The ruling Tuesday by U.S. District Judge
The landmark 1998 deal called for the tobacco companies to pay some $206 billion to states to compensate for health-care and other costs incurred by smoking-related illnesses. Liability was apportioned by market share, and the four brands at issue accounted for 7.5% of cigarette sales.
“Reynolds accepted a perpetual release in return for agreeing to make perpetual payments,” Gilstrap said in a 92-page decision. “Reynolds remains as liable today as it was when it entered into the Texas Settlement in 1998.”
Kayleigh Lovvern, a spokeswoman for the Texas attorney general’s office said Wednesday the company is on the hook for “hundreds of millions in past and future payments” as a result of Gilstrap’s ruling.
The judge said the parties who negotiated the 1998 settlement likely did not anticipate the wave of consolidation that would transform the tobacco industry. RJR, now called Reynolds American Inc., was acquired by British American Tobacco PLC for $49 billion.
But Gilstrap chastised the company for arguing that its “responsibility to continue its payments to address the misery and costs visited upon the people of Texas by those brands had been snuffed out” by its sale of the brands.
According to Gilstrap’s decision, RJR claimed to have assigned liability to Imperial as part of the brands’ sale, but the payments to Texas simply stopped in 2015.
The judge said Imperial’s possible liability would be determined in a separate proceeding in Delaware.
(Adds details from ruling)
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