R.J. Reynolds to Settle State Lawsuit for $5 Million

R.J. Reynolds Tobacco Co. will pay $5 million to resolve a suit brought by California over the free distribution of cigarettes at a hot rod race, a jazz festival and other public events, the state attorney general’s office announced Monday.

Under the settlement, the tobacco maker will pay a civil penalty of $3.1 million, plus $1 million to the Public Health Institute, a nonprofit organization that will use the money to fund smoking prevention and tobacco control advocacy programs, and $900,000 to cover costs incurred by the state attorney general’s office.

“This settlement serves the public interest by holding RJR accountable and providing money to further the state’s anti-smoking program,” Atty. Gen. Bill Lockyer said in a statement.

David Howard, a spokesman for R.J. Reynolds, said the tobacco company denied any wrongdoing.

He said the company had been ready to take the case to the U.S. Supreme Court.

The cigarette giveaways at the public events had been restricted to smokers who were of legal age, Howard said.

The state had alleged that the maker of Winston, Salem and Camel brands had violated a 1991 California law that prohibits the distribution of free cigarettes in any public building or on public grounds. RJR had distributed 108,155 free packs of cigarettes to nearly 15,000 people at six public events in 1999.

A Los Angeles County Superior Court had awarded the state $14.8 million in civil penalties in the cigarette case in 2002.

The Winston-Salem, N.C.-based company then appealed to the state Supreme Court, which affirmed the lower court’s finding but ordered the trial court to determine whether the penalty was excessive.

“We felt [the penalty] was justified,” said Tom Dresslar, spokesman for Lockyer’s office. In the end, however, “we thought it was a better use of the taxpayers’ money to come to this mutually accepted resolution.”

The settlement must be approved by the Los Angeles Superior Court.

Shares of Reynolds American Inc., R.J. Reynolds’ parent company, fell 67 cents to close at $113.77 on Monday.