Attorney General Ellison enforcement of Tobacco Settlement wins $81 million for State
R.J. Reynolds Tobacco Company and ITG Brands to pay $81 million in back settlement payments; State to collect $10 million or more annually in future payments
March 17, 2021 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that his office has won $81 million for the State of Minnesota in settling its lawsuit against R.J. Reynolds Tobacco Company and ITG Brands, LLC concerning the companies’ responsibility to continue making settlement payments under the State’s historic 1998 tobacco agreement. In addition, the settlement ensures that the State will receive tens of millions of dollars in future payments. Additional annual payments are expected to be at least $10 million for the foreseeable future.
“Two decades ago, Big Tobacco made a commitment to the people of Minnesota. We fought and won to make sure they keep that commitment,” Attorney General Ellison said. “Defending the settlement and ensuring that the settling tobacco manufacturers cannot avoid accountability by selling off cigarette brands was and will remain a high priority for this Office. "
As part of the 1998 tobacco agreement, the settling tobacco manufacturers agreed to make annual payments to the State that are adjusted to account for their volume of tobacco sales, and profits on those sales. In 2015, Reynolds transferred four cigarette brands to ITG Brands, which had not been a party to the original agreement. After the brand transfer, Reynolds stopped including sales and profits on the transferred brands in its settlement calculations, and ITG Brands did not join the tobacco agreement despite committing to use its reasonable best efforts to do so.
After attempts to resolve the payment dispute failed, the State sued Reynolds and ITG Brands in 2018, alleging that Reynolds remained liable for the settlement payments and that ITG Brands was additionally liable based on its agreement to assume those liabilities. In 2019, the Ramsey County District Court entered judgment in favor of the State against Reynolds, holding that Reynolds was required to count sales and profits on the transferred brands in its settlement calculations. In the fall of 2020, the Court conducted an evidentiary hearing on ITG Brands’ liability and took the matter under advisement.
The present settlement resolves the disputes concerning brand-transfer issues. Under the terms of the settlement, the State will receive a full back payment for the unpaid obligations from 2015-20, and ITG Brands will assume the obligation to make payments on the transferred brands going forward. The total back payment will exceed $81 million, and the settlement will ensure the State continues to receive tens of millions of dollars in settlement payments related to future sales and profits on the transferred brands.
Under current law the $81 million in back payment, as well as future settlement payments, will go to the State’s General Fund.