JUDY ARNOLD, ET AL. V. COMMONWEALTH OF KENTUCKY, EX REL., ATTORNEY GENERAL, ALBERT CHANDLER II V. PHILLIP MORRIS, INC., ET AL.
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RENDERED: DECEMBER 20,200l
TO BE PUBLISHED
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ON REVIEW FROM THE COURT OF APPEALS
NO. 2000-CA-1612
V.
COMMONWEALTH OF KENTUCKY, EX REL.,
ATTORNEY GENERAL, ALBERT CHANDLER II
APPELLEE/PLAINTIFF/
INTERVENING DEFENDANT
V.
APPELLEESlDEFENDANTS
PHILLIP MORRIS, INC., ET AL.
OPINION OF THE COURT BY CHIEF JUSTICE LAMBERT
AFFIRMING
Sixteen months after entry of a final judgment reflecting settlement of
litigation brought by the Commonwealth against a number of tobacco companies,
Appellants moved to intervene for the purpose of asserting claims to the settlement
proceeds. The trial court denied intervention as untimely and Appellants appealed.
The issue before this Court is whether the trial court abused its discretion in denying intervention.
To resolve threatened litigation, forty-six states, six other jurisdictions and
several tobacco companies entered into a Master Settlement Agreement, (MSA). An
element of the agreement provided that the Commonwealth of Kentucky would receive
$3.45 billion over a period of twenty-five years. By the terms of the agreement, the
Commonwealth of Kentucky was required to file suit naming Phillip Morris, Inc., Brown
& Williamson Tobacco Corp. (individually and as successor by merger to The American
Tobacco Company), Lorillard Tobacco Company, R.J. Reynolds Tobacco Co., Liggett
Group, Inc., and United States Tobacco Company, (Tobacco Companies), as
defendants. The lawsuit was filed in the Franklin Circuit Court and was dismissed by
agreement with prejudice three days later. The Circuit Court entered a Consent Decree
and Final Judgment approving the MSA and retaining jurisdiction over the case to
ensure compliance.
Sixteen months after dismissal of the lawsuit, but before the effective date
of the act of the General Assembly distributing the anticipated settlement proceeds,
Appellants, claiming to be representatives of a group of persons suffering from tobacco
related illnesses and claiming to be recipients of Medicaid benefits, filed a Motion to
Intervene in the litigation. In their tendered intervening complaint, Appellants argued
that the Commonwealth had already been reimbursed under the Medicaid program for
Appellants’ smoking related illnesses and that Appellants should receive any sums paid
by the Tobacco Companies in excess of actual Medicaid costs incurred by the
Commonwealth. The Complaint also alleged due process violations and taking without
just compensation claims. The trial court denied the motion to intervene holding that it
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was untimely and that it failed to satisfy the requirements of CR 24.01’ or CR 24.02.*
The court further held that even if the requirements for intervention were met, sovereign
immunity would bar the claims. Appellants appealed to the Court of Appeals and this
Court granted transfer. CR 74.02.
1. TIMELINESS OF MOTION TO INTERVENE
Appellants claim they should have been permitted to intervene in the suit
between the Commonwealth and the Tobacco Companies since their rights would be
affected by the settlement. They argue that they have met all requirements of CR 24.01
and CR 24.02 and that the trial court erred in denying their motion.
Pursuant to both provisions of CR 24, a threshold requirement for
intervention is that the motion be timely. Appellants argue that their Motion to Intervene
was timely, though they did not file the motion until long after the Consent Decree and
Final Judgment became final. They claim they were not given notice of the suit filed by
the Commonwealth and note that the case was dismissed only three days after it was
commenced. Appellants further argue that their motion was timely because there is no
definite time after which a motion to intervene is considered untimely. They reject the
’ CR 24.01 provides:
(1) Upon timely application anyone shall be permitted to intervene in an
action (a) when a statute confers an unconditional right to intervene, or (b)
when the applicant claims an interest relating to the property or
transaction which is the subject of the action and is so situated that the
disposition of the action may as a practical matter impair or impede the
applicant’s ability to protect that interest, unless that interest is adequately
represented by existing parties.
* CR 24.02 provides in part:
Upon timely application anyone may be permitted to intervene in an
action: (a) when a statute confers a conditional right to intervene or (b)
when an applicant’s claim or defense and the main action have a question
of law or fact in common.
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idea that the media coverage of the lawsuit and settlement is the type of notice
permitted by due process, even though the complaint and the MSA were made public
before they were filed. Therefore, according to Appellants, they had no notice
comporting with due process of the litigation.
Appellants also claim that their cause of action did not accrue until after
the Commonwealth determined its disbursement plan. Not until then, they argue, did
they know they were left out of the disbursement of settlement funds. Appellants claim
their motion was timely because it was filed before the disbursement bill was signed by
the Governor.
The Supreme Court of Arizona addressed the issue presented here in
State ex rel. Napojitano v. Brown & Williamson Tobacco Corp.,3 the Arizona tobacco
settlement case. The motion to intervene was denied as untimely. There, the
intervenors were counties fearing that they would not get any of the settlement monies
or be able to sue the tobacco companies. The lawsuit lasted two and a half years.
Fifteen days after the judgment was final, the intervenors filed their motion. The Court
held this to be untimely and prejudicial to both plaintiffs and defendants in the case. It
was untimely because the counties did not seek to intervene until fifteen days after the
final judgment. Moreover, the court held that the counties had received a copy of the
MSA twenty-eight days before they filed their motion. The counties should have been
aware during the litigation that their interests were not adequately represented and the
state would be prejudiced because it would not receive payment until all appeals were
final, possibly creating a substantial delay in the receipt of settlement monies. The
3 998 P.2d 1055 (Ariz. 2000).
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tobacco companies would be prejudiced because they would be kept in the lawsuit until
the state and intervenors settled their dispute. The Court held that the intervenor
counties should have been aware prior to the signing of the MSA that the state was
potentially not representing the counties’ interests. Their claim was foreclosed.
A party wishing to intervene after final judgment has a “special burden” to
justify the untimeliness4
“ The rule requires ‘timely’ application, and the board has
offered no excuse for waiting until 30 days after judgment before moving to intervene.“5
While the rule does not forbid post judgment intervention, it is broadly within the
discretion of the trial judge whether to allow a party to intervene at that stage.’ In the
case at bar, the trial court conducted a hearing and concluded that the motion to
intervene should be denied as untimely. There is no hint of abuse of discretion.
Appellants have failed to satisfy their special burden or offer any sufficient explanation
for waiting so long to seek participation in the case. It is difficult to overlook that
significant media coverage occurred prior to and following the settlement. The terms
were widely known and parties who believed themselves to be prejudiced thereby were
under a duty to make timely application for relief. Accordingly, we affirm the trial court’s
order of June 12, 2000 whereby it denied Appellants’ motion to intervene.
II. PRESERVATION OF CLAIMS
We are not unconcerned by Appellants’ contention that the effect of the
settlement forecloses their individual claims for injuries and damages. They ague that
4 Monticello Electric Plant Bd. v. Board of Education, Ky., 310 S.W.2d 272
(1958).
5 M. at 274.
6 u. and Dairyland Ins. Co. v. Clark, Ky., 476 S.W.2d 202 (1972).
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the Commonwealth would not have a cause of action against the Tobacco Companies
but for them because it was they who were injured and it was for their medical
expenses that the Commonwealth sought reimbursement.
The MSA states:
‘Releasing Parties’ means each Settling State and any of its
past, present and future agents, officials acting in their
official capacities, legal representatives, agencies,
departments, commissions and divisions; and also means,
to the full extent of the power of the signatories hereto to
release past, present and future claims, the following: (1)
any Settling State’s subdivisions (political or otherwise,
including but not limited to, municipalities, counties,
parishes, villages, unincorporated districts and hospital
districts), public entities, public instrumentalities and public
educational institutions; and (2) persons or entities acting in
a parens patriae, sovereign, quasi-sovereign, private
attorney general, qui tam, taxpayer, or any other capacity,
whether or not any of them participate in this settlement, (A)
to the extent that any such person or entity is seeking relief
on behalf of or generally applicable to the general public in
such Settling State or the people of the State, as opposed
solely to private or individual relief for separate and distinct
injuries, or (B) to the extent that any such entity (as opposed
to an individual) is seeking recovery of health-care expenses
(other than premium or capitation payments for the benefit
of present or retired state employees) paid or reimbursed,
directly or indirectly, by a Settling State.7
The emphasized language expressly preserves individuals’ rights to sue the Tobacco
Companies for individual harms inflicted. At oral argument, counsel for the Tobacco
Companies judicially admitted’ that these claims were preserved. As such, the
Commonwealth released only its claims against the Tobacco Companies, but not those
of Appellants and those similarly situated.
7 Master Settlement Agreement, pp. 14-15, (emphasis added).
‘See Sutherland v. Davis, Ky., 151 S.W.2d 1021 (1941).
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For the foregoing reasons, the judgment of the Franklin Circuit Court is
affirmed.
Cooper, Graves, Johnstone, Keller, Stumbo and Wintersheimer, JJ.,
concur.
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COUNSEL FOR APPELLANTS:
Mike Breen
MIKE BREEN ATTORNEYS AT LAW, PSC
1700 Destiny Lane
Bowling Green, KY 42104
Casey Alan Hixson
BRATCHER & HIXSON LLP
511 East Tenth Avenue
Bowling Green, KY 42102
COUNSEL FOR AMICUS CURIAE,
LINDA COLLINS and DONNA BALL:
William E. Johnson
Guthrie J. True
Richard M. Guarnieri
JOHNSON, JUDY, TRUE & GUARNIERI, LLP
326 West Main Street
Frankfort. KY 40601
COUNSEL FOR APPELLEE,
ATTORNEY GENERAL ALBERT CHANDLER II;
DENNIS BOYD, COMMISSIONER OF DEPT.
OF MEDICAID; COMMONWEALTH, CABINET FOR
HEALTH SERVICES, DEPT. OF MEDICAID SERVICES;
JIMMY D. HELTON, SECRETARY OF CABINET
FOR HEALTH SERVICES; and JOHN P. MCCARTY,
SECRETARY OF THE KENTUCKY FINANCE:
Albert B. Chandler III
Attorney General of Kentucky
Scott White
Assistant Deputy Attorney General
D. Brent Irvin
Special Assistant Attorney General
Aileen Rose
Office of the Attorney General
700 Capitol Avenue, Suite 118
Frankfort, KY 40601-3449
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COUNSEL FOR APPELLEES,
BROWN EL WILLIAMSON, ETC.
and R. J. REYNOLDS TOBACCO CO.:
Charles S. Cassis
Kenneth J. Tuggle
BROWN, TODD & HEYBURN
3200 Providian Center
400 West Market Street, 32nd Floor
Louisville, KY 40202
Ian T. Ramsey
FROST TODD & TODD LLC
3200 Providian Center
400 West Market Street
Louisville, KY 40202
COUNSEL FOR APPELLEES,
LIGETT GROUP, INC.
Daryl William Durham
Melissa R. Metzger
WEBER & ROSE, PSC
400 West Market Street, Suite 2700
Louisville, KY 40202
COUNSEL FOR APPELLEE,
LORILLARD TOBACCO COMPANY:
Edward H. Stopher
Richard V. Evans
BOEHL, STOPHER & GRAVES
400 West Market Street, Suite 2300
Louisville, KY 40202
COUNSEL FOR APPELLEE,
PHILLIP MORRIS, INC.:
William D. Grubbs
David T. Schaefer
WOODWARD, HOBSON & FULTON, LLP
2500 National City Tower
Louisville, KY 40202
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COUNSEL FOR APPELLEE,
UNITED STATES TOBACCO CO.:
John S. Reed, II
Ridley M. Sandridge, Jr.
REED, WEITKAMP, SCHELL, COX & VICE
500 West Jefferson Street, Suite 2400
Louisville, KY 40202
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