         IN THE SUPREME COURT OF THE STATE OF DELAWARE

 ITG BRANDS, LLC,                            §
                                             §
        Plaintiff-Counterclaim               §   Nos. 453, 2019
        Defendant Below,                     §
        Appellant,                           §   Court Below—Court of Chancery
                                             §   of the State of Delaware
        v.                                   §
                                             §   C.A. No. 2017-0129
 REYNOLDS AMERICAN INC. and                  §
 R.J. REYNOLDS TOBACCO                       §
 COMPANY,                                    §
                                             §
        Defendants-Counterclaim              §
        Plaintiffs Below,                    §
        Appellees.                           §

                              Submitted: October 31, 2019
                               Decided: November 7, 2019

Before VALIHURA, Acting Chief Justice;* VAUGHN and TRAYNOR, Justices.

                                         ORDER

       Upon consideration of the notice of interlocutory appeal and the documents

attached thereto, it appears to the Court that:

       (1)    This interlocutory appeal arises from part of a Court of Chancery

opinion and order deciding cross-motions for partial judgment on the pleadings.1

The following events led to this ruling. In July 2014, Reynolds American Inc. agreed




* Pursuant to Del. Const. Art. IV §§ 2, 13.
1
  ITG Brands, LLC v. Reynolds Am. Inc., 2019 WL 4593495 (Del. Ch. Sept. 23, 2019).
to sell four cigarette brands owned by its subsidiary, R.J. Reynolds Tobacco

Company (“Reynolds Tobacco” and together with Reynolds American Inc.

(“Reynolds”)), to ITG Brands, LLC (“ITG Brands”). As part of the Asset Purchase

Agreement, ITG Brands agreed to use its reasonable best efforts to assume Reynolds

Tobacco’s obligations for post-closing cigarette sales under settlement agreements

that Reynolds Tobacco had previously entered into with Florida, Minnesota,

Mississippi, and Texas. The transaction closed in June 2015, but ITG Brands has

not yet assumed Reynold Tobacco’s obligations under the settlement agreements

with Florida, Minnesota, and Texas.       A Florida state court judgment against

Reynolds Tobacco for approximately $93 million in unpaid settlement payments

since the closing of the ITG transaction is currently on appeal.

      (2)    On February 17, 2017, ITG Brands filed an action for injunctive and

declaratory relief against Reynolds in the Court of Chancery. Reynolds filed

counterclaims. Earlier this year the parties filed cross-motions for partial judgment

on the pleadings on the issue of whether the Asset Purchase Agreement required ITG

Brands to indemnify Reynolds for the amount of the Florida state court judgment

against Reynolds Tobacco. Reynolds also moved for partial judgment on the

pleadings on the ground that ITG Brands was not entitled under the Asset Purchase

Agreement to demand, as a condition to joining settlement agreements, protection




                                          2
from making payments under equity fee statutes in states like Florida that have not

enacted such statutes.2

       (3)     The Court of Chancery denied the parties’ cross-motions on the first

issue and granted Reynolds’s motion on the second issue.3 As to the first issue, the

Court of Chancery held that the relevant portions of the Asset Purchase Agreement

were ambiguous.4 As to the second issue, the Court of Chancery held that the Asset

Purchase Agreement did not authorize ITG Brands to demand, as a condition to

joining settlement agreements, protection from making payments under equity fee

statutes in states that have not enacted such statutes.5

       (4)     ITG Brands filed a motion for entry of a partial final judgment under

Court of Chancery Rule 54(b) or, in the alternative, an application for certification

under Supreme Court Rule 42 solely on the Court of Chancery’s ruling as to the

equity fee statute issue. For certification purposes, ITG Brands argued that the ruling

decided a substantial issue of material importance under Rule 42. As to the Rule

42(b)(iii) criteria, ITG Brands contended that certification would serve

considerations of justice because otherwise ITG Brands would be forced to join the

Florida settlement and forfeit its rights under the Asset Purchase Agreement.



2
  Under an equity fee statute, a state imposes fees on tobacco companies based on their cigarette
sales to pay for health care costs in that state. Id. at *2.
3
  Id. at *1.
4
  Id. at *9.
5
  Id. at *12.
                                                3
Reynolds opposed the motion and application. As to the application for certification,

Reynolds argued that the ruling did not decide a substantial issue of material

importance. Reynolds also argued that none of the Rule 42(b)(iii) criteria were

satisfied.

       (5)    On October 31, 2019, the Court of Chancery denied the motion for

entry of a partial final judgment and the application for certification.6 The Court of

Chancery held that its ruling decided a substantial issue of material importance, but

certification of an interlocutory appeal would not serve considerations of justice.7

The Court of Chancery found that ITG Brands’s assertion of immediate and

irreparable harm was overblown and speculative, noting that Florida had not yet

enacted an equity fee statute.8 The Court of Chancery also recognized the risk of

wasteful piecemeal litigation given the number of outstanding claims and the

pendency of related cases in other states. 9

       (6)    Applications for interlocutory review are addressed to the sound

discretion of the Court.10 In the exercise of our discretion and giving great weight

to the Court of Chancery’s well-reasoned denial of the application for certification,



6
  ITG Brands, LLC v. Reynolds Am. Inc.. 2019 WL 5654216 (Del. Oct. 31, 2019). A corrected
order was issued on November 1, 2019. ITG Brands, LLC v. Reynolds Am. Inc.. 2019 WL
5688559 (Del. Nov. 1, 2019)
7
  Id. at *4.
8
  Id.
9
  Id.
10
   Supr. Ct. R. 42(d)(v).
                                             4
this Court has concluded that the application for interlocutory review does not meet

the strict standards for certification under Supreme Court Rule 42(b). The case is

not exceptional,11 and the potential benefits of interlocutory review do not outweigh

the inefficiency, disruption, and probable costs caused by an interlocutory appeal.12

          NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is

REFUSED.

                                              BY THE COURT:


                                              /s/ Karen L. Valihura
                                              Acting Chief Justice




11
     Supr. Ct. R. 42(b)(ii).
12
     Supr. Ct. R. 42(b)(iii).
                                          5
