       DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                            FOURTH DISTRICT

                R.J. REYNOLDS TOBACCO COMPANY,
                            Appellant,

                                   v.

         STATE OF FLORIDA and PHILIP MORRIS USA INC.,
                          Appellees.

                              ____________

                             No. 4D18-2616
                   __________________________________


                      PHILIP MORRIS USA INC.,
                             Appellant,

                                   v.

                          ITG BRANDS, LLC,
                               Appellee.

                             _____________

                            No. 4D18-2715
                  ___________________________________

                            [July 29, 2020]

   Consolidated appeals from the Circuit Court for the Fifteenth Judicial
Circuit, Palm Beach County; Jeffrey Dana Gillen, Judge; L.T. Case No. 50-
1995-CA-001466-OCAE-MB.

   Elliot H. Scherker, Brigid F. Cech Samole, and Stephanie L. Varela of
Greenberg Traurig, P.A., Miami, for appellant R.J. Reynolds Tobacco
Company.

   Paul Vizcarrondo and Ben M. Germana of Wachtell, Lipton, Rosen &
Katz, New York, New York, and David P. Ackerman and E. Raul Novoa Jr.
of Akerman LLP, West Palm Beach, for appellee Philip Morris USA Inc.
  Ashley Moody, Attorney General, Amit Agarwal, Solicitor General,
Edward M. Wenger, Chief Deputy Solicitor General, and Russell Kent,
Special Counsel for Litigation, Office of the Attorney General, Tallahassee;
and Scott B. Cosgrove and Jeremy L. Kahn of León Cosgrove, LLP, Coral
Gables, for appellee State of Florida.

   Elizabeth B. McCallum and Robert J. Brookhiser Jr. of Baker &
Hostetler, LLP, Washington, D.C., and James V. Etscorn and Robert W.
Thielhelm Jr. of Baker & Hostetler, LLP, Orlando, for appellee ITG Brands,
LLC.

LEVINE, C.J.

   This is a tale of two contracts. One contract, the Florida Settlement
Agreement (“FSA”) entered in 1997, in which appellant Reynolds agreed to
make large payments to the State of Florida in perpetuity, based on the
future sales of its brands of cigarettes in order to settle all claims of liability
resulting from past and future medical costs to the state. The other
contract, the Asset Purchase Agreement (“APA”), entered in 2014, where
Reynolds sold four brands of cigarettes to ITG Brands for seven billion
dollars. Reynolds now claims that due to the sale of these four brands, it
is no longer required to pay the state under the contract it agreed to in
1997. It claims the cigarettes sold under these four brands are no longer
the responsibility of Reynolds since they are no longer part of Reynolds’s
market share and that ITG, the new owner of these brands, had agreed to
use “reasonable best efforts” to become part of the FSA.

   We find that the second contract, the APA, between Reynolds and ITG
did not in any way vitiate the responsibilities and obligations of Reynolds
under the first contract, the FSA, to the State of Florida. We find the FSA
to be a clear and unambiguous contract which required any amendment
to the contract to be in writing and agreed to by all the parties to the
contract. We find that the FSA required payments in perpetuity in
exchange for the release of liability for past and future medical bills
payable by the State of Florida.

   We find, simply put, that a contract is a contract, and that Reynolds
continues to be liable under the contract it signed with the State of Florida.
Thus, we affirm.

   Florida Settlement Agreement

   In 1995, Florida filed a complaint against major tobacco companies,
including Reynolds, Philip Morris, and others, to recoup healthcare costs

                                        2
incurred by the State of Florida due to the consumption of cigarettes. The
parties settled the complaint from which came the Florida Settlement
Agreement (“FSA”) in 1997. The settlement was “binding upon all Settling
Defendants and their successors and assigns.” The “Settling Defendants”
were defined as “those Defendants in this Action that are signatories to
this Settlement Agreement,” like Reynolds and Philip Morris. The Settling
Defendants would make an initial payment and then annual payments in
perpetuity based on their Market Share of the sales of cigarettes as follows
in the FSA:

         7. Annual Payments. Each of the Settling Defendants
      agrees that on or before September 15, 1998 it shall severally
      cause to be paid to an account designated in writing by the
      State of Florida, pro rata in proportion to its respective Market
      Share and in accordance with and subject to paragraph 18 of
      this Stipulation of Amendment, its share of $220 million
      (subject to adjustment for appropriate allocation among
      Settling Defendants by January 30, 1999).

          Each of the Settling Defendants further agrees that, on or
      before December 31, 1999 and annually thereafter on or
      before December 31st of each year after 1999 (subject to final
      adjustment within 30 days), it shall severally cause to be paid
      into an account designated by the State of Florida, pro rata in
      proportion to its respective Market Share and in accordance
      with and subject to paragraph 18 of this Stipulation of
      Amendment, its share of 5.5% of the following amounts (in
      billions):

        Year     1999    2000     2001    2002     2003    thereafter

      Amount     $4.5B    $5B    $6.5B    $6.5B    $8B        $8B

         The payments made by Settling Defendants pursuant to
      this paragraph 7 shall be adjusted upward by the greater of
      3% or the actual total percent change in the Consumer Price
      Index applied each year on the previous year, beginning with
      the annual payment due on December 31, 1999. Such
      payments will also be decreased or increased, as the case may
      be, beginning with the annual payment due on December 31,
      1999, in accordance with the formula for adjustment of
      payments set forth in Appendix A hereto. Settling Defendants
      shall pay the payment due on September 15, 1998 without
      adjustment for inflation or in accordance with the formula for

                                     3
      adjustments of payments set forth in Appendix A hereto. This
      paragraph 7 supersedes section II.B(3) of the Settlement
      Agreement, which is hereby rendered null, void and of no
      further effect.

“Market Share,” in turn, was defined as “a Settling Defendant’s respective
share of sales of Cigarettes, by number of individual Cigarettes shipped in
the United States for domestic consumption . . . .”

   In exchange for the payments in perpetuity from the Settling
Defendants, Florida released the settling tobacco companies from past as
well as future liability. At one point in the agreement, it stated that “[t]he
payments to be made by Settling Defendants under the Settlement
Agreement and this Stipulation of Amendment are in settlement of all of
the State of Florida’s claims for damages incurred by the State in the year
of payment or earlier years related to the subject matter of this Action . . .
.” At another point in the agreement, it stated that the payments in
perpetuity were “to reimburse the State of Florida for medical expenses
incurred by the State . . . .”

    Merged as part of the FSA was a Florida Fee Payment Agreement, in
which the Settling Defendants agreed to pay Florida’s attorneys’ fees. The
fees due and owing would be made by the Settling Defendants in pro rata
proportion to their respective Market Share, just like the method outlined
in the FSA. A merger clause stated:

      The Settlement Agreement (including this Stipulation of
      Amendment, Florida Fee Payment Agreement and the Consent
      Decree) contains an entire, complete and integrated statement
      of each and every term and provision agreed to by and among
      the parties hereto relating in any way to the settlement of the
      tobacco litigation brought by the State of Florida, and is not
      subject to any condition not provided for herein.

    Significantly, the FSA could be “amended only by a writing executed by
all signatories hereto and any provision hereof may be waived only by an
instrument in writing executed by the waiving party.” There is no evidence
in this record of any writing executed by any of the parties waiving or
changing any of the terms of the FSA with respect to Reynolds’s liability
for payments.

   The FSA, unlike a prior settlement agreement negotiated a year before
between Liggett and the State of Florida, and the Master Settlement
Agreement between 46 states and the Settling Defendants, did not include

                                      4
a provision for brand transfer. The Liggett Agreement and the Master
Settlement Agreement both required that the party acquiring a brand
transfer agree to be bound by all the obligations of the Settling Defendant.
No such requirement releasing the Settling Defendant or obligating the
acquiring defendant is present in the FSA.

   Asset Purchase Agreement

    In 2014, Reynolds entered into an Asset Purchase Agreement (“APA”)
with ITG, a non-Settling Defendant, to sell four brands of cigarettes,
including Winston, KOOL, Salem, and Maverick, referred to as the
“Acquired Brands,” for seven billion dollars. Reynolds divested itself of the
brands as a result of antitrust considerations that arose from a previous
merger with Liggett. ITG agreed to “purchase, acquire and accept” all of
Reynolds’s “right, title and interest” in the Acquired Brands. Part of the
“right, title and interest” acquired by ITG were “all benefits and credits
under the State Settlements in respect of the Acquired Brands that relate
to the period after the Closing Date.” Additionally, ITG was to assume “all
Liabilities under the State Settlements in respect of the Acquired Tobacco
Cigarette Brands that relate to the period after the Closing Date.” An
exhibit to the APA stated that ITG was to “use its reasonable best efforts
to reach agreements with each of the Previously Settled States, by which
[ITG] will assume, as of the Closing, the obligations of a Settling Defendant
under the . . . Agreement with each such State.”

   Another exhibit to the APA stated that ITG would receive the benefit of
a Previously Settled States Reduction:

      Section 4.1 The Acquiror’s assumption of the obligations of an
      OPM [Original Participating Manufacturer] with respect to the
      Acquired Tobacco Cigarette Brands includes receiving the
      benefit of the credits and reductions and other calculations
      applied to brands owned by an OPM under the MSA [Master
      Settlement Agreement] with respect to the period after the
      Closing. This includes, without limitation, receiving the
      benefit of the Previously Settled States Reduction.

   Following the execution of the APA, neither Reynolds nor ITG made the
required annual payment to the State of Florida for the Acquired Brands
pursuant to the FSA. ITG never executed an amendment to the FSA to
become a party to the FSA. Reynolds, although it discontinued annual
payments to the State of Florida pursuant to the FSA, continued to pay
attorneys’ fees pursuant to the Florida Fee Payment Agreement.


                                     5
    Litigation Ensues

    After Reynolds and ITG refused to make settlement payments pursuant
to the FSA for the four Acquired Brands, litigation resulted in Florida and
other states. 1 In 2017, Florida moved to enforce the FSA against both
Reynolds and ITG, who was added as a party defendant. Philip Morris also
moved to enforce the FSA because of increased payment obligations it had
incurred. Florida and Philip Morris argued that Reynolds remained liable
for payments under the FSA and, additionally, that ITG assumed liability
under the APA.

   The trial court found that ITG was not liable as a successor or assign
because under the APA, ITG merely agreed to use “reasonable best efforts”
to enter into an agreement with Florida to assume liabilities under the
FSA. The trial court found that Reynolds continued to be liable for
payments under the FSA. The trial court stated:

      [N]othing in the [FSA] allows Reynolds to relieve itself from its
      obligations unless the transferee becomes a successor or
      assign/assignee. As is manifestly obvious, there can be no
      successor or assign/assignee unless the transferee-entity
      agrees to be bound by all, not merely some, of the provisions
      of the [FSA]. Under the asset-purchase agreement, Reynolds
      and [ITG] simply set the stage for the latter to become the
      former’s successor or assign/assignee. . . .

      [T]he fact Reynolds contracted with [ITG] to continue to pay
      Florida under the fee-payment agreement does prove that
      Reynolds understood that it was obligated to persuade [ITG]
      to become --- not merely endeavor to become --- Reynolds’
      successor or assign with respect to all Florida.

(emphasis omitted).

   The trial court entered a final judgment ordering that Reynolds pay
$92,620,158.99 to Florida and $9,828,088.70 to Philip Morris, for a total
in excess of $102.4 million. The court reiterated that “under the Florida
Settlement Agreement, a Settling Defendant that transfers a cigarette
brand to an entity that is not, and does not become, a Settling Defendant
will remain liable for the subsequent sales of cigarettes under that brand

1 Reynolds and ITG sued each other in Delaware to determine their contractual
rights with respect to each other. We make no comment on the merits of that
matter.

                                     6
(or brands, as the case may be) when making its settlement payments.”
The trial court directed that the “settlement payments must be calculated
as if the transaction with ITG Brands had not occurred . . . .”

    Reynolds filed a notice of appeal. Philip Morris filed a separate notice
of appeal, challenging the trial court’s ruling finding ITG not liable.

   R.J. Reynolds Appeal

   “A trial court’s interpretation of a contract is subject to de novo review.
The court’s findings of fact are reviewed using a substantial and competent
evidence standard.” Boca Concepts, Inc. v. Metal Shield Corp., 78 So. 3d
567, 570 (Fla. 4th DCA 2011) (citation omitted).

   “As settlement agreements are contractual in nature, they are
interpreted and governed by contract law.” Barone v. Rogers, 930 So. 2d
761, 763-64 (Fla. 4th DCA 2006). “Where contracts are clear and
unambiguous, they should be construed as written . . . from the words of
the entire contract.” Khosrow Maleki, P.A. v. M.A. Hajianpour, M.D., P.A.,
771 So. 2d 628, 631 (Fla. 4th DCA 2000). “Courts are required to construe
a contract as a whole and give effect, where possible, to every provision of
the agreement.” Anarkali Boutique, Inc. v. Ortiz, 104 So. 3d 1202, 1205
(Fla. 4th DCA 2012) (citation omitted).

   Affirmance is warranted because under the clear and unambiguous
language of the FSA, Reynolds remained liable for annual payments of the
Acquired Brands. The FSA required that Reynolds make annual payments
to the State of Florida in perpetuity, with no condition of termination, in
exchange for the release of liability for past and future medical costs
incurred by the State of Florida. Significantly, the FSA could be “amended
only by a writing executed by all signatories hereto and any provision
hereof may be waived only by an instrument in writing executed by the
waiving party.” It is undisputed that there was no written agreement by
the signatories to the FSA altering or waiving Reynolds’s payment
obligations to Florida. In the absence of such a written amendment,
Reynolds’s payment obligations continued in full force and effect under
the FSA. Thus, the lack of any such written agreement altering or waiving
conditions of the contract alone compels affirmance.

   The Florida Fee Payment Agreement also supports a finding of
Reynolds’s continuing liability. Under the Florida Fee Payment Agreement,
which was merged into the FSA, Reynolds agreed to be liable for attorneys’
fees incurred by Florida. Although Reynolds omitted the Acquired Brands
from its Market Share for purposes of annual payments under the FSA

                                      7
after it sold the Acquired Brands, it continued to include the same
Acquired Brands in its Market Share for purposes of payments of
attorneys’ fees. Reynolds’s agreement to be liable for attorneys’ fees, and
its continued payment of attorneys’ fees, is consistent with a finding and
understanding that Reynolds continued to be liable for annual payments
to Florida, as both were calculated based on the same Market Share
provision. See In re Failla, 838 F.3d 1170, 1176-77 (11th Cir. 2016) (“The
presumption of consistent usage instructs that ‘[a] word or phrase is
presumed to bear the same meaning throughout a text . . . .’”) (quoting
Antonin Scalia & Bryan A. Garner, Reading Law 170 (2012)). If Reynolds
is liable for attorneys’ fees pursuant to Market Share, then it stands to
reason, within the same FSA, that Reynolds would also be liable for annual
payments pursuant to the same Market Share provision.

    The APA did not, and could not, alter Reynolds’s continuing payment
obligations to the State of Florida. The APA could not extinguish
Reynolds’s responsibilities and obligations under the FSA, as it was a
separate agreement not involving all the parties to the FSA. Moreover, the
APA did not contain a specific provision requiring ITG to make payments
on the Acquired Brands. “A corporation that acquires the assets of another
business entity does not as a matter of law assume the liabilities of the
prior business.” Corp. Exp. Office Prods., Inc. v. Phillips, 847 So. 2d 406,
412 (Fla. 2003). “[T]he parties must agree to a contract which is intended
to take the place of a prior obligation.” Moring v. Miller, 330 So. 2d 93, 95
(Fla. 1st DCA 1976). “[M]ere acceptance of the obligation of the assignee
without any intention to relieve the original debtor is not, in and of itself,
sufficient . . . .” Id.

   Although the APA stated that ITG assumed Reynolds’s liabilities under
the FSA, it also stated that ITG had to use “reasonable best efforts” to
reach an agreement with Florida to become a party to the FSA. It is
undisputed that ITG never became a party to the FSA. Having never
become a party to the FSA, ITG was not bound by the provisions of that
agreement. See Phillips, 847 So. 2d at 412; Moring, 330 So. 2d at 95. See
also Gee v. Tenneco, Inc., 615 F.2d 857, 862 (9th Cir. 1980) (“[N]o rule of
law . . . allows a corporate entity to evade liability for its tortious conduct
merely by selling the instrumentality which is alleged to have caused the
injury . . . .”); 19 C.J.S. Corporations § 735 (2020) (“[T]he mere transfer of
the assets of one corporation to another corporation or individual generally
does not make the latter liable for the debts or liabilities of the first
corporation.”).

   Reynolds argues that once it stopped manufacturing, selling, and
shipping the Acquired Brands, they were no longer part of its Market Share

                                      8
for purposes of calculating the annual payments. Reynolds’s argument is
inconsistent with the clear and unambiguous language of the FSA.
Nothing in the Market Share provision establishes that assignment of the
Acquired Brands to ITG somehow extinguishes Reynolds’s liability in the
absence of a signed written agreement to the FSA. Finally, the assignment
of the Acquired Brands to ITG does not change the fact that ITG did not
assume the obligation to make payments on the Acquired Brands.

    Two cases from Texas and Minnesota are instructive. In both cases,
each court similarly rejected Reynolds’s argument and concluded that
Reynolds continued to remain liable for payments to the state under
settlement agreements even after assigning the acquired brands to ITG.
See Texas v. Am. Tobacco Co., 5:96-CV-00091-JRG, 2020 WL 991784 (E.D.
Tex. Feb. 25, 2020); In Re Petition of the State of Minnesota for an Order
Compelling Payment of Settlement Proceeds Related to ITG Brands, LLC, No.
62-CV-18-1912 (Sept. 24, 2019). In both those cases, like this case, the
state entered into a settlement agreement with tobacco companies
providing for annual payments in perpetuity based on Market Share. After
selling the Acquired Brands to ITG, like the present case, neither Reynolds
nor ITG made annual payments to the state.

    The Texas court found that Reynolds remained liable under the
common law because mere assignment does not extinguish liability. Am.
Tobacco Co., 2020 WL 991784, at *38. The court also found liability under
the plain language of the settlement agreement, which provided for
perpetual payments with no termination condition, did not contain a
“release upon assignment” provision, and required the other parties’ prior
written consent to extinguish an obligation. Id. at *35, 39-40. The
settlement’s purpose of reimbursement of healthcare expenses further
supported Reynolds’s continued liability. Id. at *33-34. The court rejected
Reynolds’s argument that its liability was extinguished by the Market
Share provision, concluding “that the Market Share provision does not
apply to the legal question of liability following an assignment.” Id. at *41.
Finally, the court found that “Reynolds’ continued inclusion of the
Acquired Brands in its Market Share payment to Texas’ Private Counsel is
tantamount to an admission by Reynolds that it remains liable to Texas.”
Id.

   The Minnesota court, in an Order and Memorandum addressing cross-
motions for summary judgment, similarly held Reynolds liable. The court
rejected Reynolds’s contention that its liability was limited by the Market
Share provision, concluding that Reynolds remained liable absent an
agreement otherwise. In Re Petition, No. 62-CV-18-1912, at 15-16. The
court further found that allowing Reynolds to escape liability simply by

                                      9
transferring assets was “absurd” and contrary to the purpose of the
agreement, which was to make payments in perpetuity to offset public
health care expenditures associated with the use of cigarettes. Id. at 17.

   Philip Morris Appeal

   Philip Morris argues that ITG, in addition to Reynolds, should be liable
for annual settlement payments for two reasons: first, ITG received the
benefit of a Previously Settled States Reduction under the APA and,
second, ITG is a successor and assign under the FSA.

  Philip Morris’s Previously Settled States Reduction argument is
unsupported by the plain language of the exhibit to the APA, which states:

      Section 4.1 The Acquiror’s assumption of the obligations of an
      OPM [Original Participating Manufacturer] with respect to the
      Acquired Tobacco Cigarette Brands includes receiving the
      benefit of the credits and reductions and other calculations
      applied to brands owned by an OPM under the MSA [Master
      Settlement Agreement] with respect to the period after the
      Closing. This includes, without limitation, receiving the
      benefit of the Previously Settled States Reduction.

   Section 4.1 simply states that ITG is entitled to certain rights “under
the MSA.” (emphasis added). Section 4.1 does not mention Florida or the
FSA or relate to any obligation by ITG to make payments under the FSA.
The language of Section 4.1 deals solely with MSA payment calculations.
Nothing in Section 4.1 suggests ITG assumed liability for the settlement
payments under the FSA.

    Nor was ITG liable as Reynolds’s successor or assign under the FSA.
“A corporation that acquires the assets of another business entity does not
as a matter of law assume the liabilities of the prior business.” Phillips,
847 So. 2d at 412; see also Bernard v. Kee Mfg. Co., 409 So. 2d 1047, 1049
(Fla. 1982) (“[T]he traditional corporate law rule . . . does not impose the
liabilities of the selling predecessor upon the buying successor company
unless . . . the successor expressly or impliedly assumes obligations of the
predecessor . . . .”).

   The plain language of the APA makes clear that ITG did not agree to
assume the settlement payment obligations. Rather, ITG agreed only to
use its “reasonable best efforts” to try to reach an agreement with Florida
to become a party to the FSA, and it is undisputed that ITG never became
a party to that agreement. Therefore, we find the trial court was correct

                                    10
since ITG was not a successor or assignee of Reynolds. See Phillips, 847
So. 2d at 412; Bernard, 409 So. 2d at 1049.

   Conclusion

   Reynolds seeks to cease annual payments pursuant to the FSA. This
despite a contract requiring payments in perpetuity. It points to the fact
that ITG, not Reynolds, presently owns the four Acquired Brands making
up that part of the “Market Share.” But, as Oliver Wendell Holmes once
stated, “[t]he duty to keep a contract at common law means a prediction
that you must pay damages if you do not keep it,—and nothing else.” The
Path of the Law, 10 Harv. L. Rev. 457, 462 (1897). In this case, by stopping
annual payments, Reynolds breached the FSA and failed the “duty to keep
a contract” and thus “must pay damages” by paying what it is required to
pay pursuant to the contract.

   We find the trial court correctly found that Reynolds remained liable for
the annual settlement payments for the Acquired Brands under the clear
and unambiguous language of the FSA since, in this case, one contract
did not alter the obligations of the other contract. The APA did not, and
could not, in any way alter Reynolds’s obligation under the FSA. The trial
court also correctly found that ITG did not assume liability for payments
to Florida under the APA and that ITG was not a successor or assign under
the FSA.

   We therefore affirm the final judgment in all respects.

   Affirmed.

DAMOORGIAN and FORST, JJ., concur.

                           *         *         *

   Not final until disposition of timely filed motion for rehearing.




                                    11
