Will the protracted litigation between tobacco manufactures and the State of California finally be coming to an end?

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The State of California engaged in lengthy and protracted litigation with numerous tobacco manufacturers concerning their marketing activities and advertising in the State of California. In the Consolidated Tobacco Cases, the court of appeal rendered a decision concerning the award of attorney fees which may bring that litigation to its final conclusion.

In 1998, Reynolds Tobacco (“Reynolds”) and other tobacco manufacturers entered into a settlement agreement with the state, in an attempt to finally resolve claims related to the advertising of tobacco products.

The trial court approved the settlement and the parties entered into a stipulated consent decree. This too was entered as an order of the court. The decree permanently enjoined Reynolds from using cartoons in its marketing campaigns. Subsequently, the state moved to enforce the consent decree, alleging Reynolds violated the consent decree in a subsequent advertising campaign.

The court refused to grant the state’s request for an injunction however. The court concluded that Reynolds had discontinued the advertisement, and for that reason alone the requested injunction was not necessary. After further protracted litigation, the lower court awarded the state almost $3 million in contractual attorney fees under Civil Code Section 1717. The basis for the fee award was the court found that the state was a prevailing party in an action to enforce the consent decree. Reynolds appealed, arguing there was no basis for the award of attorney fees.

The court of appeal affirmed, referencing Civil Code Section 1717. Under that statute, the prevailing party in a contract containing a fee provision can be awarded fees. The prevailing party is the one “who received the greater relief in the action on the contract.” Reynolds argued that the state did not obtain the necessary relief because the trial court denied the state’s subsequent request for injunctive relief. The court noted, however, that the lack of injunctive relief did not automatically require the trial court to reject the fee petition.

The court of appeal concluded that, because the state’s main litigation objective was to stop the use of cartoons in advertising, and because it largely achieved that objective, it was a prevailing party. On that basis, the attorney fee award was affirmed by the court of appeal.