CA Supreme Court Upholds RJR Ruling

Allows hearing on $14.8 million fine

SAN JOSE, Calif. -- In a major showdown over a state's right to regulate cigarette promotions and advertising, the California Supreme Court last month upheld a 15-year-old law that resulted in a multi-million dollar fine against the R.J. Reynolds Tobacco Co. for handing out free cigarettes at public events such as a San Jose beer festival, according to a report in San Jose's Mercury News.

The state's high court did side with the company on one issue, saying it is entitled to a new hearing to determine whether the nearly $15 million fine was excessive. [image-nocss] But the Supreme Court unanimously concluded that California had the power to regulate a company's ability to dole out free cigarettes under a 1991 law meant to prevent minors from gaining easy access to smokes.

Distribution of cigarettes in any form, whether free of charge, sold at a discount or sold at full retail price, creates the same health hazard, and should be equally subject to state regulation, Justice Joyce Kennard wrote for the court.

The clash between R.J. Reynolds, the maker of cigarette brands such as Camel and Winston, and state regulators dates back to 1999, when the company handed out cigarette packs and cartons to an estimated 15,000 people at a number of events around California. That included a promotion at the San Jose International Beer Festival in Guadalupe River Park.

Attorney General Bill Lockyer sued the company two years later, arguing that six of the public events violated the state law barring distribution of free cigarettes. The lawsuit later produced a $14.8 million fine, believed to be one of the state's largest against a company.

R.J. Reynolds' central argument in appealing the fine is that state laws like California's are trumped by a 1969 federal law regulating cigarette promotion and advertising. That law, called the Federal Cigarette Labeling and Advertising Act, did not directly ban free cigarette promotions.

The U.S. Supreme Court in recent years has issued a number of rulings supporting Congress' regulation of the industry over the states, raising the possibility the California case could eventually be headed to the nation's high court. Joseph Escher III, the lawyer for R.J. Reynolds, referred questions to a company spokesman.

David Howard, an R.J. Reynolds spokesman, said the company would weigh its legal options, but was pleased it would have a chance to reargue the amount of the fine. Howard added that the California Supreme Court ruling is squarely in conflict with other court decisions on state regulation of tobacco advertising.

Tom Dresslar, a spokesman for Lockyer, said the office is confident the fine will be imposed again once a trial judge considers the company's arguments, which include the fact the state unfairly delayed in bringing its regulatory action. Dresslar added that the ruling bolsters laws like California's, calling it a victory for public health in California.

More than a dozen other states have similar laws.