As Passed by the House 1
123rd General Assembly 4
Regular Session Am. H. B. No. 362 5
1999-2000 6
REPRESENTATIVES COUGHLIN-THOMAS-VAN VYVEN-VESPER-MOTTLEY-JONES- 8
CAREY-WILSON-O'BRIEN-METZGER-WOMER BENJAMIN-BOYD-PERRY-BARRETT- 9
D. MILLER-ROBERTS-DAMSCHRODER-GOODMAN-HOOPS-MEAD-OPFER-TIBERI- 10
JOLIVETTE-MYERS-CALVERT-BUEHRER-ALLEN-GARDNER-HARRIS-OLMAN- 11
WINKLER-BRITTON-DePIERO 12
_________________________________________________________________ 14
A B I L L
To enact sections 1346.01 and 1346.02 of the Revised 16
Code to require a tobacco product manufacturer 17
who sells cigarettes in this state but is not
part of a settlement agreement with the Attorney 18
General to place specified amounts of money into 19
a qualified escrow fund each year to be used to
pay any future judgment or settlement on a claim 20
brought against the manufacturer regarding 21
tobacco products, and to declare an emergency.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 23
Section 1. That sections 1346.01 and 1346.02 of the 25
Revised Code be enacted to read as follows: 26
Sec. 1346.01. (A) "ADJUSTED FOR INFLATION" MEANS 28
INCREASED IN ACCORDANCE WITH THE FORMULA FOR INFLATION ADJUSTMENT 29
SET FORTH IN EXHIBIT C TO THE MASTER SETTLEMENT AGREEMENT. 30
(B) "AFFILIATE" MEANS A PERSON WHO DIRECTLY OR INDIRECTLY 32
OWNS OR CONTROLS, IS OWNED OR CONTROLLED BY, OR IS UNDER COMMON 33
OWNERSHIP OR CONTROL WITH, ANOTHER PERSON. SOLELY FOR PURPOSES 34
OF THIS DEFINITION, THE TERMS "OWNS," "IS OWNED" AND "OWNERSHIP" 35
MEAN OWNERSHIP OF AN EQUITY INTEREST, OR THE EQUIVALENT THEREOF, 36
OF TEN PER CENT OR MORE, AND THE TERM "PERSON" MEANS AN 37
INDIVIDUAL, PARTNERSHIP, COMMITTEE, ASSOCIATION, CORPORATION OR
2
ANY OTHER ORGANIZATION OR GROUP OF PERSONS. 38
(C) "ALLOCABLE SHARE" MEANS ALLOCABLE SHARE AS THAT TERM 40
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 41
(D)(1) "CIGARETTE" MEANS ANY PRODUCT THAT CONTAINS 43
NICOTINE, IS INTENDED TO BE BURNED OR HEATED UNDER ORDINARY 44
CONDITIONS OF USE, AND CONSISTS OF OR CONTAINS ANY OF THE 45
FOLLOWING:
(a) ANY ROLL OF TOBACCO WRAPPED IN PAPER OR IN ANY 47
SUBSTANCE NOT CONTAINING TOBACCO; 48
(b) TOBACCO, IN ANY FORM, THAT IS FUNCTIONAL IN THE 50
PRODUCT, WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF TOBACCO 51
USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS LIKELY TO 52
BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A CIGARETTE; OR 53
(c) ANY ROLL OF TOBACCO WRAPPED IN ANY SUBSTANCE 55
CONTAINING TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, THE TYPE OF 56
TOBACCO USED IN THE FILLER, OR ITS PACKAGING AND LABELING, IS 57
LIKELY TO BE OFFERED TO, OR PURCHASED BY, CONSUMERS AS A 58
CIGARETTE DESCRIBED IN DIVISION (D)(1)(a) OF THIS SECTION. 59
(2) THE TERM "CIGARETTE" INCLUDES "ROLL-YOUR-OWN" (I.E., 61
ANY TOBACCO WHICH, BECAUSE OF ITS APPEARANCE, TYPE, PACKAGING, OR 62
LABELING IS SUITABLE FOR USE AND LIKELY TO BE OFFERED TO, OR 63
PURCHASED BY, CONSUMERS AS TOBACCO FOR MAKING CIGARETTES). FOR 64
PURPOSES OF THIS DEFINITION OF "CIGARETTE," 0.09 OUNCES OF 65
"ROLL-YOUR-OWN" TOBACCO SHALL CONSTITUTE ONE INDIVIDUAL
"CIGARETTE."
(E) "MASTER SETTLEMENT AGREEMENT" MEANS THE SETTLEMENT 68
AGREEMENT (AND RELATED DOCUMENTS) ENTERED INTO ON NOVEMBER 23, 69
1998 BY THE STATE AND LEADING UNITED STATES TOBACCO PRODUCT 70
MANUFACTURERS.
(F) "QUALIFIED ESCROW FUND" MEANS AN ESCROW ARRANGEMENT 72
WITH A FEDERALLY OR STATE CHARTERED FINANCIAL INSTITUTION HAVING 73
NO AFFILIATION WITH ANY TOBACCO PRODUCT MANUFACTURER AND HAVING 74
ASSETS OF AT LEAST ONE BILLION DOLLARS WHERE SUCH ARRANGEMENT 75
REQUIRES THAT SUCH FINANCIAL INSTITUTION HOLD THE ESCROWED FUNDS' 76
3
PRINCIPAL FOR THE BENEFIT OF RELEASING PARTIES AND PROHIBITS THE 77
TOBACCO PRODUCT MANUFACTURER PLACING THE FUNDS INTO ESCROW FROM 78
USING, ACCESSING OR DIRECTING THE USE OF THE FUNDS' PRINCIPAL
EXCEPT AS CONSISTENT WITH SECTION 1346.02 OF THE REVISED CODE. 79
(G) "RELEASED CLAIMS" MEANS RELEASED CLAIMS AS THAT TERM 81
IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 82
(H) "RELEASING PARTIES" MEANS RELEASING PARTIES AS THAT 84
TERM IS DEFINED IN THE MASTER SETTLEMENT AGREEMENT. 85
(I)(1) "TOBACCO PRODUCT MANUFACTURER" MEANS AN ENTITY THAT 87
AFTER THE EFFECTIVE DATE OF THIS SECTION DIRECTLY (AND NOT 88
EXCLUSIVELY THROUGH ANY AFFILIATE): 89
(a) MANUFACTURES CIGARETTES ANYWHERE THAT SUCH 91
MANUFACTURER INTENDS TO BE SOLD IN THE UNITED STATES, INCLUDING 92
CIGARETTES INTENDED TO BE SOLD IN THE UNITED STATES THROUGH AN 94
IMPORTER (EXCEPT WHERE SUCH IMPORTER IS AN ORIGINAL PARTICIPATING
MANUFACTURER (AS THAT TERM IS DEFINED IN THE MASTER SETTLEMENT 96
AGREEMENT) THAT WILL BE RESPONSIBLE FOR THE PAYMENTS UNDER THE 97
MASTER SETTLEMENT AGREEMENT WITH RESPECT TO SUCH CIGARETTES AS A 98
RESULT OF THE PROVISIONS OF SUBSECTIONS II(mm) OF THE MASTER 100
SETTLEMENT AGREEMENT AND THAT PAYS THE TAXES SPECIFIED IN 101
SUBSECTION II(z) OF THE MASTER SETTLEMENT AGREEMENT, AND PROVIDED 102
THAT THE MANUFACTURER OF SUCH CIGARETTES DOES NOT MARKET OR 103
ADVERTISE SUCH CIGARETTES IN THE UNITED STATES); 104
(b) IS THE FIRST PURCHASER ANYWHERE FOR RESALE IN THE 107
UNITED STATES OF CIGARETTES MANUFACTURED ANYWHERE THAT THE
MANUFACTURER DOES NOT INTEND TO BE SOLD IN THE UNITED STATES; OR 109
(c) BECOMES A SUCCESSOR OF AN ENTITY DESCRIBED IN DIVISION 111
(I)(1)(a) OR (b) OF THIS SECTION. 112
(2) THE TERM "TOBACCO PRODUCT MANUFACTURER" SHALL NOT 114
INCLUDE AN AFFILIATE OF A TOBACCO PRODUCT MANUFACTURER UNLESS 115
SUCH AFFILIATE ITSELF FALLS WITHIN ANY OF DIVISION (I)(1)(a), 116
(b), OR (c) OF THIS SECTION. 117
(J) "UNITS SOLD" MEANS THE NUMBER OF INDIVIDUAL CIGARETTES 119
SOLD IN THE STATE BY THE APPLICABLE TOBACCO PRODUCT MANUFACTURER 120
4
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 121
INTERMEDIARY OR INTERMEDIARIES) DURING THE YEAR IN QUESTION, AS 122
MEASURED BY EXCISE TAXES COLLECTED BY THE STATE ON PACKS (OR 123
"ROLL-YOUR-OWN" TOBACCO CONTAINERS) BEARING THE EXCISE TAX STAMP 124
OF THE STATE. THE DEPARTMENT OF TAXATION SHALL PROMULGATE SUCH
REGULATIONS AS ARE NECESSARY TO ASCERTAIN THE AMOUNT OF STATE 125
EXCISE TAX PAID ON THE CIGARETTES OF SUCH TOBACCO PRODUCT 126
MANUFACTURER FOR EACH YEAR.
Sec. 1346.02. ANY TOBACCO PRODUCT MANUFACTURER SELLING 128
CIGARETTES TO CONSUMERS WITHIN THE STATE (WHETHER DIRECTLY OR 129
THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR INTERMEDIARY OR 131
INTERMEDIARIES) AFTER THE EFFECTIVE DATE OF THIS SECTION SHALL DO 132
ONE OF THE FOLLOWING:
(A) BECOME A PARTICIPATING MANUFACTURER (AS THAT TERM IS 134
DEFINED IN SECTION II(jj) OF THE MASTER SETTLEMENT AGREEMENT) AND 137
GENERALLY PERFORM ITS FINANCIAL OBLIGATIONS UNDER THE MASTER 138
SETTLEMENT AGREEMENT; OR
(B)(1) PLACE INTO A QUALIFIED ESCROW FUND BY APRIL 15 OF 140
THE YEAR FOLLOWING THE YEAR IN QUESTION THE FOLLOWING AMOUNTS (AS 141
SUCH AMOUNTS ARE ADJUSTED FOR INFLATION): 142
1999: $.0094241 PER UNIT SOLD AFTER THE EFFECTIVE DATE OF 144
THIS SECTION;
2000: $.0104712 PER UNIT SOLD; 146
FOR EACH OF 2001 AND 2002: $.0136125 PER UNIT SOLD; 148
FOR EACH OF 2003 THROUGH 2006: $.0167539 PER UNIT SOLD; 150
FOR EACH OF 2007 AND EACH YEAR THEREAFTER: $.0188482 PER 152
UNIT SOLD.
(2) A TOBACCO PRODUCT MANUFACTURER THAT PLACES FUNDS INTO 154
ESCROW PURSUANT TO DIVISION (B)(1) OF THIS SECTION SHALL RECEIVE 155
THE INTEREST OR OTHER APPRECIATION ON SUCH FUNDS AS EARNED. SUCH 156
FUNDS THEMSELVES SHALL BE RELEASED FROM ESCROW ONLY UNDER THE 157
FOLLOWING CIRCUMSTANCES:
(a) TO PAY A JUDGMENT OR SETTLEMENT ON ANY RELEASED CLAIM 159
BROUGHT AGAINST SUCH TOBACCO PRODUCT MANUFACTURER BY THE STATE OR 160
5
ANY RELEASING PARTY LOCATED OR RESIDING IN THE STATE. FUNDS 161
SHALL BE RELEASED FROM ESCROW UNDER DIVISION (B)(2)(a) OF THIS 162
SECTION:
(i) IN THE ORDER IN WHICH THEY WERE PLACED INTO ESCROW; 164
AND
(ii) ONLY TO THE EXTENT AND AT THE TIME NECESSARY TO MAKE 166
PAYMENTS REQUIRED UNDER SUCH JUDGMENT OR SETTLEMENT. 167
(b) TO THE EXTENT THAT A TOBACCO PRODUCT MANUFACTURER 169
ESTABLISHES THAT THE AMOUNT IT WAS REQUIRED TO PLACE INTO ESCROW 170
IN A PARTICULAR YEAR WAS GREATER THAN THE STATE'S ALLOCABLE SHARE 171
OF THE TOTAL PAYMENTS THAT SUCH MANUFACTURER WOULD HAVE BEEN 172
REQUIRED TO MAKE IN THAT YEAR UNDER THE MASTER SETTLEMENT 173
AGREEMENT (AS DETERMINED PURSUANT TO SECTION IX(i)(2) OF THE 174
MASTER SETTLEMENT AGREEMENT, AND BEFORE ANY OF THE ADJUSTMENTS OR 175
OFFSETS DESCRIBED IN SECTION IX(i)(3) OF THAT AGREEMENT OTHER THE 177
THE INFLATION ADJUSTMENT) HAD IT BEEN A PARTICIPATING 178
MANUFACTURER, THE EXCESS SHALL BE RELEASED FROM ESCROW AND REVERT 179
BACK TO SUCH TOBACCO PRODUCT MANUFACTURER; OR
(c) TO THE EXTENT NOT RELEASED FROM ESCROW UNDER DIVISION 181
(B)(2)(a) OR (b) OF THIS SECTION, FUNDS SHALL BE RELEASED FROM 183
ESCROW AND REVERT BACK TO SUCH TOBACCO PRODUCT MANUFACTURER 184
TWENTY-FIVE YEARS AFTER THE DATE ON WHICH THEY WERE PLACED INTO
ESCROW. 185
(3) EACH TOBACCO PRODUCT MANUFACTURER THAT ELECTS TO PLACE 187
FUNDS INTO ESCROW PURSUANT TO DIVISION (B) OF THIS SECTION SHALL 188
ANNUALLY CERTIFY TO THE ATTORNEY GENERAL THAT IT IS IN COMPLIANCE 189
WITH DIVISION (B) OF THIS SECTION. THE ATTORNEY GENERAL MAY 190
BRING A CIVIL ACTION ON BEHALF OF THE STATE AGAINST ANY TOBACCO 191
PRODUCT MANUFACTURER THAT FAILS TO PLACE INTO ESCROW THE FUNDS 192
REQUIRED UNDER THIS SECTION. ANY TOBACCO PRODUCT MANUFACTURER 193
THAT FAILS IN ANY YEAR TO PLACE INTO ESCROW THE FUNDS REQUIRED
UNDER THIS SECTION SHALL: 194
(a) BE REQUIRED WITHIN FIFTEEN DAYS TO PLACE SUCH FUNDS 196
INTO ESCROW AS SHALL BRING IT INTO COMPLIANCE WITH THIS SECTION. 197
6
THE COURT, UPON A FINDING OF A VIOLATION OF DIVISION (B) OF THIS 198
SECTION, MAY IMPOSE A CIVIL PENALTY TO BE PAID TO THE GENERAL 199
REVENUE FUND OF THE STATE IN AN AMOUNT NOT TO EXCEED FIVE PER 200
CENT OF THE AMOUNT IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE 201
VIOLATION AND IN A TOTAL AMOUNT NOT TO EXCEED ONE HUNDRED PER
CENT OF THE ORIGINAL AMOUNT IMPROPERLY WITHHELD FROM ESCROW; 202
(b) IN THE CASE OF A KNOWING VIOLATION, BE REQUIRED WITHIN 204
FIFTEEN DAYS TO PLACE SUCH FUNDS INTO ESCROW AS SHALL BRING IT 205
INTO COMPLIANCE WITH THIS SECTION. THE COURT, UPON A FINDING OF 206
A KNOWING VIOLATION OF DIVISION (B) OF THIS SECTION, MAY IMPOSE A 207
CIVIL PENALTY TO BE PAID TO THE GENERAL REVENUE FUND OF THE STATE 209
IN AN AMOUNT NOT TO EXCEED FIFTEEN PER CENT OF THE AMOUNT
IMPROPERLY WITHHELD FROM ESCROW PER DAY OF THE VIOLATION AND IN A 210
TOTAL AMOUNT NOT TO EXCEED THREE HUNDRED PER CENT OF THE ORIGINAL 211
AMOUNT IMPROPERLY WITHHELD FROM ESCROW; AND 212
(c) IN THE CASE OF A SECOND KNOWING VIOLATION, BE 214
PROHIBITED FROM SELLING CIGARETTES TO CONSUMERS WITHIN THE STATE 215
(WHETHER DIRECTLY OR THROUGH A DISTRIBUTOR, RETAILER OR SIMILAR 216
INTERMEDIARY) FOR A PERIOD NOT TO EXCEED TWO YEARS. 217
EACH FAILURE TO MAKE AN ANNUAL DEPOSIT REQUIRED UNDER THIS 219
SECTION SHALL CONSTITUTE A SEPARATE VIOLATION. 220
Section 2. Section 1 of this act enacts the Model Statute 222
described in Exhibit T to the Master Settlement Agreement entered 223
into between leading tobacco manufacturers and state attorney 224
generals on November 23, 1998.
Section 3. This act is hereby declared to be an emergency 225
measure necessary for the immediate preservation of the public 226
peace, health, and safety. The reason for such necessity is to 227
ensure that the state's financial and public health benefits 228
under the Master Tobacco Settlement Agreement of 1998 are not
subject to reduction. Therefore, this act shall go into 229
immediate effect.