Category: Litigation

North Carolina Revenue Department Disputes Philip Morris in Tax Litigation

Image: andreykr | Adobe Stock
Philip Morris is engaged in a legal battle with the North Carolina Department of Revenue over an $8.7 million tax bill, reports The Carolina Journal. Philip Morris argues that it should be able to claim $7.2 million in tax credits, but the department disagrees.
The dispute centers on the interpretation of a phrase in the state law, with Philip Morris claiming that the law does not limit the amount of credit that can be generated in a given year. The revenue department argues that Philip Morris exceeded the $6 million cap on credits and improperly carried them forward to subsequent tax returns.
“Philip Morris argues the decision in the case will be determined by the meaning of the phrase ‘credit allowed’ found in N.C. Gen. Stat. § 105-130.45. However, this case is about the meaning of six words added to N.C. Gen. Stat. § 105-130.45(b) during a special session convened by the General Assembly,” according to a brief filed by N.C. Department of Justice lawyers. They represent the Department of Revenue in the tax dispute.
“The words ‘may not exceed 6 million dollars’ specifically limited the amount of credits a taxpayer could generate on the exportation of cigarettes,” state lawyers wrote. “The amendment did not disturb the separate and preexisting cap on the amount of credits that a taxpayer could use on its tax return during a single year in subsection (c). Despite a plain reading of the amended language, Philip Morris contends that subsection (b) does not limit the amount of credit that can be generated in any given year and only limits the amount that can be claimed in a tax year. Thus, Philip Morris continued to incorrectly generate credits in excess of the $6 million cap.”
“For tax years 2005, 2006 and 2007, Philip Morris calculated its export credits generated in the amount of $28,767,799; $27,374,957; and $14,310,414, respectively, far exceeding the $6,000,000 limit,” according to the brief. “Philip Morris then improperly attempted to carry forward the unauthorized credits to its 2013 and 2014 corporate tax returns.”
“Through this appeal, Philip Morris now continues to lobby for better treatment than its competitor R.J. Reynolds by attempting to question the statutory construction of an unambiguous statute,” the revenue department’s lawyers argued.
Philip Morris argues that the department’s interpretation of the law is a recent development and not supported by legislative history.
The state Supreme Court is yet to issue a ruling in the case.
June 6, 2023
Updates to Tobacco Settlement with DOJ

Image: Tobacco Reporter archive
Altria, Philip Morris USA, ITG Brands and R.J. Reynolds Tobacco Company sent notices to their retail partners regarding an update on a Department of Justice (DOJ) requirement to supply court-ordered signs to stores that have contracts with the companies, reports NACS.
A settlement agreement between the DOJ and Altria, Philip Morris USA and R.J. Reynolds Tobacco Co. and four cigarette brands owned by ITG Brands was formally approved by a D.C. court in December, resolving litigation over communications of tobacco-related messaging at retail locations.
The court order requires retail outlets that have contracts with any of these companies to post signs carrying one of 17 different preapproved health messages, distributed at random, for a total of 24 months. Each store will be required to rotate to a new message halfway through the time period. The manufacturers will be required to hire auditors to check that the signs are posted correctly.
The notices sent by the companies include amendments to each of the company’s retail merchandising agreements, required by the consent order; additional details around placement of corrective-statement signs at retail; and a summary of implementation activities during the initial posting period.
The court order takes effect July 1, 2023, and tobacco firms have three months to post the corrective statements in both English and Spanish in stores.
June 5, 2023
FDA Commissioner Laments Lawsuits

Image: Tobacco Reporter archive
U.S. Food and Drug Administration Commissioner Robert Califf has lamented the FDA’s ongoing tobacco industry litigation following the agency’s attempt to regulate e-cigarettes, according to Politico. The FDA is facing over 40 lawsuits from companies whose premarket tobacco product applications have been denied.
“We are in a legal battle every single day, and it’s draining on the agency,” Califf said at the annual public meeting of the Reagan-Udall Foundation. “It has a big impact and a much bigger impact than I thought.”
“None of us expected 27 million applications for vaping,” he said.
Califf also noted that enforcement is difficult when it comes to illegal product. “I find myself in the midst of really an epic struggle … when I think of how to enforce when you have an industry that is amazingly creative.”
Califf hinted that the FDA would meet with the Department of Justice soon to discuss enforcement but declined to say more: “Stay tuned on that one.”
May 31, 2023
Juul and Altria to Pay $60.5 Million in Minnesota Deal

mehaniq41
Juul Labs and Altria Group will pay more than $60 million to settle Minnesota litigation relating to Juul’s marketing practices, according to Law360.
Minnesota Attorney General Keith Ellison sued Juul in 2019, alleging its marketing was deliberately targeted to minors and that the company failed to adequately verify customers’ ages, as required by law.
In April, the parties announced a settlement without disclosing the terms pending public filing of the papers.
Under the terms of the consent judgment filed with the Hennepin County District Court, Juul and Altria—a one-time Juul investor—will jointly pay $60.5 million to the state over an eight-year period. Altria will foot $5 million of the bill, according to the agreement.
The deal is front-loaded and will require the companies to pay nearly 60 percent of the settlement in less than one year, according to the Attorney General’s office.
The agreement also prohibits Juul from marketing or selling to children and young adults, restricts the company’s ability to sponsor certain events and use outdoor advertising in the state, prevents it from distributing product samples and requires that it accurately disclose the nicotine content of its products, according to the judgment.
The deal with Minnesota follows a $438.5 million settlement with more than 30 states and territories in September, a $255 million deal in December to end economic loss claims in multidistrict litigation and a $23.8 million deal in March to resolve the city of Chicago’s suit, among others.
And Juul last month agreed to pay $462 million to settle claims with California, Colorado, Illinois, Massachusetts, New Mexico, New York and Washington, D.C., over youth marketing claims.
May 19, 2023
California Officials Sued Over ‘Flavored’ Smokes

Photo: RAI
R.J. Reynolds Tobacco Co. (RJRT) has filed a lawsuit against California state officials, including Attorney General Robert Bonta, in response to the Attorney General’s issuance of several Notices of Determination that allege certain Camel and Newport cigarettes styles are “presumptively” flavored based on their promotional materials. The lawsuit, filed in California state court, seeks declaratory and injunctive relief, including that the notices be rescinded.
In a press note, RJRT said it stands by its new products and believes that they comply with California state law and therefore can continue to be sold. Before introducing the products for sale, RJRT followed all applicable pre-market regulatory requirements.
According to RJRT, the new Camel and Newport styles do not impart a distinguishable taste or aroma other than tobacco and are marketed to clearly indicate that they are non-menthol. The California Attorney General’s Notices do not acknowledge the fact that RJRT’s new product introductions are prominently labeled and marketed as non-menthol.
“Reynolds has repeatedly called on enforcement officials in California to take action to combat the flood of illegal, unregulated, disposable vapes in kid-friendly flavors like Watermelon Bubble Gum and Rainbow Candy that are being shipped into the state’s ports from unknown origins,” RJRT wrote. Prioritizing enforcement of these illicit vapor products, rather than focusing on compliant products, would better serve Californians.”
May 12, 2023
Top Court Asked to Review Avail Case

Avail Vapor has asked the U.S. Supreme Court to examine a lower court’s refusal to review a marketing denial order issued by the Food and Drug Administration to Avail products.
In its petition, known as a Writ of Certiorari, Avail asks the Supreme Court to consider the lower court’s legal reasoning and decision.
Among other things, Avail argues in its petition that the FDA’s decisionmaking was arbitrary and capricious; that another court sided with a different petitioner against the FDA on the same basic arguments; and that the case is significant not only for Avail but for the entire industry and its customers.
The Supreme Court has not yet decided whether it will hear Avail’s case.
May 12, 2023
PM to Pay $36 Million in Massachusetts Suit

Court, courtroom, law.
A Massachusetts unanimous state Supreme Judicial Court ruling awarded $37 million to a plaintiff in a lawsuit against Philip Morris USA.
Issued Tuesday, the justices’ opinion found enough evidence to support a prior jury verdict and lower court judge’s rulings against the company in a case that claimed that the company’s cigarettes — and the company’s claims about them — resulted in the plaintiff’s cancer, reports WBUR.
In the high court opinion, written by Justice Scott Kafker, the justices found the company failed to disclose its own research to customers, which showed that filtered cigarettes were even more damaging to human DNA than regular cigarettes.
The opinion noted Philip Morris did not dispute that cigarettes are harmful to health. Instead, the company claimed there was no evidence linking its advertisements to Greene’s personal decision to take up Marlboro Lights as a safer alternative.
May 11, 2023
Altria Settles Multiple Juul Cases

Photo: Steheap
Altria Group has reached agreement on terms to resolve at least 6,000 Juul-related state and federal cases for $235 million.
“While we continue to believe the claims against us are meritless, we believe this settlement avoids the uncertainty and expense of a protracted legal process and is in the best interest of our shareholders,” said Murray Garnick, Altria’s executive vice president and general counsel, in a statement. “This settlement brings to a close the vast majority of our pending Juul-related litigation.”
In October 2019, the U.S. Judicial Panel on Multidistrict Litigation ordered the coordination or consolidation of federal individual and class action lawsuits related to Juul in the U.S. District Court for the Northern District of California for pretrial purposes. These cases include approximately 50 economic class actions, approximately 4,500 personal injury actions and approximately 1,500 government entity actions, including approximately 1,400 school district cases. These cases are covered by the agreement as well as cases in a related state court consolidated proceeding involving 750 cases.
This settlement does not apply to three cases brought by attorneys general, 35 cases brought by Native American tribes, 17 antitrust cases or three Canadian cases.
The settlement remains subject to the parties entering into one or more final settlement agreements approved by the relevant courts.
Altria expects to record a pre-tax charge of $235 million in the second quarter of 2023 and intend to treat such amount as a special item and exclude it from our adjusted diluted earnings per share.
May 10, 2023
Logic Challenges Marketing Denial Of Its Menthol Product

E-cigarette maker Logic filed papers in court on May 9 that challenge the U.S. Food and Drug Administration’s marketing denial orders (MDO) that it issued against two brands: Logic Pro Menthol E-Liquid Package and Logic Power Menthol E-Liquid Package, reports Bloomberg Law.
Logic called the FDA’s MDOs “arbitrary and capricious.”
The 3rd Circuit Court entered a stay on the FDA’s MDOs in December 2022. The MDOs were the FDA’s first-ever MDOs directed at menthol e-cigarette products.
May 10, 2023
Altria’s ‘Juul Trial’ Begins

Image: Tobacco Reporter archive
The trial of San Francisco’s public school system against Altria Group began on Monday, with Thomas Cartmell, a lawyer for the San Francisco Unified School District, stating to jurors, “This case is about Altria, the largest cigarette company in our country, who helped hook a whole new generation of our young people on nicotine, causing a vaping crisis, a youth epidemic,” reports Reuters.
Beth Wilkinson, a lawyer for Altria, told the jury in her opening statement that the company had aimed to boost sales among cigarette smokers seeking a less harmful option, not among teens. “You can’t forget about those smokers,” she said. “If you can get smokers away from cigarettes, it’s a worthy cause.”
The school district also sued Juul, which settled that lawsuit last year. Cartmell told jurors that Altria, which was Juul’s largest investor from 2018 until earlier this year, when it exchanged its stake for a license to certain Juul intellectual properties, was “at the heart” of Juul’s strategy to grow its business by appealing to teenagers with sweet flavors and flashy advertising.
According to Cartmell, Altria made its large investment in Juul after being unsuccessful with its own e-cigarette, and the company knew Juul’s success was driven by youth usage, according to Bloomberg. Juul’s device was “marketed to appeal to the young, cool, popular crowd” and was “packed with nicotine,” Cartmell said.
Wilkinson argued that evidence would not support this. Juul sales fell after Altria’s investment, and Altria’s investment occurred after Juul pulled most of its flavored products off the market, according to Wilkinson, reports Law.com.
The San Francisco schools’ lawsuit was chosen to go to trial as a test case.
April 25, 2023