BRADENTON, Fla. - Florida is losing millions on its 1997 tobacco settlement deal, the state's attorney general says, because the companies involved in the sale of several cigarette brands refuse to remit agreed-upon payments.
Attorney General Pam Bondi sued R.J. Reynolds Co. and ITG Brands LLC in West Palm Beach Wednesday, contending that neither company is complying with terms of the state's 20-year-old agreement.
The suit is based on R.J. Reynolds' sale of Winston, Kool, Salem, and Maverick brands to ITG for $7 billion last year – four brands that accounted for about 17 billion of cigarettes sold or 8% of the domestic tobacco market in 2016.
Florida has already missed out on $45 million in payments related to the sale, and stands to lose about $30 million a year in future payments, the suit said.
According to the attorney general's office, R.J. Reynolds has refused to include the sales of these cigarette brands when making annual payments to Florida, despite not having been released from its payment obligations, and ITG has refused to make any payment to Florida after assuming the payment obligations for these brands.
"We believe we have strong legal and factual defenses to the motions filed in this case and will vigorously defend against them," Reynolds spokesman Bryan Hatchell said Monday. "However, as this is ongoing litigation we decline any further comment at this time."
Hatchell did not respond to a question about whether any other states have pursued similar charges.
ITG Brands did not immediately respond to a request for comment.
"The sale of major, pre-existing tobacco brands to another company for billions of dollars does not cause the payment obligations to vanish like a puff of smoke," Bondi said in a statement. "I look forward to the state obtaining prompt relief."
Florida, Mississippi, Texas, and Minnesota filed individual lawsuits against tobacco companies in the late 1990s, each entering their own settlement agreements instead of joining 46 states and six U.S. territories in a master settlement agreement in 1998.
Florida uses its annual cash payments for healthcare costs and education related to smoking, and has not securitized the revenue stream with bonds the way more than 20 other states have done.
In December, Florida's economists estimated that the state would receive about $336.1 million in total tobacco settlement revenues in the current budget year and $339.1 million in fiscal 2018.