Reynolds American Inc. and a subsidiary are facing a second potential class-action lawsuit over organic and additive-free marketing claims for the Natural American Spirit brand.
Santa Fe Natural Tobacco Co. emphasized the additive-free element of Natural American when it launched the cigarette in 1982, well before Reynolds bought the company for $340 million in December 2001.
The latest complaint was submitted Dec. 22 in the U.S. District Court for New Mexico by six plaintiffs from four states. The plaintiffs are seeking certification for a class-action lawsuit.
The first complaint was filed in September in the U.S. District Court for the Southern District of Florida. Reynolds and Santa Fe requested dismissal of that lawsuit Dec. 16.
Natural American is a Top 10 U.S. traditional cigarette brand with a 1.9 percent market share as of Sept. 30. It is the top-selling super-premium brand.
Both lawsuits piggyback on an Aug. 27 notice from the Food and Drug Administration that it had sent warning letters to Santa Fe and two other manufacturers. The letter said the manufacturers’ advertising of their traditional cigarette products as “additive free” or “natural” is in violation of federal regulations.
The FDA warning came about a month after Santa Fe launched a national advertising campaign for Natural American with full-page ads in magazines such as Sports Illustrated, Time, Field and Stream, Southern Living, Architectural Digest, Vanity Fair and US Weekly.
It was the first time the FDA had used its authority under the Tobacco Control Act of 2009 to target additive-free and natural tobacco product labeling.
Santa Fe spokesman Seth Moskowitz said Aug. 27 that the company has provided the FDA with a written explanation of its marketing strategy.
There has been no FDA or Reynolds public update since the notice. Moskowitz said Thursday that “we do not comment on pending matters with the agency.”
The lawsuits share several claim counts, including: fraud; false advertising; negligent misrepresentations; unjust enrichment; and unfair competition.
In arguing that the defendants violated the New Mexico Unfair Practices Act, one of the New Mexico plaintiffs claimed he was misled into believing that the cigarettes were “the product of Native American craftsmanship when in fact they are not.” The plaintiffs cited the use of Native American imagery in advertising.
Besides compensatory and punitive damages, the N.M. lawsuit plaintiffs want Santa Fe enjoined from selling Natural American Spirit cigarettes, to have to recall all cigarettes at retail, and conduct “a corrective advertising campaign.”
The Florida plaintiff requests defendants pay for medical monitoring and smoking cessation programs.
Reynolds and Santa Fe, in requesting the dismissal in Florida, said the plaintiff failed to state a claim upon which he can seek relief.
“This case involves important questions about the interaction between federal and state law and about the standards governing claims for false and deceptive trade practices, unjust enrichment and medical monitoring,” the defendants said.
The lawsuit likely boils down to which federal regulatory agency, the FDA or the Federal Trade Commission, has authority over the Santa Fe marketing claims.
In 2000, Santa Fe and the FTC reached a settlement in which Santa Fe agreed to include disclosures that “no additives in our tobacco does NOT mean safer.” A similar agreement was reached with R.J. Reynolds Tobacco Co. with marketing for certain Winston styles.
The FDA said its authority supersedes the FTC agreement. The FDA determined that marketing the cigarettes as additive free and natural “represents explicitly and/or implies” that the products offer a modified risk or are less harmful to consumers without having FDA approval as a modified-risk product.
Santa Fe has said its organic tobacco is certified through the National Organic program of the U.S. Agriculture Department. Certified organic tobacco is grown without the use of pesticides and fertilizers prohibited under the program.
Reynolds has agreed to sell for $5 billion the global trademark rights to Natural American to Japan Tobacco Group. The deal, which requires regulatory approval, is expected to close in early 2016.