U.S. Supreme Court
declines to hear tobacco arbitration dispute
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[October 12, 2016]
By Lawrence Hurley
WASHINGTON (Reuters) - The U.S. Supreme
Court on Tuesday let stand lower court rulings allowing Pennsylvania and
Maryland to keep tens of millions of dollars in a dispute with tobacco
companies involving the massive 1998 settlement over deceptive marketing
and advertising of cigarettes.
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The justices declined to hear appeals, filed by Reynolds America
Inc, Altria Group Inc and other companies that were part of the
settlement, of rulings that had favored Pennsylvania and Maryland
regarding the amount of the annual payment that those states should
receive under the deal.
The dispute centered on the 2003 annual payment that companies that
participated in the settlement were required to make to the various
states as part of the deal.
An arbitration panel found that six states, including Pennsylvania
and Maryland, had not met their side of the bargain to ensure, as
required, that companies that were part of the settlement did not
disproportionately lose market share as a result of the terms of the
deal to competitors that shunned it.
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The arbitration panel reduced the amount of money the six states
would receive for that year, but state courts in Maryland and
Pennsylvania subsequently ruled in favor of those states when they
objected. As a result of those rulings, Pennsylvania was able to
keep $125 million and Maryland was able to retain $50 million that
the companies had demanded be given back.
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Under the landmark settlement reached with 46 states, the largest
U.S. tobacco companies promised to pay nearly $200 billion over 25
years to states to settle lawsuits over cigarette-related public
health costs. Among other provisions, the deal imposed restrictions
on the sale and marketing of cigarettes including barring ads
targeting youths.
The major tobacco companies worried that they would have to raise
prices on their brands in order to fund the settlement. So the 1998
agreement required states to pass laws that prevented cigarette
companies that did not sign the agreement from gaining an unfair
economic advantage over those that did sign it.
(Reporting by Lawrence Hurley; Editing by Will Dunham)
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