Connecticut v. Philip Morris, Inc.
(3rd Party Rec., CT Superior Ct. 1996 Settled) Citation: 279 Conn. 785, 905 A.2d 42This third party health care recovery suit was brought by Richard Blumenthal as Attorney General for the State of Connecticut against Philip Morris, R.J. Reynolds, Brown & Williamson, British American Tobacco, Lorillard, Liggett, United States Tobacco, Hill & Knowlton, the Council for Tobacco Research, and the Tobacco Institute on July 18, 1996.
The state claimed unfair and deceptive trade practices, wilful unfair and deceptive trade practices, conspiracy in restraint of trade, wilful failure to perform a special duty, negligent performance of special duty, unjust enrichment, and interference with obligation. It relied on factual allegations that the industry (1) agreed to falsely represent that they were creating an unbiased source of information on smoking and health, (2) used this position to misrepresent, distort and confuse facts about the same. (3) These were accomplished by the formation of a joint industry research organizationin 1954. (4) They used its credibility to further misinformation. (5) They concealed internal research confirming the dangers of tobacco. (6) They created a Gentlemen's Agreement between the companies to not compete in the area of health research. The state sought relief in the forms of injunctions preventing the industry from continuing its deceptive practices, disgorgement of profits made through said practices, disclosure of research, corrective public education, payment of health care costs.
The case was filed in the Superior Court, Judicial District of Stanford/Norwalk at Stanford (Case Number CV 960072414). It was removed by the defense, to the United States District Court for the District of Connecticut, but that court granted remand to the Connecticut Superior Court on October 9, 1996. The case was settled as part of the Master Settlement Agreement, executed November 23, 1998.
Following the settlement, certain tobacco manufacturers who joined the settlement in exchange for the states releasing all past and future claims against them, filed a petition to compel arbitration, alleging that the independant auditor had failed to properly calculate the participating manufacturers' annual payments. In response to the auditor's request for information for the 2003 annual paument, the petitioners allege that they sent a letter reporting a significant market share decrease that would result in a downward adjustment in payment. They allege that the auditor assumed that the qualifying statute that the state had in place was being diligently enforced and that even if it was, the adjustment should apply anyway. The state replied with its own letter calling for a significant factor determination to find the reson for the market share decrease. It argued that the auditor should presume enforcement of the statute absent substantial evidence otherwise. The auditor released his calculations for the year without the downward adjustment or explicit statement as to the enforcement of the statute. The petitioners requested arbitration; the state refused.
The petition was heard in the Superior Court, Judicial District of Hartford (No. 17548) before the Honorable Judge Sheldon. The judge granted the motion to compel arbitration, finding that the underlying dispute fell within the MSA's arbitration provision. The state appealed.
The Supreme Court of Connecticut (905 A.2d 42) affirmed the judgment on September 12, 2006. The appeal was heard the Honorable Judges Vertefeuille, Zarella, Miano, Thim and Mack, Jr. It found that the MSA required arbitration for any dispute arising out of the auditor's calculations. Since the auditor had to determine whether to apply the adjustment, the plain language of arbitration provision showed that it applied in this case.