Reynolds Innovations Inc. filed the lawsuit Friday in the U.S. District Court for the Middle District of N.C. The case has been referred to a mediator.

Named in the lawsuit are SAS Technologies Inc. of Ozark, Ala., doing business as SaveASmoker.com and Save A Smoker Inc., and co-owner Eric Slaick.

E-cigs are battery-powered devices that heat a liquid nicotine solution in a disposable cartridge and create a vapor that is inhaled. Refill cartridges can be purchased in different amounts and flavors; five-packs typically cost between $9 and $18.

By comparison, a carton of cigarettes can cost between $25 and $50 for most name brands.

Reynolds Innovations said the company marketed its products using images that are “colorable imitations and confusingly similar to” the Camel and Winston trademarks.

When Reynolds filed the lawsuit, SaveASmoker.com listed as flavors “Camell Tobacco” and “Winston” on its website, as well as USA Blend – “comparable to Marlboro” – and Newport, the top-selling menthol brand of Lorillard Inc.

Brian May, a spokesman for Altria, the parent company of Philip Morris, said the company has not filled a similar lawsuit against SAS Technologies and the other companies.

Reynolds said in the lawsuit the use of such images “will continue to result in a likelihood of consumer confusion and irreparable injury to the company.”

Reynolds spokesman Bryan Hatchell said the company declined to comment beyond the lawsuit.

Slaick said Monday that the SAS has pulled all references to Camel and Winston from its website and the shelves of its stores.

The products now on its website are for its MaxxVapor Pro brand. The company lists retail locations in the Southeast for its products, but none in North Carolina.

Slaick said the company sources its e-cigarettes from a Chinese manufacturer who used the Camel and Winston imagery as part of distinguishing the styles and flavors for its product options.

“We just went with what the manufacturer provided and had not heard a complaint from Reynolds,” Slaick said. “Once we learned of the lawsuit, we pulled them off the website within minutes.

“It was never our intention to take on R.J. Reynolds or to trick consumers into thinking there was a connection.”

Reynolds has moved into the e-cigarette category with Vuse, which is being test-marketed in the Triad at select Tarheel Tobacco outlets.

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With the Zonnic gum of its Niconovum pharmaceutical subsidiary, Reynolds is asking consumers, particularly smokers, to trust the company that got smokers hooked on nicotine to have the expertise to produce the right cessation product for them.

Until four years ago, Reynolds’ evolution into a “total tobacco company” was met with steep skepticism, if not derision, by anti-tobacco advocates.

However, the launch of Zonnic in retail outlets in Des Moines, Iowa, on Sept. 3 represents just the latest innovation for Reynolds, following up on Camel Snus and three Camel dissolvable products.

Also on tap is Reynolds’ version of an electronic cigarette (Vuse), smokeless pouches and pellets (Viceroy) and nicotine extract products such as lozenges. Vuse and Viceroy are being test-marketed in the Triad at select Tarheel Tobacco outlets.

“We hope the focus of Zonnic is on the message of the product, and not the messenger, because we believe Zonnic takes the smoker’s perspective into cessation,” said Tommy Payne, president of Niconovum USA Inc., based in Winston-Salem.

The gum represents Niconovum’s first product introduction in the United States. Reynolds bought Niconovum AB, based in Sweden, in 2009 for $44 million. Its products, which also include pouches and spray forms, are sold in Denmark and Sweden.

Payne said Zonnic already has been approved by the Food and Drug Administration.

Zonnic is the latest entrant into a nicotine-replacement therapy marketplace occupied by well-hyped products that have yielded mixed results at best in helping smokers quit.

The long-term effectiveness of NRT products was called into doubt in January by a study released by researchers at the Harvard School of Public Health and the University of Massachusetts at Boston.

The study of 787 adult smokers in Massachusetts found that the products, specifically nicotine patches and gum, “are no more effective in helping people stop smoking cigarettes in the long term than trying to quit on one’s own,” said Hillel Alpert, a research scientist with the Harvard group and the study’s lead author.

Gregory Connolly, director of the Center for Global Tobacco Control at Harvard, said the study “showed clearly that while the NRT products can help with quitting and withdrawal over two weeks to six months, they are not really designed to help with relapsing.”

Payne said that although about 70 percent of smokers annually express a desire to quit smoking, only 10 percent are successful. Of that 10 percent, about 6 percent are successful through the use of NRT products, he said.

Stop-smoking aid

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The donation from the North Carolina firm more than doubled the money available to the Missouri Petroleum Marketers and Convenience Store Association PAC, the group that will spearhead the fight against the tax hike. On its latest report, covering the period through July 26, the PAC reported it had $116,000 in the bank.

Behind the donation, however, is some good news for supporters of the proposal: The largest tobacco manufacturers have told Ron Leone, executive director of the association, that they will not participate in the campaign, he said.

“Altria and R.J. Reynolds, what most people would define as Big Tobacco, are sitting out the fight,” Leone said.

The donation — and the big companies’ decisions to sit it out — came in response to donation solicitations from the PAC, he said.

Earlier this week, Missouri Secretary of State Robin Carnahan announced that the proposal, which would add 73 cents to the cost of a pack of cigarettes, had enough signatures to be placed on the ballot as Proposition B. Along with the extra tax on cigarettes, the proposal would impose a 25 percent tax on loose tobacco for rolling cigarettes and a 15 percent tax on cigars and other tobacco products.

Missouri now imposes a tax of 17 cents per pack on cigarettes, the lowest in the nation.

The measure is expected to raise $283 million to $423 million annually. Public schools would get half the money, state colleges and universities would get 30 percent, and the rest would go toward smoking cessation programs.

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By Rudi Keller/ Columbia Daily Tribune

First, the issue drawing the most public attention was the company’s dealings with groups representing farm workers who toil under dangerous conditions and provide the tobacco that brings prosperity to the company and its key executives. At least 20 individuals who attended the meeting dominated the question-and-answer session, urging the company to meet directly with the Farm Labor Organizing Committee (FLOC)  after many years of failing to achieve such a meeting. Reynolds American CEO Daniel M. Delen publicly pledged that he would be willing to participate in such a meeting. Dozens of protestors outside the building underscored the message of the supporters of the human rights of tobacco farm workers.

Delen also touted an April 2012 “multilateral” meeting in Raleigh as a first step in addressing issues of inadequate worker safety in the tobacco fields of North Carolina. [See Oxfam America’s report: “A State of Fear: Human Rights Abuses in North Carolina’s Tobacco Industry”]

A second issue was contained in the shareholder resolution that called on RAI to establish a special ethics committee to examine the company’s marketing practices. The purpose of this special committee is “to ensure shareholders that its products and product promotions, as far as is possible, not undermine efforts of governments at any level to adopt laws and practices that will free Americans from the negative consequences of use of our tobacco products.”

In addition to commenting on the text of the resolution, Father Michael Crosby denounced RAI’s heavy-handed campaign to oppose California’s Proposition 29, which would raise that state’s cigarette excise tax by $1 per pack and increase taxes on cigars and pipe tobacco from 31.73 percent to 54.89 percent. If passed by the voters, the proposal would raise about $735 million annually, most of which would go toward cancer research.

Fr. Crosby also cited the company’s support of the right-wing political organization ALEC, the American Legislative Exchange Council, whose stealth activities have come under increased scrutiny following public disclosures of ALEC’s drafting of and advocacy for Florida “Stand Your Ground” law and several states’ anti-immigrant legislation.

The shareholder resolution was defeated, according to the preliminary tally reported at the meeting, with 6.4 million shares in favor, 418 million shares opposed and 6.3 shares abstaining.

The third key issue was litigation, specifically RAI’s “litigation progress” – or lack thereof – in dealing with the Engle Progeny cases in Florida. During the business presentation by Mr. Delen, RAI’s CEO stated that, since 2010, RAI had been “successful” in two-thirds of the Engle Progeny trials. Such “successes” included not only defense verdicts but also – for the first time publicy stated in this author’s memory at any tobacco company’s shareholders meeting – mistrials (such as when a jury is deadlocked without being able to reach a verdict).

In 2009, a Florida jury awarded $3.3 million in compensatory damages and $25 million in punitive damages against Reynolds American in a case involving the death of Benny Ray Martin, the husband of Mathilde Martin. Her case is one of thousands of “Engle Progeny” lawsuits in Florida, cases that followed the landmark 2006 ruling by the Florida Supreme court in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). After losing on appeal at every stage in the Florida’s state court system, RAI filed a petition for certiorari with the Supreme Court of the United States.

In arguing in December 2011 that its petition for a writ of certiorari should be granted, Reynolds’ attorneys (Paul D. Clement of Bancroft PLLC, Gregory G. Katsas of Jones Day and Eric E. Murphy of Jones Day) claimed that in “their conduct of Engle progeny litigation, the Florida state courts are engaged in serial due-process violations that threaten the defendants with literally billions of dollars of liability.” (emphasis added) Moreover, “the massive liability imposed on the Engle defendants – which currently stands at over $375 million in adverse judgments – will… steadily increase as Engle progeny trials continue with no end in sight.” (emphasis added).

RAI’s attorneys’ description of doomsday for the company became reality on March 26, 2012 when the Supreme Court announced that it would not consider RAI’s appeal in the Martin case. As I described at the time, “At long last, Reynolds American and the other major tobacco companies will be held accountable for their massive and reprehensible misconduct that harmed thousands of Florida smokers. As Reynolds’ own lawyers have concluded, denial of its cert petition is a very big deal indeed.”

Citing the question I asked at the 2011 Reynolds American Shareholders Meeting about the Martin case, the response I received from Mark Holton, RAI’s Executive Vice President and General Counsel, that he was “confident that the Engle process violates due process” and that the company’s legal arguments were strong and would ultimately prevail, and the fact that on March 26, 2012 the U.S. Supreme Court refused to consider RAI’s appeal of the $28 million verdict, this RAI shareholder from Massachusetts asked the following question:

“Given how Mr. Holton got it wrong last year about this important case, why shouldn’t investors and shareholders be skeptical when they hear pronouncements by Reynolds American management about tobacco litigation?”

In response, Mr. Holton acknowledged what the Supreme Court had done regarding the Martin case, but cited what he called “encouraging” developments with two appeals of plaintiff verdicts in the state court system in Florida. This included a March 30th ruling by Florida’s Second District Court of Appeal affirming a $2.5 million wrongful death verdict against Reynolds American and Philip Morris USA. In that appeal of the Douglas case, the Court of Appeal also certified the following question to the Supreme Court of Florida: “Does accepting as res judicata the eight Phase I findings approved in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006) violate the tobacco companies’ due process rights guaranteed by the Fourteenth Amendment of the United States Constitution?”

Mr. Holton notably did not address the doomsday scenario outlined by his company’s attorneys who filed the writ for certiorari. So, in a span of just five months, this RAI shareholder received from the company diametrically polar opposite predictions concerning the future of tobacco litigation, depending on which side of the Reynolds American corporate mouth was talking.

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By By Edward L. Sweda, Jr., Public Health Advocacy Institute