Summary: California versus U.S. Smokeless Tobacco Co.

By Kay Burk
8/8/05

lthough the NHRA is not a defendant in this action, the outcome of this case could have serious financial repercussions for the sanctioning body and for Don Prudhomme Racing, who both may be looking for a replacement sponsor for the Skoal brand.

Drag Racing Online received a copy of the 19-page complaint filed in the Superior Court of California, County of San Diego. We will give a brief summary of the major points.

On July 27, 2005, the Attorney General of the State of California brought suit against U.S. Smokeless Tobacco Company, parent company of the Skoal brand, charging that that USSTC is violating the Smokeless Tobacco Master Settlement Agreement because it promotes its Skoal brand by sponsoring NHRA racing events with contestants younger than age 18.

The suit alleges USSTC is also violating the Agreement by: "(i) selling or permitting to be sold prohibited Skoal hats, clothes, toy cars, and other Skoal merchandise at NHRA event; (ii) engaging in prohibited paid Skoal product placement at NHRA live and televised events; and (iii) engaging in prohibited Outdoor Advertising of Skoal at NHRA events, such as by having the Skoal name on signs and race cars.

"Additionally, USSTC is violating the STMSA ban on having more than one Brand Name Sponsorship per year. Since 2004, USSTC has sponsored multiple NHRA race cars and multiple NHRA-sanctioned national series or tours."

LEGAL BACKGROUND

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The Smokeless Tobacco Master Settlement Agreement was part of a Consent Decree entered by the San Diego Superior Court on December 9, 1998. It provides, in part: "Prohibited Sponsorships. …[N]o Participating Manufacturer may engage in any Brand Name Sponsorship in any State consisting of . . . events in which any paid participants or contestants are Youth." Youth means any person or persons under 18 years of age.

Section III(e) of the STMSA prohibits USSTC from making "Any payment or other consideration to any other person or entity to use, display, make reference to, or use as a prop any Tobacco Product, Tobacco Product package, advertisement for a Tobacco Product, or any other item bearing a Brand Name in any motion picture, television show, theatrical production or other live performance, live or recorded performance of music, commercial film or video, or video game."

USSTC AGREEMENT WITH NHRA

The sponsorship agreement between USSTC and the NHRA provides for an approximately 4-foot by 28-foot "Skoal Racing" sign to be displayed across the bottom of the big screen video display at each of the 23 National Events; one 30-second big screen video display featuring the Skoal sponsorship program which is aired at least six times at each National Event; a minimum of three public address announcements per day; two signs on the outside guardwalls at each National Event facility; four additional inside guardwall signs at each NHRA-owned National Event facility; USSTC supplied banners in high visibility locations; and exclusive sponsorship and name entitlement to the "NHRA Skoal Showdown" for Funny Cars.

USSTC AGREEMENT WITH PRUDHOMME RACING

The 2004 sponsorship agreement between USSTC and Don Prudhome Racing, Inc. provides for the Skoal Brand Name to be displayed on two Funny Cars, one top Fuel Dragster and all support vehicles as well as workday and raceday uniforms of the drivers and crew. The agreement provides USSTC with space in the pits for Skoal advertising during National Events.

The 2005 agreement is for one Funny Car and one Top Fuel dragster.