Posts Tagged ‘litigation’
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.
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 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.
Friday, January 17th, 2014
FOR IMMEDIATE RELEASE
Contact: Mark Gottlieb (617-373-2026) or Edward L. Sweda, Jr. (617-373-8462)
Boston – The U.S. Surgeon General’s Report on Smoking and Health, which was released today at the White House, highlighted the importance of litigation against tobacco companies over the past 50 years in the United States. Thanks to a landmark 2013 ruling by the Massachusetts Supreme Judicial Court (SJC) in the case of Evans v. Lorillard Tobacco Co., the Bay State is poised to become the most attractive state in which to file product liability lawsuits against tobacco companies.
“The current state of the law in Massachusetts is that any cigarette that addicts or maintains the nicotine addiction of consumers is defective. This precedent in Evans will tremendously benefit smokers who are seeking legal redress against tobacco manufacturers in Massachusetts,” said Mark Gottlieb, Executive Director of the Public Health Advocacy Institute, which is based at Northeastern University School of Law.
In the Evans case, a Suffolk County jury in 2010 awarded the son of Marie Evans, a woman who died of lung cancer in 2002 at the age of 54 after she had been given free packs of Newport cigarettes as a child at the Orchard Park Housing Project, $71 million in compensatory damages – a figure later reduced to $35 million. In June 2013, the SJC, while overturning an $81 million punitive damages award solely due to a flaw in jury instructions, upheld the compensatory damages award and ruled that it declines “to place addictive chemicals outside the reach of product liability and give them special protection akin to immunity based solely on the strength of their addictive qualities.” In October, Lorillard announced that it had settled the case for $79 million ($35 million plus accumulated interest) and dropped its threatened appeal to the U.S. Supreme Court.
“The SJC’s opinion in Evans now stands as a landmark precedent, binding in Massachusetts and potentially persuasive in any other jurisdiction in the country,” said Edward L. Sweda, Jr., PHAI’s Senior Attorney. “Anyone who developed a tobacco-related disease from smoking any cigarettes (other than “ultra low tar and nicotine” cigarettes) in Massachusetts can now recover their damages from the cigarette manufacturer,” Sweda added.
Massachusetts residents and their families who have suffered from a disease or death caused by smoking should contact PHAI.
Historic $79 Million Cigarette Settlement Signifies Beginning of Wave of Tobacco Cases in Massachusetts
Wednesday, October 23rd, 2013
FOR IMMEDIATE RELEASE
CONTACT: Mark Gottlieb – 617-373-2026
Massachusetts is now the most favorable state in the country to bring a cigarette smoking personal injury case. A Massachusetts Tobacco Case Information Hotline has been established for victims of smoking and their families to learn more at: 888-991-8728 or here at www.MATobaccoCase.com.
Today’s announcement in Lorillard’s 8K SEC filing of a $79 million settlement for compensatory damages and interest and conclusion of Evans v. Lorillard Tobacco Co. marks the end of the first tobacco trial in Massachusetts since 1990. Much has changed since then.
In 1994, a torrent of extraordinarily damaging documents from the cigarette companies’ internal files laying out how the companies hid what they knew about the dangers of their products from customers and government became available to the public.
- Whistleblowers came forward offering their testimony of what they saw.
- Congress held embarrassing hearings where cigarette company CEOs blatantly lied under oath on national television.
- States sued cigarette manufacturers for billions of dollars lost treating sick smokers on Medicaid.
After years of constant litigation and public disclosure of the industry’s bad behavior, in 2006, a federal judge issued a scathing opinion detailing in 1,500 pages of factual findings the industry’s improper activities and finding them liable for racketeering.
These developments have transformed the tobacco litigation landscape. In Florida, under special rules subsequent to the dismissal of a class action, 71 out of 104 individual tobacco trials held over the past 4 years have resulted in verdicts for the plaintiff. But the most important state for tobacco litigation is not Florida. It’s Massachusetts.
Massachusetts, benefitting from the combination of two key rulings by the Supreme Judicial Court, is the best state in the nation for litigation against cigarette manufacturers.
In Haglund v. Philip Morris (847 N.E. 2d 315 (2006)), the Massachusetts Supreme Judicial Court unanimously rejected the tobacco industry’s blame-the-smoker-for-smoking defense. This is the only court opinion in the country that has squarely held that, as a matter of law – except in extremely rare and unlikely cases – the so-called “personal choice defense” is unavailable to the tobacco companies. The Court wrote that, “If Philip Morris chooses to market an inherently dangerous product, it is at the very least perverse to allow the company to escape liability by showing only that its product was used for its ordinary purpose.” The affirmative defense that the smoker’s behavior was unreasonable or should have known the risks is not available in Massachusetts.
In this past June’s Supreme Judicial Court ruling in the case announced as settled today, Evans v. Lorillard (465 Mass. 411 (2013)), the Court held that Lorillard breached the implied warranty of merchantability and that cigarettes that were addictive and caused disease were not fit to be sold in Massachusetts. This rendered virtually every cigarette sold here as defective. The Court reasoned, “We decline to place addictive chemicals outside the reach of product liability and give them special protection akin to immunity based solely on the strength of their addictive qualities. . . . Rather, we conclude . . . that a reasonable jury could find from the evidence presented that a low tar, low nicotine cigarette constituted a safer reasonable alternative to Lorillard’s Newport cigarettes.”
By “low tar, low nicotine cigarette,” the Court is not referring to brands that were deceptively marketed as “light cigarettes.” Rather it means cigarettes that do not addict and expose consumers to an array of carcinogens. While the cigarette companies could have sold such products, virtually no cigarettes sold in Massachusetts utilized such a reasonable alternative to the deadly and addictive products that have been so lucrative for Philip Morris, R.J. Reynolds, Lorillard, Brown and Williamson, American Tobacco Co., or Liggett for so long.
As the book closes on Evans v. Lorillard, a new era of tobacco litigation based in Massachusetts is about to begin. Individuals and family members of those who have suffered from a cigarette-caused illness such as lung cancer, COPD, Buerger’s disease or bladder cancer, to name a few, should contact the Massachusetts Tobacco Case Information Hotline at 888-991-8728 to learn more about their legal rights. They can also contact the Hotline via the web here.
Mark Gottlieb, Director of the Public Health Advocacy Institute, at Northeastern University School of Law noted that, “The time for so many tobacco industry victims in Massachusetts to come forward to hold the industry responsible is finally here.”
Edward Sweda, Senior Attorney for the Institute stated, “The state of the law in Massachusetts, as set forth by the Supreme Judicial Court, is that any cigarette that addicts or maintains the nicotine addiction of consumers is defective. This is great news for smokers who seek legal redress from the companies that put these defective products on the market. Conversely, it is disastrous news for the cigarette companies.”
US Supreme Court deals devastating blow to the cigarette industry and settlement value of nearly 8,000 pending Engle cases rises dramatically
Monday, October 7th, 2013
For seven years, cigarette companies have repeatedly claimed that the Florida Supreme Court’s decision in Engle v. Liggett, which relieved about 8,000 Florida cases of the need to prove general liability or that cigarette smoking causes disease, violated the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution. They repeatedly represented to industry analysts and shareholders that these key procedural advantages, which have helped plaintiffs in the trials held to date obtain verdicts against the cigarette manufacturers in two out of every three cases, ultimately would be wiped out as unconstitutional.
The original ruling was based on the long-established notion of res judicata, meaning that the matter had already been judged. The issues that the defendants wanted to re-litigate were already determined in a year-long class action trial in 1999.
Twice now, the cigarette companies have failed to get these important procedural advantages overturned by the U.S. Supreme Court and it appear that, for all intents and purposes, the industry’s uphill legal battle has just become considerably steeper in Florida.
Last November, the U.S. Supreme Court declined to review an appeal of another Engle progeny case, Clay v. RJ Reynolds Tobacco, which raised similar Due Process issues.
Today, about seven months after the Florida Supreme Court issued a decision upholding its 2006 Engle ruling in Philip Morris v. Douglas, the industry was again rebuffed by the nation’s highest court and may have exhausted ways of arguing that its Constitutional rights to due process have been denied in Florida.
Mark Gottlieb, Director of the Public Health Advocacy Institute, at Northeastern University School of Law in Boston noted that, “the cigarette companies have two choices left in Florida: either spend the next century continuing to lose around 65-70% of its cases or working to fairly settle them and bring some closure to those 8,000 or so victims who have been waiting more than 15 years for their day in court.”
Public Health Advocacy Institute’s Senior Attorney, Ed Sweda, said,”the tobacco companies’ long-repeated claim that the procedure for trying Engle Progeny cases violates their Due Process rights is now legally dead. The rights of the victims of these companies have been vindicated.”
Monday, August 26th, 2013
Cheeseburger Bills or Common Sense Consumption Acts (CCAs) were spearheaded by the National Restaurant Association as well as the American Legislative Exchange Council (ALEC) and have been enacted in 26 states. Media coverage and legislative debates about CCAs were dominated by themes of personal responsibility and the need for tort reform to protect businesses from frivolous litigation. A recent study just published in the Food and Drug Law Journal by PHAI’s Cara Wilking, J.D. and Richard A. Daynard, J.D., Ph.D. analyzes the
25 CCAs enacted between 2003 and 2012, and found they go well-beyond tort reform. Key findings from “Beyond Cheeseburgers: The Impact of Commonsense Consumption Acts on Future Obesity-Related Lawsuits” include:
- The majority of CCAs (16 states) may be interpreted to confer broad civil immunity for claims seeking to recover for health harms stemming from long-term consumption of food.
The CCAs enacted in nine states (Alabama, Colorado, Georgia, Idaho, Illinois, Michigan, Missouri, Oklahoma and Tennessee) impose a limitation on the kinds of cases government attorneys can bring by specifically referencing governmental entities when defining the reach of the statute.
- Six states (Alabama, Georgia, Kentucky, Texas, Oregon and Washington) explicitly protect the authority of governmental entities to enforce certain food-related laws.
- Thirteen states impose substantial procedural barriers such as heightened pleading requirements and stays of discovery for covered obesity-related claims.
- All states had laws to guard against frivolous litigation in place prior to the enactment of CCAs.
The health harms of tobacco are well-known and linked to corporate misconduct. In the late 1990’s, tobacco litigation brought by State Attorneys General resulted in individual settlements by four states to recover smoking-related Medicaid costs. Forty-six states and territories negotiated the Master Settlement Agreement securing annual payments of several billion dollars in perpetuity as repayment for smoking-related healthcare costs.
Between 2008 and 2010, adult obesity rates increased in a total of 16 U.S. states, 11 of which are CCA states. The CCA states of Alabama, Louisiana and Tennessee are among the top five states with the highest rates of obesity, diabetes and hypertension. The current medical cost of adult obesity in the U.S. is estimated at $147-$210 billion per year, $61.8 billion of which is paid for by Medicare and Medicaid (Levi et al. 2012). The twenty-sixth CCA was passed in North Carolina in 2013 and they continue to be introduced in state legislatures. “A close analysis of CCAs reveals that the real point of the CCA proponents was not to prevent frivolous litigation, from which industry already had plentiful protection, but rather to limit legally and factually sound tobacco-style litigation, which might eventually have harmed industry’s bottom line and forced it to change its practices,” said Cara Wilking, J.D.
“Beyond Cheeseburgers: The Impact of Commonsense Consumption Acts on Future Obesity-Related Lawsuits” was published in the Food and Drug Law Journal and is reproduced with the permission of the Food and Drug Law Institute.
This research was supported by award #2R01CA087571 from the National Cancer Institute. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Cancer Institute or the National Institutes of Health.
Wednesday, August 14th, 2013
PHAI has just published a new website consisting of searchable summaries of over 600 secondhand smoke lawsuits based in the United States. The cases stretch back to the 1970s and the data was most recently updated in July, 2013. We will continue to update the site and add new cases as well as indicate developments in existing cases.
The project is the work of our Senior Attorney Edward Sweda, who began compiling “Ed’s List” about 25 years ago. The list has been published in the Tobacco Products Litigation Reporter and used by many tobacco control organizations and individuals seeking legal redress to smoke exposure problems. The project would not have made it to the web but for the efforts of our summer intern, Rebecca Leff, who copied and formatted a 133 page single spaced document to create 628 case entries.
The site is searchable by type of case, e.g., custody disputes, real property, smoking in prisons, or litigation against tobacco companies, as well as the state where the action was filed.
Tuesday, July 30th, 2013
Update: July 30, 2013
At this point, the Supreme Court of NY County (March 11, 2013) and the Supreme Court, Appellate Division, First Dept. (today) have ruled that the sugary beverage serving size cap in New York is invalid. The case name is: In re New York Statewide Coalition of Hispanic Chambers of Commerce, et al. v. New York Dept. of Health and Mental Hygene, et al..
Clearly, I was mistaken in my prediction (see original post below) that the measure would survive a legal challenge. While the City will seek review by the Court of Appeals of the State of New York (the state’s highest court), this has clearly turned into an uphill battle for Mayor Bloomberg and the City at this point.
Interestingly, the beverage industry has (so far) successfully relied on a case brought by the tobacco industry in the 1987 to successfully the stop the NY Health Council from taking steps to regulate smoking in public places. At that time, it was politically impossible to get the state legislature to enact smoking restrictions in public indoor areas and limit smoking in restaurants. Such a measure was viewed as an extreme infraction on smokers’ rights. In that case, Boreali v. Axelrod, the court held that for several reasons, only the legislature was suited to enact such a restriction. Those same reasons are cited in today’s decision reinforce the impression that many of the same societal changes and setbacks experienced in tobacco control are playing out around obesity prevention policy.
- In Boreali, the Court found that the administrative health agency took economic issues into account by exempting restaurants and bars from smoking bans. Economic concerns are beyond the scope of a health agency’s legal authority. In today’s decision, the fact that NYC exempted convenience stores and bodegas was interpreted as an economic concession (despite the City’s strong arguments to the contrary).
- In Boreali, the fact that the state legislature had previously rejected smoking bans suggested that it was inappropriate for a health agency to go ahead and do an end-run around a matter previously before the legislature. Likewise, in today’s decision the Court found that the NY City Council has “targeted” sugary beverages in the past, so this subject matter should be off-limits to the Board of Health.
- In Boreali, the Court ruled that the fact that the health agency was drafting a new type of restriction was evidence that it was “writing on a clean slate” rather than tweaking or otherwise perfecting an existing restriction that was clearly within its purview. Same thing here. It was a new and innovative regulation which, according the this Court’s reasoning, is why it ought to be handled by a legislative body rather than an administrative agency.
- Finally, the Court in Boreali found that a simple no-smoking rule did not involve expertise in health matters. In today’s decision, too, the Court found that a simple beverage size ban did not require health expertise and, therefore, is beyond the scope of authority granted to the Board of Health.
Under today’s ruling, any one of these four factors could invalidate agency action. Such strict application of Boreali may ultimately represent chilling new limits on the powers of health boards in New York state.
While analysts may disagree over whether the Court’s decision today was a well-reasoned one, and it may yet be subject to further appellate review, it is important to note that it is basically a dispute about New York law and not a fundamental legal problem with placing limits on serving sizes for sugary beverages that is at issue.
But that said, the real disagreement may be more about evolving norms surrounding sugary beverages than about administrative authority. As norms around tobacco use evolved over time, Boreali is increasingly seen as an example of the tobacco industry gaining a temporary victory at the cost delaying the protection of the public’s health. Perhaps today’s decision will be seen in a similar light in the not-too-distant future as norms around sugary beverages continue to evolve.
-Mark Gottlieb, J.D., Executive Director
Public Health Advocacy Institute at Northeastern University School of Law
Today the New York City Board of Health approved first-in-the-nation limits on the maximum size of sugary drinks served in restaurants, theaters, and sports venues. The vote was 8-0 in favor of adopting the regulation with one abstention. Grocery and convenience stores are exempt and diet drinks, juices, and drinks that are 50% of more milk (or milk substitute) are excluded.
While the measure drew ire from critics throughout the political spectrum, and has been inaccurately characterized as a “ban,” it has succeeded in invigorating the debate on the role of sugary drinks in obesity and the role of government to encourage mindful consumption. Such mindful consumption will begin 6 months from today when the new rule should go into effect.
In the meantime, there may be efforts by big drink stakeholders to challenge the regulation. One such group, New Yorkers for Beverage Choices, a group closely aligned if not controlled by the American Beverage Association, has hinted at such a challenge. The pro-business think tank, the Washington Legal Foundation, has published comments on the measure that suggest the basis for a legal challenge. A credible legal challenge could result in the granting of a injunction that could delay or derail the beverage size restriction. However, there appears to be little chance that such a challenge will lead to any measure of success.
The Washington Legal Foundation’s primary legal argument to oppose the measure is that it is the type of action that is normally reserved for legislation rather than rule-making by an administrative agency. The problem with that argument is that regulating serving sizes of sugary drinks in food establishments is clearly within the New York City Department of Health and Mental Hygiene’s authority to protect the public’s health under the City Charter’s sec. 558 and to engage in rule-making under sec. 1043. The Washington Legal Foundation public comments cite to a 1980s case, Boreali v. Axlerod. The case involved an early New York non-smoking rule that was overturned primarily because the state’s Public Health Council considered the economic impact of the restriction on businesses and offered waivers for those that could show financial hardship. This went beyond the Public Health Council’s legal authority to issue rules based solely on protecting health. Here, however, there is no waiver process and no consideration by the Board of Health of the economic impact this rule might have on businesses.
A second issue raised by the Washington Legal Foundation is that the problem of obesity is an important issue of concern to society and that dealing with such social issues is best left to legislative bodies rather than regulatory agencies. Citing again to the Boreali case, WLF suggests that this is a matter that it should only be addressed by elected officials and not agency appointees. Essentially, they are making a philosophical rather than a legal argument. Legally, this rule-making is very clearly within the agency’s purview.
In yesterday’s New York Times, an attorney who has previously represented New York restaurants suggested that the rule could be overturned on Constitutional grounds. This would be a reference to the Commerce Clause (Art. I, Sec. 8, Clause 3 of the U.S. Constitution) which grants Congress the power to regulate commerce among the states. If a state or, as in this case, a political subdivision of a state, passes a law or rule that substantially affects interstate commerce, it is possible that a court would find that the Commerce Clause reserved that power to Congress and the law or rule would be found to be unconstitutional. However, in this instance, there is virtually no argument that could be made that the beverage size rule could affect interstate commerce any more than the cup size could be found to be a form of free speech that the rule unconstitutionally restricts. Neither argument is credible enough to argue in a court room.
There is virtually no chance that the rule will be successfully challenged. Either threats of litigation will not materialize or, if they do, will be quickly dismissed. That result will encourage other communities to replicate the courageous action taken in new York City by Mayor Bloomberg and the Board of Health.
-Mark Gottlieb, J.D., Executive Director
Public Health Advocacy Institute at Northeastern University School of Law
Monday, July 8th, 2013
On February 21, 2011, Lorillard Tobacco Company and R.J. Reynolds Tobacco Company filed a complaint against the FDA in the United States District Court for the District of Columbia challenging the composition of the Tobacco Products Scientific Advisory Committee (“TPSAC”) and alleging that TPSAC failed to comply with the Federal Advisory Committee Act (“FACA”). TPSAC was formed immediately following the passage of the Family Smoking Prevention and Tobacco Control Act (“Tobacco Act”). TPSAC was charged with researching the health effects of menthol in cigarettes and reported to the FDA that mentholated cigarettes adversely affected public health, and that their removal from the market would benefit public health.
In their complaint, the tobacco companies allege that three members of TPSAC have financial and appearance conflicts of interest stemming from their continued service as paid expert witnesses in anti-tobacco litigation, as well as their continued employment for pharmaceutical companies that manufacture smoking-cessation products. The tobacco companies argue that this creates an unbalanced committee representing only one set of viewpoints that are against smokeless tobacco products and menthol in cigarettes.
Lorillard and R.J. Reynolds alleged injuries include disclosure of confidential information to conflicted committee members who could use it to testify for parties adverse to them, that the conflicted members have the ability to shape the TPSAC report to help with their work as expert witnesses, that Lorillard lost 2 billion in shareholder value, and that their procedural right to fair decision making was violated. The companies are seeking declaratory relief that the three committee members violated FACA, as well as an injunction preventing the FDA from receiving or considering any suggestions from TPSAC pending the result of this litigation.
On April 29, 2011, the FDA moved to dismiss the suit for lack of subject matter jurisdiction and failure to state a claim. The FDA argued that the tobacco companies lacked standing to challenge the committee’s composition because their alleged injuries were speculative, not traceable to the FDA, and were unlikely to be redressed by the court.[7 Furthermore, the FDA argued that any conflicts of interest are within FDA discretion and are not subject to judicial review.
On August 1, 2012, the U.S. District Court for the District of Columbia denied the FDA’s motion in its entirety. The court held that Lorillard and R.J. Reynolds pled sufficient injuries and that the conflicts of interest are justiciable by the court. Due to the limited number of viewpoints regarding tobacco issues and the scientific, rather than political, nature of the issues, the court determined they are equipped with sufficient standards against which it can assess the committee’s objectiveness. With the denial of the FDA’s motion to dismiss, the tobacco companies are able to proceed with their suit.
On July 21, 2014, Judge Richard Leon granted Lorillard’s Motion for Summary Judgment to bar the Committee’s menthol report from consideration and orders the agency to reconstitute the Committee. The judge found that the, “the Committee’s findings and recommendations, including reports such as the Menthol Report, are, at a minimum, suspect, and, at worst, untrustworthy.” The FDA has not yet announced whether it would appeal the ruling.
Summary by Katelyn Blaney
Online Copy of Initial Complaint: http://www.hpm.com/pdf/LORILLARD%20Adv%20Cmte%20-%20Complaint.pdf.
 The Tobacco Products Scientific Advisory Committee, Menthol Cigarettes and Public Health: Review of the Scientific Evidence and Recommendations, Chapter 8, p. 220 (March, 2011).
 2d Amended Complaint at ¶ 2, Lorillard, Inc. v. U.S. Food & Drug Admin., No. 11-440 (RJL), 2012 WL 3542228 (D.D.C. 2012).
 Id. at ¶ 3.
 Lorillard, Inc v. United States Food & Drug Admin., No. 11-440 (RJL), 2012 WL 3542228, at *2 (D.D.C. 2012).
 Id. at ¶ 4.
 Lorillard, No. 11-440 (RJL), 2012 WL 3542228, at *2 (D.D.C. 2012).
 Id. at *1.
 Id. at *2.
 Id. at *2.
 Lorillard Inc v. United States Food and Drug Administration, Civil Action No. 2011-0440 (D.C. 2014) District Court, District of Columbia.