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IN THE CIRCUIT COURT OF MOBILE COUNTY, ALABAMA
CAROL FLETCHER, RETHA
COLCLOUGH, BETTY CLARK,
KRISTINA CHUTZ-REYMERS, and
UNIVERSITY OF SOUTH ALABAMA, on behalf of themselves and
all others similarly situated,
Plaintiffs,
vs.
BROOKE GROUP LTD., LIGGETT
GROUP INC. AND LIGGETT &
MYERS INC.
Defendants.
)))))))))))))))) CIVIL ACTION NO. ________.
CLASS ACTION
SETTLEMENT AGREEMENT
CLASS SETTLEMENT AGREEMENT
This CLASS SETTLEMENT AGREEMENT is entered into this 20th day
of March 1997 by and between the named and representative plaintiffs (collectively,
"Plaintiffs") in Carol Fletcher, et al. v. Liggett Group Inc., et al.,
Civil No. _____, In the Circuit Court of Mobile, Alabama (the "Fletcher
Action"), for themselves and on behalf of the plaintiff settlement class
as hereinafter defined ("Settlement Class"); and Brooke Group Ltd., a Delaware
corporation ("Brooke Group"), Liggett & Myers Inc., a Delaware corporation
("Myers"), and Liggett Group Inc., a Delaware corporation (which, with
Myers, is hereinafter referred to as "Liggett").
RECITALS
WHEREAS,
On March 19, 1997 Plaintiffs filed a complaint to commence the
Fletcher Action against Liggett and Brooke Group asserting claims on behalf
of a putative nationwide class of all persons and entities which have incurred
or are alleged to have incurred costs or other damages arising from cigarette
smoking, seeking, among other things, equitable/injunctive relief, a declaratory
judgment, and compensatory and/or punitive damages, according to proof,
as set forth in the complaint.
The primary purpose of this Class Settlement Agreement is to
provide certain injunctive relief sought by Plaintiffs and other settlement
class members, including the cooperation of Liggett and Brooke Group, and
to create a fund for the equitable settlement of the claims of the settlement
class members, free of the risks and costs of prolonged litigation.
The mechanism for accomplishing this purpose is the creation of a settlement
fund board, to which the claims of all settlement class members against
Liggett and Brooke Group shall be directed.
The injunctive relief, cooperation, and monetary settlement
are components of an integrated settlement set forth in this Class Settlement
Agreement. Liggett and Brooke Group agree to provide cooperation
and to submit to the injunctive relief set forth herein in the context
of a mandatory class settlement.
Apart from the Fletcher Action, hundreds of individual actions
and putative class actions, as well as numerous actions brought on behalf
of states and other governmental bodies and other entities, have been filed
against Liggett and Brooke Group and other tobacco defendants seeking,
among other things, equitable relief and damages allegedly arising from
cigarette smoking. In addition to the hundreds of smoking-related
claims that have already been filed against these defendants in jurisdictions
throughout the United States, many more are expected to be filed in the
future. Smoking-related litigation has resulted in extensive discovery
concerning the potential liability of Liggett and Brooke Group as well
as extensive consideration of the legal and factual bases of smoking-related
litigation.
The plaintiffs and the defendant tobacco companies have spent,
and continue to spend, enormous resources litigating these smoking-related
claims. Litigating smoking-related lawsuits is depleting and will
continue to deplete the defendant tobacco companies' resources otherwise
available to compensate claimants. Absent an alternative method of
resolution, Liggett would not be able to satisfy the smoking-related claims
pending against it, let alone claims which may be asserted in the future.
In light of the uncertainties associated with the pending litigation
and Liggett's financial condition, there are substantial risks that adjudications
with respect to smoking-related claims by certain settlement class members
will, as a practical matter, be dispositive of the claims and interests
of certain other settlement class members not yet adjudicated or will substantially
impair or impede the ability of such other settlement class members to
protect their interests.
Plaintiffs allege that Liggett and Brooke Group have acted or
refused to act on grounds generally applicable to the settlement class,
thereby making final injunctive relief appropriate with respect to the
class as a whole in accordance with Rule 23 of the Alabama Rules of Civil
Procedure in the context of this settlement.
Counsel for the Plaintiffs have substantial experience in the
litigation of smoking-related cases and class actions, including the litigation
and trial of individual smokers' cases.
Liggett has made available relevant information, and Plaintiffs,
through counsel, have investigated such information and other relevant
information and conducted discovery, as to the nature, extent and availability
of Liggett's financial resources, and have concluded that the criteria
of Alabama Rule of Civil Procedure 23(b)(1) apply to Liggett and its affiliates
in the context of this settlement.
Plaintiffs and Liggett and Brooke Group recognize and support
the public interest in preventing smoking by, or the promotion of smoking
to, children and adolescents and further recognize that it is of extreme
importance to halt any marketing efforts directed to children and adolescents
and to provide for full disclosures of material facts relating to tobacco
products.
Liggett and Brooke Group have denied, and continue to deny any
wrongdoing or any legal liability of any kind in all smoking-related litigation.
Liggett and Brooke Group recognize and acknowledge that defending
the continued prosecution of the Fletcher Action (and other similar putative
class actions and individual suits) against them, through trial and appeals,
would require considerable resources and expense, would entail uncertainty
and risk, and constitute circumstances under which the available assets
of Liggett and Brooke Group may be properly characterized as a "limited
fund" in comparison to the aggregate potential claims of all settlement
class members. Liggett and Brooke Group have determined that the
settlement, in accordance with this Class Settlement Agreement, of the
claims asserted in the Fletcher Action against them will be beneficial
to them by enabling Liggett to continue the legal business of selling cigarettes,
under terms of candor and full disclosure to the public, while avoiding
bankruptcy or other insolvency that could otherwise result from the transaction
costs and potential exposure of ongoing litigation.
Plaintiffs recognize and acknowledge that the continued prosecution
of the Fletcher Action and other smoking-related litigation against Liggett
and Brooke Group through trial and appeals would require considerable time
and expense and would entail uncertainty, risk and delay, including the
risk of bankruptcy or other insolvency of Liggett and Brooke Group.
Plaintiffs and Liggett and Brooke Group recognize that this settlement
with Liggett provides uniquely favorable terms to Liggett in recognition
of its unique situation, including its willingness to be the first tobacco
industry defendant to settle with any of the public or private plaintiffs,
its agreement to provide documents and cooperation expected to be of material
benefit to the litigation against the other, much larger tobacco defendants,
Liggett's small market share, and its precarious financial situation.
Plaintiffs have determined that the settlement, in accordance with this
Class Settlement Agreement, of the claims asserted in the Fletcher Action
against Liggett and Brooke Group will be beneficial to the settlement class
by providing all settlement class members with substantial and critical
non-monetary equitable relief, as well as the opportunity to share equitably
in the common fund created by this Class Settlement Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the
promises and covenants set forth in this Class Settlement Agreement, Plaintiffs,
on their own behalf and on behalf of the Settlement Class (as defined below),
and Liggett and Brooke Group hereby stipulate and agree that, conditional
upon the approval of the Court as required by Rule 23 of the Alabama Rules
of Civil Procedure and as provided herein, the Action shall be settled
as against Liggett and Brooke Group and that all claims asserted by or
on behalf of the putative class members in the Fletcher Action against
the Settling Defendants shall be dismissed with prejudice, all on the terms
and conditions contained herein, as follows:
Definitions.
As used in and solely for the purposes of this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means a Present Affiliate or a Future Affiliate.
"Agreement" means this Settlement Agreement.
"Arbitrator" means the person or persons agreed to by the Settling
States and the Settlement Class, and/or their counsel, or appointed by
the Court or the Multidistrict Litigation Panel, as the case may be, to
make decisions regarding allocations of the Settlement Fund between the
Settling States and the Settlement Class, and to resolve disputes of the
Oversight Committee.
"Attorneys General" means those State Attorneys General or other
parties who have brought Attorney General Actions.
"Attorney General Actions" means actions by or on behalf of
States seeking injunctive relief and/or damages in connection with smoking
and/or Medicaid or other expenses allegedly resulting therefrom.
"Attorneys General Settlement Agreement" means that agreement
entered into on or about March 20, 1997 between Brooke Group and Liggett
and the Attorneys General of certain states, a copy of which is annexed
hereto as Exhibit A.
"Brooke Group" means Brooke Group Ltd. and its Present Affiliates
other than Liggett.
"Cigarette" means any product including components, accessories,
or parts which is intended to be burned under ordinary conditions of use
and consists of: (1) any roll of tobacco wrapped in paper or in any substance
not containing tobacco; or (2) any roll of tobacco wrapped in any substances
containing tobacco which, because of its appearance, the type of tobacco
used in the filler, or its packaging and labeling, is likely to be offered
to, or purchased by, consumers as a cigarette described in subparagraph
(1).
"Cigarette Pack" means a unit of twenty Cigarettes or one ounce
of Tobacco Snuff.
"Cost Per Cigarette Pack" means, with respect to a Tobacco Company,
the aggregate costs incurred by such Tobacco Company under a Global Settlement
during a specified year, divided by the number of Cigarette Packs manufactured
by such Tobacco Company during such year, as determined by The Maxwell
Consumer Report published by Wheat First Butcher Singer or a similar or
successor report.
"Court" means the Circuit Court of Mobile County, Alabama.
"Domestic Tobacco Operations" means the manufacture and/or sale
of Cigarettes and any other tobacco products in the United States, its
territories, its possessions and the Commonwealth of Puerto Rico.
"FDA Rule" means the regulations promulgated by the FDA concerning
the sale and distribution of cigarettes and other products on August 28,
1996 at 60 Fed. Reg. 44396, to be codified at 21 C.F.R. Parts 801, 803,
804, 807, 820 and 897.
"Future Affiliate" means any one entity, other than an entity
with a Market Share greater than 30% as of the date of this Agreement,
which is a Non-settling Tobacco Company (including any successor to or
assignee of its assets) if such entity or an Affiliate of such entity with
the prior written approval of Brooke Group, subsequent to the date, and
during the term, of this Agreement but prior to the fourth anniversary
of the date of execution of this Settlement Agreement: (i) directly
or indirectly acquires or is acquired by Liggett or Brooke Group; (ii)
directly or indirectly acquires all or substantially all of the stock or
assets of Liggett or Brooke Group; (iii) all or substantially all of whose
stock or assets are directly or indirectly acquired by Liggett or Brooke
Group; or (iv) directly or indirectly merges with Liggett or Brooke Group
or otherwise combines on any basis with Liggett or Brooke Group.
"Future Affiliate Transaction" means a transaction, or series
of transactions, by which an entity becomes a Future Affiliate.
"Global Settlement" means any National disposition, settlement,
agreement or other arrangement, such as "Tobacco Claims Legislation", by
way of legislation, executive order, regulation, taxation, levy, fine,
class action settlement, court order or otherwise, of smoking-related litigation,
in direct or indirect connection with which one or more Tobacco Companies
receives the benefit of a limitation of, or total or partial immunity from,
liability to the members of the Settlement Class for the types of claims
released under this Agreement.
"Initial Notice" means the written notice document to be provided
by Liggett and its Present Affiliates to Settlement Class members as defined
in Section 8.1 of this Agreement.
"Initial Notice Date" means the first date upon which Initial
Notice is given by Liggett and its Present Affiliates to the Settlement
Class pursuant to Section 8.1 of this Agreement.
"Injury" means any physical, mental or emotional injury, including,
by way of example and not limitation, cancer, heart disease, emphysema,
addiction and phobia.
"Liggett" means Liggett Group, Inc. and Liggett & Myers,
Inc.
"Mandatory Class Fairness Hearing" means the hearing to be conducted
by the Court in connection with the determination of the fairness, adequacy
and reasonableness of this Agreement under Rule 23 of the Alabama Rules
of Civil Procedure, insofar as the Agreement applies to Liggett and its
Present Affiliates.
"Mandatory Class Final Order and Judgment" or "Mandatory Class
Final Approval" means the order to be entered by the Court, with respect
to Liggett and its Present Affiliates, approving this Agreement without
material alterations, as fair, adequate and reasonable under Rule 23 of
the Alabama Rules of Civil Procedure, confirming the Settlement Class certification
under Rule 23 thereof, and making such other findings and determinations
as the Court deems necessary and appropriate to effectuate the terms of
this Agreement and to exercise its continuing and exclusive jurisdiction
over the enforcement and administration of all terms of this Settlement
Agreement.
"Mandatory Class Settlement Date" or "Settlement Date" means
the date on which all of the following shall have occurred: (a) the
entry of the Mandatory Class Final Order and Judgment without material
modification, and (b) the achievement of finality for the Mandatory Class
Final Order and Judgment by virtue of that order having become final and
non-appealable through (i) the expiration of all appropriate appeal periods
without an appeal having been filed; (ii) final affirmance of the Mandatory
Class Final Order and Judgment on appeal or final dismissal or denial of
all such appeals, including petitions for review, rehearing or certiorari;
or (iii) final disposition of any proceedings, including any appeals, resulting
from any appeal from the entry of the Mandatory Class Final Order and Judgment.
"Market Share" means, with respect to a specified Tobacco Company
and a specified year, the Domestic Tobacco Operations market share in that
year of all of such company's cigarettes and other tobacco products (as
the case may be), as determined by The Maxwell Consumer Report published
by Wheat First Butcher Singer or a similar or successor report.
"National" means actually covering or potentially covering (whether
by block grants to states, localities or other governmental entities or
otherwise) the United States or the United States and one or more of its
territories, possessions and the Commonwealth of Puerto Rico.
"Non-Settling Tobacco Companies" means each of The American
Tobacco Co., Lorillard Tobacco Co., Philip Morris Inc., R.J. Reynolds Tobacco
Co., Brown & Williamson Tobacco Corp., and United States Tobacco Co.,
unless and until it becomes a Future Affiliate, as herein defined.
"Other Settlement" means a settlement of a Tobacco Action which
is not a Global Settlement.
"Oversight Committee" means a committee, made up of no less
than nine (9) individuals, to oversee the cooperation provided by Settling
Defendants under Section 5.3.1 and 5.3.2 hereof. The committee shall
have not less than 75% of its composition from representation of the Attorneys
General.
"Parent", with respect to Liggett means Brooke Group, and with
respect to any other specified corporation or entity, means another corporation,
partnership or other entity which directly or indirectly controls such
specified corporation or entity.
"Parties" means the Plaintiffs and Brooke Group and Liggett.
"Personal Injury Subclass" means a settlement subclass composed
of:
(a) all Smokers who reside in the United States, its territories,
possessions and the Commonwealth of Puerto Rico; and
(b) the estates, representatives, and administrators of these
Smokers; and
(c) the spouses, children, relatives and "significant others"
of these Smokers as their heirs or survivors; and
(d) all persons who, prior to or during the term of this
Agreement, have been exposed to environmental or second-hand tobacco smoke
and have suffered or claim to have suffered Injury as a consequence thereof;
provided that excluded from such settlement subclass are (i)
officers and directors of any of the Settling Defendants and (ii) any person
or entity which has entered into any prior or contemporaneous settlement
with Liggett of a Tobacco Action.
"Population" means, with respect to a geographic area, the population
of that area as reported in the most recent census conducted by the United
States Bureau of the Census.
"Population Quotient" means, with respect to an Other Settlement
or judgment, a quotient whose numerator is the Population of the United
States and whose denominator is the total Population of the state(s), jurisdictions,
or other grouping of persons covered by such Other Settlement or judgment.
"Preliminary Approval" means the Court's provisional certification
of the Settlement Class, preliminary approval of this Agreement, approval
of the form of Initial Notice to the Settlement Class pursuant to Rule
23 of the Alabama Rules of Civil Procedure, or the setting of a date for
the approval or submission for approval of the form of such notice.
"Present Affiliate" means with respect to a specified corporation,
another corporation, partnership or other entity which as of the date of
this Agreement, directly or indirectly, controls, is controlled by, or
is under common control with, such specified corporation or entity including
any and all Parents, subsidiaries, and/or sister corporations or entities
of such specified corporation or entity.
"Present Value" means, with respect to a specified amount or
amounts, the present value of such amount or amounts as calculated using
a discount rate equal to the yield on 10-year Treasury Notes as reported
in the Wall Street Journal at the time of such calculation; provided that
where such amount or amounts are not otherwise determinable, the amount
or amounts to be present-valued shall be deemed to be the average for the
most recent three years.
"Pretax Income", with respect to Liggett, means for a specified
year, the "Income before Income Taxes" as determined in accordance with
generally accepted accounting principles ("GAAP") of Liggett for its most
recent fiscal year, as report in filings to the United States Securities
and Exchange Commission or, if there is no such filing, as reported by
Liggett's independent outside auditors. If GAAP changes in any material
respect during the term of this Agreement so that the benefits anticipated
by the parties (in light of GAAP applicable on the date of this Agreement),
an appropriate adjustment shall be made to the formulas and calculations
hereunder to achieve the parties' expectations as of the date hereof.
"Protective Order" or "Stipulation Regarding Liggett Documents"
means, with respect to privileged documents produced by a Settling Defendant
pursuant to 5.3 on order of the Court: (a) protecting the confidentiality
of such documents; (b) providing that such documents may be used only in
actions against Non-Settling Tobacco Companies and, to the extent permitted
by law, only under seal; (c) providing that, to the extent such documents
are or may be subject to the attorney/client privilege or attorney work
product doctrine, such production or use of the documents does not constitute
a waiver of such privilege, doctrine or protection with respect to any
party other than the parties to whom the documents are produced subject
to the order. The provisions of the Protective Order shall not apply
to documents claimed to be privileged but which are determined by the Court
or by any other court not to be privileged for reasons other than waiver
due to production pursuant to this Agreement.
"Recoupment Subclass" means a settlement subclass composed of:
all persons or entities not in the Personal Injury Subclass (including,
without limitation, any territory, city, county, state, parish, possession
or any other political subdivision thereof, or any agency or instrumentality
of any of the foregoing, or any insurance company) in the United States,
its territories, possessions, and the Commonwealth of Puerto Rico, which,
prior to or during the term of this Agreement, have incurred or claim to
have incurred, directly or indirectly, economic loss as a result of paying
for the treatment of diseases, illnesses, or medical conditions allegedly
caused by Cigarettes (or exposure thereto, including by way of environmental
or second hand smoke); provided that excluded from such settlement subclass
are (i) officers and directors of any of the Settling Defendants, (ii)
any person or entity which has entered into any prior or contemporaneous
settlement with Liggett of a Tobacco Action, and (iii) any State that opts
out of this Settlement pursuant to Section 9 of this Agreement.
"Settlement Class" means a settlement class composed of the
Personal Injury Subclass and the Recoupment Subclass as herein defined.
"Settlement Class Counsel" means the firms listed as Personal
Injury Settlement Subclass Counsel and Recoupment Settlement Subclass Counsel
in Section 26.8 of this Agreement.
"Settlement Class Representatives" means the Plaintiffs approved
by the Court to serve as Settlement Class representatives for their respective
settlement subclasses.
"Settlement Fund" means the fund established in accordance with
the terms of Section 7 of this Agreement, which shall be established in
a reputable bank or other financial institution subject to the jurisdiction
of the Court, to provide a secure and interest-bearing fund, which shall
be jointly controlled by the Settling States and the Settlement Class.
"Settlement Fund Board" or "Board" means the board which shall
be established pursuant to this Agreement to administer that portion of
the Settlement Fund allocated to the Settlement Class pursuant to this
Agreement. The Settlement Class representatives shall be appointed
by the Court pursuant to procedures for selection of the representatives
established by the Court. At least one-third of the Board shall be
comprised of representatives of the public health community who shall be
designated by majority vote of the other members of the Board.
"Settling Defendants" means Brooke Group and/or Liggett.
"Settling Defendants' Counsel" means the law firm of Kasowitz,
Benson, Torres & Friedman L.L.P.
"Settling States" means those States that entered into the Attorneys
General Settlement Agreement.
"Smokers" means all persons who, prior to or during the term
of this Agreement, have smoked Cigarettes or have used other tobacco products
and have suffered or claim to have suffered Injury as a consequence thereof.
"State Opt Out Period" means the period commencing on the Initial
Notice Date and extending for a period of time as provided in Section 9
hereof.
"Subsequent Notice" means the written notice to be provided
by Liggett and its Present Affiliates to Settlement Class members as defined
and provided by Section 8.4 of this Agreement.
"Subsequent Notice Dates" means the dates defined in Section
8.4 hereof.
"Tobacco Action" means any individual lawsuit, putative or certified
class action lawsuit or action on behalf of a governmental entity brought
against one or more Tobacco Companies in connection with smoking-related
claims such as (without limitation) those asserted in the Fletcher Action
or any Attorney General Action.
"Tobacco Companies" means The American Tobacco Co., Lorillard
Tobacco Co., Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown &
Williamson Tobacco Corp., Liggett and United States Tobacco Co. and/or
their respective Affiliates.
"Tobacco Snuff" means any cut, ground, powdered, or leaf tobacco
that is intended to be placed in the oral cavity.
2. Settlement Purposes Only.
2.1. This Agreement is for settlement purposes only, and neither
the fact of, nor any provision contained in, this Agreement nor any action
taken hereunder shall constitute, be construed as, or be admissible in
evidence against the Settling Defendants as, any admission of the validity
of any claim, any argument or any fact alleged or which could have been
alleged by Plaintiffs in the Action or alleged or which could have been
alleged in any other action or proceeding of any kind or of any wrongdoing,
fault, violation of law, or liability of any kind on the part of the Settling
Defendants or any admission by them of any claim or allegation made or
which could have been made in the Action or in any other action or proceeding
of any kind, or as an admission by any of the Plaintiffs or members of
the Settlement Class of the validity of any fact or defense asserted or
which could have been asserted against them in the Action or in any other
action or proceeding of any kind.
3. Submission for Preliminary Approval.
Promptly after execution of this Agreement, the Parties shall,
through their respective attorneys, jointly submit this Agreement to the
Court and move the Court for Preliminary Approval.
4. Parties.
4.1. This Agreement shall be binding, in accordance with the
terms hereof, upon Plaintiffs, the Settlement Class, Brooke Group and Liggett;
provided that, notwithstanding anything else contained in this Agreement,
the payment obligations of this Agreement shall be binding only upon Liggett.
4.2. No Settling Defendant shall sell, dispose or transfer substantially
all of its cigarette brands or businesses without first causing the acquiror,
on behalf of itself and its successors, to be bound by all of the obligations
of a Settling Defendant pursuant to Sections 5.2 and 5.4 through 5.8 hereunder
as to such transferred brands or businesses; provided that this Section
4.2 shall not apply to the extent such sale, disposition or transfer is
required by the Federal Trade Commission, Department of Justice, State
Attorney General or court order.
4.3. The Parties acknowledge and agree that the willingness
of Brooke Group and Liggett to enter into this Agreement, and in particular
their willingness to agree to the equitable and other relief relating to
cigarette marketing and to cooperation provided for in Section 5 hereof,
are important to the interests of the Settlement Class.
5. Consent Decrees; Warnings; Cooperation.
5.1. Upon execution of this Settlement Agreement, Liggett shall,
by and through its Director, Bennett S. LeBow, issue a public statement
substantially in the following form and substance:
I am, and have been for a number of years, a Director of Liggett
Group, Inc., a manufacturer of cigarettes. Cigarettes were identified
as a cause of lung cancer and other diseases as early as 1950. I,
personally, am not a scientist. But, like all of you, I am aware
of the many reports concerning the ill-effects of cigarette smoking.
We at Liggett know and acknowledge that, as the Surgeon General, the FDA
and respected medical researchers have found, cigarette smoking causes
health problems, including lung cancer, heart and vascular disease and
emphysema. We at Liggett also know and acknowledge that, as the Surgeon
General, the Food and Drug Administration and respected medical researchers
have found, nicotine is addictive.
Liggett will continue to engage in the legal activity of selling
cigarettes to adults, but will endeavor to ensure that these adults are
aware of the health risks and addictive nature of smoking. As part
of our efforts, we will do the following:
1. In accordance with a court-approved settlement, Liggett will
set up a fund to compensate equitably those who claim to have been injured
by our products.
2. Liggett will add a prominent warning to each of our packages
of cigarettes and all of our cigarette advertising stating that "Smoking
is Addictive".
3. Liggett supports and will not challenge Food and Drug Administration
regulations concerning the sale and distribution of nicotine-containing
cigarettes and smokeless tobacco products to children and adolescents.
Accordingly, Liggett has agreed to comply with many of these regulations
even before they apply to the tobacco industry generally.
4. Liggett has instructed its advertising and marketing people
to scrupulously avoid any and all advertising or marketing which would
appeal to children or adolescents. Liggett acknowledges that the
tobacco industry markets to "youth," which means those under 18 years of
age, and not just those 18-24 years of age. Liggett condemns this
practice and will not market to children. Liggett agrees that if
it sees industry advertisements which in its view are aimed at children,
it will bring this to the attention of the Attorneys General.
5. In accordance with our settlement agreements, Liggett agrees
to fully cooperate with the Attorneys General and Settlement Class Counsel
in their lawsuits against the other tobacco companies. To that end,
Liggett will make available to the Attorneys General, Settlement Class
Counsel and other parties with whom we have settled all relevant documents
and information, including documents subject to Liggett's own attorney-client
privileges and work product protections and will assist those parties in
obtaining prompt court adjudication of the rest of the industry's joint
privilege claims.
5.2. As promptly as reasonably practicable, but
no later than six months after execution of the Attorneys General Settlement
Agreement, Settling Defendants shall cause to be printed boldly, on all
of their Cigarette packages and in all of their Cigarette advertising,
in addition to the warnings mandated under the Federal Cigarette Labeling
and Advertising Act, as amended, 15 U.S.C. § 1331 et seq., the statement
that cigarette smoking is addictive. To the extent any Settling Defendant
manufactures and sells other tobacco products, a similar warning shall
be placed on such product.
5.3.1. Upon execution of this Agreement, each Settling Defendant
shall:
(1) cooperate with the Settlement Class, its members and
counsel, in that such Settling Defendant will take no steps to impede or
frustrate their investigations into, or prosecutions of, any of the non-settling
defendants in Tobacco Actions, so as to secure the just, speedy and inexpensive
determination of all such smoking-related claims against said non-settling
persons and entities;
(2) cooperate in and facilitate reasonable non-party discovery
from Settling Defendants in connection with Tobacco Actions;
(3) actively assist the Settlement Class, its members
and counsel in identifying and locating any and all persons known to such
Settling Defendant to have documents or information that is discoverable
in such proceedings, and to actively assist in interviewing and obtaining
documents and information from all such persons, and to encourage such
person to cooperate with the Settlement Class; and shall actively assist
in interpreting documents relating to litigation against Non-settling Tobacco
Companies; and
(4) insofar as such Settling Defendant has or obtains
any material information concerning any fraudulent or illegal conduct on
the part of any parties, including Non-settling Tobacco Companies, their
agents, or their co-defendants designed to frustrate or defeat the claims
of the plaintiffs against such parties, companies, agents or co-defendants,
or which have the effect of unlawfully suppressing evidence relevant to
smoking claims, disclose such information to the appropriate judicial and
regulatory agencies.
5.3.2. With respect to each Settlement Class member and her
counsel, subject to, and promptly after (i) the entry of a Protective Order
by the Court, and (ii) an agreement by such Settlement Class member and
her counsel to abide by, and not object to this Settlement Agreement, each
Settling Defendant shall:
(1) promptly provide all documents and information that are relevant
to the subject matter of the Actions or which are likely to lead to admissible
evidence in connection with the claims asserted in a Tobacco Action, subject
to the provisions of Section 5.3.2(2) hereof;
(2) waive any and all applicable attorney-client privileges
and work product protections with respect to such documents and information.
Such waiver shall not extend to (a) documents and information not relevant
to the subject matter of Tobacco Actions or not reasonably likely to lead
to admissible evidence in connection with claims asserted in any Tobacco
Action (b) documents subject to a joint defense or other privilege or protection
which Settling Defendants cannot legally waive unilaterally, except that
the waiver by the Settling Defendant shall apply, to the extent permitted
by law, to its own joint defenses or other privileges. To the extent
that a Settling Defendant has a good faith belief, or one or more Non-settling
Tobacco Companies claims, that documents to be provided pursuant to Section
5.3.2(1) hereof may be subject to a joint defense or other privilege (or
a claim of such privilege) of one or more of the Non-settling Tobacco Companies,
such documents shall be deposited under seal for in camera inspection by
the Court, or a court in which a Tobacco Action is pending, together with
a statement to the Court that such Settling Defendant has concerns as to
whether some or all of such documents should be protected from discovery,
and the Parties agree to request that the Court shall retain jurisdiction
to resolve that issue. Liggett will participate in proceedings, including
by way of court appearances or declarations, concerning issues of whether
such documents are discoverable;
(3) offer their employees, and any and all other individuals
over whom they have control, to provide witness interviews of such employees
and to testify, in depositions and at trial; it being understood and agreed
that Liggett will waive and hereby does waive any and all applicable confidentiality
agreements to the extent such confidentiality agreements would restrict
testimony under this Agreement, if any, to which such witnesses may be
subject;
(4) demand from its past or current national legal counsel
all documents and information obtained in the course of representation
of any Settling Defendant which in any way relates to the cooperation required
in paragraphs 5.3.1(1) -5.3.2(3) above, which shall be provided to the
Settlement Class, its members and counsel as provided under this paragraph.
5.3.3. With respect to the cooperation set forth in paragraphs
5.3.1 and 5.3.2 above, the Attorneys General and Settlement Class Counsel
shall appoint, on a yearly basis, an Oversight Committee, to oversee such
cooperation so that it fairly assists them and minimizes the burden on
a Settling Defendant. All requests for cooperation will be first
made to the Oversight Committee. The Oversight Committee shall coordinate
such requests giving due regard to the legitimate needs of the litigants
requesting cooperation and the burden on the Settling Defendant.
Nothing in this Agreement shall waive or alter the rights of Settlement
Class members to obtain discovery of Liggett as required by a court order
or case management order in any Attorneys General Action, provided that
no order is sought that is inconsistent with this Agreement.
5.3.4. In the event the Oversight Committee cannot agree on
the sharing of cooperation by litigants, any member of the Committee may
seek resolution by an Arbitrator. In the event that the Oversight
Committee cannot agree on the selection of an Arbitrator, the Oversight
Committee will petition the Multidistrict Litigation Panel for appointment
of an Arbitrator. In the event any Settling Defendant, absent good
cause, does not provide requested cooperation as promptly as reasonably
practicable, after receiving written notice from the Committee of such
request, (1) the Committee may seek relief from an Arbitrator, and (2)
the Committee, upon notice to the Settling Defendant, may petition an Arbitrator
for specific performance of such requested cooperation.
5.4. Each Settling Defendant, promptly after becoming
bound by this Agreement, shall consent to jurisdiction by the FDA, for
the sole purpose of promulgating the FDA Rule with respect to all Tobacco
Companies. Further, each Settling Defendant, promptly after execution
of this Agreement, shall endorse, support and assist in attempts by the
FDA to have the FDA Rule become enforceable. Such efforts shall include,
if and as reasonably requested by the Attorneys General, filing appropriate
amicus briefs and other court papers in litigation relating to the FDA
Rule.
5.5. Each Settling Defendant shall follow and abide by the provisions
of the FDA Rule, insofar as they pertain solely to such Settling Defendant's
Domestic Tobacco Operations, as set forth in, and modified by, paragraphs
5.5.1 - 5.5.4 hereof until a final determination is reached respecting
the FDA Rule at which time the Settling Defendants will be bound by the
FDA Rule only insofar as, and to the extent that, the FDA Rule becomes
an enforceable obligation binding upon all of the Tobacco Companies.
5.5.. FDA Rule § 897.16(b), as proposed.
5.5.. FDA Rule § 897.16(d), as proposed.
5.5.. FDA Rule § 897.30(a), as proposed.
5.5.. FDA Rule § 897.30(b), but only to the extent that
such section applies to billboards within 1,000 feet of a clearly marked
public or private elementary or secondary school or a clearly marked, outdoor,
municipal or other government-operated public playground for children.
5.6. Notwithstanding anything to the contrary in the Proposed
Rule or in this Agreement, Liggett will commence compliance with Section
5.5 of this Agreement as soon as reasonably practicable, according priority
as to compliance to the States listed in Appendix A to the Attorneys General
Settlement Agreement and then to Subsequent Settling States; provided that
Liggett may limit its compliance to the extent, if any, necessary to ensure
that the net annual out-of-pocket cost to Liggett of such compliance not
exceed $1 million; and provided further that Liggett shall not be obligated
pursuant hereto to breach pre-existing legal obligations, if any, it may
have with respect to the matters covered by Section 5.5 (and shall use
its reasonable best efforts to minimize the degree to which any such obligations
would impede its full compliance therewith). For purposes of this
paragraph, the phrase "net annual out-of-pocket costs" means the excess
of (a) the additional out-of-pocket expenditures incurred during a particular
year by Liggett in complying with the matters specified in Section 5.5,
over (b) savings, if any, in out-of-pocket expenditures realized during
such year by Liggett directly from the implementation of the matters covered
by Section 5.5.
5.7. If, when and to the extent that the FDA Rule, in
whole or in part, becomes an enforceable legal obligation binding upon
all of the Defendants, each Settling Defendant will comply therewith, without
consideration of any limits or exceptions herein. If the FDA Rule
does not so become such a legal obligation, Liggett shall, during the duration
of this Agreement, continue to comply with Section 5.5.
5.8. Each Settling Defendant shall not use cartoon characters,
such as "Joe Camel" in any of its advertising and promotional materials
and activities with respect to tobacco products. No Settling Defendant
shall enter into any new contract for advertising and promotion with respect
to tobacco products using any such cartoon characters after the date the
Settling Defendants become bound by this Agreement.
5.9. Each Settling Defendant may, after becoming bound
by this Settlement Agreement, continue in the lawful manufacture, advertising
and/or sale of tobacco products. This Settlement Agreement does not
in any way abrogate or restrict the authority or ability of the Recoupment
Subclass members, to the extent such members possess such authority or
ability, to enforce compliance with the laws of their respective jurisdictions.
6. Global Settlement.
6.. Effective upon the execution hereof, Settlement Class Counsel
each agree (a) to exercise best efforts to ensure that the financial terms,
financial obligations or financial conditions of any Global Settlement
are no more onerous on, or less favorable to, Brooke Group and Liggett
than the financial terms, financial obligations or financial conditions
of this Settlement Agreement, and (b) to issue a public statement substantially
in the following form and substance:
The historic settlements entered into by Liggett, whereby Liggett has
agreed, among other things, to provide full cooperation to twenty-two Attorneys
General and a nationwide settlement class and to consent to FDA regulation
of tobacco marketing, are a major advance in our efforts to prevent smoking
by children and adolescents and to ensure that the tobacco industry markets
its products lawfully. Accordingly, the undersigned counsel will
use their best efforts in Congress and elsewhere to ensure that any such
industry-wide resolution provide for financial terms for Liggett that reflect
appropriate recognition of Liggett's cooperative efforts, and which are
no more onerous on, or less favorable to Liggett than those provided for
in our Settlement Agreement.
6.. In the event there is a Global Settlement at any time
which contains financial terms, financial obligations or financial conditions
as to Brooke Group and Liggett which are more onerous on, or less favorable
to, Brooke Group and Liggett than those of this Settlement Agreement, then,
in addition to and not in derogation of any other rights or remedies Brooke
Group and Liggett may have, Brooke Group and Liggett shall have the right,
at their option, to withdraw from future performance of this Agreement.
7. Settlement Fund.
7.1. Except as may otherwise be provided herein, all amounts
due and owing by each Settling Defendant under this Agreement shall be
paid when due into the Settlement Fund to be allocated and distributed
to Settlement Class members and Settling States in accordance with this
and the Attorneys General Settlement Agreement. In the event that
the Settling States and Settlement Class Counsel cannot agree to an equitable
allocation of the Settlement Fund between the Settling States and the Settlement
Class, the Settling States and Settlement Class Counsel shall seek to agree
on the selection of an Arbitrator to determine such allocation. In
the event that the Settling States and Settlement Class Counsel cannot
agree on the selection of an Arbitrator, the Settling States and Settlement
Class Counsel will petition the Court to determine such allocation; it
being understood that some portion of the Settlement Fund will be allocated
to counter-market advertising.
7.2. Settling Defendants shall have no interest in or responsibility
for allocations or distributions from the Settlement Fund and do not guarantee
any earnings or insure against any losses from any portion of the Settlement
Fund assets that may be maintained or administered as provided in Section
7.1 above.
7.3. Subject to the terms of this Agreement, Liggett shall make
the following payments:
7.3.1. An initial payment of $25 million due 120 days
from the date of a Future Affiliate Transaction; and
7.3.2. Subject to the provisions of Sections 7.7
- 7.9, payments, each equivalent to 25% of Liggett's Pretax Income, due
120 days after the end of each fiscal year of Liggett. The first
payment shall be made with respect to the first full fiscal year commencing
after the date of this Settlement Agreement.
7.4. Liggett shall pay the reasonable and necessary expenses
of the administration, allocation, and distribution of the Settlement Fund;
provided that Liggett shall not be obligated to pay more than $1 million
in any year for such expenses or the costs of Initial and each Subsequent
Notice.
7.5. The amounts payable hereunder to the Settlement Fund shall
represent the maximum amounts payable to the Settlement Fund under this
Agreement and the Attorneys General Settlement Agreements. Subject
to the approval of the Court, the Settlement Fund Board shall institute
a process for the allocation of the Settlement Fund to the Settlement Class,
as set forth in this Agreement.
7.6. The Court shall retain exclusive and continuing jurisdiction
over the Settlement Fund, and any and all claims thereto. All allocations
of, and distributions from, the Settlement Fund to the Settlement Class
shall be subject to Court approval.
7.7. In the event of a Global Settlement, the Settling Defendants
shall have the right to reduce the aggregate payments due from Liggett
in each year pursuant to this Agreement so that such aggregate payments
shall be no more than the lesser of (A) on a Cost Per Cigarette Pack basis,
one-third of the lowest Cost Per Cigarette Pack due in such year from the
Non-Settling Tobacco Companies under such Global Settlement and (B) on
a percentage of Pretax Income basis, one-third of the lowest percentage
of Pretax Income due in such year from the Non-Settling Tobacco Companies
under such Global Settlement (such percentage to be computed as if the
payments due from such companies were included in revenues and earnings).
7.8. Liggett shall receive as a credit against any and all amounts
due hereunder, any and all amounts it is required to pay under a Global
Settlement.
7.9. In the event that one or more States elect to opt out of
the Mandatory Settlement Class and action(s) are brought against any Settling
Defendant on behalf of such State(s), the annual payment amount due under
Sections 7.3.2 of this Agreement from a Settling Defendant shall be reduced
by an amount equal to the product of (i) the ratio that the Medicaid Population
of the States that elect to opt out of the Mandatory Settlement Class then
bears to the total Medicaid Population and (ii) 20% of Liggett's Pretax
Income.
7.10. The Settlement Fund shall constitute the sole source of
recovery on any and all claims against Liggett and its Present Affiliates
which have been, will be, or could be asserted, directly or indirectly,
by, on behalf, or for the benefit of any and all Settlement Class members,
such that, subject to the Court's final determination that this Settlement
Agreement is fair pursuant to Mandatory Class Final Approval, Liggett and
its Present Affiliates shall enjoy a universal release from all claims
associated with or resulting from the smoking of their cigarettes in consideration
of their agreeing to the entry of the Consent Decree and of Liggett's payments
into the Settlement Fund and of the reasonable expenses of the administration,
allocation, and distribution of the Settlement Fund, for the benefit of
Settlement Class members, in accordance with this Agreement.
7.11. The Board shall institute a process for the equitable
adjudication of smoking-related claims against Liggett for compensatory
damages by Settlement Class members in view of, among other things, the
history of the outcome of such claims; it being understood that all claims
for punitive, exemplary or other such damages are hereby waived.
The Board shall also consider any and all comments, recommendations, requests
and suggestions from Settlement Class members and their counsel, as to
the appropriate and equitable allocation and distribution of the Settlement
Fund, for evaluation and recommendation by the Board to the Court for its
approval. The Court shall not be requested by the Parties or the
Board to make any specific orders regarding the ultimate allocation and
distribution of the Settlement Fund at the time of Preliminary or Mandatory
Class Final Approval. The notice forms to be submitted to the Court
for its approval shall inform Settlement Class members that issues of allocation
and distribution are reserved for future rulings, conditioned upon and
subsequent to Mandatory Class Final Approval, and that any and all Settlement
Class members who wish to do so may submit their comments, recommendations,
requests and suggestions for the allocation and distribution of the Settlement
Fund, under a procedure to be established by the Court. The Court
will be requested to grant Preliminary and Mandatory Class Final Approval
without regard to the ultimate equitable allocation and distribution of
the Settlement Fund, in order to provide Settlement Class members with
a full opportunity to participate in the allocation decision-making process
after the Settlement Fund is in place; and to avoid distracting the parties
and the Court, during the settlement approval process, with comments or
objections more properly directed at the specifics of allocation and distribution
with respect to particular claimants rather than the common class interest
in the overall fairness, adequacy, and reasonableness of the Settlement
itself, in the context of the "limited fund" available from Liggett to
pay claims, the provision of valuable equitable relief, and the compromise
of disputed and risky claims.
7.12. Settling Defendants agree not to take any action the primary
purpose of which is to reduce Liggett's payment obligations under this
Agreement.
8. Notice to the Settlement Class.
8.1. Upon Preliminary Approval, and as the Court may direct,
each Settling Defendant shall cause notice of the settlement embodied herein
(the "Initial Notice") to be given to the members of the Settlement Class.
8.2. The Initial Notice to Settlement Class members shall inform
them as follows:
The allocation of the Settlement Fund to specific uses or among
particular claimants has not been determined. Future allocation and
distribution of the Settlement Fund will be administered by the Settlement
Fund Board. The Board shall be comprised of representatives appointed
by the Attorneys General of certain settling states and by Settlement Class
Counsel with the approval of the Court, and it shall include representatives
of the public health community. The Board shall be responsible for
recommending and implementing guidelines and procedures for the administration
of claims. The Settlement Agreement does not specify any particular
allocation of Settlement proceeds. Settlement Class members will
be given notice and an opportunity to be heard and make suggestions regarding
allocation before any final allocation or distribution decisions are made.
8.3. The Initial Notice, in a form to be approved by the Court,
shall be disseminated as provided in this Section 8 over the course of
a period not to exceed ninety (90) days from the Initial Notice Date, subject
to approval by the Court.
8.4. At the end of each successive three-year interval during
the term of this Agreement ("Subsequent Notice Dates"), each Settling Defendant
shall cause notice of the settlement embodied herein (the "Subsequent Notice")
to be given to the members of the Settlement Class.
8.5. Each Subsequent Notice, in a form to be approved by the
Court, shall be disseminated over the course of four periods each not to
exceed sixty (60) days from each applicable Subsequent Notice Date.
9. States' Right of Exclusion/Inclusion.
A Settlement Class member that is a State may opt out at any
time during the thirty day period from the Initial Notice Date. In
order to exercise the opt out right set forth in this Section 9, such State
must complete and return a request for exclusion in a form to be agreed
upon by the Parties and approved by the Court. Such request must
be postmarked on or before the end of the thirty day period. Any
such State that has not so elected will be a Settlement Class member for
all purposes under this Agreement. Any State that elects to opt out
of the Settlement Class pursuant to this Section 9 shall not be entitled
to relief under or be affected as to a Settling Defendant by this Agreement.
10. Mandatory Class Certification As To Liggett.
The mandatory certification of the Settlement Class under Rule
23(b)(1)(B) and/or 23(b)(2) of the Alabama Rules of Civil Procedure is
essential to the ability of the Parties to perform the terms and conditions
set forth in this Settlement Agreement. It is the intent and understanding
of the Parties that the undertakings of Liggett and Brooke Group as described
in Section 5 of this Settlement Agreement, with respect to Liggett's promotional,
advertising, marketing and sales practices in order to inform the Settlement
Class and the American public of the dangers of smoking and the addictive
nature of nicotine, to prevent sales of cigarettes to children and adolescents,
and to provide active and meaningful cooperation in the prosecution of
smokers' claims against Non-Settling Tobacco Companies constitute injunctive,
equitable, and declaratory relief of real, immediate, and ongoing benefit
to the Settlement Class and the public, sufficient to satisfy the criteria
of mandatory class certification under Rule 23. The Parties shall
cooperate in establishing, to the satisfaction of the Court, the evidentiary
predicates for the Court's determination of a "limited fund" under Rule
23. In the event the Settlement Class is not certified under one
or more of these mandatory provisions, or is later decertified by the Court
or on appeal, Liggett and Brooke Group shall have the right and option
to withdraw from this Settlement Agreement.
11. Future Affiliate.
11.1. The terms of this Agreement shall not be binding upon
or applicable to a Future Affiliate of the Settling Defendants, except
as provided for in this Section 11.
11.2. (a) In the event of a Future Affiliate Transaction, the
Settlement Class shall not seek to enjoin or otherwise challenge a spinoff
or like disposition of the stock or assets of any Affiliate of the Future
Affiliate which is not engaged in Domestic Tobacco Operations. The
Settlement Class reserves the right to seek to enjoin such a spinoff in
the event that such spinoff or like disposition is sought by someone other
than Brooke Group or a Future Affiliate or an Affiliate of a Future Affiliate.
(b) In the event of and after a Future Affiliate Transaction:
(i) the Settlement Class members each release (pursuant to, mutatis mutandis,
Section 13.1 hereof) and covenant not to bring suit for any claim so released
against any Affiliate of the Future Affiliate, other than the Affiliate
engaged in Domestic Tobacco Operations; and (ii) if prior to the Future
Affiliate Transaction, a Settlement Class member shall have obtained a
verdict or judgment in an action, against an Affiliate (including the Parent)
of the Future Affiliate, other than against the Affiliate engaged in Domestic
Tobacco Operations, such Settlement Class member shall not seek to enforce
such verdict or judgment against any such Affiliate other than the Affiliate
engaged in Domestic Tobacco Operations.
11.3. In the event a Settlement Class member obtains a verdict
or judgment against a Non-settling Tobacco Company in a Tobacco Action,
and a Settling Defendant commences a proxy contest or similar action seeking
control of such Non-settling Tobacco Company or an Affiliate thereof, then
such Non-settling Tobacco Company or an Affiliate thereof will not be required
to post a bond in order to stay enforcement of such verdict or judgment,
and such Settlement Class member will not seek to enforce such verdict
or judgment against such Non-settling Tobacco Company or such Affiliate,
for a period of the earlier of (i) one year from the commencement of such
proxy contest or action, and (ii) completion or resolution of the proxy
or merger vote.
11.4. In the event that subsequent to a Future Affiliate Transaction,
and in conformity with § 17.2(b) hereof, a Settlement Class member
obtains a verdict or judgment against a Future Affiliate in an action,
such Future Affiliate will not be required to post a bond in order to stay
enforcement of such verdict or judgment, and such Settlement Class member
will not seek to enforce such judgment against such Future Affiliate or
an Affiliate of such Future Affiliate until the verdict or judgment becomes
final and non-appealable.
11.5. Prior to a Future Affiliate Transaction, Settling Defendants
shall not enter into any agreement with any prospective Future Affiliate
which diminishes or impairs the prospective Future Affiliate's assets,
other than in the established and/or ordinary course of business of such
prospective Future Affiliate, and shall use best efforts to prevent such
prospective Future Affiliate from diminishing or impairing such assets.
In the event of a Future Affiliate Transaction, Settling States reserve
all of their rights to prevent the Future Affiliate from diminishing or
impairing the Future Affiliate's assets, other than in the established
and/or ordinary course of business of such Future Affiliate.
11.6. With respect to subsections 11.1 - 11.5 above, nothing
in these provisions, or elsewhere in this Agreement, limits the authority
of the Settlement Class to challenge any transaction which they reasonably
believe is in violation of federal or state antitrust law.
11.7. In the event of a Future Affiliate Transaction, after
which Liggett remains as a separate entity such that Liggett's Pretax Income
is readily calculable, Section 6.3.2 hereof shall remain in effect with
respect to Pretax Income solely attributable to such separate entity.
In the event of a Future Affiliate Transaction, Settling Defendants and
the Attorneys General and their respective counsel, each agree to exercise
best efforts to negotiate in good faith a payment schedule to replace that
set forth in Section 6.3.2. Nothing in this Section 17.7 affects
in any way Liggett's payment obligations under Section 7.3.1 hereof.
11.8. Promptly after a Future Affiliate Transaction, a Future
Affiliate shall abide by Sections 5.4 - 5.7 hereof.
11.9. Promptly after a Future Affiliate
Transaction, Settling Defendants and the Settlement Class Counsel, each
agree to exercise best efforts to negotiate in good faith a settlement
of all claims against a Future Affiliate.
11.10. As promptly as reasonably practicable after a Future
Affiliate Transaction, a Future Affiliate shall agree to eliminate cartoon
characters such as "Joe Camel," from all of its advertising and promotional
materials and activities with respect to tobacco products.
12. Release.
12.1. Upon the Mandatory Class Settlement Date, with respect
to each Settling Defendant, for good and sufficient consideration as described
herein, all members of the Settlement Class, collectively and individually,
on behalf of themselves, the persons they represent, their heirs, executors,
administrators, trustees, beneficiaries, agents, attorneys, successors,
assigns, affiliates, officers, directors, employees and shareholders shall
be deemed to and do hereby release, dismiss and discharge each and every
claim, right, and cause of action (including, without limitation, all claims
for damages, medical expenses, restitution, medical monitoring, or any
similar legal or equitable relief, under federal, state or common law),
known or unknown, asserted or unasserted, direct or indirect, which they
had, now have, or may hereafter have against each Settling Defendant (including
its past, present and future parents, subsidiaries, affiliates and their
past, present and future agents, servants, attorneys, employees, officers,
directors, shareholders, and beneficial owners) (and downstream distribution
entities of Liggett, but only to the extent that such downstream distribution
entities would have cross-claims against Liggett) which is based on any
and all harm, injury or damages claimed by members of the Settlement Class
to be caused by smoking, addiction to, or dependence upon, cigarettes or
which is asserted in the Action in connection with, or arising out of the
conduct, acts, facts, transactions, occurrences, representations or omissions
set forth, alleged, referred to or otherwise embraced in the Action complaint
or any and all other Tobacco Actions or any other smoking-related actions.
Provided, however, as follows:
1) If this Agreement expires upon completion of its full term,
this release shall continue and apply in full force and effect with respect
to all released claims which accrued or shall accrue prior to, through
and including the date of such expiration, such that such claims shall
be forever released, but only as to such claims through and including such
date; if this Agreement terminates for any reason prior to its full term,
this release shall be of no further force and effect and Settling Defendants
shall be entitled to a credit to the extent otherwise provided in this
Agreement against all claims covered by the release for the full amount
paid by such Settling Defendants hereunder.
2) Except as specifically provided herein, this release does
not pertain or apply to any other existing or potential defendant in any
present or future action.
3) This release does not release Settling Defendants from claims
which may be asserted by the Settlement Class against a Settling Defendant
involving conduct unrelated to the manufacture and/or sale of tobacco products.
12.2. Except as specifically provided herein, nothing in this
Agreement shall prejudice or in any way interfere with the rights of the
Plaintiffs, Settlement Class members, and the Settling Defendants to pursue
all of their rights and remedies against Non-settling Tobacco Companies
or other defendants.
13. Exclusive Remedy; Dismissal of Action; Jurisdiction of Court.
13.1. Except as otherwise provided in this Agreement, his Agreement
shall be the sole and exclusive remedy for any and all released claims
of Settlement Class members against the Settling Defendants, and upon the
entry of the Mandatory Class Final Order and Judgment by the Court, each
Settlement Class member shall be barred from initiating, asserting, or
prosecuting any released claims against Brooke Group or Liggett.
13.2. On the Mandatory Class Settlement Date, the Action shall
be dismissed as against each Settling Defendant, subject to the continuing
and exclusive jurisdiction of the Court over the enforcement and administration
of the Settlement Agreement, and the allocation and distribution of the
Settlement Fund. Settlement Class members may not commence or prosecute
actions against Brooke Group or Liggett on claims released pursuant to
this Agreement once the Mandatory Class Final Order and Judgment is entered.
The Settlement Class Counsel agree to provide reasonable cooperation to
stay or dismiss, as appropriate, any action of any Settlement Class member
for such released claims pending in state or federal court against the
Settling Defendants.
13.3. The Court shall retain exclusive and continuing jurisdiction
over the Action, all Parties, all Settlement Class members and the Settlement
Fund to interpret and enforce the terms, conditions, and obligations of
this Agreement. Nothing in this Agreement shall be construed to divest
or limit the jurisdiction of the Court with respect to claims which may
be alleged by the Settlement Class against Non-settling Tobacco Companies
or other defendants.
14. Term.
14.1. Unless earlier terminated in accordance with the provisions
of this Agreement, the duration of this Agreement shall be twenty-five
(25) years from the Liggett Settlement Date; provided that in the event
of a Global Settlement, the duration of this Agreement shall be equal to
the duration of the Global Settlement.
14.2. The performance of this Agreement by Liggett and Brooke
Group is expressly contingent upon the Court's issuance of the Mandatory
Class Final Order and Judgment. If the Court fails to hold the Mandatory
Class Fairness Hearing within six (6) months of the date hereof or to issue
a Mandatory Class Final Order and Judgment within sixty (60) days following
conclusion of the Mandatory Class Fairness Hearing, Liggett and Brooke
Group may elect to terminate this Agreement by written notice to the Court
and the Settlement Class Counsel within twenty (20) business days following
the end of either such period.
14.3. Except as may be otherwise specifically provided in this
Agreement, a termination by a Settling Defendant hereunder shall have the
effect of rendering this Agreement as having no force or effect whatsoever,
null and void ab initio, and not admissible as evidence for any purpose
in any pending or future litigation in any jurisdiction. However,
a termination shall not affect any prior cooperation or require the return
of any documents produced to a Settlement Class member pursuant to this
Agreement.
15. Continuing Enforceability.
15.1. The parties acknowledge and agree that the purpose of
this Agreement and the mandatory certification of the Settlement Class
with respect to Liggett and its Present Affiliates is to provide the Settlement
Class with certain equitable and other relief, and a secure and ongoing
source of recovery, subject to equitable allocation and distribution, while
ensuring that Liggett may make its payments hereunder without risking bankruptcy
or other insolvency; this Agreement is intended to be a mutually beneficial
and equitable alternative to the prospect of bankruptcy.
15.2. Unless earlier terminated, as to the Settlement Class,
this Agreement and each provision of or obligation arising from this Agreement
shall continue and remain fully executory and enforceable if a Settling
Defendant institutes or is subject to the institution against it of any
proceeding or voluntary case under title 11 of the United States Code,
or other proceeding seeking to adjudicate it insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or other
proceeding seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or for
any part of its property (each, a "Bankruptcy Proceeding"). Brooke
Group has the right but not the obligation to cure and to perform any and
all obligations of Liggett under this Agreement notwithstanding the occurrence
and continuation of any Bankruptcy Proceeding with respect to Liggett;
provided, however, that until such time as Liggett decides whether to reject
or assume this Agreement, Brooke Group shall have the obligation to pay
the annual installments as provided by Section 7 hereof and any and all
rights the Settlement Class may have not to accept such cure or performance
in any Bankruptcy Proceeding are waived.
16. Entry of Good Faith Bar Order on Contribution and Indemnity Claims;
Indemnification.
16.1. The Parties shall request that the Court enter an order
barring and prohibiting the commencement and prosecution of any claim or
action by any Non-settling Tobacco Company in any smoking-related litigation
against Settling Defendants, including but not limited to any contribution,
indemnity and/or subrogation claim seeking reimbursement for payments made
or to be made to any Settlement Class member for claims settled under this
Agreement. Settling Defendants shall be entitled to dismissal with
prejudice of any such Non-settling Tobacco Company's claims against them
which violate or are inconsistent with this bar.
16.2. Any Settlement Class member making a claim against a non-settling
person for what would be a claim settled under this Agreement if asserted
against a Settling Defendant shall indemnify and hold harmless each Settling
Defendant from any claim ever asserted against such Settling Defendant
arising from such claim.
16.3. Claims by or on behalf of any Settlement Class members
against any non-settling parties are not released and shall not be barred,
precluded, limited, or reduced as a consequence of this Agreement or the
subsequent award and distribution of funds to such Settlement Class members
from the Settlement Fund, except if and to the extent required under federal
or state law applicable under choice-of-law doctrines in the forum in which
any such claims may be instituted or pursued.
17. Expenses and Fees.
17.1. Subject to Section 7.5 hereof, all reasonable and necessary
expenses incurred by the Board in administering, allocating and distributing
the Settlement Fund, and the costs of Initial and Subsequent Notices, shall
be paid by the Settling Defendants in addition to, and without reducing,
their payments into the Settlement Fund.
17.2. In addition to the above described expenses of administration
and notice, the reasonable fees and expenses of the Settlement Class Counsel,
if and as approved by the Court, shall be paid by the Settling Defendants
after the Settlement Date separate and apart from, and in addition to,
their initial payments into the Settlement Fund.
17.3. In the event of a failure by the Court to issue
the Final Order and Judgment or a decision by any Settling Defendant to
exercise its right to withdraw pursuant to Section 15 of this Agreement,
the Settling Defendants will bear, in accordance with the terms of this
Agreement, the costs of the Initial Notice incurred to such point (in the
case of Brooke Group and Liggett not to exceed a total of $1 million; provided
that Brooke Group, Liggett and Plaintiffs shall each have the right to
terminate this Agreement in the event that the Court orders Initial
Notice costing in excess of $1 million, unless Brooke Group and/or Liggett
and/or Plaintiffs and/or Settlement Class Counsel agree to pay such excess.)
18. Tax Status of Settlement Fund.
18.1. The Settlement Fund created under this Agreement will
be established and maintained as a Qualified Settlement Fund ("QSF") in
accordance with Section 468B of the Internal Revenue Code of 1986, as amended
(the "IRC"), and the regulations promulgated thereunder. Any Settling
Defendant shall be permitted, in its discretion, and at its own cost, to
seek a private letter ruling from the Internal Revenue Service ("IRS")
regarding the tax status of the Settlement Fund. The parties agree
to negotiate in good faith, subject to Court approval, any changes to the
Agreement which may be necessary to obtain IRS approval of the Settlement
Fund as a QSF.
18.2. Representatives of the Settling States and the Settlement
Class will be appointed to act as administrator of the Settlement Fund.
As administrator, such representatives will undertake the following actions
in accordance with the regulations under IRC section 468B: (a) apply
for the tax identification number required for the Settlement Fund; (b)
file, or cause to be filed, all tax returns the Settlement Fund is required
to file under federal or state laws; (c) pay from the Settlement Fund all
taxes that are imposed upon the Settlement Fund by federal or state laws;
and (d) file, or cause to be filed, tax elections available to the Settlement
Fund, including a request for a prompt assessment under IRC sec. 6501(d),
if and when the administrator deems it appropriate to do so.
18.3. The Settling Defendants, as transferors of the Settlement
Fund, shall prepare and file the information statements concerning their
settlement payments to the Settlement Fund as required to be provided to
the IRS pursuant to the regulations under IRC Section 468B.
19. Court's Settlement Approval Order.
Except as specifically provided herein, this Agreement is subject
to and conditioned upon the issuance by the Court, following the Fairness
Hearing, of a Liggett Final Order and Judgment.
20. Effect of Default of Any Settling Defendant.
In the event any Settling Defendant fails to make a payment
due and owing under the terms of this Agreement, or is in default of this
Agreement in any other respect, the Settlement Class Counsel shall so notify
the Court. The defaulting Settling Defendant shall then be given
up to sixty (60) calendar days to "cure" the default. If the defaulting
Settling Defendant does not "cure" the default in the time provided in
this Section 20, the Settlement Class Counsel may apply to the Court for
relief, including withdrawal from the agreement.
21. Representations and Warranties; Covenants.
21.1. Each Settling Defendant represents and warrants that (i)
it has all requisite corporate power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby; (ii) the execution, delivery and performance by such Settling Defendant
of this Agreement and the consummation by it of the actions contemplated
herein have been duly authorized by all necessary corporate action on the
part of such Settling Defendant; and (iii) this Agreement has been duly
and validly executed and delivered by such Settling Defendant and constitutes
its legal, valid and binding obligation.
21.2. Each Settling Defendant covenants and agrees for the benefit
of the Settlement Class that it will not enter into any transaction involving
the borrowing of funds in excess of $100 million unless such transaction
is fair from a financial perspective to the Settling Defendant and represents
the reasonable exercise of such Settling Defendant's business judgment.
22. Arbitration.
22.1. In the event that the Parties are unable to agree, after
good faith efforts, as to the determination or calculation of Pretax Income
or Market Share for any year hereunder, such determination or calculation
shall be submitted to binding arbitration under the supervision of the
Court.
22.2. The Settlement Class Counsel shall during the term of
this Agreement have the right, at its sole cost, to have an independent
auditor review the Settling Defendants' compliance with their payment obligations
under this Agreement; provided that any such review will not be binding
upon such Settling Defendants.
23. Most Favored Nation.
23.1. In the event of any Other Settlement with any Non-Settling
Tobacco Company, the payments due from each Settling Defendant in each
year under this Agreement shall be reduced to the extent, if any, necessary
to ensure that such payments are the lesser of (a) on a percentage of Pretax
Income basis, payments such that the percentage in each year of such Settling
Defendant's Pretax Income represented by such payments is no more than
one-third of the percentage in such year of such Non-Settling Tobacco Company's
Pretax Income represented by the product of (i) the average annual payments
due from such Non-Settling Tobacco Company under such Other Settlement
and (ii) the Population Quotient with respect to such Other Settlement
and (b) on a Cost Per Cigarette Pack basis, no more than the product of
(i) one-third of the lowest Cost Per Cigarette Pack due in such year from
the Non-Settling Tobacco Companies under such Other Settlement and (ii)
the Population Quotient with respect to such Other Settlement. The
Benchmark Figure set forth in this Section 23.1 does not reflect in any
fashion the Settlement Class's or Settlement Class Counsels' views as to
an appropriate settlement or resolution with any Non-Settling Tobacco Company.
23.2. In the event of the entry of any final monetary judgment
(other than by way of settlement) in a Tobacco Action, against any one
or more of the Non-Settling Tobacco Companies, then each Settling Defendant
shall have the right to reduce the payments it is obligated to make pursuant
to this Agreement to the extent, if any, necessary to make the sum of all
amounts theretofore paid and the then Present Value of all amounts thereafter
payable pursuant to this Agreement (assuming for purposes of such Present
Value calculation that the annual amounts due hereunder remain unchanged
from the then most recent fiscal year) by any Settling Defendant per percentage
point of the then Market Share of such Settling Defendant no more than
the lesser of (a) fifty (50%) of (i) the dollar amount of the product of
(A) such judgment and (B) the Population Quotient with respect to such
judgment per (ii) percentage point of the then Market Share of each such
Non-Settling Tobacco Company and (b) on a Cost Per Cigarette Pack basis,
no more than the product of (i) one-third of the lowest Cost Per Cigarette
Pack due in each year from such Non-Settling Tobacco Company under such
judgment and (ii) the Population Quotient with respect to such judgment;
provided that such Settling Defendant shall give written notice of such
reduction and the method of calculating such reduction to the Court and
Settlement Class Counsel as soon as practicable after the entry of such
judgment.
23.3. In each year beginning with the second year a Settling
Defendant becomes bound by this Agreement, the annual payment amount due
under Section 7.3 of this Agreement from such Settling Defendant shall
be decreased in proportion to any decrease, and (only if there shall have
been a prior such decrease) increased in proportion to any increase, in
such Settling Defendant's Market Share from the prior year; provided, however,
that (a) such annual payment amount shall not be so decreased to the extent,
if any, that such annual payment amount in such year is decreased as a
result of a decrease in such Settling Defendant's Pretax Income and (b)
such annual payment amount shall never be increased such that the aggregate
amount of any such increases exceeds the aggregate amount of any such decreases.
Such Settling Defendant, as soon as practicable after the end of such year,
shall give written notice of any such decrease or increase and the method
of calculating it to the Court and Settlement Class Counsel.
23.4. The Plaintiffs, on behalf of themselves (upon the execution
hereof) and the Settlement Class (upon Preliminary Approval), Settlement
Class Counsel, and any attorneys or representatives of any of the foregoing,
agree that for the next fifteen (15) years neither the Plaintiffs, the
Settlement Class, nor any attorneys or representatives of the foregoing
will, without the express written consent of Brooke Group (which may be
withheld for any reason or for no reason) discuss, negotiate, support,
approve or enter into any agreement or understanding with any creditor,
claimant, trustee, receiver or other party-in-interest, of Liggett, Brooke
Group or any of their affiliates, other than Brooke Group itself (collectively,
"Prohibited Parties"), with respect to any restructuring, liquidation or
reorganization of Liggett, Brooke Group or any of their affiliates, including
with respect to any plan under Chapter 11 or Chapter 7 of title 11, United
States Code (the "Bankruptcy Code").
23.5. The rights and remedies of each Settling Defendant under
this Section 23 are cumulative and not exclusive of each other and shall
survive the termination of this Agreement.
24. Further Actions.
Each of the Parties and their respective counsel shall take
such actions and execute such additional documents as may be reasonably
necessary or appropriate to consummate or implement the settlement contemplated
by this Agreement.
25. Miscellaneous.
25.1. This Agreement, including all Exhibits attached hereto,
shall constitute the entire agreement among the Parties with regard to
the subject matter of this Agreement and shall supersede any previous agreements
and understandings between the Parties with respect to the subject matter
of this Agreement. This Agreement may not be changed, modified, or
amended except in writing signed by all parties, subject to Court approval.
25.2. This Agreement shall be construed under and governed by
the laws of the State of Alabama.
25.3. This Agreement may be executed by the Parties in one or
more counterparts each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
25.4. This Agreement shall be binding upon and inure to the
benefit of the Settlement Class, the Settling Defendants, and their representatives,
heirs, successors, and assigns.
25.5. Nothing in this Agreement shall be construed to subject
any Settling Defendant's parent or affiliated company to the obligations
or liabilities of that Settling Defendant.
25.6. There shall be no third party beneficiaries of this Agreement
other than non-party releases hereunder. No person other than the
Parties hereto, the Settlement Class members and the releasees hereunder
shall have any right or claim under or in respect of this Agreement.
25.7. The headings of the Sections of this Agreement are included
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect its construction.
25.8. Any notice, request, instruction, application for
Court approval or application for Court orders sought in connection
with this Agreement or other document to be given by any Party to any other
Party shall be in writing and delivered personally or sent by registered
or certified mail, postage prepaid, if to the Settling Defendants to the
attention of each Settling Defendant's respective representative and to
the Settlement Class Counsel on behalf of Settlement Class members, or
to other recipients as the Court may specify. As of the date
of this Agreement, the respective representatives are as follows:
Personal Injury Settlement Subclass Counsel
Steven A. Martino
JACKSON, TAYLOR, MARTINO, PC
South Trust Bank Building
61 St. Joseph St., Suite 1600
Mobile, Alabama 33602
Howard M. Acosta
LAW OFFICES OF HOWARD M. ACOSTA
300 First Avenue North
St. Petersburg, Florida 33701
Norwood S. Wilner
SPOHRER WILNER MACIEJEWSKI &
STANFORD P.A.
444 E. Duval Street
Jacksonville, Florida 32202
Recoupment Settlement Subclass Counsel
Russell Jackson Drake
COOPER MITCH
505 20th Street North
1100 Financial Center
Birmingham, Alabama 35203-2605
Brooke Group and Liggett
Mr. Bennett S. LeBow
BROOKE GROUP LTD.
100 S.E. Second Street
Miami, Florida 33131
Mr. Marc E. Kasowitz
Mr. Daniel R. Benson
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
1301 Avenue of the Americas
New York, New York 10019
Mr. Michael L. Hirschfeld
MILBANK, TWEED, HADLEY & MCCLOY
1 Chase Manhattan Plaza
New York, New York 10005-1413
The above designated representatives may be changed from
time to time by any Party upon giving notice to all other Parties in conformance
with this Section 24.8.
26.9. References to or use of a singular noun or pronoun in
this Agreement shall include the plural, unless the context implies otherwise.
IN WITNESS WHEREOF the Parties have executed this Agreement
as of the day and date first written above.
SETTLEMENT CLASS COUNSEL
BROOKE GROUP LTD.
By:
Bennett S. LeBow
Date:
LIGGETT GROUP INC.
By:
Bennett S. LeBow
Date:
Table of Contents
Page
SETTLEMENT AGREEMENT 2
RECITALS 2
1. Definitions 7
2. Settlement Purposes Only 17
3. Submission for Preliminary Approval 18
4. Parties 18
5. Consent Decrees; Warnings; Cooperation 19
6. Settlement Fund 23
7. Notice to the Settlement Class 27
8. Mandatory Class Certification 28
9. Release 29
10. Exclusive Remedy; Dismissal of Action; Jurisdiction of Court
30
11. Term 32
12. Continuing Enforceability 33
13. Entry of Good Faith Bar Order on Contribution and Indemnity
Claims; Indemnification 34
14. Expenses and Fees 35
15. Tax Status of Settlement Fund 36
16. Court's Settlement Approval Order 38
17. Effect of Default of Any Settling Defendant 38
18. Representations and Warranties; Covenants 38
19. Arbitration 39
20. Global Settlement Terms; Most Favored Nation 40
21. Further Actions 44
22. Miscellaneous 44 |