Four tobacco companies filed this lawsuit against the state of Massachusetts to block enforcement of a tobacco disclosure law. The law requires tobacco companies to provide lists of ingredients in their products other than tobacco, water, and reconstituted tobacco. The companies claim the law would force them to give up trade secrets in violation of the Constitutional provisions against seizing property without compensation. They also claim the required disclosures would place an undue burden on interstate and foreign commerce.

PHILIP MORRIS INCORPORATED; R.J.
REYNOLDS TOBACCO COMPANY;
BROWN & WILLIAMSON TOBACCO
CORPORATION; and LORILLARD
TOBACCO COMPANY;

Plaintiffs,

v.

L. SCOTT HARSHBARGER, Attorney General of the Commonwealth of Massachusetts, and DAVID H. MULLIGAN, Massachusetts Commissioner of Public Health,

Defendants.

COMPLAINT

CIVIL ACTION NO.

Nature of Action

1. This is an action to declare null and void, and to enjoin enforcement of, legislation enacted by the Massachusetts legislature to be codified at Mass. Gen. Laws c. 94, Section 307A ("Section 307A"), providing for public disclosure of trade secret and other proprietary information regarding ingredients used in cigarettes. Section 307A provides as follows:

"For the purpose of protecting the public health, any manufacturer of cigarettes, snuff or chewing tobacco sold in the commonwealth shall provide the department of public health with ah annual report, in a form and at a time specified by that department, which lists for each brand of such product sold the following information:

"(a) The identity of any added constituent other than tobacco, water or reconstituted tobacco sheet made wholly from tobacco, to be listed in descending order according to weight, measure, or numerical count; and

"(b) The nicotine yield ratings, which shall accurately predict nicotine intake for average consumers, based on standards to be established by the department of health.

"The nicotine yield ratings so provided, and any other such information in the annual reports with respect to which the department determines that there is a reasonable scientific basis for concluding that the availability of such information could reduce risks to public health, shall be public records; provided, however, that before any public disclosure of such information the department shall request the advice of the attorney general whether such disclosure would constitute an unconstitutional taking of property, and shall not disclose such information unless and until the attorney general advises that such disclosure would not constitute an unconstitutional taking.

"This section shall not require a manufacturer, in its report to the department or otherwise, to identify or disclose the specific amount of any ingredient that has been approved by the Food and Drug Administration and Public Health Service, United States Department of Health and Human Services ('FDA'), or its successor agency, as safe when burned and inhaled or that has been designated by the FDA, or its successor agency, as generally recognized as safe when burned and inhaled, according to the Generally Recognized As Safe list of the FDA."

2. The only way a manufacturer could avoid the requirements imposed by this statute would be to stop being a "manufacturer of cigarettes . . . sold in the commonwealth."

3. The annual reports required to be filed by Section 307A are to be filed beginning in 1997.

Nature of Claims

4. Plaintiffs claim that Section 307A is preempted by the Federal Cigarette Labeling and Advertising Act, 15 U.S.C., Section 1331 et seq. (FCLAA), because it invades a field that Congress in FCLAA demonstrated an intent to occupy, and because it conflicts with FCLAA by requiring the disclosure of trade secrets and other confidential proprietary information that Congress in FCLAA established elaborate procedures to prevent from being disclosed. Plaintiffs further claim that Section 307A violates the Commerce Clause, U.S. Const. art. I, Section 8, because it places an undue burden on interstate and foreign commerce, and the Full Faith and Credit Clause, U.S. Const. art. IV, Section I, because it would nullify the protections afforded cigarette ingredient trade secrets and other confidential proprietary information by other states. Finally, plaintiffs claim that Section 307A violates the Takings Clause of the Fifth Amendment to the U.S. Constitution because it would authorize the disclosure of plaintiffs' trade secrets and other confidential proprietary information, and thereby destroy their value, without any provision for just compensation.

Parties

5. Philip Morris Incorporated ("Philip Morris") is a Virginia corporation with its principal place of business in New York. Philip Morris manufactures brands of cigarettes in states other than Massachusetts that are sold throughout the United States, including Massachusetts.

6. R.J. Reynolds Tobacco Company ("Reynolds") is a New Jersey corporation with its principal place of business in North Carolina. Reynolds manufactures brands of cigarettes in states other than Massachusetts that are sold throughout the United States, including Massachusetts.

7. Brown & Williamson Tobacco Corporation ("Brown & Williamson") is a Delaware corporation with its principal place of business in Kentucky. Brown & Williamson manufactures brands of cigarettes in states other than Massachusetts that are sold throughout the United States, including Massachusetts.

8. Lorillard Tobacco Company ("Lorillard") is a Delaware corporation with its principal place of business in New York. Lorillard manufactures brands of cigarettes in states other than Massachusetts that are sold throughout the United States, including Massachusetts.

9. L. Scott Harshbarger is the Attorney General of the Commonwealth of Massachusetts.

10. David H. Mulligan is Commissioner of the Department of Public Health of the Commonwealth of Massachusetts, and head of the Massachusetts Department of Public Health.

Jurisdiction and Venue

11. This Court has jurisdiction over this action by virtue of 28 U.S.C. Sections 1331 and 1332 and has pendent jurisdiction over the plaintiffs' related state law claim. Declaratory relief is authorized by 28 U.S.C. Sections 2201-02 and Fed. R. Civ. P. 57.

12. Venue is proper in the district pursuant to 28 U.S.C. Section 1391(b).

Facts Applicable to All Claims

13. Each plaintiff's brands of cigarettes have been brought from places of manufacture in other states into, and sold in, Massachusetts from before 1965 continuously to the present. Each plaintiff desires that its brands of cigarettes continue to be brought from other states into Massachusetts for sale.

14. Section 307A purports to require each plaintiff to comply with its disclosure requirements in order for that plaintiff's brands of cigarettes to continue to be sold in the Commonwealth of Massachusetts. There exists an actual controversy, justiciable in character, between plaintiffs and defendants as to whether, under the United States Constitution, Section 307A is lawful in this regard. Plaintiffs believe it is not, but compliance with its terms would cause each plaintiff irreparable injury, as would noncompliance.

15. In manufacturing each of its brands of cigarettes, each plaintiff adds to tobacco, water, and reconstituted tobacco sheet various ingredients and combinations of ingredients. These ingredients help give each individual cigarette brand its distinctive characteristics such as flavor, taste, and aroma, on the basis of which consumers choose the brand over competing brands, including brands of each plaintiff's competitors.

16. Each plaintiff has invested substantial resources in selecting the ingredients and the combination of ingredients used in each of its cigarette brands. The identity of each such ingredient, the combination of the ingredients used in each brand, and the relative quantities of the ingredients used in each brand are valuable trade secrets of each plaintiff which are unknown to the other plaintiffs or other potential competitors. Each plaintiff has taken and continues to take reasonable precautions to maintain the confidentiality of its trade secrets.

17. The disclosure of this trade secret information by the Department of Public Health, as authorized and contemplated by Section 307A, would enable competitors of each plaintiff in the United States and throughout the world to misappropriate the value of these trade secrets, and to deprive each plaintiff of the opportunity to continue to obtain a competitive advantage from its own trade secrets.

18. Each plaintiff's trade secrets are recognized and sanctioned by the Congress in FCLAA as part of a "comprehensive Federal program" established in FCLAA "with respect to any relationship between smoking and health." 15 U.S.C. Section 1331. The "comprehensive" program was designed by Congress to assure that "the public may be adequately informed about any adverse health effects of cigarette smoking," id. Section 1331(1), while "commerce and the national economy" are "protected to the maximum extent consistent" with that objective, id. Section 1331(2).

19. To ensure that the public is "adequately informed about any adverse health effects of cigarette smoking," id. Section 1331(1), FCLAA requires each package of cigarettes, and each cigarette advertisement, to carry one of four rotating health warnings, see id. Section 1334(a). The required health warnings do not include any message regarding cigarette ingredients.

20. Instead, FCLAA requires each person who manufactures, packages or imports cigarettes to annually provide the Secretary of Health and Human Services with "a list of the ingredients added to tobacco in the manufacture of cigarettes which does not identify the company which uses the ingredients or the brand of cigarettes with contains the ingredients. " 15 U.S.C. Section 1335a(a). FCLAA directs the Secretary to transmit to Congress a report, at such times as the Secretary considers appropriate, respecting ongoing and proposed research on "the health effects of [such] ingredients," 15 U.S.C. Section 1335a(b)(1)(A), and information regarding "any such ingredient which in the judgment of the Secretary poses a health risk to cigarette smokers," id. Section 1335a(b)(1)(B).

21. FCLAA provides that any information provided by the manufacturers pursuant to the statute "shall be treated as trade secret or confidential information . . . and shall not be revealed [except as specified in reports to Congress] to any person other than those authorized by the Secretary in carrying out their official duties under this section." Id. Section 1335a(b)(2)(A). Such information is declared to be subject to the provision of the federal Freedom of Information Act exempting trade secrets and other confidential commercial information from disclosure (5 U.S.C. Section 552(b)(4)); the unlawful disclosure of such information is declared to be punishable as a criminal violation of the federal Trade Secrets Act (18 U.S.C. Section 1905). 15 U.S.C. Section 1335(a)(B)(2)(a)

22. FCLAA directs the Secretary to establish "written procedures to assure the confidentiality of the ingredient information supplied by cigarette manufacturers." Id. Section 1335a(b)(2)(C). FCLAA states:

"Such procedures shall include the designation of a duly authorized agent to serve as custodian of such information. The agent- (i) shall take possession of the information and, when not in use by a person authorized to have access to such information, shall store it in a locked cabinet or file, and

(ii) shall maintain a complete record of any person who inspects or uses the information.

Such procedures shall require that any person permitted access to the information shall be instructed in writing not to disclose the information to anyone who is not entitled to have access to the information."

23. Pursuant to FCLAA, the Secretary has established strict written procedures to "control and protect" documents that contain ingredient information provided by the manufacturers, as well as "any other materials derived from [such] information." See 50 Fed. Reg. 49,617, 49,618 (1985). These procedures require, among other things, that all such documents and materials be kept in a locked room or non-portable file container during non-working hours, and that persons authorized to have access to such documents and materials sign a declaration of their commitment to protecting the confidentiality of the information contained in such documents and materials. Id.

24. In providing that any cigarette ingredient information provided to the Secretary pursuant to FCLAA shall be treated as "trade secret or confidential information," Congress formally recognized the trade secret status of ingredient information nationwide. Indeed, Congress noted that the Surgeon General, in his 1981 report to Congress, had recommended that procedures be established by which the manufacturers would disclose ingredient information to the federal government "'while still protecting their legitimate interest in trade secrets.'" S. Rep. No. 177, 98th Cong., 1st Sess. 5 (1983). Rep. Mike Synar, who claimed a significant role in securing passage of the 1984 law, likewise stressed that "[t]rade secret information will be protected for cigarette companies but ingredient information will be available to Congress to review if it deems necessary." 130 Cong. Rec. 24,626 (1984).

25. Since 1986, the plaintiffs have submitted ingredient information annually to the Secretary. To date, the Secretary has not indicated that any of the ingredients pose a health risk to smokers. If the Secretary concludes that any additive does present a cause for concern, she undoubtedly will so inform the manufacturers as well as Congress.

26. Section 307A authorizes and contemplates the disclosure of trade secret and other confidential proprietary information that FCLAA establishes stringent procedures to prevent from being disclosed, and injects the Commonwealth into an area that Congress has demonstrated an unmistakable intent to occupy.

27. Plaintiffs' trade secrets and other confidential proprietary information, required to be disclosed by the plaintiffs to the Department of Public Health under Section 307A, constitute the property of the plaintiffs under federal and state law.

28. The disclosure of such trade secrets and other confidential proprietary information by the Department of Public Health, pursuant to Section 307A, would destroy the value of that property of the plaintiffs not only in Massachusetts but in every other state and throughout the world.

Claims for Relief

COUNT I (SUPREMACY CLAUSE)

29. Plaintiffs incorporate and reallege each and every allegation contained in paragraphs 1 through 28 of this Complaint as though fully set forth herein.

30. Section 307A is null and void by reason of Article VI, Section 2 of the United States Constitution ("Supremacy Clause") in that it is preempted by FCLAA.

31. Accordingly, each plaintiff need not comply with the provisions of Section 307A in order to continue to be a manufacturer of cigarettes sold in the Commonwealth of Massachusetts.

COUNT II (COMMERCE CLAUSE)

32. Plaintiffs incorporate and reallege each and every allegation contained in paragraphs 1 through 31 of this Complaint as though fully set forth herein.

33. Section 307A is null and void by reason of Article I, Section 8 of the United States Constitution ("Commerce Clause") in that it places an undue burden on interstate and foreign commerce in cigarettes.

34. Accordingly, each plaintiff need not comply with the provisions of Section 307A in order to continue to be a manufacturer of cigarettes sold in the Commonwealth of Massachusetts.

COUNT III (FULL FAITH AND CREDIT CLAUSE)

35. Plaintiffs incorporate and reallege each and every allegation contained in paragraphs 1 through 34 of this Complaint as though fully set forth herein.

36. Section 307A is null and void by reason of Article IV, Section 4 of the United States Constitution ("Full Faith and Credit Clause") in that it nullifies the protections afforded cigarette ingredient trade secrets and other confidential proprietary information by other states.

37. Accordingly, each plaintiff need not comply with the provisions of Section 307A in order to continue to be a manufacturer of cigarettes sold in the Commonwealth of Massachusetts.

COUNT IV (TAKINGS CLAUSE)

38. Plaintiffs incorporate and reallege each and every allegation contained in paragraphs 1 through 37 of this Complaint as though fully set forth herein.

39. Section 307A is null and void by reason of the Takings Clause of the Fifth Amendment to the United States Constitution, as made applicable to the states by the Fourteenth Amendment to the United States Constitution. Under Section 307A each plaintiff's property would be taken for a purported public use without any provision for just compensation, and plaintiffs have no adequate remedy under Massachusetts law to obtain such just compensation.

40. Accordingly, each plaintiff need not comply with the provisions of Section 307A in order to continue to be a manufacturer of cigarettes sold in the Commonwealth of Massachusetts.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray that this Court:

(A) enter a judgment declaring (i) that Section 307A of Chapter 94 of the General Laws of the Commonwealth of Massachusetts is null and void and (ii) that if the Massachusetts Department of Public Health, pursuant to Section 307A, should disclose plaintiffs' trade secrets or other confidential proprietary information, plaintiffs would be entitled to compensation under the Takings Clause of the Fifth Amendment to the U.S. Constitution, as made applicable to the states pursuant to the Fourteenth Amendment to the U.S. Constitution;

(B) enter a permanent injunction enjoining defendants and their agents from taking any action under or to enforce Section 307A of Chapter 94 of the General Laws of the Commonwealth of Massachusetts;

(C) enter a preliminary injunction, pending final resolution of this action, enjoining defendants and their agents from taking any action under or to enforce Section 307A of Chapter 94 of the General Laws of the Commonwealth of Massachusetts;

(D) award plaintiffs their reasonable attorneys' fees and costs; and

(E) grant plaintiffs such additional or different relief as it deems just and proper.

PHILIP MORRIS INCORPORATED,

By its attorneys,

/s/
Thomas J. Griffin (BBO No. 211400)
Henry C. Dinger, P.C. (BBO . 125340)
Cerise Lim-Epstein (BBO No. 300290)
GOODWIN, PROCTER & HOAR LLP
Exchange Place Boston, MA 02109
(617) 570-1000

R.J. REYNOLDS TOBACCO COMPANY;
BROWN & WILLIAMSON TOBACCO
CORPORATION; and LORILLARD
TOBACCO COMPANY

By their attorneys,

/s/
Verne W. Vance, Jr. (BBO No. 507540)
John H. Henn (BBO No. 230520)
FOLEY, HOAG & ELIOT
One Post Office Square
Boston, MA 02107

OF COUNSEL:

Herbert Dym
Clausen Ely
David H. Remes
Jason A. Levine
COVINGTON & BURLING
1200 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044-7566
(202) 662-6000

Dated: August 2, 1996