As Introduced 1
123rd General Assembly 4
Regular Session H. B. No. 362 5
1999-2000 6
REPRESENTATIVES COUGHLIN-THOMAS-VAN VYVEN-VESPER-MOTTLEY-JONES 8
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A B I L L
To enact sections 1346.01 and 1346.02 of the Revised 11
Code to require a tobacco product manufacturer 12
who sells cigarettes in this state but is not
part of a settlement agreement with the Attorney 13
General to place specified amounts of money into 14
a qualified escrow fund each year to be used to
pay any future judgment or settlement on a claim 15
brought against the manufacturer regarding 16
tobacco products.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 18
Section 1. That sections 1346.01 and 1346.02 of the 20
Revised Code be enacted to read as follows: 21
Sec. 1346.01. (A) "ADJUSTED FOR INFLATION" MEANS 23
INCREASED IN ACCORDANCE WITH THE FORMULA FOR INFLATION ADJUSTMENT 24
SET FORTH IN EXHIBIT C TO THE MASTER SETTLEMENT AGREEMENT. 25
(B) "AFFILIATE" MEANS A PERSON WHO DIRECTLY OR INDIRECTLY 27
OWNS OR CONTROLS, IS OWNED OR CONTROLLED BY, OR IS UNDER COMMON 28
OWNERSHIP OR CONTROL WITH, ANOTHER PERSON. SOLELY FOR PURPOSES 29
OF THIS DEFINITION, THE TERMS "OWNS," "IS OWNED" AND "OWNERSHIP" 30
MEAN OWNERSHIP OF AN EQUITY INTEREST, OR THE EQUIVALENT THEREOF, 31
OF TEN PER CENT OR MORE, AND THE TERM "PERSON" MEANS AN 32
INDIVIDUAL, PARTNERSHIP, COMMITTEE, ASSOCIATION, CORPORATION OR
ANY OTHER ORGANIZATION OR GROUP OF PERSONS. 33
(C) "ALLOCABLE SHARE" MEANS ALLOCABLE SHARE AS THAT TERM 35
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 36
(D)(1) "CIGARETTE" MEANS ANY PRODUCT THAT CONTAINS 38
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NICOTINE, IS INTENDED TO BE BURNED OR HEATED UNDER ORDINARY 39
CONDITIONS OF USE, AND CONSISTS OF OR CONTAINS ANY OF THE 40
FOLLOWING:
(a) ANY ROLL OF TOBACCO WRAPPED IN PAPER OR IN ANY 42
SUBSTANCE NOT CONTAINING TOBACCO; 43
(b) TOBACCO, IN ANY FORM, THAT IS FUNCTIONAL IN THE 45
PRODUCT, WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF TOBACCO 46
USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS LIKELY TO 47
BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A CIGARETTE; OR 48
(c) ANY ROLL OF TOBACCO WRAPPED IN ANY SUBSTANCE 50
CONTAINING TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF 51
TOBACCO USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS 52
LIKELY TO BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A 53
CIGARETTE DESCRIBED IN DIVISION (D)(1)(a) OF THIS SECTION. 54
(2) THE TERM "CIGARETTE" INCLUDES "ROLL-YOUR-OWN" (I.E., 56
ANY TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, TYPE, PACKAGING, OR 57
LABELING IS SUITABLE FOR USE AND LIKELY TO BE OFFERED TO, OR 58
PURCHASED BY, CONSUMERS AS TOBACCO FOR MAKING CIGARETTES). FOR 59
PURPOSES OF THIS DEFINITION OF "CIGARETTE," 0.09 OUNCES OF 60
"ROLL-YOUR-OWN" TOBACCO SHALL CONSTITUTE ONE INDIVIDUAL
"CIGARETTE."
(E) "MASTER SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT 63
AGREEMENT (AND RELATED DOCUMENTS) ENTERED INTO ON NOVEMBER 23, 64
1998 BY THE STATE AND LEADING UNITED STATES TOBACCO PRODUCT 65
MANUFACTURERS.
(F) "QUALIFIED ESCROW FUND" MEANS AN ESCROW ARRANGEMENT 67
WITH A FEDERALLY OR STATE CHARTERED FINANCIAL INSTITUTION HAVING 68
NO AFFILIATION WITH ANY TOBACCO PRODUCT MANUFACTURER AND HAVING 69
ASSETS OF AT LEAST ONE BILLION DOLLARS WHERE SUCH ARRANGEMENT 70
REQUIRES THAT SUCH FINANCIAL INSTITUTION HOLD THE ESCROWED FUNDS' 71
PRINCIPAL FOR THE BENEFIT OF RELEASING PARTIES AND PROHIBITS THE 72
TOBACCO PRODUCT MANUFACTURER PLACING THE FUNDS INTO ESCROW FROM 73
USING, ACCESSING OR DIRECTING THE USE OF THE FUNDS' PRINCIPAL
EXCEPT AS CONSISTENT WITH SECTION 1346.02 OF THE REVISED CODE. 74
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(G) "RELEASED CLAIMS" MEANS RELEASED CLAIMS AS THAT TERM 76
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 77
(H) "RELEASING PARTIES" MEANS RELEASING PARTIES AS THAT 79
TERM IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 80
(I)(1) "TOBACCO PRODUCT MANUFACTURER" MEANS AN ENTITY THAT 82
AFTER THE EFFECTIVE DATE OF THIS SECTION DIRECTLY (AND NOT 83
EXCLUSIVELY THROUGH ANY AFFILIATE): 84
(a) MANUFACTURES CIGARETTES ANYWHERE THAT SUCH 86
MANUFACTURER INTENDS TO BE SOLD IN THE UNITED STATES, INCLUDING 87
CIGARETTES INTENDED TO BE SOLD IN THE UNITED STATES THROUGH AN 89
IMPORTER (EXCEPT WHERE SUCH IMPORTER IS AN ORIGINAL PARTICIPATING
MANUFACTURER (AS THAT TERM IS DEFINED IN THE MASTER SETTLEMENT 91
AGREEMENT) THAT WILL BE RESPONSIBLE FOR THE PAYMENTS UNDER THE 92
MASTER SETTLEMENT AGREEMENT WITH RESPECT TO SUCH CIGARETTES AS A 93
RESULT OF THE PROVISIONS OF SUBSECTIONS II(mm) OF THE MASTER 95
SETTLEMENT AGREEMENT AND THAT PAYS THE TAXES SPECIFIED IN 96
SUBSECTION II(z) OF THE MASTER SETTLEMENT AGREEMENT, AND PROVIDED 97
THAT THE MANUFACTURER OF SUCH CIGARETTES DOES NOT MARKET OR 98
ADVERTISE SUCH CIGARETTES IN THE UNITED STATES); 99
(b) IS THE FIRST PURCHASER ANYWHERE FOR RESALE IN THE 102
UNITED STATES OF CIGARETTES MANUFACTURED ANYWHERE THAT THE
MANUFACTURER DOES NOT INTEND TO BE SOLD IN THE UNITED STATES; OR 104
(c) BECOMES A SUCCESSOR OF AN ENTITY DESCRIBED IN DIVISION 106
(I)(1)(a) OR (b) OF THIS SECTION. 107
(2) THE TERM "TOBACCO PRODUCT MANUFACTURER" SHALL NOT 109
INCLUDE AN AFFILIATE OF A TOBACCO PRODUCT MANUFACTURER UNLESS 110
SUCH AFFILIATE ITSELF FALLS WITHIN ANY OF DIVISION (I)(1)(a), 111
(b), OR (c) OF THIS SECTION. 112
(J) "UNITS SOLD" MEANS THE NUMBER OF INDIVIDUAL CIGARETTES 114
SOLD IN THE STATE BY THE APPLICABLE TOBACCO PRODUCT MANUFACTURER 115
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 116
INTERMEDIARY OR INTERMEDIARIES) DURING THE YEAR IN QUESTION, AS 117
MEASURED BY EXCISE TAXES COLLECTED BY THE STATE ON PACKS (OR 118
"ROLL-YOUR-OWN" TOBACCO CONTAINERS) BEARING THE EXCISE TAX STAMP 119
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OF THE STATE. THE DEPARTMENT OF TAXATION SHALL PROMULGATE SUCH
REGULATIONS AS ARE NECESSARY TO ASCERTAIN THE AMOUNT OF STATE 120
EXCISE TAX PAID ON THE CIGARETTES OF SUCH TOBACCO PRODUCT 121
MANUFACTURER FOR EACH YEAR.
Sec. 1346.02. ANY TOBACCO PRODUCT MANUFACTURER SELLING 123
CIGARETTES TO CONSUMERS WITHIN THE STATE (WHETHER DIRECTLY OR 124
THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR INTERMEDIARY OR 126
INTERMEDIARIES) AFTER THE EFFECTIVE DATE OF THIS SECTION SHALL DO 127
ONE OF THE FOLLOWING:
(A) BECOME A PARTICIPATING MANUFACTURER (AS THAT TERM IS 129
DEFINED IN SECTION II(jj) OF THE MASTER SETTLEMENT AGREEMENT) AND 132
GENERALLY PERFORM ITS FINANCIAL OBLIGATIONS UNDER THE MASTER 133
SETTLEMENT AGREEMENT; OR
(B)(1) PLACE INTO A QUALIFIED ESCROW FUND BY APRIL 15 OF 135
THE YEAR FOLLOWING THE YEAR IN QUESTION THE FOLLOWING AMOUNTS (AS 136
SUCH AMOUNTS ARE ADJUSTED FOR INFLATION): 137
1999: $.0094241 PER UNIT SOLD AFTER THE EFFECTIVE DATE OF 139
THIS SECTION;
2000: $.0104712 PER UNIT SOLD; 141
FOR EACH OF 2001 AND 2002: $.0136125 PER UNIT SOLD; 143
FOR EACH OF 2003 THROUGH 2006: $.0167539 PER UNIT SOLD; 145
FOR EACH OF 2007 AND EACH YEAR THEREAFTER: $.0188482 PER 147
UNIT SOLD.
(2) A TOBACCO PRODUCT MANUFACTURER THAT PLACES FUNDS INTO 149
ESCROW PURSUANT TO DIVISION (B)(1) OF THIS SECTION SHALL RECEIVE 150
THE INTEREST OR OTHER APPRECIATION ON SUCH FUNDS AS EARNED. SUCH 151
FUNDS THEMSELVES SHALL BE RELEASED FROM ESCROW ONLY UNDER THE 152
FOLLOWING CIRCUMSTANCES:
(a) TO PAY A JUDGMENT OR SETTLEMENT ON ANY RELEASED CLAIM 154
BROUGHT AGAINST SUCH TOBACCO PRODUCT MANUFACTURER BY THE STATE OR 155
ANY RELEASING PARTY LOCATED OR RESIDING IN THE STATE. FUNDS 156
SHALL BE RELEASED FROM ESCROW UNDER DIVISION (B)(2)(a) OF THIS 157
SECTION:
(i) IN THE ORDER IN WHICH THEY WERE PLACED INTO ESCROW; 159
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AND
(ii) ONLY TO THE EXTENT AND AT THE TIME NECESSARY TO MAKE 161
PAYMENTS REQUIRED UNDER SUCH JUDGMENT OR SETTLEMENT. 162
(b) TO THE EXTENT THAT A TOBACCO PRODUCT MANUFACTURER 164
ESTABLISHES THAT THE AMOUNT IT WAS REQUIRED TO PLACE INTO ESCROW 165
IN A PARTICULAR YEAR WAS GREATER THAN THE STATE'S ALLOCABLE SHARE 166
OF THE TOTAL PAYMENTS THAT SUCH MANUFACTURER WOULD HAVE BEEN 167
REQUIRED TO MAKE IN THAT YEAR UNDER THE MASTER SETTLEMENT 168
AGREEMENT (AS DETERMINED PURSUANT TO SECTION IX(i)(2) OF THE 169
MASTER SETTLEMENT AGREEMENT, AND BEFORE ANY OF THE ADJUSTMENTS OR 170
OFFSETS DESCRIBED IN SECTION IX(i)(3) OF THAT AGREEMENT OTHER THE 172
THE INFLATION ADJUSTMENT) HAD IT BEEN A PARTICIPATING 173
MANUFACTURER, THE EXCESS SHALL BE RELEASED FROM ESCROW AND REVERT 174
BACK TO SUCH TOBACCO PRODUCT MANUFACTURER; OR
(c) TO THE EXTENT NOT RELEASED FROM ESCROW UNDER DIVISION 176
(B)(2)(a) OR (b) OF THIS SECTION, FUNDS SHALL BE RELEASED FROM 178
ESCROW AND REVERT BACK TO SUCH TOBACCO PRODUCT MANUFACTURER 179
TWENTY-FIVE YEARS AFTER THE DATE ON WHICH THEY WERE PLACED INTO
ESCROW. 180
(3) EACH TOBACCO PRODUCT MANUFACTURER THAT ELECTS TO PLACE 182
FUNDS INTO ESCROW PURSUANT TO DIVISION (B) OF THIS SECTION SHALL 183
ANNUALLY CERTIFY TO THE ATTORNEY GENERAL THAT IT IS IN COMPLIANCE 184
WITH DIVISION (B) OF THIS SECTION. THE ATTORNEY GENERAL MAY 185
BRING A CIVIL ACTION ON BEHALF OF THE STATE AGAINST ANY TOBACCO 186
PRODUCT MANUFACTURER THAT FAILS TO PLACE INTO ESCROW THE FUNDS 187
REQUIRED UNDER THIS SECTION. ANY TOBACCO PRODUCT MANUFACTURER 188
THAT FAILS IN ANY YEAR TO PLACE INTO ESCROW THE FUNDS REQUIRED
UNDER THIS SECTION SHALL: 189
(a) BE REQUIRED WITHIN FIFTEEN DAYS TO PLACE SUCH FUNDS 191
INTO ESCROW AS SHALL BRING IT INTO COMPLIANCE WITH THIS SECTION. 192
THE COURT, UPON A FINDING OF A VIOLATION OF DIVISION (B) OF THIS 193
SECTION, MAY IMPOSE A CIVIL PENALTY TO BE PAID TO THE GENERAL 194
REVENUE FUND OF THE STATE IN AN AMOUNT NOT TO EXCEED FIVE PER 195
CENT OF THE AMOUNT IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE 196
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VIOLATION AND IN A TOTAL AMOUNT NOT TO EXCEED ONE HUNDRED PER
CENT OF THE ORIGINAL AMOUNT IMPROPERLY WITHHELD FROM ESCROW; 197
(b) IN THE CASE OF A KNOWING VIOLATION, BE REQUIRED WITHIN 199
FIFTEEN DAYS TO PLACE SUCH FUNDS INTO ESCROW AS SHALL BRING IT 200
INTO COMPLIANCE WITH THIS SECTION. THE COURT, UPON A FINDING OF 201
A KNOWING VIOLATION OF DIVISION (B) OF THIS SECTION, MAY IMPOSE A 202
CIVIL PENALTY TO BE PAID TO THE GENERAL REVENUE FUND OF THE STATE 204
IN AN AMOUNT NOT TO EXCEED FIFTEEN PER CENT OF THE AMOUNT
IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE VIOLATION AND IN A 205
TOTAL AMOUNT NOT TO EXCEED THREE HUNDRED PER CENT OF THE ORIGINAL 206
AMOUNT IMPROPERLY WITHHELD FROM ESCROW; AND 207
(c) IN THE CASE OF A SECOND KNOWING VIOLATION, BE 209
PROHIBITED FROM SELLING CIGARETTES TO CONSUMERS WITHIN THE STATE 210
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 211
INTERMEDIARY) FOR A PERIOD NOT TO EXCEED TWO YEARS. 212
EACH FAILURE TO MAKE AN ANNUAL DEPOSIT REQUIRED UNDER THIS 214
SECTION SHALL CONSTITUTE A SEPARATE VIOLATION. 215
Section 2. Section 1 of this act enacts the Model Statute 217
described in Exhibit T to the Master Settlement Agreement entered 218
into between leading tobacco manufacturers and state attorney 219
generals on November 23, 1998.