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The California Supreme Court ruled Thursday that state limits on cigarette giveaways can stand, but a record $14.8 million fine might be excessive. The unanimous opinion focused on the Legislature’s intent in passing the law, which aims to prevent children from taking up smoking by limiting tobacco hand-outs on public property. The justices remanded the issue of the fine to a trial court to weigh the eight-figure judgment against R.J. Reynolds Tobacco Co. “We consider this a significant decision for upholding state law,” said Senior Assistant Attorney General Dennis Eckhart, who heads the tobacco litigation and enforcement section. R.J. Reynolds spokesman David Howard said the company is “pleased the judgment was reversed with regards to the fine,” though he acknowledged that “it could have been a larger victory.” Eckhart estimates that previous suits and settlements have totaled $250,000. But Health & Safety Code �118950 packs a big punch. When a company’s promotional events cross the line, there’s a $200 fine for the first pack of cigarettes given away, $500 for two packs and another $1,000 for each pack thereafter. At six 1999 events, including a street fair, a car show and a jazz festival, R.J. Reynolds gave away nearly 15,000 packs. The state law prohibits the “nonsale distribution” of cigarettes on public property unless the property has been leased for a private function that minors can’t attend. R.J. Reynolds argued that its promotions fell under the exception because the company held its giveaways in booths or tents, hired security guards to keep minors out, and only gave cigarettes to smokers who could show they already had a pack. The state argued, and the justices agreed, that minors would have to be excluded from the entire event — not just the cigarette maker’s tent — for the giveaways to be legal. The company also tried attacking the statute as a whole and arguing that the fine against it was excessive because the company had believed its giveaways were legal. “Each issue is a close and difficult one,” wrote Justice Joyce Kennard, who authored Thursday’s opinion. The justices — joined by 4th District Court of Appeal Justice William Bedsworth sitting by assignment — ruled for the state regarding the exemption and the federal pre-emption, but said a trial court would have to determine whether the fine was over the top. As the company had feared, that will effectively limit its giveaways to smaller events such as parties, receptions and meetings, Kennard wrote. “But this limitation appears to be exactly what the Legislature intended.” The justices also cited intent in deciding the pre-emption argument. A federal law stops states from regulating the “advertising or promotion” of cigarettes, but nothing in that law’s congressional history defines “promotions,” Kennard noted. She cited a 1996 case, Medtronic v. Lohr, 518 U.S. 470, in which the U.S. Supreme Court decided not to follow a “plain meaning” interpretation because it seemed inconsistent with Congress’ intent. And while Congress has never regulated giveaways like those that R.J. Reynolds conducted, federal lawmakers have expressly recognized the health hazards associated with smoking. So, “it would be unreasonable to conclude that Congress intended nonsale distribution of cigarettes to continue entirely without regulation.” Still, the justices thought it possible that the tobacco company was punished too harshly. The trial judge should have considered whether R.J. Reynolds believed it was abiding by the rules, Kennard wrote. “Although ignorance of the law is not a defense to a violation � good faith or bad faith is relevant to the evaluation of the fine.” A trial court could consider R.J. Reynolds’ claims that the attorney general sent mixed signals about whether the company’s promotions were OK and delayed enforcement so that fines would pile up. The spokesman for R.J. Reynolds, which was represented at oral argument by Dechert partner H. Joseph Escher III, said the company is still considering whether to keep pushing its case at the trial level or try for a settlement. The opinion is People ex rel. Lockyer v. R.J. Reynolds Tobacco, 05 C.D.O.S. 10766.

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