The California Supreme Court on Thursday overturned a $14.8 million fine the state imposed on R.J. Reynolds Tobacco Co. for illegally doling out free cigarettes at a beerfest, a biker rally and other public events.
The seven justices unanimously ruled the tobacco firm violated state law when it handed out cigarettes and upheld the constitutionality of the law that R.J. Reynolds had challenged.
But the state's highest court sent the case back to a lower court to consider whether the fine was excessive, and questioned whether the tobacco maker had acted in bad faith.
"Distribution of cigarettes in any form, whether free of charge, sold at a discount, or sold at full retail price, creates the same health hazard, and should be equally subjected to state regulation," Justice Joyce Kennard wrote for the justices.
R.J. Reynolds had passed out free packs of cigarettes — and in some cases free cartons — to nearly 15,000 adults at six California public events, including a San Jose beer festival and a motorcycle event in Del Mar.
Company officials claimed they complied with the law because minors were not allowed in the distribution areas.
"Clearly, we believed we conducted our promotions in good faith and that our conduct conformed with state law," spokesman David Howard said for the North Carolina-based company.
Tom Dresslar, spokesman for California Attorney General Bill Lockyer, said the entire fine should be upheld.
"Good faith and RJR are mutually exclusive terms. That's not part of their corporate culture," Dresslar said.
The penalty for violating the 1991 state law has grown to about $18 million with interest, and was one of the state's largest against a company.
The maker of Camel, Winston and other brands claimed it had a constitutional right to give free tobacco to adults despite a ban state lawmakers approved amid intense lobbying from the California Medical Association. At least 16 states and the District of Columbia regulate the distribution of free tobacco.
R.J. Reynolds claimed state laws regulating the "promotion" of cigarettes are pre-empted, or nullified, because of the 1969 congressional Federal Cigarette Labeling and Advertising Act. The act says "No requirement or prohibition based on smoking and health shall be imposed under state law with respect to the advertising or promotion of any cigarettes."
Among other things, the federal measure also prohibited tobacco advertising on radio and television stations.
The justices said California, one of 16 states regulating free tobacco promotions, had the right to ban free cigarettes because tobacco is a health hazard, and that Congress has not spoken against state laws regulating the time, place and manner in which cigarettes could be sold or distributed.
The case is Lockyer v. R.J. Reynolds, S121009.
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