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Tobacco Manufacturer Requests Supreme Court Intervention

Monday, May, 16, 2016

The country’s largest manufacturer of tobacco has asked the US Supreme Court to review the decision made by the Pennsylvania Supreme Court that affects $120 million in Master Settlement agreement money. The R.J. Reynolds Tobacco Col., Lorriland Inc., and Phillip Morris USA filed a writ of certiorari in April for the Supreme Court to take up the case. At least four justices have agreed so far to hear the petition.


The tobacco manufacturers agreed in 1998 to settle lawsuits filed by 46 state’s attorneys general regarding smoking related healthcare costs. North Carolina and Pennsylvania were among the states in the suit. The companies agreed to payments to the stats of $206 billion over the course of two decades. It also included marketing limits the companies would be forced to adhere to.


The manufacturers now claim there is a provision in the agreement that allows them to pay less if they have lost market share to smaller companies not originally part of the deal. Some smaller manufacturers have joined the agreement.


An arbitration panel ruled in 2013 that six states, including Pennsylvania, failed to enforce escrow settlement provisions involving manufacturers not participating in the agreement, which meant the state received $150 million in 2014, rather than $330 million. The manufacturers cited their eligibility for one-time credits from the six states. A Philadelphia judge restored $120 million of the $180 million difference and an appeals court upheld the ruling in April.


The manufactures are now asking that the US Supreme Court determine if the Federal Arbitration Act, governing interstate commerce, pre-empt contrary state laws judicial review standards.