CIGARETTE GIANT SUES STATE ATTORNEYS GENERAL

Lorillard Accuses Group of Not Monitoring Anti-Smoking Ads

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WASHINGTON (AdAge.com) -- Lorillard Tobacco Co. is taking a new tact in its fight with the American Legacy Foundation over an anti-tobacco ad, suing the state attorneys general who formed the foundation for failing to adequately oversee their creation.

Dog urine ad
Lorillard has sued the foundation itself, arguing that a radio ad suggesting the company might have used dog urine in its products violated terms of the agreement between tobacco companies and states, but the latest Delaware state court suit charges the National Association of Attorneys General with "breech of fiduciary duty" for not controlling the foundation.

The foundation was

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created in 1998 as part of the Master Settlement Agreement attorneys general in 46 states signed with tobacco companies to settle state tobacco suits.

Lorillard also issued a notice saying it will similarly sue Delaware Attorney General Jane Brady.

The dispute stems from the foundation's "truth" ad campaign and several ads created by Havas' Arnold Worldwide, Boston, and MDC Communications Corp.'s Crispin Porter & Bogusky, Miami. Among the ads was radio commercial that ran last year in which a Lorillard employee is called and asked if he wants to buy dog urine as a source of urea for cigarettes.

Lorillard: Agreement violated
The Master Settlement Agreement between tobacco companies and states that settled state tobacco suits provides funds for the foundation but bars vilification of the industry or individual tobacco companies. Lorillard contends that the ad violated that agreement.

In a statement today Lorillard said that after trading suits with the American Legacy Foundation -- which filed its own lawsuit contending it wasn't a party to the original pact and couldn't be sued -- and being unable to negotiate an agreement, it finally decided to sue the state officials.

'Ridicule and attack'
"Lorillard and other tobacco companies have paid $1.25 billion to date to ALF, under the terms of the MSA," said Ronald S. Milstein, vice president and general counsel for the tobacco maker. "Such funds were to be used solely to educate the public about the dangers of smoking and to reduce the incidence of youth smoking. Instead, ALF has consistently used these funds to ridicule and attack the companies and their employees through its 'truth' campaign."

The association of attorneys general was reviewing the statement late Friday and had no immediate comment.

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