Exhibit 99.1
CERTAIN LITIGATION MATTERS AND
RECENT DEVELOPMENTS
As described in Note 11.
Contingencies to this Form 10-Q, there are legal proceedings
covering a wide range of matters pending or threatened in various
United States and foreign jurisdictions against Altria Group, Inc.,
its subsidiaries, including Philip Morris USA Inc. (“PM
USA”), and their respective indemnitees. Various types of
claims are raised in these proceedings, including product
liability, consumer protection, antitrust, tax, contraband
shipments, patent infringement, employment matters, claims for
contribution and claims of competitors and distributors. Pending
claims related to tobacco products generally fall within the
following categories: (i) smoking and health cases alleging
personal injury brought on behalf of individual plaintiffs,
(ii) smoking and health cases primarily alleging personal
injury or seeking court-supervised programs for ongoing medical
monitoring and purporting to be brought on behalf of a class of
individual plaintiffs, including cases in which the aggregated
claims of a number of individual plaintiffs are to be tried in a
single proceeding, (iii) health care cost recovery cases
brought by governmental (both domestic and foreign) and
non-governmental plaintiffs seeking reimbursement for health care
expenditures allegedly caused by cigarette smoking and/or
disgorgement of profits, (iv) class action suits alleging that
the uses of the terms “Lights” and “Ultra
Lights” constitute deceptive and unfair trade practices,
common law fraud or RICO violations, and (v) other
tobacco-related litigation.
The following lists certain of the
pending claims included in these categories and certain other
pending claims. Certain developments in these cases since
May 9, 2008 are also described.
SMOKING AND HEALTH
LITIGATION
The following lists the consolidated
individual smoking and health cases as well as smoking and health
class actions pending against PM USA and, in some cases, Altria
Group, Inc. and/or its other subsidiaries and affiliates, as of
August 1, 2008, and describes certain developments in these
cases since May 9, 2008.
Consolidated Individual Smoking
and Health Cases
In re: Tobacco Litigation
(Individual Personal Injury cases), Circuit Court, Ohio County,
West Virginia, consolidated January 11, 2000.
In West Virginia, all smoking and
health cases in state court alleging personal injury have been
transferred to the State’s Mass Litigation Panel. The
transferred cases include individual cases and putative class
actions. All individual cases filed in or transferred to the court
by September 13, 2000 were consolidated for pretrial
proceedings and trial. John Middleton Co. was named as a defendant
in this action but it, along with other non-cigarette
manufacturers, has been severed from this case. Currently pending
are 728 civil actions (of which 414 are actions against PM USA). In
December 2005, the West Virginia Supreme Court of Appeals ruled
that the United States Constitution does not preclude a trial in
two phases in this case. Issues related to defendants’
conduct, plaintiffs’ entitlement to punitive damages and a
punitive damages multiplier, if any, would be determined in the
first phase. The second phase would consist of individual trials to
determine liability, if any, and compensatory damages. In May 2007,
the trial court denied defendants’ motion to vacate the trial
court’s trial plan based on the United States Supreme
Court’s decision in Williams v. Philip Morris . In
November 2007, the West Virginia Supreme Court of Appeals denied
defendants’ renewed motion for review of the trial plan. In
December 2007, defendants filed a petition for writ of certiorari
with the United States Supreme Court, which was denied on
February 25, 2008. In February 2008, the court granted
defendants’ motion to stay the case pending the outcome of
United States Supreme Court’s decision in Good, et al. v.
Altria Group, Inc., et al . (“ Good ”),
described below.
Flight Attendant
Litigation
The settlement agreement entered
into in 1997 in the case of Broin, et al. v. Philip Morris
Companies Inc., et al. , which was brought by flight attendants
seeking damages for personal injuries allegedly caused by
environmental tobacco smoke, allows members of the Broin
class to file individual lawsuits seeking compensatory damages, but
prohibits them from seeking punitive damages. In October 2000, the
trial court ruled that the flight attendants will not be required
to prove the substantive liability elements of their claims for
negligence, strict liability and breach of implied warranty in
order to recover damages, if any, other than establishing that the
plaintiffs’ alleged injuries were caused by their exposure to
environmental tobacco smoke and, if so, the amount of
compensatory
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Exhibit 99.1
damages to be awarded. Defendants’ initial
appeal of this ruling was dismissed as premature. Defendants
appealed the October 2000 rulings in connection with their appeal
of the adverse jury verdict in the French case. In December
2004, the Florida Third District Court of Appeal affirmed the
judgment awarding plaintiff in the French case $500,000, and
directed the trial court to hold defendants jointly and severally
liable. Defendants’ motion for rehearing was denied in April
2005. In December 2005, after exhausting all appeals, PM USA paid
$328,759 (including interest of $78,259) as its share of the
judgment amount and interest in French and, although
plaintiffs may still contest the amount, in August 2007, PM USA
paid $229,293.11 (including interest of $7,380.48) representing its
share of attorneys’ fees. PM USA, in March 2008, paid
additional attorneys’ fees of $4,700. In November 2007, a
jury found in favor of the defendants in a case brought by a flight
attendant. As of August 1, 2008, 2,621 cases were pending in
the Circuit Court of Dade County, Florida against PM USA and three
other cigarette manufacturers.
Domestic Class
Actions
Engle, et al. v. R.J. Reynolds
Tobacco Co., et al., Circuit Court, Eleventh Judicial Circuit, Dade
County, Florida, filed May 5, 1994. See Note 11. Contingencies , for a
discussion of this case.
Scott, et al. v. The American
Tobacco Company, et al., Civil District Court, Orleans Parish,
Louisiana, filed May 24, 1996. See Note 11. Contingencies , for a
discussion of this case.
Young, et al. v. The American
Tobacco Company, et al., Civil District Court, Orleans Parish,
Louisiana, filed November 12, 1997.
Parsons, et al. v. A C & S,
Inc., et al., Circuit Court, Kanawha County, West Virginia, filed
February 27, 1998.
Cleary, et al. v. Philip Morris
Incorporated, et al., Circuit Court, Cook County, Illinois, filed
June 3, 1998. In
April 2006, defendants’ motion to dismiss a nuisance claim
was granted. In July 2006, plaintiffs filed a motion for class
certification.
Cypret, et al. v. The American
Tobacco Company, et al., Circuit Court, Jackson County, Missouri,
filed December 22, 1998.
Simms, et al. v. Philip Morris
Incorporated, et al., United States District Court, District of
Columbia, filed May 23, 2001 . In May 2004, plaintiffs filed a motion for
reconsideration of the court’s 2003 ruling that denied their
motion for class certification. In September 2004, plaintiffs
renewed their motion for reconsideration. This motion was denied by
the court in December 2006.
Lowe, et al. v. Philip Morris
Incorporated, et al., Circuit Court, Multnomah County,
Oregon , filed
November 19, 2001 . In September 2003, the court granted
defendants’ motion to dismiss the complaint, and plaintiffs
appealed. In September 2006, the Oregon Court of Appeals affirmed
the final judgment in favor of the defendants. In December 2006,
plaintiffs filed a petition for review with the Oregon Supreme
Court. The Oregon Supreme Court granted plaintiffs’ petition
for review in March 2007. In May 2008, the Oregon Supreme Court
affirmed the dismissal of plaintiffs’ medical monitoring
claims.
Caronia, et al. v. Philip Morris
USA, Inc., United States District Court, Eastern District of New
York, filed January 13, 2006. See Note 11. Contingencies, for a
discussion of this case.
Donovan, et al. v. Philip Morris,
United States District Court, District of Massachusetts, filed
March 2, 2007. See
Note 11. Contingencies, for a discussion of this
case.
HEALTH CARE COST RECOVERY
LITIGATION
The following lists the health care
cost recovery actions pending against PM USA and, in some cases,
Altria Group, Inc. and/or its other subsidiaries and affiliates as
of August 1, 2008 and describes certain developments in these
cases since May 9, 2008. As discussed in Note 11.
Contingencies, in 1998, PM USA and certain other United
States tobacco product manufacturers entered into a Master
Settlement Agreement (the “MSA”) settling
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Exhibit 99.1
the health care cost recovery claims of 46
states, the District of Columbia, the Commonwealth of Puerto Rico,
Guam, the United States Virgin Islands, American Samoa and the
Northern Marianas. Settlement agreements settling similar claims
had previously been entered into with the states of Mississippi,
Florida, Texas and Minnesota. PM USA believes that some or all of
the claims in certain of the health care cost recovery actions
listed below are released in whole or in part by the MSA, or that
recovery in any such actions should be subject to the offset
provisions of the MSA.
City of St. Louis
Case
City of St. Louis, et al. v.
American Tobacco, et al., Circuit Court, City of St. Louis,
Missouri, filed November 23, 1998 . In November 2001, the court granted in part
and denied in part defendants’ motion to dismiss and
dismissed three of plaintiffs’ eleven claims. In June 2005,
the court granted in part defendants’ motion for summary
judgment limiting plaintiffs’ claims for past compensatory
damages to those that accrued after November 16, 1993, five
years prior to the filing of the suit. The trial is scheduled to
begin in January 2010.
Department of Justice
Case
The United States of America v.
Philip Morris Incorporated, et al., United States District Court,
District of Columbia, filed September 22, 1999
. See Note 11. Contingencies
, for a discussion of this case.
International
Cases
Kupat Holim Clalit v. Philip
Morris USA, et al., Jerusalem District Court, Israel, filed
September 28, 1998 .
Defendants’ motion to dismiss the case has been denied by the
district court. In June 2004, defendants filed a motion with the
Israel Supreme Court for leave to appeal. The appeal was heard by
the Supreme Court in March 2005, and the parties are awaiting the
court’s decision.
Her Majesty the Queen in Right of
British Columbia v. Imperial Tobacco Limited, et al., Supreme
Court, British Columbia, Vancouver Registry, Canada, filed
January 24, 2001 .
In June 2003, the trial court granted defendants’ motion to
dismiss the case, and plaintiff appealed. In May 2004, the
appellate court reversed the trial court’s decision.
Defendants appealed. In September 2005, the Supreme Court of Canada
ruled that the legislation permitting the lawsuit is
constitutional, and, as a result, the case will proceed before the
trial court. On September 15, 2006, the British Columbia Court
of Appeal rejected PM USA’s motion seeking dismissal
from the case on jurisdictional grounds. In April 2007, the Supreme
Court of Canada denied PM USA’s motion seeking leave to
appeal. Trial is tentatively scheduled to begin in September,
2010.
Her Majesty the Queen in Right of
the Province of New Brunswick v. Rothmans, Inc. et al., Court of
the Queen’s Bench, New Brunswick, Fredericton, Canada, filed
March 13, 2008. The
complaint alleges deceit and misrepresentation, failure to warn,
marketing to minors, negligent design and manufacture, conspiracy
and concerted actions and seeks reimbursement for past, present and
future healthcare costs of individuals with tobacco-related
injuries.
See Note 11. Contingencies ,
for a discussion of the Distribution Agreement between Altria
Group, Inc. and PMI, which provides for indemnities for certain
liabilities concerning tobacco products.
Medicare Secondary Payer Act
Case
United Seniors Association v.
Philip Morris USA, et al., District of Massachusetts, filed
August 4, 2005. In
August 2006, the trial court granted defendants’ motion to
dismiss plaintiff’s complaint. In September 2006, plaintiff
appealed to the United States Court of Appeals for the First
Circuit. In August 2007, the United States Court of Appeals for the
First Circuit affirmed the district court’s dismissal. In
November 2007, plaintiffs filed a petition for writ of certiorari
with the United States Supreme Court, which was denied on
January 22, 2008.
National Committee to Preserve
Social Security and Medicare, et al. v. Philip Morris USA, et
al., Circuit Court of
the Eleventh Judicial Circuit of and for Miami County,
Florida filed April 18, 2008 . This action was
brought under the Medicare as Secondary Payer statute and purports
to be brought on behalf of Medicare to recover an
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Exhibit 99.1
unspecified amount of damages equal to double
the amount paid by Medicare for smoking-related health care
services provided from April 19, 2002 to the present.
Plaintiffs voluntarily dismissed the case in May 2008.
National Committee to Preserve
Social Security and Medicare, et al. v. Philip Morris USA, et al.,
United States District Court, Eastern District, New York filed
May 20, 2008 .
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