Posts Tagged ‘Reynolds’
Reynolds American Inc. in 2012: “Progress” in tobacco litigation is alleged five weeks after U.S. Supreme Court leaves the company with “massive liability…with no end in sight.”
Friday, May 25th, 2012
By Edward L. Sweda, Jr.
Three key issues were taken up at the 2012 Reynolds American Inc. (RAI) Annual Shareholders Meeting in Winston-Salem, North Carolina on May 3rd.
First, the issue drawing the most public attention was the company’s dealings with groups representing farm workers who toil under dangerous conditions and provide the tobacco that brings prosperity to the company and its key executives. At least 20 individuals who attended the meeting dominated the question-and-answer session, urging the company to meet directly with the Farm Labor Organizing Committee (FLOC) after many years of failing to achieve such a meeting. Reynolds American CEO Daniel M. Delen publicly pledged that he would be willing to participate in such a meeting. Dozens of protestors outside the building underscored the message of the supporters of the human rights of tobacco farm workers.
Delen also touted an April 2012 “multilateral” meeting in Raleigh as a first step in addressing issues of inadequate worker safety in the tobacco fields of North Carolina. [See Oxfam America’s report: “A State of Fear: Human Rights Abuses in North Carolina’s Tobacco Industry”]
A second issue was contained in the shareholder resolution that called on RAI to establish a special ethics committee to examine the company’s marketing practices. The purpose of this special committee is “to ensure shareholders that its products and product promotions, as far as is possible, not undermine efforts of governments at any level to adopt laws and practices that will free Americans from the negative consequences of use of our tobacco products.”
In addition to commenting on the text of the resolution, Father Michael Crosby denounced RAI’s heavy-handed campaign to oppose California’s Proposition 29, which would raise that state’s cigarette excise tax by $1 per pack and increase taxes on cigars and pipe tobacco from 31.73 percent to 54.89 percent. If passed by the voters, the proposal would raise about $735 million annually, most of which would go toward cancer research.
Fr. Crosby also cited the company’s support of the right-wing political organization ALEC, the American Legislative Exchange Council, whose stealth activities have come under increased scrutiny following public disclosures of ALEC’s drafting of and advocacy for Florida “Stand Your Ground” law and several states’ anti-immigrant legislation.
The shareholder resolution was defeated, according to the preliminary tally reported at the meeting, with 6.4 million shares in favor, 418 million shares opposed and 6.3 shares abstaining.
The third key issue was litigation, specifically RAI’s “litigation progress” – or lack thereof – in dealing with the Engle Progeny cases in Florida. During the business presentation by Mr. Delen, RAI’s CEO stated that, since 2010, RAI had been “successful” in two-thirds of the Engle Progeny trials. Such “successes” included not only defense verdicts but also – for the first time publicy stated in this author’s memory at any tobacco company’s shareholders meeting – mistrials (such as when a jury is deadlocked without being able to reach a verdict).
In 2009, a Florida jury awarded $3.3 million in compensatory damages and $25 million in punitive damages against Reynolds American in a case involving the death of Benny Ray Martin, the husband of Mathilde Martin. Her case is one of thousands of “Engle Progeny” lawsuits in Florida, cases that followed the landmark 2006 ruling by the Florida Supreme court in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). After losing on appeal at every stage in the Florida’s state court system, RAI filed a petition for certiorari with the Supreme Court of the United States.
In arguing in December 2011 that its petition for a writ of certiorari should be granted, Reynolds’ attorneys (Paul D. Clement of Bancroft PLLC, Gregory G. Katsas of Jones Day and Eric E. Murphy of Jones Day) claimed that in “their conduct of Engle progeny litigation, the Florida state courts are engaged in serial due-process violations that threaten the defendants with literally billions of dollars of liability.” (emphasis added) Moreover, “the massive liability imposed on the Engle defendants – which currently stands at over $375 million in adverse judgments – will… steadily increase as Engle progeny trials continue with no end in sight.” (emphasis added).
RAI’s attorneys’ description of doomsday for the company became reality on March 26, 2012 when the Supreme Court announced that it would not consider RAI’s appeal in the Martin case. As I described at the time, “At long last, Reynolds American and the other major tobacco companies will be held accountable for their massive and reprehensible misconduct that harmed thousands of Florida smokers. As Reynolds’ own lawyers have concluded, denial of its cert petition is a very big deal indeed.”
Citing the question I asked at the 2011 Reynolds American Shareholders Meeting about the Martin case, the response I received from Mark Holton, RAI’s Executive Vice President and General Counsel, that he was “confident that the Engle process violates due process” and that the company’s legal arguments were strong and would ultimately prevail, and the fact that on March 26, 2012 the U.S. Supreme Court refused to consider RAI’s appeal of the $28 million verdict, this RAI shareholder from Massachusetts asked the following question:
“Given how Mr. Holton got it wrong last year about this important case, why shouldn’t investors and shareholders be skeptical when they hear pronouncements by Reynolds American management about tobacco litigation?”
In response, Mr. Holton acknowledged what the Supreme Court had done regarding the Martin case, but cited what he called “encouraging” developments with two appeals of plaintiff verdicts in the state court system in Florida. This included a March 30th ruling by Florida’s Second District Court of Appeal affirming a $2.5 million wrongful death verdict against Reynolds American and Philip Morris USA. In that appeal of the Douglas case, the Court of Appeal also certified the following question to the Supreme Court of Florida: “Does accepting as res judicata the eight Phase I findings approved in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006) violate the tobacco companies’ due process rights guaranteed by the Fourteenth Amendment of the United States Constitution?”
Mr. Holton notably did not address the doomsday scenario outlined by his company’s attorneys who filed the writ for certiorari. So, in a span of just five months, this RAI shareholder received from the company diametrically polar opposite predictions concerning the future of tobacco litigation, depending on which side of the Reynolds American corporate mouth was talking.
Supreme Court Rejects Key Tobacco Industry Appeal Leaving “Massive Liability . . . with no End in Sight.”
Monday, March 26th, 2012
FOR IMMEDIATE RELEASE
Contact: Edward L. Sweda 617-373-8462
Tobacco companies face the prospect of having to pay billions of dollars in liability to Florida smokers after the U.S. Supreme Court today denied Reynolds American’s petition for certiorari in the case of R.J. Reynolds Tobacco Co. v. Mathilde Martin, No. 11-754.
The company had appealed a $28.3 million judgment against Reynolds for the death of Benny Ray Martin, the husband of Mathilde Martin. Her case is one of thousands of “Engle Progeny” lawsuits in Florida, cases that followed the landmark 2006 ruling by the Florida Supreme court in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006).
Edward L. Sweda, Jr., Senior Attorney for the Tobacco Products Liability Project (a project of the Public Health Advocacy Institute based at Northeastern University School of Law in Boston) was ecstatic to learn of the denial of Reynolds’ cert petition. “At long last, Reynolds and the other major tobacco companies will be held accountable for their massive and reprehensible misconduct that harmed thousands of Florida smokers. As Reynolds’ own lawyers have concluded, denial of its cert petition is a very big deal indeed,” Sweda said.
In arguing in December 2011 that its petition should be granted, Reynolds’ attorneys (Paul D. Clement of Bancroft PLLC, Gregory G. Katsas of Jones Day and Eric E. Murphy of Jones Day) claimed that in “their conduct of Engle progeny litigation, the Florida state courts are engaged in serial due-process violations that threaten the defendants with literally billions of dollars of liability.” (emphasis added) Moreover, “the massive liability imposed on the Engle defendants – which currently stands at over $375 million in adverse judgments – will… steadily increase as Engle progeny trials continue with no end in sight.” (emphasis added).
TPLP Director, Mark Gottlieb, noted that, “while cigarette companies’ statements are often thought to be disingenuous, in the case of Reynold’s Petition to the Court, it is absolutely true that the Engle cases create ‘massive liability’ with ‘no end in sight.'” Gottlieb added: “But the industry’s liability is not limited to these cases. Verdicts like the Evans case in Boston ($81 million) and Schwarz in Oregon ($25 million) can and should become more commonplace beyond the Sunshine State.”
Currently, of the 61 Engle Progeny cases that have reached a verdict (not counting mistrials), 41 have been plaintiff verdicts (one of which was overturned on appeal on statute of limitations grounds and is being further appealed) and 20 have been defense verdicts, with thousands of cases awaiting trial. “Today is a great day for thousands of Florida residents who turned to the American judicial system to seek justice,” Sweda concluded.
Federal Judge Blasts RJ Reynolds for Providing a “Wholly Inaccurate Description of the Trial Record” and Upholds Multi-Million Dollar Verdict
Tuesday, August 30th, 2011
For Immediate Release Contact: Edward L. Sweda, Jr. (617) 373-8462
U.S. District Court Judge Stefan R. Underhill on Friday denied R.J. Reynolds’ motion for a new trial or for judgment as a matter of law in the case of Izzarelli v. R.J. Reynolds Tobacco Co. Barbara Izzarelli smoked Salem King cigarettes for 25 years until she was diagnosed and treated for larynx cancer at the age of 36. On May 26, 2010, a Connecticut jury determined that RJR was 58% responsible for her injuries and that Ms. Izzarelli was 42% responsible for her injuries.
An amended judgment, which includes punitive damages ($3,970,289.87) and interest, amounted to $28,079,629.27. Ms. Izzarelli is represented by Silver, Golub & Teitell of Stamford, CT. The firm’s telephone is 203-325-4491.
Judge Underhill concluded his ruling as follows: “R.J. Reynolds’ motion for a new trial or for judgment as a matter of law raises a myriad of claims, issues and arguments. Many of the assertions made in support of its motion fail the straight-face test and rely on a wholly inaccurate description of the trial record. Although this ruling does not address every one of R.J. Reynolds’ arguments, I have considered them all and find them to be meritless. Accordingly, R.J. Reynolds’ motion for judgment as a matter of law, or in the alternative for a new trial, is denied.”
Edward L. Sweda, Jr., Senior Attorney for the Tobacco Products Liability Project (TPLP) based at Northeastern University School of Law in Boston, described Judge Underhill’s ruling as a “resounding repudiation of R.J. Reynolds’ legal arguments and distortions of the trial record.”
The ruling is available for download from tobacco-on-trial.com
Tuesday, May 17th, 2011
WINSTON-SALEM, N.C. — On Thursday, May 5, 2011, I made my way to this historic city via the Winston-Salem Express. Friday morning at 9:00 A.M. sharp was the scheduled start of the 2011 Annual Meeting of Shareholders of tobacco giant Reynolds American, Inc. (RAI).
Beautiful sunny skies greeted everyone in Winston-Salem on Friday morning. Having just walked into the lair, i.e. RAI’s corporate headquarters, I noticed an intriguing sign by the registration desk: “As a courtesy to non-smoking guests, the Annual Meeting will be a non-smoking event.” Not in any way a matter of health but, rather, a “courtesy.”
A Corporate Shift?
The 2011 Annual Shareholders Meeting of Reynolds American, Inc. (RAI) took place on a day when Daniel Delen, who took over as chief executive and president of the company in March, made what was billed as a major pronouncement. Noting the findings of a major study entitled “A State of Fear: Human Rights Abuses in North Carolina’s Tobacco Industry,” by Oxfam America and the Farm Labor Organizing Committee, AFL-CIO (FLOC) of the conditions under which tobacco farm workers in North Carolina do their work in the fields, Mr. Delen proposed that a multi-party council be formed to address these labor issues. Additionally, he publicly pledged to use an independent, third-party monitor to analyze the issue of the conditions under which these workers labor at U.S.-based farms that supply essential product to RAI.
A front-page article in the May 7, 2011 edition of the Winston-Salem Journal, entitled “Reynolds American Takes Step,” quoted Rev. Michael Crosby of the Interfaith Center for Corporate Responsibility: “I see a glimmer of hope on an issue we have been raising for a number of years. For your willingness to participate with stakeholders, I sprinkle holy water on you. Yet, because these discussions are going on at the highest levels with Altria and Philip Morris International, I would urge you to take the same level here.”
Mr. Delen’s promises, which will be put to the test in the upcoming weeks and months, stand in contrast to the public position of previous C.E.O. Susan Ivey, who insisted that RAI had no responsibility to take steps to improve working conditions of farm workers who labor under often unsafe working conditions on farms run by Reynolds’ suppliers.
Response to Litigation – More of the Same
However, on the litigation front, RAI management is as rigid as ever. During the question and answer session, to which RAI allotted all of 25 minutes – fully ten minutes more than at the 2010 Annual Shareholders Meeting – I addressed the major legal problems that R.J. Reynolds Tobacco Co. is facing in the Engle Progeny litigation in Florida. Shareholders are allowed up to two minutes to ask a question (a video board at the front of the meeting room featured a large numeric countdown from “2:00” once a shareholder began to speak); I mentioned that since February 2009, there have been 43 Engle Progeny trials that have reached a verdict and that 30 out of those 43 have been plaintiff verdicts. Just a week before the shareholders meeting, a jury in Jacksonville, where a disproportionately large number of the remaining 8,000 to 9,000 lawsuits yet to be tried are located, hit RAI with a $17 million punitive damages award. Furthermore, the company is appealing its multi-million dollar loss in the Martin case and must prevail in an uphill climb to convince the Florida Supreme Court to reverse its own 2006 landmark ruling in the Engle class-action case.
I concluded my remarks by asking whether the company, for the good of its shareholders, would move away from its current policy of refusing to settle these Engle Progeny cases.
Mark Holton, RAI’s Executive Vice President and General Counsel, responded by reiterating the company’s stated opposition to settling any of these cases and said that he was “confident that the Engle process violates due process” and that the company’s legal arguments are strong and would ultimately prevail. Though no follow-up questions are allowed, I commented that “the risk [for the company] is there.”
Two important shareholder resolutions called on the company to address concerns regarding tobacco flavoring and to create human rights protocols for the company and its suppliers.
Noting that the U.S. Food and Drug Administration has found that the smoking of flavored cigarettes is more popular among youth than among adults, the proponents offered this resolution “that, because youth initiation of tobacco products is influenced by the flavoring, shareholders request that, within six months of Reynolds American Inc.’s annual meeting, the Board of Directors move to ensure that RAI stops the production of any of its tobacco products with such flavoring added, as well as their distribution and their marketing, unless and until it can be proven by independent and evidence-based research that such added flavors do not contribute to youth initiation of tobacco use.” Father Michael Crosby introduced the resolution while Anne Morrow Donley of Virginia seconded it (their remarks were limited to two minutes each).
RAI management, of course, opposed the resolution, falling back on the contention that the “flavorings utilized on our operating companies’ tobacco products are legally permitted.” The resolution was defeated with 3 million shares being voted “Yes” with 397 million “No.”
A major threat to the health of tobacco farm workers is Green Tobacco Sickness (GTS), which occurs when the skin absorbs nicotine after touching the tobacco plants. Another significant concern regarding Reynolds American, Inc. is that it receives leaf from Malawi, a country in which child labor in tobacco fields takes place.
This resolution stated that “shareholders request Reynolds American Tobacco Inc. Board of Directors to commit itself to create effective procedures to implement protocols ensuring basic worker rights consistent with internationally agreed-upon human rights conventions in the countries which supply its tobacco and to find ways to ensure, through truly independent monitoring, that its varied suppliers are enforcing these protocols as well as all other pertinent laws of the nations in which its suppliers operate.”
Father Crosby introduced the resolution while I seconded it. RAI’s opposition to this resolution attempted to pass off any responsibility on this issue onto the already overburdened regulatory apparatus of state and federal governments in the United States. Management also claimed that “RAI and its operating companies strive to comply with all laws and regulations.” In my allotted two minutes, I noted that, as an individual, I do not “strive to comply with laws, I comply with laws.” I noted that, while there would be serious consequences for me if I failed to comply with laws, there seem to be no consequences for RAI or its suppliers failing to comply with basic laws and regulations governing worker health and safety.
The resolution was defeated, having received 39 million shares voting “Yes”, with 361 million “No.”
Outside the auditorium where the meeting took place, RAI provided shareholders with copies of the company’s publications, one of which is a 33-page brochure entitled “Our Continuing Commitment,” the 2010 Corporate Social responsibility Report. On page 23 of the report, RAI informs its shareholders that “[d]uring the past four years, the American Snuff Co. Charitable Trust has contributed $40,000 to a campaign by Methodist Healthcare Foundation to build a 30-patient hospice residence for terminally ill people of all ages…” ,
I was encouraged to see signs such as this one on the front door of the hotel in which I was staying in Winston-Salem.
As mentioned above, the shareholders meeting was entirely smoke-free.
To cap off my trip to North Carolina, on Friday night I attended a South Atlantic League baseball game between the Hickory Crawdads and the host Greensboro Grasshoppers. The game, won by Hickory 7-2, was played at NewBridge Bank Park, a smoke-free park.
Friday, April 29th, 2011
FOR IMMEDIATE RELEASE
Contact: Edward L. Sweda, Jr. or Mark Gottlieb 617-373-8462 or 617-373-2026
A Jacksonville, Florida jury this week assessed $34 million in punitive damages against tobacco giants Philip Morris and R.J. Reynolds Tobacco Co. for their reprehensible misconduct in the case of Andy Allen v. R.J. Reynolds Tobacco Co., et al. This award followed a compensatory damages award of $6 million for the family of Patricia Allen, who died of chronic obstructive pulmonary disease (COPD) after having smoked for 36 years. Ms. Allen, who was born in 1948, started smoking in high school at a time when the tobacco companies were targeting teenage girls, according to Allen family attorney Keith Mitnick of Morgan & Morgan.
Edward L. Sweda, Jr., senior Attorney for the Tobacco Products Liability Project (TPLP), a project of the Public Health Advocacy Institute, based at Northeastern University School of Law in Boston, was delighted with the jury’s verdict. Noting that the jury “expressed appropriate and justifiable outrage at the reprehensible misconduct of these tobacco companies,” Sweda applauded the verdict, which was the third highest among the 30 plaintiff verdicts of the 43 Engle Progeny trials that have reached a verdict since February 2009.
It is also significant that this huge plaintiff victory occurred in Jacksonville, since approximately 4000 Engle Progeny cases are pending in state and federal court in Jacksonville.
TPLP Executive Director Mark Gottlieb said, “these trials stemming from the Engle class action suit of the 1990s disrupt business as usual for cigarette companies as juries continually find them liable at an astaunding rate.”
Thursday, February 24th, 2011
FOR IMMEDIATE RELEASE –
Contact: Edward L. Sweda (617-373-8462) or
Mark Gottlieb (617-373-2026)
A jury in Gainesville, Florida today assessed punitive damages in the amount of $1.5 million against R.J. Reynolds Tobacco Co. (RJR) and another $1.5 million against Philip Morris (PM) in an Engle Progeny case. The same jury on Tuesday night awarded the family of John Huish $750,000 in compensatory damages, attributing 25% fault to RJR, 25% to Philip Morris and 50% to Mr. Huish. So, The compensatory damages award will be reduced by 50%.
Of the 35 Engle Progeny trials that have reached a jury verdict since February 2009, 24 have been plaintiff verdicts (69%).
Mr. Huish, who died of small-cell lung cancer in 1993 at the age of 64, had started smoking two decades before warning labels appeared on cigarette packs. He started smoking Lucky Strikes, followed by Camel, Chesterfield, Marlboro and then Marlboro Lights. Mr. Huish’s widow, Anna Louise Huish, brought the lawsuit and is represented by the West Palm Beach firm of Searcy, Denney, Scarola, Barnhart & Shipley. Attorney James Gustafson can be reached at 800-780-8607.
Senior Attorney for the Tobacco Products Liability Project at Northeastern University School of Law (TPLP), Edward L. Sweda, Jr. was delighted with the verdict: “This jury was justifiably appalled by what it learned about the tobacco companies’ outrageous misconduct during the decades that John Huish was an addicted customer. Someone who is not addicted would not have smoked two or more packs per day for 46 years, as Mr. Huish did before succumbing to lung cancer.”
TPLP Director Mark Gottlieb noted that, “Jury after jury of ordinary folks have found the way that cigarette makers conduct their business is deserving of punishment. With thousands of these cases in the pipeline in Florida, it’s going to be a long slog for Philip Morris and R.J. Reynolds.”
The Tobacco Products Liability Project is a project of the Public Health Advocacy Institute (PHAI) at Northeastern University School of Law in Boston, MA. PHAI is an independent federally recognized non-profit charity.
Florida court of appeal affirms $28.3 million verdict against R.J. Reynolds; explicitly rejects RJR’s attempt to “essentially nullify” Florida Supreme Court’s 2006 decision in Engle
Tuesday, December 14th, 2010
FOR IMMEDIATE RELEASE
Contact: Edward L. Sweda, Jr. or Mark Gottlieb (617) 373-8462 or (617) 373-2026
In a resounding defeat for R.J. Reynolds Tobacco Co., the First District Court of Appeal of Florida affirmed a jury’s award of $5 million in compensatory damages (later reduced by the trial judge to $3.3. million because the jury found Benny Martin 34% responsible for his death from lung cancer in 1995) and $25 million in punitive damages.
As the court noted, the “crux of this appeal is the extent to which an Engle class member can rely upon the findings from the class action when she individually pursues one or more Engle defendants for damages.” RJR attempted to “diminish the preclusive effect of the findings by claiming, based on the Phase I verdict form, that the findings ‘facially’ prove nothing specifically relevant to Mr. Martin’s claims. In so doing, RJR urges an application of the supreme court’s decision that would essentially nullify it. We decline to do so.”
Edward L. Sweda, Jr., Senior Attorney for the Tobacco Product’s Liability Project (TPLP), a project of the Public Health Advocacy Institute (PHAI), based at Northeastern University School of Law, called today’s decision the “worst nightmare for the tobacco defendants because the powerful Phase I findings will be applicable to Engle progeny trials in state court.” Furthermore, the award of $25 million in punitive damages is entirely justified by what the court accurately described as the ‘evidence of decades-long wanton conduct by RJR…’”
Report from the Reynolds American, Inc. Annual Shareholders Meeting -– May 7, 2010 – Winston-Salem, North Carolina
Wednesday, June 2nd, 2010
By Edward L. Sweda, Jr., Senior Attorney – PHAI
NEW RULES REGARDING ADMITTANCE TO THE MEETING.
The Reynolds American Inc. (RAI) Annual Shareholders Meeting took place in Winston-Salem, North Carolina on Friday morning, May 7, 2010. According to a March 22, 2010 “Dear Shareholder” letter from President and CEO Susan M. Ivey, those shareholders who planned to attend the meeting “MUST pre-register for the meeting and request an admittance ticket no later than Wednesday, April 28, 2010.”
However, that letter, which was part of the company’s proxy materials, was not mailed to shareholders unless the shareholder specifically requested that the material be sent. Unfortunately, both I and shareholder Anne Morrow Donley of Virginia GASP missed the deadline for requesting an admission ticket by one day. Strictly adhering to the terms of this new rule, RAI’s Assistant Secretary, Dean E. Tsipis, informed me that the company was “unable” to fulfill my April 29, 2010 request for an admission ticket. “Unwilling” would have been a more accurate adjective.
Similarly, a new attendance rule by RAI kept out Keith T. Barber, a reporter for the Greensboro, North Carolina-based “Yes Weekly.” On April 28, 2010, RAI “announced” – via a release via PR Newswire but not by directly contacting local reporters – that members of the media had to request an admittance ticket by April 30, 2010. Mr. Barber, who arrived at the meeting on May 7, 2010, was barred from the meeting.
Winston-Salem’s taxpayers financially supported the heavy presence by the Winston-Salem Police Department (WSPD) at the Reynolds American meeting. Shortly after the 9:00 A.M. start of the meeting, there were four police officers standing in front of the building while four marked police cruisers were parked near the building’s main entrance. At the side of the building were another two parked police cruisers. As the FLOC demonstration was winding down at about 11:25 A.M., one of the WSPD officers told organizers of the demonstration that Reynolds management would like the demonstrators to leave the front of the building by 11:30 A.M.
The major controversy at the RAI meeting was management’s unwillingness to meet with members of FLOC (Farm Labor Organizing Committee), AFL-CIO. (See this for details of FLOC’s campaign regarding Reynolds American. FLOC has also described desperate conditions in North Carolina’s tobacco fields, noting that nine workers have recently died in the fields, most due to heat stroke.
According to the Winston-Salem Journal, FLOC believes that “it has to be more vocal and demanding to persuade Reynolds to use its clout to pressure its suppliers to improve conditions for the state’s 30,000 tobacco farmworkers.” The company insists that its supplier list is proprietary and has refused to reveal who they are. Baldemar Velasquez, president of the Ministers
Conference of Winston-Salem and Vicinity, said that “We believe it is Reynolds’ role, and under its sphere of influence, to require its suppliers to treat the farm workers with dignity and proper work and living conditions.”
Two of the shareholder resolutions considered at the meeting addressed issue of smoking and health and the company’s conduct. The first resolution was filed by proponents who noted that in 2009 RAI had challenged some provisions of the new law which allows the Food and Drug Administration (FDA) to regulate tobacco products, arguing that the law violated the company’s First Amendment rights. RAI also contended that FDA restrictions had limited the company’s ability to “convey ‘truthful information’ about its tobacco products.” Therefore, “shareholders request the RAI Board of Directors to oversee the inclusion in all RAI product advertising, promotion
and marketing (including inserts in tobacco packages themselves) truthful information regarding the devastating health consequences identified with using such products.” The proponents suggested that this truthful information cover the health hazards to smokers from smoking and to nonsmokers from breathing secondhand smoke; the decline in tobacco-related diseases when increased taxes on tobacco are combined with smoking restrictions; and the “human rights violations connected with undocumented workers in the U.S.A. and forced child labor in key ‘developing’ countries who pick tobacco leaf used by RAI.”
Not surprisingly, RAI management opposed the resolution calling on it to provide its customers with truthful information. It claimed that “Our Guiding principles and Beliefs” are sufficient.
The resolution received less than 2 percent of the shares voted and, thus, will not be eligible to be refiled for next year’s Shareholders Meeting.
The next resolution, on Human Rights Protocols for the Company and Its Suppliers, received over 10 percent of the shares voted and will be eligible for refilling for the 2011 meeting. The resolution requests that RAI’s Board of Directors “to commit itself to create effective procedures to implement the internationally agreed-upon human rights conventions in the countries from which it gets its tobacco and to find ways to ensure, through truly independent monitoring, that its varied suppliers are enforcing these as well as pertinent laws of the nations in which its suppliers operate.” The proponents specifically cited the African nation of Malawi, where “countless children are being forced into slave-like situations to provide leaf for RAI products,” and that “forced child labor persists to the degree that the U.S. Department of Labor lists Malawi’s tobacco production as particularly egregious.”
RAI management opposed this resolution as well, claiming that respecting universally recognized human rights “is one of the foundations of how we conduct our businesses.” Nonetheless, RAI opposed the resolution, stating that “we do not believe it is within our sphere of influence to assume the regulatory and enforcement role of the federal, state and local governments” in the United States. Of course, the resolution had not called on the company to assume those roles; rather, the “truly independent monitoring” would be key to ensuring that the suppliers were adhering to these laws in countries such as Malawi. The proponents noted that “RAI cannot dismiss the above problems by saying its suppliers ‘report’ they comply with codes covering farm workers’ basic rights and that no forced child labor takes place in tobacco fields supplying RAI product.” If RAI feels it cannot enforce these basic codes, it could stop doing business with suppliers that abuse workers’ human rights. It has never done so.