Dover, Dell. – Tobacco maker ITG Brands was held liable for a tobacco settlement to Florida when it acquired four brands from Reynolds American in 2015, a Delaware judge has ruled.
Vice Chancellor Lori Will granted summary judgment in Reynolds’ favor on Friday, ruling that as a result, ITG must compensate Reynolds American for its losses.
Reynolds sold the Cool, Winston, Salem and Maverick brands to ITG in 2014 and received federal regulatory approval to acquire Lorillard.
Prior to the closing of the sale, RJ Reynolds Tobacco Co., an affiliate of Reynolds American, had made payments under an existing settlement agreement with Florida for reimbursement of smoking-related medical expenses. After closing, Reynolds stopped paying for four of his brands he no longer owned.
The asset purchase agreement required ITG to use its reasonable best efforts to participate in the Florida settlement and to make annual payments to Florida for sales of brands acquired from Reynolds. ITG has not yet entered into the settlement agreement with Florida and has not made any payments.
Florida sued Reynolds and ITG, ruling that Reynolds will continue to make payments under ITG’s brand unless ITG participates in Florida’s settlement agreement.
“That sentence against Reynolds has exceeded $170 million to date, with tens of millions more per year going on forever,” Will noted. “Clear terms” in the asset purchase agreement support Reynolds’ claim that ITG agreed to assume the liability imposed by the Florida judgment and must indemnify Reynolds, she concluded. .
The ruling is the result of a lengthy legal battle between North Carolina-based Reynolds and ITG. In 2017, another judicial court judge concluded that ITG’s obligation to do its best to reach a tobacco settlement agreement with Florida did not end when the sale ended.
Last year, Reynolds sought compensation from ITG for the amount it paid to Reynolds Tobacco and the amount it would pay due to the Florida judgment, but ITG refused. In a subsequent lawsuit, ITG lost, arguing that it had fulfilled its reasonable best efforts obligations and was not required to indemnify Reynolds for its liability to the State of Florida.
In a settlement of a lawsuit filed by the state of Minnesota last year, ITG agreed to be obligated under the state’s tobacco settlement agreement to pay for the sale of four brands it acquired from Reynolds. ITG agreed to pay Minnesota for all years after 2021, but he split the payment obligations for the period 2015-2020 between ITG and Reynolds.
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https://www.ksat.com/business/2022/10/03/judge-itg-is-liable-for-florida-tobacco-settlement-payments/ ITG will be responsible for paying the Florida Tobacco Settlement.