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Monday, December 9, 2019

ITG Brands denied partial final judgment in case over tobacco settlements

State Court

By Charmaine Little | Nov 12, 2019


WILMINGTON, Del. (Legal Newsline) – The Delaware Court of Chancery has denied ITG Brand’s motion for partial final judgment and its motion for certification of an interlocutory appeal in its suit against Reynolds American Inc. and R.J. Reynolds Tobacco Co.

“Entry of a partial final judgment is not warranted here because the court did not ‘finally decide’ in the opinion ‘at least one claim’ or ‘the rights and liabilities of at least one party,’” Chancellor Andre G. Bouchard wrote in the ruling.

The suit stems from an asset purchase agreement (APA) between the companies. Reynolds American Inc., the parent company of R.J. Reynolds Tobacco Co., agreed on the APA with ITG Brands on July 15, 2014. Under the agreement, Reynolds would sell ITG Brands' four cigarette brands for roughly $7.1 billion. 

The sale was finalized on June 12, 2015. The agreement also said that ITG Brands would have to do its best to unite settlement agreements with Florida, Minnesota, Mississippi and Texas “to assume Reynolds’ existing settlement obligations with those states” as it relates to the post-closing sales, according to the opinion.

Florida then sued Reynolds in Florida state court and asked the court to include ITG Brands as a defendant to enforce the Florida settlement agreement against both parties. ITG Brands then filed this lawsuit for injunctive and declaratory relief against Reynolds. 

It wanted to, in part, block Reynolds from sung ITG Brands in connection to the same in any forum other than Delaware, and a declaratory judgment that ITG Brands didn’t take on the responsibility under the Florida settlement agreement.

That court sided with Reynolds in 2017 and determined that ITG Brands’ responsibility to utilize its best efforts to get to an agreement with the Florida settlement agreement didn’t end the closing and will continue until ITG Brands “actually has made reasonable best efforts to assume the annual payment obligations for post-closing sales of the four cigarette brands it acquired from Reynolds,” according to the opinion.

After Reynolds was also granted its motion for partial judgment (after ITG Brands filed its own), ITG Brands sought an appeal on if the APA entitled it to protection from having to make payments via an equity fee statute if Florida were to adapt a statute in the future.

Brouchard said that the opinion that denied ITG's motion for partial judgment only took on one of the issues that involved a hypothetical equity fee regulation in ITG Brands’ as a part to join the Florida settlement agreement.

“The opinion also did not finally decide all of ITG Brands’ rights and liabilities for purposes of this case … Because the opinion did not finally decide any claim in this action and did not finally resolve all of ITG Brands’ rights or liabilities for purposes of this case, ITG Brands’ motion for entry of a partial judgment is denied,” Bouchard wrote.

Bouchard denied the application for certification of interlocutory appeal and noted that the key issue centers on ITG Brands’ rejection of the Florida settlement agreement for over five years since it first agreed to the APA. While he noted that allowing certification would offer the parties a sure answer of whether ITG Brands would be owed protection from a theoretical equity fee statute, he also pointed out that ITG Brands’ “assertion that it will suffer ‘immediate and irreparable harm’ in the absence of an appealable order on this issue is overblown.”

Bouchard said the cons of permitting the appeal offset the benefit as he denied it.

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