Posts Tagged ‘Altria’
Monday, June 12th, 2017
By Edward L. Sweda, Jr., PHAI Senior Attorney
As I approached the Greater Richmond Convention Center on the partly cloudy morning of Thursday, May 18, 2017, thoughts of sub-freezing temperatures and snowstorms never entered my mind. But, before the morning gave way to the afternoon, I realized that I had just seen dozens of snowflakes.
As he opened the meeting just before 9:00 A.M., Altria Group Chairman, President and CEO Martin J. Barrington declared that the company had experienced “another outstanding year” in 2016. That was followed by a “solid start” in the first quarter of 2017. He listed four priorities for the company:
- Tobacco Harm Reduction;
- Supply Chain Responsibility; and
The company’s strategies are:
- Maximize income from core tobacco businesses over the long term;
- Grow new streams with innovative tobacco products (including MarkTen XL, the “fastest growing e-vapor brand” in the last quarter of 2016); and
- Manage diverse income streams and a strong balance sheet to deliver consistent financial performance (citing Altria’s ownership of over 10% of AB InBev and its Ste. Michelle Wine Estates ).
I was able to begin the Question and Answer session of the meeting with the following question:
“You and other executives of Altria Group have often referred to tobacco litigation as an issue that is ‘manageable’ and, therefore, should not be troubling to investors.
Yet, just within the past two months, the following developments have occurred:
- On April 6th, the Florida Supreme Court in the R.J. Reynolds Tobacco Co. v. Marotta case ruled that federal law does not preempt Engle Progeny plaintiffs from bringing strict liability and negligence claims against tobacco companies.
- On April 12th in the Boatright v. Philip Morris USA, Inc. case, a Florida Appeals Court affirmed a jury award of $35 million against Philip Morris USA, Inc., and reversed the reduction of the award by the trial judge because the smoker was also at fault for his illnesses, ruling that Florida’s comparative fault law does not apply to intentional torts. This increases the company’s exposure to liability.
- On April 6th in the Sommers v. Philip Morris case, a Florida state jury awarded $1 million to the widow of a lawyer and real estate developer after finding Philip Morris responsible for his coronary artery diseases and fatal lung cancer.
My question is: do you understand why there are shareholders who believe that the tobacco litigation problem is no longer simply ‘manageable’?”
Mr. Barrington’s response was, while acknowledging these and other recent legal setbacks for Altria, to emphasize that in the larger picture, tobacco lawsuits are still “manageable” in the view of Altria’s management. He admitted that “litigation presents a risk and we devote substantial resources to it.” Mr. Barrington also claimed that the litigation has been “well managed” and that the slope of the numbers of cases “has been coming down.” Regarding Engle, he said that it presents a “complex set of individual cases” and that Altria is “working our way through it.” He complained that the “terms on which those cases are being tried are not particularly fair to the defendants.” He concluded by stating that tobacco litigation is “a complex matter but it is a finite matter.”
Reality Check’s Jonathan Chaffe asked about the growing number of localities across the country that have adopted Age 21 policies – making it illegal to sell or give cigarettes and other tobacco products to people under age 21. Mr. Barrington responded by saying that he prefers to minimum age to be 18 rather than 21. He also raised the potential problem of communities that have passed Age 21 laws being surrounded by other communities that hadn’t, thus encouraging young smokers to travel to a place where the minimum age is still 18. Finally, he opined that it would be better to have this issue dealt with by Congress, rather than by states or localities.
A 15-year-old student from Elmira, New York asked Mr. Barrington what steps Altria is taking “to ensure that specific populations with higher smoking rates based on ethnicity, income, education and mental health are not being profiled by Altria’s advertising?” Altria’s current top executive gave an answer that any number of his predecessors have given over the years. He claimed that the company markets cigarettes “only to adults.”
In response to a question about how Altria plans to respond to the U.S. Department of Housing and Urban Development’s November 2016 policy for smoke-free public housing, Mr. Barrington said that Altria “hasn’t weighed in” on the issue but that, as a general rule, homeowners should decide whether to allow smoking in people’s homes.
A shareholder resolution, sponsored by the Sisters of St. Francis of Philadelphia (see http://osfphila.org/ ), called on the company to “voluntarily commit itself that, by August 15, 2017, it will not allow any images of its logo or products be placed anywhere outside any store, in store windows or anywhere else inside any store selling its tobacco products and will stop incentives to any retailer for such placements.” The proposal noted that “people of low socioeconomic status have higher rates of cigarette smoking than the general population” and that a city of Philadelphia analysis of licenses found that lower income zip codes “had two-thirds more tobacco retailers per capita than higher-income zip codes and three-quarters more within 1000 feet of a school.”
The resolution received a 2.6% YES vote.
Before, during and after the meeting, at least thirty teenagers demonstrated outside the convention center, carrying teal and black balloons to emphasize how young people who begin using a deadly and addictive product become replacement smokers for Altria’s customers who die from smoking-caused diseases. The teenagers, who were accompanied be several adults, were representatives of Reality Check New York ) and No Limits Nebraska.
After the 50-minute meeting had ended, I emerged from the meeting room to learn that the approximately 85 attendees were blocked from exiting from the same doors through which they had entered an hour or so earlier. Instead, everyone had to walk down a long corridor – about the length of a city block – to get to the exit which led to the parking garage.
Why did Altria management take this action, which had never been done before in my experience of having attended annual shareholder meetings for more than 20 years?
If it hadn’t done so, shareholders would have seen dozens of teenagers wearing T-shirts with the message “People Over Profit.” They would have seen the balloons that represent both tobacco’s death toll and replacement toll. They would have heard the chants that describe the lies used by tobacco companies to help maximize profit levels at the expense of the health and the lives of the public.
In May 2016, the Urban Dictionary defined “snowflake” as “an overly sensitive person, incapable of dealing with any opinions that differ from their own.” The key message of this year’s Altria Group shareholders meeting was not that 2016 was an “outstanding” year for the company. It was that Altria’s management is afraid of opinions that differ from their own, especially when those opinions are espoused by young people who have the courage to speak truth to power – up close and personal.
Monday, June 6th, 2016
by Edward L. Sweda, Jr.
As soon as Altria Group, Inc. Chairman, CEO and President Martin J. Barrington opened the 2016 Annual Shareholders Meeting, he boasted that 2015 had been “another terrific year.” The “excellent business results” included dividends increasing by 8.7% (to $4.2 billion) and a shareholder return of more than 23%. Marlboro, with 44% of the retail share in the United States, is larger than the next 10 brands combined. But, just as at the Reynolds American Inc. meeting two weeks earlier, the tobacco company executive made no mention of other numbers – numbers that tally the toll in death and disease that is directly caused by the intended use of the company’s main product.
By distributing to shareholders a colorful, glossy handout summarizing the company’s 2015 business accomplishments, Mr. Barrington significantly cut back on the length of his oral business report compared to previous annual meetings. After that report and some perfunctory votes on election of the board of directors and the accounting firm were completed, the meeting’s agenda quickly came to the question and answer session.
After an initial question from a company-friendly stock analyst, I asked the following question of Mr. Barrington:
“Just within the past two months, the following developments have occurred.
- “On March 17, the Florida Supreme Court ruled in the Soffer case that the widow of a smoker who died of lung cancer can seek punitive damages against a tobacco company on strict liability and negligence claims.
- “On March 24, the Florida Supreme Court in the Ciccone case ruled that a smoker did not need an official diagnosis before the cutoff date for membership in the original Engle class.
- “On April 25, the Connecticut Supreme Court in the Izzarelli case ruled that the “good tobacco” language of the Restatement 2nd of Torts does not shield tobacco companies from product liability lawsuits. (See news coverage) This is similar to a ruling in Massachusetts
- “And, earlier this week on May 16, the U.S. Supreme Court in the Schwarz case declined Philip Morris USA’s request to review an Oregon jury’s $25 million punitive damages award to a widower whose wife died of lung cancer.
“Why shouldn’t Altria Group’s shareholders and investors be very concerned about these negative litigation developments for the company?”
Mr. Barrington’s response echoed the traditional party line from the top executives of the major cigarette companies in the United States: tobacco litigation is a “well-managed risk” that should not alarm shareholders and investors. He commended the quality of the work of the company’s lawyers, including Denise Keane, Altria’s General Counsel.
A representative of the AFL-CIO’s Farm Labor Organizing Committee (FLOC) cited “poverty wages and squalid housing” on tobacco farms and called on Altria to crack down on the abuses of farm workers in tobacco fields. He also specifically mentioned Jackson Farms in North Carolina, where seven workers who had filed a wage theft lawsuit were subsequently blacklisted. Mr. Barrington responded by confirming that Altria does not use Jackson Farms to get any of its tobacco.
Amber Updike, a 14-year-old member of New York-based Reality Check , mentioned Altria’s having spent $9 billion annually in marketing to youth in the United States. Mr. Barrington responded by denying that Altria targets youth and referred her to the company’s websites. He also claimed that Altria “led the effort to get cigarettes off the [store] counter.”
Cathy Rowan, representing Trinity Health, spoke in favor of a resolution calling on Altria to “undertake a thorough analysis, engaging chemical and pharmacological experts as needed, of all the harmful liquids, additives and chemicals and their potential health consequences when each brand of our tobacco products is used as intended by consumers and report the results of the analysis on the Company’s website.” Ms. Rowan noted that there is no clarity regarding the ingredients in Altria’s cigarettes and e-cigarettes and that compliance with the U.S. Food and Drug Administration’s (FDA) deeming regulations (which were adopted on May 5, 2016) could take up to three years.
Altria opposed the resolution, preferring to leave the matter to the FDA. The resolution was defeated with 93% of the shares having been voted “No.”
The second shareholder resolution, which was sponsored by the national AFL-CIO, called on Altria to follow the lead of Pepsico and follow the United Nations’ Guiding Principles on Business and Human Rights. A company would have the following: a) A policy commitment to meet their responsibility to respect human rights; b) A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights; and c) Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.”
Since agricultural workers are excluded from the National Labor Relations Act, it is important to have non-judicial grievance mechanisms to remedy human rights violations. Altria opposed the resolution, arguing that its “responsible supply chain management practices appropriately address the objectives of this proposal.” This resolution was defeated with 94.1% of the shares having been voted “No.”
After the 45-minute meeting concluded, I went outside to meet some of the 40 youth members of Reality Check who had protested against Altria’s targeting of youth. [Insert photo] The loud protests were heard inside the Richmond Convention Center (especially as attendees came to and from the restrooms) before, during and after the shareholders meeting.
It was a distinct pleasure to meet with Gretchen Galley, Ken Dahlgren and Jon Chaffee, as well as the youth – about 40 in number – who sent the clear message to Altria that “We have seen enough!”
Tuesday, May 24th, 2016
On May 23, 2016, the widow and children of baseball great Tony Gwynn filed a wrongful death lawsuit against Altria Group alleging that the manufacturers of Skoal smokeless tobacco’s negligence, fraud, defective design, and failure-to-warn caused the death of the Hall of Famer in 2014.
Richard Daynard, PHAI’s president and University Distinguished Professor of Law at Northeastern University, discussed the case in the New York Times and also on ESPN along with Neil Romano of the National Spit Tobacco Education project.
Monday, June 1st, 2015
By Edward L. Sweda, Jr.
There are 8,760 hours in any given year (excluding leap years). The management of Altria Group, Inc. used just under one of those 8,760 hours to conduct its 2015 Annual Shareholders’ Meeting at the Greater Richmond Convention Center in Richmond, Virginia on the morning of May 20th. The meeting began precisely at 9:00 A.M. and was adjourned at 9:57 A.M.
In his business presentation, Altria Group, Inc. Chairman, CEO and President Martin J. Barrington reported that “2014
was a very strong year for Altria and its shareholders,” that “Marlboro achieved record retail share of 43.8%, larger than the next ten brands combined” and Altria “delivered shareholder return of over 34%, far outpacing the S&P 500 and the S&P Food, Beverage and Tobacco Index.” Addressing an important concern in Washington, Mr. Barrington stated that Altria believes that the U.S. Food and Drug Administration “has an unprecedented opportunity to advance public health goals by recognizing that some types of tobacco products may have significantly lower risk compared to cigarettes.”
During the Question and Answer session, I asked the following question:
“According to Altria Group’s most recent form 10-K filed with the SEC ‘an unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related or other litigation are significant and, in certain cases, range in the billions of dollars.’ Just last month, the Boston Globe reported on an upsurge of tobacco product liability lawsuits that have been filed in Massachusetts, spurred on by a recent ruling from the state’s Supreme Judicial Court that is favorable to plaintiffs in those cases. Moreover, Altria’s Form 10-K also states on page 67 that ‘after exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation since October of 2004, PMUSA has paid in the aggregate judgments (and related costs and fees) totaling approximately $144 million as of December 31, 2014.’ So my question is ‘Why shouldn’t Altria’s shareholders and investors expect the company to continue to pay judgments in the hundreds of millions, if not billions, of dollars in the years to come?’”
Mr. Barrington answered that litigation “presents risks to this company and to others. But it is also true that we have considerable experience in managing that risk. And I think if you look at the track record for Altria, and fill it more so over the years, you see that it has been extremely well managed. The approach we take is to defend the cases strongly and vigorously and you overwhelmingly see that from time to time, a matter may present itself in which we have a unique opportunity to resolve the matter. And if we think it’s in shareholders’ best interest to do that, we will go ahead to do that, but I think actually if you look at the curve of tobacco litigation over the last, I don’t know, 7 to 10 years, you will see that it is not up at all. In fact, it’s sharply down. And I think that’s because we have managed it and we have addressed the challenges that we have had in litigation that you are pointing out.”
Father Michael Crosby of the Province of St. Joseph of the Capuchin Order in Milwaukee addressed the issue of forced labor in tobacco fields. After Mr. Barrington had stated that Altria opposes illegal cigarette smuggling, Fr. Crosby commented that Altria “does not seem to be that much against illegal trafficking in human beings who are coming into our fields to produce and harvest the tobacco. You called the trafficking of tobacco products criminal behavior, for me it’s criminal behavior when this company is aware of the illegality of having so many undocumented workers, some people say up to 70% of all farm workers in the United States are undocumented, that means this company is involved in illegal behavior maybe not directly but indirectly it knows it’s going on and doesn’t do anything, so there’s culpability. This is the elephant in the board room. This is the elephant in the shareholders meeting that our dividends are coming on the back of illegal activities.”
In response, Mr. Barrington stressed that “we oppose exploiting labor on the farm or elsewhere.” He added that, as opposed to doing nothing, the company “have put it in our supplier code of conduct. We tell the growers that they should not be using forced labor or exploitive labor in our work.”
Officials from the AFL-CIO’s Farm Labor Organizing Committee addressed concerns about child labor in tobacco fields as well as the effort to get substantive change in the conditions, wages and housing for tobacco farm workers.
Cathy Rowan, on behalf of Trinity Health as well as Catholic Health Initiatives , the Sisters of St. Dominic of Caldwell, New Jersey, the Sisters of Charity of St. Elizabeth and the Sisters of St. Francis, supported a resolution asking the Altria Board of Directors to “initiate efforts to develop materials informing tobacco users who live below the poverty line or have little formal education about the health consequences of smoking our products along with market-appropriate smoking cessation materials.” The proposal “speaks to the high prevalence of smoking among people living in poverty, people with disabilities and minority populations. Many of these are fellow citizens who are people who have the fewest resources, the least amount of social support and the least access to cessation services.” The company’s opposition to this resolution claims that the company “believes the wide variety of current communication programs sponsored by multiple parties addresses the objectives of this proposal.” This resolution was defeated.
Two other shareholder resolutions were presented. One, sponsored by the AFL-CIO, called on Altria Group, Inc. to prepare a report on the steps it has taken to reduce the risk of acute nicotine poisoning (or “Green Tobacco Sickness”) for farmworkers in the company’s supply chain for tobacco. The other resolution, sponsored by the Province of St. Joseph of the Capuchin Order in Milwaukee, requested the company’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.” Just as at the Reynolds American Shareholders Meeting two weeks earlier , both of these resolutions were defeated.
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.
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.
Friday, May 24th, 2013
By Edward L. Sweda, J.D.
In sharp contrast to the manner in which management at Reynolds American, Inc. conducted its annual meeting of shareholders a week earlier, Altria Group, Inc.’s Chairman and Chief Executive Officer Martin J. Barrington treated everyone at the May 16th meeting in Richmond, Virginia with courtesy and politeness.
Barrington began his presentation by commending the Altria Board of Directors’ “strong leadership and oversight.” He touted “strong results in 2012” and declared that the company’s “main brands did well.” Citing the company’s 9000 employees, Barrington praised the company for being a founding member of the Farm Labor Practices Group, supporting the arts and investing in communities. He admitted that “more needs to be done to discourage youth tobacco use” and, without giving any data showing how the program discourages youth tobacco use, praised Altria’s “We Card” program.
Barrington reported increased market share for Marlboro (in red, green, gold and black) cigarettes and progress for Black & Mild (tipped cigarillos) and the two major smokeless tobacco brands of Skoal and Copenhagen. He informed the audience that the company would introduce NuMark, a brand of e-cigarettes, in the second half of 2013.
Altria’s CEO also assured shareholders that the company’s outlook for 2013 is good; he noted that Altria had increased dividends six separate times since 2008. Also, Altria’s shareholder returns had increased by 84.2% during the span of 2008 to 2012.
On the topic of tobacco litigation, Barrington declared that the company had “success in managing litigation,” mentioned the ongoing Brown case in California dealing with light cigarettes and said that Altria has “strong defenses” as it continues to defend Engle Progeny cases in Florida.
A shareholder resolution, submitted by the Province of St. Joseph of the Capuchin Order in Milwaukee, dealt with the issue of disclosure of the company’s lobbying policies and practices. Specifically, it called on the Board of Directors to prepare a report, to be updated annually, for shareholders disclosing the following:
- “Company policy and procedures governing lobbying, both direct and indirect, and Grassroots lobbying communications;
- “Payments by Altria used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient;
- “Altria’s membership in and payments to any tax-exempt organization that writes and endorses model legislation; and
- “Description of the decision making process and oversight by management and the Board for making payments described in section 2 above.
Fr. Michael Crosby presented the resolution. He stressed that, while Altria has disclosed its payments to political candidates, it has kept largely secret the details about its spending on lobbying and making contributions to third-party organizations such as ALEC, the American Legislative Exchange Council. The resolution’s supporting statement pointed out that “Altria spent approximately $21.37 million in 2010 and 2011 on direct federal lobbying activities” but that these figures “do not include lobbying expenditures to influence legislation in states.”
This author then spoke in support of the “modest, pro-transparency resolution” and described the opposition to the resolution by Altria’s management as “short-sighted.” The company had described the reports required by the proposal as imposing “additional and unnecessary burdens and costs on the Company and would not be in the best interests of the Company and its shareholders.”
The results of preliminary voting were reported that the resolution was defeated with supporters garnering 21.82% of the votes cast.
During the question and answer session, to which thirty minutes were allotted, this author noted that Altria had suffered a major setback in mid-March when the Florida Supreme Court ruled 6-1 that the way dozens of Engle Progeny trials have been conducted since February 2009 does not violate the tobacco companies’ due process rights. I concluded my observations about this litigation with the question: Why shouldn’t shareholders believe tobacco company attorneys who have warned about “massive liability” with thousands of Engle Progeny cases still in the pipeline with “no end in sight,” rather than believing the optimistic assurances from management?
Barrington’s response was to acknowledge that litigation is a “challenge” and to refer shareholders to the company’s 10-Q report (PDF), which covers litigation in detail.
Fr. Crosby noted that heavy users of cigarettes are often those who are at the lowest rung of the economic ladder. “What steps will Altria Group take to reduce consumption of its tobacco products by the poor?” Rev. Crosby asked. Mr. Barrington simply cited the company’s programs to reduce youth consumption without addressing low-income adult smokers. Even after a follow-up question by Fr. Crosby, Barrington refused to commit any company resources to trying to discourage tobacco consumption among low-income adults.
After the 67-minute meeting had been adjourned, Altria Group, Inc., with its Marlboro brand having increased its market share of cigarettes by two-tenths of a percentage point in the first quarter of 2013, continued to conduct its business as it so usually does. During the course of the meeting, approximately 56 people died in the United States from smoking-caused diseases.
Monday, March 18th, 2013
Florida smokers and their families who are suing tobacco companies won a resounding victory on March 14, 2013 when the Supreme Court of Florida upheld its landmark 2006 ruling in Engle v. Liggett Group, Inc., 945 So.2d 1246 (Fla. 2006).
By a vote of 6 to 1, Florida’s highest court ruled in favor of the plaintiff in Philip Morris USA, Inc., et al. v. Douglas, 2013 Fla. LEXIS 440, upholding a $2.5 million award in the death of Charlotte Douglas and explicitly rejecting industry arguments that the Florida Supreme Court’s ruling seven years ago violated the Due Process rights of the companies.
The Engle case originated as a class action and went to trial before a jury; that jury in Phase I of the trial found the defendant companies strictly liable, in that the cigarettes that the defendants manufactured and placed on the market “were defective in many ways including the fact that the cigarettes contained many carcinogens, nitrosamines, and other deleterious compounds such as carbon monoxide.” While the case ultimately was not allowed to proceed as a class action, the Supreme Court of Florida ruled in 2006 that the members of the class could file their own individual cases (so-called “Engle Progeny” cases) and proceed with those cases relying upon the jury’s Phase I findings of liability, including that smoking caused a variety of specific diseases, that nicotine in cigarettes is addictive, that the tobacco defendants placed cigarettes on the market that were defective and unreasonably dangerous and that all of the Engle defendants were negligent.
The tobacco companies have argued that, despite the fact that they vigorously presented a defense to these claims during the original Engle trial, applying the Phase I findings to the Engle Progeny trials violates their due process rights. Even though the R.J. Reynolds Tobacco Co. relied on this argument unsuccessfully in the Martin case a year ago, (see http://www.phaionline.org/2012/03/26/supreme-court-rejects-key-tobacco-industry-appeal-leaving-massive-liability-with-no-end-in-sight/ ), the companies tried again in Douglas. Commenting on the original Engle trial, the six-member majority in Douglas said: “As illustrated by hundreds of witnesses, thousands of documents and exhibits and tens of thousands of pages of testimony, the Engle defendants had notice and the opportunity to defend against all theories of liability for each of the class’s claims in the yearlong Phase I trial.”
That six-member majority also noted that the tobacco defendants “argue that the Phase I findings establish, at most, that some of their cigarette were defective for some unspecified reason and that they engaged in some, unspecified tortious conduct. This, they claim, requires reversal of the verdict for the plaintiff based on strict liability because the Douglas jury was not instructed (and did not find) a causal connection between a specific defect in the defendants’ cigarettes and the injuries alleged. We disagree and decline the defendants’ invitation to revisit our decision in Engle.”
The majority clearly recognized and emphatically rejected the industry’s fundamental argument. “At its core, the defendants’ due process argument is an attack on our decision in Engle to give the Phase I findings res judicata – as opposed to issue preclusion – effect in class members’ individual damages actions. However, res judicata is the proper term, and we decline the defendants’ invitation to rewrite Engle.”
The decision was bad news for the tobacco industry and its friends on Wall Street. Pro-industry analyst David J. Adelman of Morgan Stanley admitted that the ruling “was even more pro-plaintiff than we expected and will make it more difficult for the industry to successfully defend these claims.”
After the decision was released, Philip Morris USA announced that “it plans to seek further review” of the Douglas decision. That means yet another attempt to persuade the Supreme Court of the United States to consider the industry’s appeal that Engle Progeny trials that result in plaintiff verdicts somehow violate the companies’ due process rights. If the Supreme Court of the United States makes the same decision it made a year ago about an almost identical appeal (Martin), the answer to the tobacco companies will be a final “No.”
-Edward L. Sweda, Senior Attorney for the Tobacco Products Liability Project
PHAI’s Friedman and Gottlieb Co-author: “Soda and Tobacco Industry Corporate Social Responsibility Campaigns: How Do They Compare?” in PLoS Medicine
Tuesday, June 19th, 2012
PHAI senior staff attorney Lissy Friedman and executive director Mark Gottlieb collaborated with Lori Dorfman, Andrew Cheyne and Asiya Wadud of the Berkeley Media Studies Group to produce this article published today in PLoS Medicine.
Soda companies’ PR campaigns are bad for health:
Health advocates need to organize strong public health campaigns to educate the public and policymakers about the dangers of both sugary beverages and the misleading industry corporate social responsibility campaigns that distract from their products’ health risks, according to US experts writing in this week’s PLoS Medicine.
In a Policy Forum article, the authors (media and public health experts from the Berkeley and Boston, USA) examined prominent campaigns from industry leaders PepsiCo and Coca-Cola, that, according to the authors, have embraced corporate social responsibility (CSR) with elaborate, expensive, and multinational campaigns.
The authors say that while soda companies may not face the level of social stigmatization or regulatory pressure that now confronts Big Tobacco, concern over soda and the obesity epidemic is growing.
In response to health concerns about their products, the authors argue that soda companies have launched comprehensive CSR initiatives sooner than did tobacco companies but that these campaigns echo the tobacco industry’s use of CSR as a means to focus responsibility on consumers rather than the corporation, bolster the companies’ and products’ popularity, and to prevent regulation.
However, unlike tobacco CSR campaigns, soda company CSR campaigns explicitly target young people and aim to increase sales.
The authors say: “It is clear that the soda CSR campaigns reinforce the idea that obesity is caused by customers’ “bad” behavior, diverting attention from soda’s contribution to rising obesity rates.” They continue: “For example, CSR campaigns that include the construction and upgrading of parks for youth who are at risk for diet-related illnesses keep the focus on physical activity, rather than on unhealthful foods and drinks. Such tactics redirect the responsibility for health outcomes from corporations onto its consumers, and externalize the negative effects of increased obesity to the public.”
The authors argue: “Emerging science on the addictiveness of sugar, especially when combined with the known addictive properties of caffeine found in many sugary beverages, should further heighten awareness of the product’s public health threat similar to the understanding about the addictiveness of tobacco products.”
They conclude: “Public health advocates must continue to monitor the CSR activities of soda companies, and remind the public and policymakers that, similar to Big Tobacco, soda industry CSR aims to position the companies, and their products, as socially acceptable rather than contributing to a social ill.”
This article is one in a PLoS Medicine series on Big Food that examines the activities and influence of the food and beverage industry in the health arena. The series runs for three weeks beginning 19 June 2012 and all articles will be collected at www.ploscollections.org/bigfood. Twitter hashtag #plosmedbigfood
Funding: This research was supported by the Healthy Eating Research program (http://www.healthyeatingresearch.org/) of the Robert Wood Johnson Foundation, grant #68240. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.
Altria’s Annual Shareholders Meeting in Richmond, Virginia: Retirement provides no change in the company’s conduct
Thursday, June 7th, 2012
By Edward L. Sweda, Jr.
In January 2012, Altria Group, Inc. announced that CEO Michael E. Szymanczyk would retire after the completion of the company’s Annual Shareholders Meeting in Richmond, Virginia on May 17. Mr. Szymancyk worked for the company in various capacities for 23 years. Michael J. Barrington was named to succeed him as Chairman and CEO, while Dave Beran was selected to take over as President and Chief Operating Officer .
While Mr. Szymancyk can take advantage of generous compensation – a pay package valued at $10.2 million for fiscal year 2011 for his work as the CEO of America’s largest cigarette manufacturer, there are many others who are not in a position to enjoy retirement. These include the hundreds of thousands of Americans who annually die prematurely due to smoking-caused diseases, as well as from exposure to secondhand smoke.
As usual, the biggest portion of time at the Annual Shareholders Meeting was devoted to the CEO’s business report on the prior year. During this presentation, Szymanczyk said that Altria had “successfully managed” the external challenges of litigation.
However, during the question-and-answer session, this author noted that, in late March 2012, the U.S. Supreme Court had declined to consider Altria’s appeal in the Campbell case and Reynolds American’s appeal in the Martin case. In its petition for certiorari filed in December 2011, the attorneys for Reynolds American alleged that “in their conduct of Engle Progeny litigation, the Florida state courts are engaged in serial due process violations that threaten the defendants [including Altria] with literally billions of dollars of liability.” The attorneys also warned that if the U.S. Supreme Court did not provide “prompt review,” then “the massive liability imposed on the Engle defendants – which currently stands at over $375 million in adverse judgments – will likewise steadily increase as Engle progeny trials continue with no end in sight.” So, this doomsday scenario outlined by tobacco company attorneys is on track to occur, thanks to the U.S. Supreme Court’s refusal to hear the appeal. Therefore, I asked Mr. Szymanczyk: “Why shouldn’t investors and shareholders rely on what tobacco company lawyers said to the U.S. Supreme Court, rather than what you are telling us today?”
In response, Mr. Szymanczyk referred the audience (which included people listening to a webcast of the meeting) to the company’s latest 10-Q report, which contains 32 pages of information on tobacco litigation.
Returning to the theme of retirement, Anne Morrow Donley, a Virginia shareholder, addressed CEO Szymanczyk directly. “With your retirement, I’m sure you look to your legacy. Certainly you and the company have a passion for success. I’m not sure about satisfying your customers’ and their preferences unless they all have a death wish,” she said. “One of every two of your tobacco customers dies from using your tobacco products, often from a debilitating illness. At some point in the future, you and the company may indeed be charged with crimes against humanity – I look forward to that,” she concluded.
After the question-and-answer session, the next order of business was the consideration of a shareholder resolution, submitted by the Province of St. Joseph of the Capuchin Order in Milwaukee. The proposal, which dealt with Altria’s lobbying activities, called for on the Board of Directors to prepare a report that would disclose, on an annual basis:
- “Company policy and procedures governing the lobbying of legislators and regulators, including that done on our company’s behalf by trade associations. The disclosure should include both direct and indirect lobbying and grassroots lobbying communications.
- A listing of payments (both direct and indirect, including payments to trade associations) used for direct lobbying as well as grassroots lobbying communications, including the amount of the payment and the recipient.
- Membership in and payments to any tax-exempt organization that writes and endorses model legislation.
- Description of the decision making process and oversight by the management and Board for
- Direct and indirect lobbying contribution or expenditure; and
- Payment for grassroots lobbying expenditure.”
The key goal of the resolution is transparency. Father Michael Crosby, a Capuchin Franciscan, endorsed the proposal, noting that his order and “eight other members of the Interfaith Center for Corporate Responsibility have submitted the resolution that has received the support of one of the biggest institutional advisor groups in the United States. ISS, Institutional Shareholder Services. When they analyzed what we are asking for, and what the company’s response is, they said that it was not adequate enough to support the company, so they are basically supporting us.”
Father Crosby continued, contending that Altria has a “culture of connivance.” Citing the election battle in California over Proposition 29, a proposition would, for the first time in 14 years, raise the state cigarette excise tax by $1 per pack to help fund cancer research. Father Crosby noted that Altria “has contributed two thirds of the $40 million trying to undermine” support for the proposition. On the “main web site of this group in California that is against” Proposition 29, it says it is supported by small business. “There is no mention that two thirds of all the money going into this is from a big business like” Altria, Father Crosby said. [Initial reports on the June 5, 2012 vote in California show a very narrow defeat for the proposition, by a margin of 50.8% against versus 49.2% in favor].
Father Crosby also condemned Altria’s support for the American Legislative Exchange Council, noting that the company has a seat on ALEC’s board of directors. “It isn’t democracy. It’s corpocracy, and it’s hypocrisy when there is this connivance,” Father Crosby told the audience.
In seconding the proposal, this author noted that “this modest shareholder proposal comes at a time of unprecedented public concern and pushback about the excessively pervasive and powerful influence that corporations have in the American political system. In the wake of the January 2010 U.S. Supreme Court decision in the Citizens United case,… in which right-wing judicial activism has transformed the landscape of the American electoral process, certainly this resolution addresses a subject of utmost importance.”
I also noted that Altria had donated $50,000 to ALEC’s annual meeting for drafting legislation for Florida and other states that adopted the so-called “Stand Your Ground” legislation which has garnered international attention after the February 2012 fatal shooting of an unarmed 17-year-old, Trayvon Martin. “ Altria’s association with ALEC should have been disclosed to shareholders” long before now, I concluded.
In its opposition to the proposal, Altria claimed that it “provides extensive information on its website describing its public policy activities” and that the “additional report sought by this proposal is not necessary and would not provide meaningful additional insight into the Company’s activities in this area.”
The proposal was defeated with a preliminary result of 20.5% of shares in favor, with 79.5% of shares opposed.
So, after the meeting, Michael Szymanczyk did indeed retire as Altria’s CEO. His successor is expected to proceed with business as usual – as deadly as that business will be for untold millions of people.