R. J. Reynolds Tobacco Co. has been ordered to pay the state of Vermont $8.328 million in civil penalties for deceptive advertising of its nontraditional Eclipse cigarette between 2000 and 2007.
Both parties have 30 days from the date of the ruling to appeal, and no money would be due while an appeal is pending. If the fine is paid, it will go into the state’s General Fund.
Several other details remain to be determined, including whether the state Attorney General’s Office can recover attorney costs and fees associated with the lengthy suit. A petition to recover those fees will be filed soon, Assistant Attorney General Mark Di Stefano said.
The ruling by Vermont Superior Court Judge Dennis Pearson resonates far beyond cigarette advertising, however. First, it sets a precedent prohibiting unsubstantiated health claims. Further, Di Stefano says, the broadly written injunction against deceptive advertising that accompanies the civil penalty is an important precedent applicable to many arenas of consumer protection, from health products to appliances, for example. And the judge’s method for calculating violations perpetrated by a continually published website turns over a new leaf in modern law.
The Reynolds team is also taking its time to parse the ruling, according to Bryan Hatchell, director of communications for Reynolds American Inc., the parent company of R.J. Reynolds Tobacco Co. “We are disappointed with the judge’s ruling and are considering our options in this case, including our right to appeal,” Hatchell said.
Background
Pearson’s determination followed extended and ultimately unsuccessful settlement negotiations between the company and the state. Pearson ruled in March 2010 that Reynolds had intentionally misled customers through direct mail marketing, print and Internet ads, and ads on the cigarette packs that touted Eclipse as a reduced-risk cigarette.
“The best choice for smokers worried about their health is to quit,” one ad read. “The next best choice is to switch to Eclipse.” Other marketing messages included claims that smoking Eclipse — because it “primarily heats rather than burns tobacco” — produces less toxic smoke than other cigarettes. That “may present less risk of cancer, chronic bronchitis, and possibly emphysema,” according to Reynolds’ ads.
Such unsubstantiated claims violate Vermont’s consumer protection laws and the state’s 1998 consent decree pursuant to the Master Settlement Agreement. That 46-state settlement, in addition to mandating the country’s four largest tobacco companies pay billions of dollars in compensation to states for treating tobacco-related illnesses, imposed restrictions on their promotional practices.
Even after the MSA and a March 28, 2005, letter from 40 state attorneys general demanding that Reynolds discontinue its deceptive advertising of Eclipse, the company persisted. The state of Vermont filed suit against the company that summer.
Next steps
As Hatchell indicated, an appeal by Reynolds is possible. It’s hard to say, however, how long that process might take.
In the meantime, Di Stefano said, the state intends to file a petition to recover the attorney costs and fees associated with the lawsuit. That petition would request compensation up to the time the petition is filed, but supplementary compensation to include the petition and a potential appeal might be possible down the road.
Of the 40 states whose attorneys general signed onto the 2005 letter, Vermont was the only one to pursue enforcement of its order that Reynolds discontinue the deceptive advertising. That said, the case is of great interest around the nation.
Reynolds claimed it was compelled to litigate its defense “to the hilt” because company executives understood the potential ramifications of this Vermont decision.
