Friday, December 23, 2005
State High Court Overturns Huge Penalty for Cigarette Giveaway
By KENNETH OFGANG, Staff Writer/Appellate Courts
The California Supreme Court yesterday overturned a $14.8 million penalty ordered by a Los Angeles Superior Court judge after R.J. Reynolds Tobacco Co. illegally distributing free cigarettes at various public events.
Justice Joyce L. Kennard, writing for a unanimous court, said Judge Conrad Aragon was correct in concluding that the tobacco manufacturer violated Health and Safety Code Sec. 118950, which generally prohibits the free distribution of cigarettes in public places.
But Kennard also concluded that the trial judge, and the Court of Appeal panel that affirmed his decision, should have considered Reynolds’ contention that the penalty was excessive because the company relied on a good faith belief that its conduct was within the law.
Good Faith Claimed
Reynolds contended that its distribution of the products in special tents to which only persons who were over 21 years of age and already had cigarettes in their possession were admitted did not violate the law. And even if it did, the company argued, the trial court should have considered its belief that it was in compliance and the fact that it stopped the distributions as soon as the attorney general complained as relevant to the amount of the penalty.
Kennard said that by imposing the penalty, amounting to nearly $1,000 for each person who received free cigarettes, without considering the argument, the trial court violated the constitutional prohibition against excessive fines. The law allows a penalty of $200 for the first free pack given away at a particular event, $500 for the second, and $1,000 for each one after that.
The giveaway program was implemented in 1999 at several motor sports events and at the Sunset Junction Festival, the Long Beach Jazz Festival, and the San Jose International Beer Festival. All together, more than 108,000 packs of cigarettes were given away.
No ‘Safe Harbor’
The Supreme Court agreed with the trial judge, and with Div. Two of this district’s Court of Appeal, that the giveaways did not fall within a “safe harbor” provision that allows free distribution on public grounds leased for private functions if minors are denied access by a peace officer or licensed security guard.
The safe harbor does not apply, Kennard said, because minors were admitted to all of the events, even though they were excluded from the tents.
Even assuming that the event grounds were “leased” within the meaning of the statutes, the justice reasoned, the interpretation argued for by Reynolds is inconsistent with the expressed legislative intent.
In its findings, Kennard explained, the Legislature declared smoking to be among the state’s most serious public health problems, expressed a goal of “keeping children from beginning to use tobacco products in any form” and noted that distribution of free samples “is a recognized source by which minors obtain tobacco products.”
Given those declarations, the justice said, “a statutory interpretation that restricts the free distribution of cigarettes conforms to the legislative purpose.”
Kennard acknowledged that this interpretation makes it impossible, as a practical matter, for manufacturers to distribute free cigarettes at any large public event. But that would not be inconsistent with the Legislature’s goals of keeping children from smoking and encouraging adult smokers to quit, she said.
The justice also rejected the claim that the 1969Federal Cigarette Labeling and Advertising Act preempts the statute. While states have been preempted from regulating “promotion” of cigarettes, the legislative history does not indicate that Congress intended to include cigarette giveaways within that phrase, the jurist said.
More than a dozen other states have similar laws, as does the District of Columbia.
In concluding that “although ignorance of the law is not a defense to a violation of section 118050, a defendant’s good faith or bad faith is relevant to the evaluation of the fine assessed against the defendant,” the justice cited United States v. Bajakajian (1998) 524 U.S. 321.
That case was a civil forfeiture proceeding in which the government seized more than $350,000 from someone who tried to take the money out of the country without filing a currency transaction report. The government declared the entire sum forfeited, even though there was no contention that the money was illegally obtained or intended to be used for an illegal purpose, and the lower courts upheld the forfeiture.
But in concluding that the forfeiture may have violated the Eighth Amendment’s prohibition against excessive fines, Supreme Court said the trial court should considered reducing the forfeiture to a lesser sum, based on the extent of the claimant’s culpability, the relationship between the harm and the penalty, the penalties imposed for comparable violations of other laws, and the claimant’s ability to pay.
In this case, Kennard said, Aragon and the Court of Appeal erred in treating the company’s asserted good faith as irrelevant.
On remand, she said, the trial court should consider whether Reynolds actually believed it was in compliance with the law, whether that belief was reasonable, and whether the Attorney General’s Office misled the company by advising it in a 1999 letter, before the program began, that the use of controlled-access tents would comply with the statute and/or by delaying the filing of its lawsuit until two years after the program began.
The case is People ex rel. Lockyer v. R.J. Reynolds Tobacco Company, 05 S.O.S. 5695.
Copyright 2005, Metropolitan News Company