What steps has the company taken to prepare to pay this multi-billion dollar judgment if the appeal to the Illinois Supreme Court is unsuccessful?”
In response, Barrington did not identify any specific steps that company may have taken. He expressed confidence that the ruling would eventually be overturned. He also told the shareholders that Altria prepares for all possible outcomes but that we are “a long way” from the point where a final judgment in the case would have to be paid.”
Two shareholder resolutions were considered at the meeting. The first, filed by Trinity Health, noted that the World Health Organization has said that tobacco and poverty “have become linked in a vicious circle, through which tobacco exacerbates poverty and poverty is also associated with higher prevalence of tobacco use. Several studies from different parts of the world have shown that smoking and other forms of tobacco use are much higher among the poor.” The resolution called on Altria to initiate efforts “to prepare appropriate materials… informing poor and less formally educated tobacco users of the health consequences of smoking our tobacco products along with market-appropriate cessation materials.” Father Michael Crosby introduced the resolution and stressed that Altria is financially benefitting on the backs of the poor at the front end of production (noting that many tobacco farm workers are undocumented and perform grueling work at the minimum wage rate of $7.25 per hour) and at the back end of sales since so many people who are addicted to nicotine are poor and have less formal education. Fr. Crosby also brought up a major concern about child labor on tobacco farms. See http://www.hrw.org/news/2014/05/14/us-child-workers-danger-tobacco-farms
Management opposed the resolution, alleging that “the matters raised in this proposal currently are being addressed and that the actions requested by the proponents are neither warranted nor in the best interests of shareholders.” The resolution was defeated, having received 3.72% of the votes.
The second shareholder resolution, which was submitted by the Province of St. Joseph of the Capuchin Order in Milwaukee, dealt with the issue of disclosure of lobbying policies and practices. This resolution called on Altria to prepare a report, to be updated annually, that would disclose four items: “1. Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. 2. Payments by Altria used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of payment and the recipient. 3. Altria’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. 4. Description of the decision making process and oversight by management and the Board for making payments described in sections 2 and 3 above.”
Proponents of the resolution noted that, while Altria currently makes some disclosure, there is still incomplete disclosure about lobbying spending at the state level. As proponents noted in the presentation in support of the resolution: “Lobbying is shareholders’ money that is being spent. Does our company stand behind its spending? Why should Altria intentionally keep us in the dark about how they are spending shareholder money? What does Altria have to hide? These are reasonable questions to ask.” Also, Altria serves on the private enterprise board of ALEC, the American Legislative Exchange Council. While the company has listed its involvement with ALEC, shareholders have no way of knowing how much Altria is contributing.
Management opposed this resolution as well, claiming that preparing and maintaining the report requested by proponents “would impose additional and unnecessary burdens and costs and would not be in the best interests of Altria and its shareholders.” The resolution was defeated, having received 6.46% of the votes.
Altria’s 2014 Annual Shareholders Meeting was adjourned at 9:55 A.M.
Thursday, June 5th, 2014
On September 19-20, 2014, the Public Health Advocacy Institute, in conjunction with the Tobacco Control Legal Consortium and Northeastern University School of Law will host a conference for advocates, “50 Years After the Surgeon General’s Report: Accelerating Tobacco Endgame Strategies in the United States.” This meeting will provide a blueprint to identify laws, regulations and policies that can:
- Reduce smoking rates to near-zero
- Give consumers true freedom of choice by eliminating addiction from the equation
- Consign non-smoker exposure to tobacco smoke to the dustbin of history
- Finally complete the process that began with the 1964 Surgeon General’s Report on Smoking and Health
See the program agenda (pdf)
Speakers will include exceptional tobacco control researchers and policy leaders sharing both evidence-based best practices and bold new practices that comprise a true endgame for tobacco products. Confirmed speakers include:
and a special message from:
Rear Admiral Boris D. Lushniak, M.D., M.P.H.
This meeting, the first of its kind in the United States, will highlight federal, state and local actions that will lead to an end to tobacco-caused addiction, death and disease in this country.
Re-imagining tobacco control as a means to truly end a public health problem that still kills more than 400,000 Americans each year is the next chapter in the movement that began 50 years ago when Surgeon General Luther Terry released the first Report on Smoking and Health.
The conference will be held September 19-20 (Fri-Sat) at Northeastern University School of Law in Boston, MA.
Our block of rooms at the Colonnade has sold out. However, there are several hotels very close to our campus that may still have availability:
- The Midtown Hotel
220 Huntington Ave
Boston, MA 02115
- Boston Marriott Copley Place
110 Huntington Ave
Boston, MA 02116
- Copley Square Hotel
47 Huntington Ave
Boston, MA 02116
- The Eliot Hotel
370 Commonwealth Ave
Boston, MA 02215
- Hampton Inn & Suites
Boston Crosstown Center
811 Massachusetts Ave
Boston, MA 02118
617-445-6400 or 800-426-7866
- Hilton Back Bay
40 Dalton St
Boston, MA 02115
- Inn at Longwood
342 Longwood Ave
Boston, MA 02115
- The Lenox Hotel
710 Boylston St
Boston, MA 02116-2699
- Sheraton Boston
39 Dalton Street
Boston, MA 02116
617-263-2000 or 800-325-3535