TITLE 29

State Government

Public Officers and Employees

CHAPTER 60D. ENFORCEMENT PROVISIONS OF DELAWARE TOBACCO SETTLEMENT ACT OF 1999


The General Assembly hereby finds that violations of Chapter 60C of this title, the Delaware Tobacco Settlement Act of 1999, threaten the integrity of the Tobacco Master Settlement Agreement, the fiscal soundness of the State, and the public health. The General Assembly hereby finds that enactment of the procedural enhancements promulgated by this chapter will aid in the enforcement of Chapter 60C of this title, and will thereby safeguard the Master Settlement Agreement, the fiscal soundness of the State, and the public health.

74 Del. Laws, c. 124, § 1.;

(a) "Affixing agent" means a person who is authorized to affix tax stamps to packages or other containers of cigarettes under Chapter 53 of Title 30 or any person that is required to pay the excise tax imposed pursuant to Chapter 53 of Title 30 on Cigarettes.

(b) "Brand family" means all styles of cigarettes sold under the same trademark and differentiated from one another by means of additional modifiers or descriptors, including, but not limited to, "menthol", "lights", "kings", and "100s", and includes any brand name (alone or in conjunctions with any other word), trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a previously known brand of Cigarettes.

(c) "Cigarette" has the same meaning as in § 6081(d) of this title.

(d) "Department" means the Department of Finance for the State.

(e) "Master settlement agreement" has the same meaning given to that term in § 6081(e) of this title.

(f) "Non-participating manufacturer" means any tobacco product manufacturer that is not a participating manufacturer.

(g) "Participating manufacturer" has the same meaning given to that term in Section II (jj) of the master settlement agreement and all amendments thereto.

(h) "Qualified escrow fund" has the same meaning given to that term in § 6081(f) of this title.

(i) "Tobacco product manufacturer" has the same meaning given to that term in § 6081(i) of this title.

(j) "Units sold" has the same meaning given to that term in § 6081(j) of this title.

74 Del. Laws, c. 124, § 1.;

(a) Certification. — Every tobacco product manufacturer whose cigarettes are sold in this State, whether directly or through a distributor, retailer or similar intermediary or intermediaries, shall execute and deliver in the manner prescribed by the Attorney General a certification to the Department and Attorney General, no later than April 30th of each year, certifying under penalty of perjury that, as of the date of such certification, such tobacco product manufacturer is either a participating manufacturer or is in full compliance with Chapter 60C of this title, including all quarterly installment payments required by § 6087(e) of this title.

(1) A participating manufacturer shall include in its certification a list of its brand families. The participating manufacturer shall update such list 30 calendar days prior to any addition to or modification of its brand families by executing and delivering a supplemental certification to the Attorney General and Department.

(2) A non-participating manufacturer shall include in its certification:

a. A list of all of its brand families and the number of units sold for each brand family that were sold in the State during the preceding calendar year;

b. A list of all its brand families that have been sold in the State at any time during the current calendar year;

c. Indicating, by an asterisk, and brand family sold in the State during the preceding calendar year that is no longer being sold in the State as of the date of such certification; and

d. Identifying by name and address any other manufacturer of such brand families in the preceding or current calendar year.

The non-participating manufacturer shall update such list thirty calendar days prior to any addition to or modification of its brand families by execution and delivering a supplemental certification to the Attorney General and Department.

(3) In the case of a non-participating manufacturer, such certification shall include representations that:

a. Such non-participating manufacturer is registered to do business in the State or has appointed a resident agent for service of process and provided notice thereof as required by § 6086 of this title; and

b. Such non-participating manufacturer:

1. Has established and continues to maintain a qualified escrow fund; and

2. Has executed a qualified escrow agreement that has been reviewed and approved by the Attorney General and that governs the qualified escrow fund; and

c. such non-participating manufacturer is in full compliance with Chapter 60C of this title and this chapter, and any regulations promulgated pursuant thereto; and

d.1. The name, address and telephone number of the financial institution where the non-participating manufacturer has established such qualified escrow fund required pursuant to Chapter 60C of this title and all regulations promulgated thereto;

2. The account number of such qualified escrow fund and any sub-account number for Delaware;

3. The amount such non-participating manufacturer placed in such fund for cigarettes sold in the State during the preceding calendar year, the date and amount of each such deposit, and such evidence or verification as may be deemed necessary by the Attorney General to confirm the foregoing; and

4. The amount and date of any withdrawal or transfer of funds the non-participating manufacturer made at any time from such fund or from any other qualified escrow fund into which it ever made escrow payments pursuant to Chapter 60C of this title and all regulations promulgated thereto.

(4) A tobacco product manufacturer may not include a brand family in its certification unless:

a. In the case of a participating manufacturer, said participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of calculating its payments under the master settlement agreement for the relevant year, in the volume and shares determined pursuant to the master settlement agreement; and

b. In the case of a non-participating manufacturer, said non-participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of Chapter 60C this title.

Nothing in this section shall be construed as limiting or otherwise affecting the State's right to maintain that a brand family constitutes cigarettes of a different tobacco product manufacturer for purposes of calculating payments under the master settlement agreement or for purposes of Chapter 60C of this title.

(5) Tobacco product manufacturers shall maintain all invoices and documentation of sales and other such information relied upon for such certification for a period of 5 years, unless otherwise required by law to maintain them for a greater period of time.

(b) Directory of cigarettes approved for stamping and sale. — Not later than August 7, 2003, the Attorney General shall develop and publish on its website a directory listing all tobacco product manufacturers that have provided current and accurate certifications conforming to the requirements of subsection (a) of this section and all brand families that are listed in such certifications (the "Directory"), except as noted below.

(1) The Attorney General shall not include or retain in such Directory the name or brand families of any non-participating manufacturer that has failed to provide the required certification or whose certification the Attorney General determines is not in compliance with subdivisions (a)(2) and (3) of this section, unless the Attorney General has determined that such violation has been cured to the satisfaction of the Attorney General.

(2) Neither a tobacco product manufacturer nor brand family shall be included or retained in the Directory if the Attorney General concludes, in the case of a non-participating manufacturer, that

a. Any escrow payment required pursuant to Chapter 60C of this title for any period for any brand family, whether or not listed by such non-participating manufacturer, has not been fully paid into a qualified escrow fund governed by a qualified escrow agreement that has been approved by the Attorney General; or

b. Any outstanding final judgment, including interest thereon, for a violation of Chapter 60C of this title has not been fully satisfied for such brand family or such manufacturer.

(3) The Attorney General shall update the Directory as necessary in order to correct mistakes and to add or remove a tobacco product manufacturer or brand family to keep the Directory in conformity with the requirements of this chapter. The Attorney General shall post in the Directory and transmit by e-mail or other practicable means to each affixing agent and tobacco product manufacturer notice of any removal from the Directory of that tobacco product manufacturer or brand family at least 30 days prior to removal from the Directory of such tobacco product manufacturer or brand family. Unless otherwise provided by agreement between an affixing agent and a tobacco product manufacturer, the affixing agent shall be entitled to a refund from a tobacco product manufacturer for any money paid by the affixing agent to the tobacco product manufacturer for any cigarettes of the tobacco product manufacturer in the possession of the affixing agent on the effective date of removal from the Directory, or as subsequently received from a retail dealer as provided herein, of that tobacco product manufacturer or brand family of cigarettes. Unless otherwise provided by agreement between a retail dealer and an affixing agent or a tobacco product manufacturer, a retail dealer shall be entitled to a refund from an affixing agent or a tobacco product manufacturer for any money paid by the retail dealer to such affixing agent or tobacco product manufacturer for any cigarettes of the tobacco product manufacturer still in the possession of the retail dealer on the effective date of removal from the Directory of that tobacco product manufacturer or brand family of cigarettes. The Attorney General shall not restore to the Directory the tobacco product manufacturer or the brand family until the tobacco product manufacturer has paid the affixing agent or retail dealer any refund due.

(4) Every affixing agent shall provide and update as necessary an electronic mail address to the Attorney General for the purpose of receiving any notifications as may be required by this chapter.

(c) Prohibition against stamping or sale of cigarettes not in the directory. — It shall be unlawful for any person:

(1) To affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the Directory;

(2) To sell, offer or possess for sale in this State, cigarettes of a tobacco product manufacturer or brand family not included in the Directory.

74 Del. Laws, c. 124, § 1.;

(a) Requirement for agent for service of process. — Any nonresident or foreign Non-participating manufacturer that has not registered to do business in the State as a foreign corporation or business entity shall, as a condition precedent to having its brand families included or retained in the Directory, appoint and continually engage without interruption the services of an agent in this State to act as agent for the service of process on whom all process, and any action or proceeding against it concerning or arising out of the enforcement of this title and Chapter 60C of this title, may be served in any manner authorized by law. Such service shall constitute legal and valid service of process on the non-participating manufacturer. The non-participating manufacturer shall provide the name, address, phone number and proof of the appointment and availability of such agent to, and to the satisfaction of, the Department and Attorney General.

(b) The non-participating manufacturer shall provide notice to the Department and Attorney General 30 calendar days prior to termination of the authority of an agent and shall further provide proof to the satisfaction of the Attorney General of the appointment of a new agent no less than 5 calendar days prior to the termination of an existing agent appointment. In the event an agent terminates an agency appointment, the non-participating manufacturer shall notify the Department and Attorney General of said termination within 5 calendar days and shall include proof to the satisfaction of the Attorney General of the appointment of a new agent.

(c) Any non-participating manufacturer whose cigarettes are sold in this State, who has not appointed and engaged an agent as herein required, shall be deemed to have appointed the Secretary of State as such agent and may be proceeded against in courts of this State by service of process upon the Secretary of State; provided, however, that the appointment of the Secretary of State as such agent shall not satisfy the condition precedent for having the brand families of the non-participating manufacturer included or retained in the Directory.

74 Del. Laws, c. 124, § 1.;

(a) Reporting by affixing agents. — Not later than 20 calendar days after the end of each calendar quarter, and more frequently if so directed by the Department, each affixing agent shall submit such information as the Department and Attorney General require to facilitate compliance with this chapter, including, but not limited to, a list by brand family of the total number of cigarettes, or, in the case of roll your own, the equivalent stick count, for which the affixing agent affixed stamps during the previous calendar month or otherwise paid the tax due for such cigarettes. The affixing agent shall maintain, and make available to the Department and the Attorney General, all invoices and documentation of sales of all non-participating manufacturer cigarettes and any other information relied upon in reporting to the Department for a period of 5 years.

(b) Disclosure of information. — The Department is authorized to disclose to the Attorney General any information received and requested by the Attorney General for purposes of determining compliance with and enforcing the provisions of this chapter and Chapter 60C of this title. The Department and Attorney General shall share with each other the information received under this chapter, and may share such information with other federal, State or local agencies only for purposes of enforcement of this chapter, Chapter 60C of this title, or corresponding laws of other states.

(c) Verification of qualified escrow fund. — The Attorney General may require at any time from the non-participating manufacturer proof, from the financial institution in which such manufacturer has established a Qualified Escrow Fund for the purpose of compliance with Chapter 60C of this title, of the amount of money in such fund, exclusive of interest, the amount and date of each deposit to such fund, and the amount and date of each withdrawal from such fund.

(d) Requests for additional information. — In addition to the information required to be submitted pursuant to Chapter 60C of this title and this chapter, the Department may require an affixing agent or tobacco product manufacturer to submit any additional information including, but not limited to, samples of the packaging or labeling of each brand family, as is necessary to enable the Attorney General to determine whether a tobacco product manufacturer is in compliance with Chapter 60C of this title.

(e) Quarterly escrow installments. — To promote compliance with this chapter, the Department may promulgate regulations requiring a tobacco product manufacturer subject to the requirements of § 6085(a)(2) of this title to make the escrow deposits required in quarterly installments during the year in which the sales covered by such deposits are made. The Department may require production of information sufficient to enable the Attorney General to determine the adequacy of the amount of the installment deposit.

74 Del. Laws, c. 124, § 1.;

(a) License revocation and civil penalty. — In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that an affixing agent has violated § 6085(c) of this title or any regulation adopted pursuant to this chapter, the Department may revoke or suspend the license of the affixing agent in the manner provided by Chapter 53 of Title 30. Each stamp affixed and each sale or offer to sell cigarettes in violation of § 6085(c) of this title shall constitute a separate violation. For each violation hereof, the Department may also impose a civil penalty in an amount not to exceed the greater of 500% of the retail value of the cigarettes or $5,000 upon a determination of violation of § 6085(c) of this title or any regulations adopted pursuant thereto. Such penalty shall be imposed in the manner provided by Chapter 53 of Title 30.

(b) Contraband and seizure. — Any cigarettes that have been sold, offered for sale, or possessed for sale in this State in violation of § 6085(c) of this title shall be deemed contraband under § 5346 of Title 30 and such cigarettes shall be subject to seizure and forfeiture as provided in such section, and all such cigarettes so seized and forfeited shall be destroyed and not resold.

(c) Injunction. — The Attorney General may seek an injunction to restrain a threatened or actual violation of §§ 6085(c), 6087(a) or 6085(d) of this title by an affixing agent and to compel the affixing agent to comply with such subsections. In any action brought pursuant to this section, the State shall be entitled to recover the costs of investigation, costs of the action and reasonable attorney fees.

(d) Unlawful sale and distribution. — It shall be unlawful for a person to:

(1) Sell or distribute cigarettes, or

(2) Acquire, hold, own, posses, transport, import or cause to be imported cigarettes that the person knows or should know are intended for distribution or sale in the State in violation of § 6085(c) of this title.

A violation of this section shall be a Class B misdemeanor.

(e) Unfair and deceptive trade practice. — A person who violates § 6085(c) of this title engages in an unfair and deceptive trade practice in violation of Chapter 25 of Title 6.

74 Del. Laws, c. 124, § 1.;

(a) Notice and review of determination. — A determination of the Attorney General to not include or to remove from the Directory a brand family or tobacco product manufacturer shall be subject to review in the manner prescribed by Chapter 101 of this title.

(b) Applicants for licenses. — No person shall be issued a license or granted a renewal of a license to act as an affixing agent unless such person has certified in writing, under penalty of perjury, that such person will comply fully with this section.

(c) Dates. — For the year 2003, the first report of affixing agents required by § 6087(a) of this title shall be due Aug. 7, 2003; the certifications by a tobacco product manufacturer described in § 6085(a) of this title shall be due Aug. 22, 2003, and the Directory described in § 6085(b) of this title shall be published or made available by Oct. 6, 2003.

(d) Promulgation of regulations. — The Department may promulgate regulations necessary to effect the purposes of this chapter.

(e) Recovery of costs and fees by Attorney General. — In any action brought by the State to enforce this chapter, the State shall be entitled to recover the costs of investigation, expert witness fees, costs of the action and reasonable attorney fees.

(f) Disgorgement of profit of violations of chapter. — If a court determines that a person has violated this chapter, the court shall order any profits, gain, gross receipts or other benefit from the violation to be disgorged and paid to the Delaware Health Fund. Unless otherwise expressly provided the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this State.

(g) Construction and severability. — If a court of competent jurisdiction finds that the provisions of this chapter and of chapter of this title conflict and cannot be harmonized, then such provisions of Chapter 60C of this title shall control. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this chapter causes Chapter 60C of this title to no longer constitute a qualifying or model statute, as those terms are defined in the master settlement agreement, then that portion of this chapter shall not be valid. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this chapter is for any reason held to be invalid, unlawful or unconstitutional, such decision shall not affect the validity of the remaining portions of this chapter or any part thereof.

74 Del. Laws, c. 124, § 1.;