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Claims Agains the Tobacco Master Settlement

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Lawsuit settlement in the United states of america

The Tobacco Master Settlement Agreement (MSA) was entered in November 1998, originally between the 4 largest Us tobacco companies (Philip Morris Inc., R. J. Reynolds, Dark-brown & Williamson and Lorillard – the "original participating manufacturers", referred to as the "Majors") and the attorneys general of 46 states. United states of america settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related wellness-care costs.[1] : 25 In exchange, the companies agreed to curtail or finish certain tobacco marketing practices, also as to pay, in perpetuity, various annual payments to u.s. to compensate them for some of the medical costs of caring for persons with smoking-related illnesses. The money likewise funds a new anti-smoking advocacy group, chosen the Truth Initiative, that is responsible for such campaigns every bit Truth and maintains a public archive of documents resulting from the cases.

The settlement also dissolved the tobacco manufacture groups Tobacco Institute, the Middle for Indoor Air Enquiry, and the Council for Tobacco Research. In the MSA, the original participating manufacturers (OPM) agreed to pay a minimum of $206 billion over the showtime 25 years of the agreement.

History of adoption [edit]

Individual lawsuits before the settlement [edit]

In September 1950, an article was published in the British Medical Journal linking smoking to lung cancer and middle disease.[2] In 1954 the British Doctors Report confirmed the proffer, based on which the authorities issued advice that smoking and lung cancer rates were related.[3] In 1964 the U.s. Surgeon General'southward Study on Smoking and Health also began suggesting the relationship betwixt smoking and cancer.

By the mid-1950s, individuals in the The states began to sue the companies responsible for manufacturing and marketing cigarettes for damages related to the effects of smoking. In the forty years through 1994, over 800 private claims were brought confronting tobacco companies in state courts across the country.[4] The individuals asserted claims for negligent manufacture, negligent advertising, fraud, and violation of diverse state consumer protection statutes. The tobacco companies were successful against these lawsuits. Only two plaintiffs ever prevailed, and both of those decisions were reversed on appeal.[v] As scientific bear witness mounted in the 1980s, tobacco companies claimed contributory negligence as they asserted agin wellness effects were previously unknown or lacked substantial credibility.

Country litigation [edit]

In the mid 1990s, more than than 40 states commenced litigation confronting the tobacco industry, seeking monetary, equitable, and injunctive relief under various consumer-protection and antitrust laws.[vi] The get-go was declared in May 1994 by Mississippi Attorney Full general Mike Moore.

The general theory of these lawsuits was that the cigarettes produced by the tobacco industry contributed to wellness problems among the population, which in turn resulted in meaning costs to the states' public health systems. As Moore declared, "'[The] lawsuit is premised on a simple notion: you caused the health crisis; you pay for it.'"[vii] United states of america alleged a wide range of deceptive and fraudulent practices by the tobacco companies over decades of sales.[8] Other states soon followed. The state lawsuits sought recovery for Medicaid and other public wellness expenses incurred in the treatment of smoking-induced illnesses. Importantly, the defenses of personal responsibility that were so effective for the tobacco industry in suits past private individuals were inapplicable to the causes of action alleged by usa.

Proposed "Global Settlement Agreement" [edit]

Mike Moore (left) announcing the tobacco settlement agreement

Faced with the prospect of defending multiple deportment nationwide, the Majors sought a congressional remedy, primarily in the class of a national legislative settlement.[ix] In June 1997, the National Association of Attorneys General and the Majors jointly petitioned Congress for a global resolution. On June 20, 1997, Mississippi Attorney General Michael Moore and a group of other attorneys full general appear the details of the settlement. The settlement included a payment past the companies of $365.5 billion, agreement to possible Nutrient and Drug Assistants regulation nether certain circumstances, and stronger warning labels and restrictions on advertizing. In commutation the companies would exist freed from class-activeness suits and litigation costs would exist capped.[ten] : 422

This proposed congressional remedy (1997 National Settlement Proposal (NSP), a.k.a. the "June 20, 1997 Proposal") for the cigarette tobacco problem resembled the eventual Multistate Settlement Understanding (MSA), but with important differences. For example, although the congressional proposal would have earmarked 1-third of all funds to combat teenage smoking, no such restrictions appear in the MSA.[eleven] In addition, the congressional proposal would take mandated Food and Drug Administration oversight and imposed federal advertising restrictions. It too would take granted immunity from state prosecutions; eliminated punitive damages in private tort suits; and prohibited the use of class actions, or other joinder or aggregation devices without the defendant's consent, assuring that simply individual actions could be brought.[12] The congressional proposal called for payments to u.s.a. of $368.5 billion over 25 years.[thirteen] By contrast, bold that the Majors would maintain their market share, the MSA provides baseline payments of about $200 billion over 25 years.[14] This baseline payment is subject area to

the Inflation Aligning, the Volume Adjustment, the Previously Settled States Reduction, the Not-Settling States Reduction, the NPM Adjustment, the offset for miscalculated or disputed payments described in subsection 11(i), the Federal Tobacco Legislation Get-go, the Litigating Releasing Parties Offset, and the offsets for claims over described in subsections XII(a)(four)(B) and XII(a)(eight).

—MSA § IX(c).

The attorneys general did not have the authorisation to grant all this by themselves: the Global Settlement Agreement would require an human action of Congress. Senator John McCain of Arizona carried the bill, which was much more than aggressive than even the global settlement.[10] : 422, 427 However, in the spring of 1998, Congress rejected both the proposed settlement and an culling proposal submitted by McCain.

While the proposed legislation was being discussed in Congress, some individual states began settling their litigation against the tobacco industry. On July ii, 1997, Mississippi became the first. Over the next year, Florida, Texas, and Minnesota followed, with the four states recovering a total of over $35 billion.

Four states (Mississippi, Florida, Texas and Minnesota) settled with the OPMs before the MSA. The OPMs pay those iv states (the "previously settled states") 17 per cent of the MSA per-cigarette payment amount for each cigarette sold in any country. Thus, the OPMs pay the settling and previously settled states 104.55 per cent of the per-cigarette amount for each cigarette sold. In 2005, OPM payments totaled about 2.2 cents per cigarette or 44 cents per box.[15]

Adoption of the "Master Settlement Agreement" [edit]

In November 1998, the Attorneys General of the remaining 46 states, as well every bit of the District of Columbia, Puerto Rico, and the Virgin Islands, entered into the Master Settlement Agreement with the 4 largest manufacturers of cigarettes in the United States. (Florida, Minnesota, Texas and Mississippi had already reached individual agreements with the tobacco manufacture.) The four manufacturers—Philip Morris Us, R. J. Reynolds Tobacco Company, Chocolate-brown & Williamson Tobacco Corp., and Lorillard Tobacco Company—are referred to in the MSA equally the Original Participating Manufacturers (OPMs).

This settlement process yielded two other national agreements:

Smokeless Tobacco Master Settlement Agreement [edit]

In the Smokeless Tobacco Master Settlement Agreement, which was executed at the same fourth dimension as the Master Settlement Agreement, the leading manufacturer in the smokeless tobacco market (United States Tobacco Company, now known as U.Southward. Smokeless Tobacco Company) settled with the jurisdictions who signed the MSA, plus Minnesota and Mississippi.

Stage II settlement [edit]

The next year, the major cigarette manufacturers settled with the tobacco-growing states to recoup tobacco growers for losses they were expected to endure due to the higher cigarette prices resulting from the before settlements. Chosen the "Phase II" settlement, this understanding created the National Tobacco Growers' Settlement Trust Fund. Tobacco growers and quota holders in the 14 states that grow flue-cured and burley tobacco used to industry cigarettes are eligible to receive payments from the trust fund. The states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, Due south Carolina, Tennessee, Virginia, and Westward Virginia.

Subsequent signatories [edit]

At the time the Primary Settlement Agreement became effective, the OPMs collectively controlled approximately 97% of the domestic market for cigarettes. In addition to these "originally settling parties" (OSPs), the Master Settlement Understanding permits other tobacco companies to bring together the settlement; a list of these "subsequently settling parties" (SSPs) is maintained by the National Association of Attorneys General.[16] Since 1998, approximately 41 additional tobacco companies have joined the Master Settlement Agreement. These companies, referred to as the Subsequent Participating Manufacturers (SPMs), are bound by the Master Settlement Agreement'due south restrictions and must make payments to the settling states as gear up forth in the Chief Settlement Agreement. Collectively, the OPMs and the SPMs are referred to equally the Participating Manufacturers (PMs). Any tobacco company choosing not to participate in the Master Settlement Understanding is referred to equally a Nonparticipating Manufacturer (NPM).

As an incentive to join the Master Settlement Understanding, the agreement provides that, if an SPM joined within ninety days following the Chief Settlement Agreement's "Execution Engagement," that SPM is exempt ("exempt SPM") from making annual payments to the settling states unless the SPM increases its share of the national cigarette market beyond its 1998 market share, or beyond 125% of that SPM's 1997 market share. If the exempt SPM's market share in a given year increases across those relevant historic limits, the MSA requires that the exempt SPM make annual payments to the settling states, similar to those made by the OPMs, but based only upon the SPM's sales representing the exempt SPM'due south marketplace share increment.[17]

SPMs joining the Master Settlement Agreement after this ninety-24-hour interval exempt period must, instead, make annual payments based upon all of the SPM'southward national cigarette sales for a given year. In addition to its annual payment obligations, in order [**9] to join the Master Settlement Agreement at present, a not-exempt SPM must, "within a reasonable time after signing the" Master Settlement Agreement, pay the amount it would have been obligated to pay nether the Principal Settlement Agreement during the time between the Master Settlement Agreement's effective appointment and the date on which the SPM joined the agreement.[17]

The addition of the Subsequent Participating Manufacturers meant that about all of the cigarette producers in the domestic market place had signed the Multistate Settlement Understanding. Their add-on was significant. The Majors allegedly feared that any cigarette manufacturer left out of a settlement (Non-Participating Manufacturers or NPMs) would be gratuitous to expand market share or could enter the market with lower prices, drastically altering the Majors' time to come profits and their ability to increase prices to pay for the settlement.

Summary of terms [edit]

The Original Participating Manufacturers (OPMs) agreed to several broad categories of conditions:

  • to restrict their advertising, sponsorship, lobbying, and litigation activities, particularly equally those activities were seen as targeting youth;
  • to disband three specific "Tobacco-Related Organizations," and to restrict their creation and participation in trade associations;
  • generally to brand available to the public documents the OPMs had disclosed during the discovery stage of their litigation with the settling states;
  • to create and fund the National Public Education Foundation, dedicated to reducing youth smoking and preventing diseases associated with smoking.[eighteen]
  • to brand annual payments to the settling states in perpetuity.

A section on enforcement gave jurisdiction to individual state courts to implement and enforce the term, and established a state enforcement fund ($l million one-time payment). The participating manufacturers also paid the states' Chaser Fees.

Restrictions on youth targeting [edit]

By and large, the participating manufacturers agreed not to "take whatsoever action, direct or indirectly, to target Youth within any Settling Land in the advertising, promotion or marketing of Tobacco Products, or take any action the primary purpose of which is to initiate, maintain or increase the incidence of Youth smoking within whatever Settling Land." (§III(a))

The restrictions specified included bans on outdoor billboards, advertizing on transit vehicles, besides equally restrictions on sports marketing, outcome sponsorships and promotional products.

Financial provisions [edit]

Receipts past the states [edit]

States were to receive over $206 billion over 25 years:

  • Upwards-front payments – $12.742 billion.
  • Almanac Payments, beginning April 15, 2000 – $183.177 billion estimated through 2025. 9 billion per year from 2018 into perpetuity.[xix]
  • Strategic Contribution Fund, 2008–2017 – $8.61 billion.
  • National Foundation ($250 million over 10 years).
  • Public Education Fund (at least $1.45 billion 2000–2003).
  • State Enforcement Fund ($50 million, ane-fourth dimension payment).
  • National Association of Attorneys General ($ane.v billion over next 10 years).

Payments past the Participating Manufacturers (PMs) [edit]

The amount of money that the PMs are required to annually contribute to u.s. varies co-ordinate to several factors. All payments are based primarily on the number of cigarettes sold.

For the OPMs (Original Participating Manufacturers), the payments are adamant in accordance with their relative market share as of 1997. The payment amount of a particular OPM is also dictated past the "Volume Adjustment," which compares the number of cigarettes sold in each payment twelvemonth to the number of cigarettes sold in 1997. If the number of cigarettes sold by an OPM in a given year is less than the number information technology sold in 1997, the Volume Adjustment allows that OPM to reduce its payment to the settling states. In other words, a reduction in the amount of cigarettes sold by the OPMs results in the settling states receiving less money.

The MSA sets forth specific amounts that the OPMs have agreed to pay the settling states each year. Those almanac amounts are subject field to a number of adjustments. The OPMs each pay a portion of the total annual payment according to each OPM's "Relative Marketplace Share" for the preceding year.[18] [20]

For the SPMs (Subsequent Participating Manufacturers), the payments are determined by their relative market share as compared to other SPMs. For the SPMs that joined the MSA within 90 days of its execution, the annual payments are adamant by the number of cigarettes an SPM sells beyond the "grandfathered" volume—calculated as the college of either the private SPM's marketplace share in 1998 (the year the MSA was executed) or 125% of the SPM'southward marketplace share in 1997. If an SPM'southward sales volume or market share declines beneath the grandfathered corporeality, then information technology is not required to brand any payments to the settling states. SPMs that failed to join the MSA inside 90 days of its execution do not receive the benefit of whatever grandfathered amount.

Both exempt and non-exempt SPMs' annual payment obligations nether the MSA are "calculated on the basis of the percentage of the 4 original participating manufacturers' total domestic marketplace share represented by the SPM[s'] domestic market share . . . . In other words, the denominator in the adding is the total OPM market share, not the total OPM and SPM marketplace share."[21] Furthermore, the parties agree that the amount the SPMs pay per cigarette is roughly the aforementioned every bit the per-cigarette amount that the OPMs pay under the MSA. To the extent the amount differs, the OPMs pay slightly more than than the SPMs on a per cigarette basis.[17]

Escrow account [edit]

The payments from all the PMs are deposited into an escrow account until disbursement to the settling states.

The MSA includes a model escrow (or qualifying) deed and provides strong incentives for settling states to adopt it.[22] "[A] Qualifying Statute . . . is one that finer and fully neutralizes the toll disadvantages that the Participating Manufacturers experience vis-a-vis Nonparticipating Manufacturers within the state."[23]

The MSA encouraged settling states to adopt the model escrow human action by providing that a settling state'south allocated payment—that is, the portion of the annual MSA payment that a particular land receives in a given twelvemonth—could be reduced by applying a not-participating manufacturers ("NPM") adjustment. That adjustment lowers a state'south allocated share of the almanac MSA payment if the OPMs lose market place share to NPMs and if "a nationally recognized firm of economic consultants" determines that the MSA was "a meaning gene contributing to the Market Share Loss for the year in question." The NPM aligning does not apply to whatsoever country that has enacted and has in "full forcefulness and effect" a "qualifying" or model escrow statute. All settling states have enacted qualifying statutes.[24]

The escrow statute is premised on the legislative finding that, in calorie-free of the MSA settling the states' claims against the major cigarette manufacturers, [i]t would exist reverse to the policy of the Land if tobacco product manufacturers who determine not to enter into such a settlement could employ a resulting cost advantage to derive large, short-term profits in the years earlier liability may ascend without ensuring that the State will take an eventual source of recovery from them if they are proven to have acted culpably. Information technology is thus in the interest of the State to require that such manufacturers establish a reserve fund to guarantee a source of bounty and to prevent such manufacturers from deriving big, short-term profits and so condign judgment-proof before liability may arise.[25] [26]

In light of that, the model escrow statute requires an NPM selling cigarettes in [*1122] a given state to practice ane of two things: 1) join the MSA, agreeing to "become a participating manufacturer (equally that term is defined in section II(jj) of the [MSA]) and generally perform its financial obligations nether the [MSA]," or 2) make like annual payments into a country "liability reserve" escrow account, the funds of which can merely exist used to pay a judgment or settlement on a claim confronting the NPM. (Later on 25 years, any amount remaining in the escrow account is returned to the NPM.)[27] [28] An NPM's almanac escrow payments in a particular state are calculated by multiplying a per-cigarette amount, established by the land's legislature and prepare forth in the statute, past the number of cigarettes the NPM sold in that state in the year for which payment is being made.[29] The parties agree that this per-cigarette amount is roughly equivalent to the per-cigarette amount the MSA requires from OPMs and SPMs for sales which are non exempt. To the extent information technology differs, the OPMs pay slightly more than the SPMs, which pay slightly more than the NPMs.[30]

The escrow statute specifically requires that the NPM place into a qualified escrow fund by Apr xv of the twelvemonth following the year in question the following amounts (equally such amounts are adjusted for inflation)—

  • (A) 1999: $.0094241 per unit of measurement sold later on the effective date of this act;
  • (B) 2000: $.0104712 per unit sold;
  • (C) for each of 2001 and 2002: $.0136125 per unit of measurement sold;
  • (D) for each of 2003 through 2006: $.0167539 per unit sold;
  • (Due east) for each of 2007 and each yr thereafter: $.0188482 per unit sold.[31]

[edit]

Each state receives a payment equal to its "Allocable Share," a percentage of the funds held in escrow that has been agreed upon by the settling states and memorialized in the MSA. This "Allocable Share" (every bit measured by a percent of the total funds in escrow) does not vary co-ordinate to how many cigarettes are sold in a particular state in a given twelvemonth.

During the drafting of the MSA, the OPMs and the settling states contemplated that many of the smaller tobacco companies would choose non to join the MSA. This failure to join posed a potential problem for both the OPMs and the settling states. The OPMs worried that the NPMs, both because they would non be bound by the advertising and other restrictions in the MSA and because they would not be required to brand payments to the settling states, would be able to charge lower prices for their cigarettes and thus increment their market share.

NPMs [edit]

Although the settling states' motivation was different from that of the OPMs, these states also were concerned about the effect of the tobacco companies that refused to join the MSA. The settling states worried that the NPMs would exist able to regulate their sales so as to stay afloat financially while at the same fourth dimension existence finer judgment-proof. Equally a result of these twin concerns, the OPMs and the settling states sought to have the MSA provide these other tobacco companies with incentives to join the agreement.

Ane such incentive, called the NPM Aligning, provides that the payments past the PMs to the settling states may be adapted according to the "NPM Adjustment Percentage." Co-ordinate to this provision, if a nationally recognized house of economic consultants determines that the PMs take lost market share equally a upshot of compliance with the MSA, the PMs' required payments to the settling states will exist reduced to business relationship for the loss. The NPM Adjustment therefore gives the settling states an incentive to protect the market dominance of the PMs, because [*551] otherwise the settling states themselves will receive less funds. The MSA also provides a condom harbor from the NPM Adjustment if a settling state "diligently enforces" the provision of a Model Statute fastened to the MSA and enacted by all of the settling states.

Most of the settling states take also voluntarily adopted "complementary" legislation to provide additional enforcement tools to hogtie compliance with the Model Statute.

[edit]

The original escrow statutes provided that NPM payments would remain in escrow for 25 years, just authorized an early release of any escrow amount which was greater than the allocable share which that state would accept received if the NPM had been an SPM.[32] The originally enacted escrow statutes permitted an NPM to obtain a refund of the amount the NPM paid into the escrow fund to the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow in a particular twelvemonth was greater than the State'southward allocable share of the total payments that such manufacturer would accept been required to brand in that twelvemonth under the [MSA] . . . had information technology been a participating manufacturer.[33] This "Allocable Share Release Provision" was intended to create substantial equivalence between the escrow obligation of NPMs nether the escrow statutes and the amounts the NPMs would have paid if they had they joined the MSA.[34]

The settling states agreed to divide the annual MSA payment amidst themselves according to each land'south preset allocable share, rather than according to the book of sales made in a particular state in a given year.[35] An NPM's payments into a land'south escrow fund, on the other hand, were dependent on the number of cigarettes that the NPM sold in that state in a given year. Nevertheless, the originally enacted escrow statute based any refund of those escrowed funds payments on that state's allocable share of the national MSA payment. This refund provision, then, assumed an NPM would sell its cigarettes nationally.[36] [37]

If an NPM made the bulk of its sales in a few states, nonetheless, it could obtain a refund of those escrow payments in excess of what it would accept paid each of those States had it been an SPM. For case, an NPM which made fifty per cent of its sales in Kansas (which has a relatively depression allocable share) would obtain a release from its Kansas escrow fund of more than 49 per cent of its total escrow payment. In other words, the original allocable share release provision created an unintended loophole: it but operated every bit intended if the NPMs distributed their products nationally. In that circumstance, the NPMs' full escrow obligations to all states with like tobacco statutes approximately totaled the payments those NPMs would take made under the MSA. If an NPM concentrated its sales in a few country with low allocable share percentages, still, the NPM could obtain a refund of much of its escrow payments. Considering the Kansas percentage was so low—roughly 0.8 per cent—NPMs concentrated their sales within Kansas and a few other states to receive immediate escrow refunds from those states.

Rather than selling cigarettes nationally, several NPMs instead concentrated their sales in just a few states. Because the originally enacted escrow statute refunded escrow funds to the extent those funds exceeded each state'south "allocable share" of the national MSA payment, NPMs were able to obtain refunds of well-nigh of the monies they had paid into a state's escrow fund. To illustrate, if an NPM merely sold cigarettes in Kansas in 2006, the Kansas escrow statute would require that NPM to pay into the Kansas escrow fund $.0167539 for each cigarette the NPM sold in that state.[38] Pursuant to the refund provision in the originally enacted Kansas escrow statute, all the same, the NPM could obtain a refund of all but .8336712% of those payments.

One commentator further explains that the calculations nether the [originally enacted escrow] statutes were based on an assumption that a nonparticipating manufacturer sold cigarettes nationally. When this was the case, the statutes functioned equally intended, permitting the NPM to obtain a refund of excess amounts placed in escrow in each land. However, when an NPM followed a regional sales strategy, as several did, the original escrow statutes allowed the NPM to obtain a refund that was much larger than intended.[39]

To close this loophole, in late 2002, the National Association of Attorneys General ("NAAG") introduced the Allocable Share Release Repealer ("ASR Repealer"), a model statute which eliminated the ASR. In a memo dated September 12, 2003, Attorney Full general William H. Sorrell of Vermont, Chairman of the NAAG Tobacco Project, underscored the urgency of "all States taking steps to bargain with the proliferation of NPM sales, including enactment of complementary legislation and allocable share legislation and consideration of other measures designed to serve the interests of u.s. in fugitive reductions in tobacco settlement payments." He stressed that "NPM sales anywhere in the country hurt all States," that NPM sales in whatsoever state reduce payments to every other State," and that "[a]ll States have an involvement in reducing NPM sales in every State."[40]

The "Allocable Share Release Repeal" ("ASR Repeal") revised the originally enacted escrow statute'southward refund calculation to remove the reference to the enacting land's "allocable share" of the annual MSA payments. HN2The amended statute, therefore, now provides that an NPM will exist entitled to a refund[t]o the extent that a tobacco production manufacturer establishes that the amount information technology was required to place into escrow, based on units sold in the land . . . in a particular year, was greater than the [MSA] payments, as determined pursuant to department Nine(i) of that understanding including, subsequently final determination of all adjustments, that such manufacturer would have been required to make based on such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert to such tobacco product manufacturer.[41]

Thus, an NPM notwithstanding has to pay annually into a land's escrow fund an amount calculated past multiplying the number of cigarettes the NPM sells in that state during the year in question past the aforementioned per-cigarette amount for that year equally set forth in the state'south escrow statute. The NPM can obtain a refund to the extent those escrowed funds are greater than the corporeality that the NPM would have had to pay under the MSA for that same year, based upon that same number of cigarettes sold.[42]

Contraband statutes [edit]

Past the middle of 2000, domestic NPMs and importers began to obtain greater marketplace share.[43] The NAAG noted that reductions in settlement payments which outcome from an overall reduction in cigarette consumption benefit u.s.a. because health care costs imposed by each cigarette exceed the settlement payments.[44] On the other hand, when reductions in settlement payments occur because NPM sales displace PM sales, united states of america receive no benefits if the NPMs do non make escrow payments. Therefore, in late 2000, the NAAG drafted a model Contraband Statute to ensure that NPMs fabricated escrow payments on cigarettes. Encounter PX 116. The model Contraband Statute provides that excise tax stamping agents may not stamp cigarettes for sale in the state unless the manufacturer becomes a PM under the MSA or is an NPM which makes all escrow payments required by the Escrow Statute.[45] The model Contraband Statute imposes a criminal penalty on wholesalers who sell cigarettes fabricated past NPMs who are not duly registered in the state and making full escrow payments. By the middle of 2002, but seven settling states had enacted Contraband Statutes. As of 2007, 44 of the 46 settling states (including Kansas) take enacted these statutes. Meet 1000.S.A. § 50-6a04. The Kansas Attorney General is charged with enforcing the Escrow and Contraband Statutes.[46]

Criticism [edit]

Some anti-smoking advocates, such equally William Godshall, take criticized the MSA equally being as well lenient on the major tobacco companies. In a oral communication at the National Tobacco Command Conference, Godshall stated that "[westward]ith unprecedented future legal protection granted past the land A.One thousand.south in exchange for money, it appears that the tobacco industry has emerged from the country lawsuits fifty-fifty more powerful".[47]

An article in the Journal of the National Cancer Constitute described the MSA as an "opportunity lost to curb cigarette employ", citing public health researchers' views that not plenty of the MSA money was being spent on anti-smoking measures.[48] Dr. Stephen A. Schroeder wrote in the New England Journal of Medicine that "Although U.S. smoking rates are slowly declining, progress toward that end [decreasing smoking] would be faster if federal policymaking matched both the rigor of the scientific evidence against tobacco use and the resolve of antitobacco advocates."[49] Cigarette consumption in the United States fell to a l-year depression in 2004.[ citation needed ] Land governments accept continued to misuse the settlement coin to fill budget holes, build golf game courses or even subsidize the tobacco industry, less than three% of every dollar is being spent on tobacco prevention programs with childhood smoking programs the most underfunded, as of 2020 more and so $138 billion has been paid out. [l] [51] [52]

Some other criticism is the alleged favoritism shown to the major tobacco companies over smaller independent tobacco growers and sellers. Proponents of this argument claim that certain restrictions on pricing get in more hard for small growers to compete with "Big Tobacco". Twelve states have successfully fought against this argument in court during the last two years and the enforcement of the MSA continues throughout the U.s.a. in perpetuity.[ citation needed ]

Fellows within the Cato Institute, which has received multiple donations from the tobacco industry and been ane of the "national allies" of tobacco company Philip Morris,[53] such as Robert Levy, assert that the lawsuit that brought on the tobacco settlement was instigated by a need to brand beneficiary payments to Medicaid recipients. Following the passage of laws that eliminated the tobacco companies' power to provide evidence in court for their defense, the tobacco companies were forced to settle. The large 4 tobacco companies agreed to pay the state governments several billion dollars but the authorities in turn was to protect the big four tobacco companies from competition. The Chief Settlement Agreement, they contend, created an unconstitutional cartel organization that benefited both the government and big tobacco.[54] [55]

Robert Levy states:

For forty years, tobacco companies had not been held liable for cigarette-related illnesses. And then, beginning in 1994, led past Florida, states across the country sued big tobacco to recover public outlays for medical expenses due to smoking. Past irresolute the police to guarantee they would win in court, us extorted a quarter-trillion-dollar settlement, which was passed forth in higher cigarette prices. Basically, the tobacco companies had coin; united states and their hired-gun attorneys wanted money; so the companies paid and united states collected. And so sick smokers got stuck with the bill.[56]

The argument the Master Settlement Agreement created a dare of the major U.South. cigarette makers, allowing them to charge "supracompetitive" prices for their product, was rejected by the U.S. Court of Appeals for the Ninth Circuit in 2007.[57] The appellate court concluded that the Plaintiffs had not alleged sufficient facts to show that the MSA and two related state laws violated the federal Sherman Act.[58]

Securitization [edit]

In the ten years following the settlement, many state and local governments have opted to sell and so-called Tobacco Bonds. They are a form of securitization. In many cases the bonds permit state and local governments to transfer the risk of declines in future principal settlement agreement payments to bondholders. In some cases, all the same, the bonds are backed by secondary pledges of land or local revenues, which creates what some see every bit a perverse incentive to support the tobacco industry, on whom they are now dependent for hereafter payments against this debt.[59]

Tobacco revenue has fallen more quickly than projected when the securities were created, leading to technical defaults in some states. Some analysts predict that many of the bonds will default entirely. Many of the longer-term bonds accept been downgraded to junk ratings.[60] More recently, financial analysts began raising concerns that the rapid growth of the electronic cigarette marketplace is accelerating the refuse of $97 billion outstanding in tobacco bonds.[61] [62] [63] States with large populations, such as New York and California, are affected to a greater degree than others.[63] Lawmakers in several states proposed measures to tax e-cigarettes like traditional tobacco products to offset the decline in TMSA revenue. They anticipate that taxing or banning e-cigarettes would exist benign to the sale of combustible cigarettes.[62]

Individual state settlements [edit]

There is technically a distinct MSA signed separately with each state. While these MSAs are identical, the states have had to enact enabling legislation which differs from country to land. Furthermore, each land's courtroom organization is entitled to create its own jurisdictional interpretations of the MSA text. As a result, legal understanding of the MSA differ from country to state.

Past state [edit]

Documents relating to the initial lawsuits filed by each individual state are bachelor at the UCSF website.[64]

  • Alabama
  • Hawaii
  • Virginia
  • California
  • Florida
  • Due north Carolina

See also [edit]

  • Operation Berkshire
  • Project SCUM
  • Tobacco Settlement Financing Corporation
  • "Truth" ad campaign
  • Truth Initiative
  • InJustice, a 2011 documentary about lawyers manipulating class action lawsuits, including tobacco settlements
  • Howard Engle

References [edit]

  1. ^ "Chief Settlement Agreement" (PDF). National Clan of Attorneys General. 1998. Archived from the original (PDF) on 2008-06-25. Retrieved 2008-07-30 .
  2. ^ Doll, R.; Hill, A. B. (i September 1950). "Smoking and Carcinoma of the Lung". British Medical Journal. ii (4682): 739–748. doi:10.1136/bmj.two.4682.739. ISSN 0007-1447. PMC2038856. PMID 14772469.
  3. ^ Doll, R.; Hill, B. (Jun 2004). "The mortality of doctors in relation to their smoking habits: a preliminary report: (Reprinted from Br Med J 1954:ii;1451-5)". BMJ (Clinical Research Ed.). 328 (7455): 1529–1533, discussion 1533. doi:x.1136/bmj.328.7455.1529. ISSN 0959-8138. PMC437141. PMID 15217868.
  4. ^ Miller, Validity, Construction, Application, and Effect of Principal Settlement Understanding (MSA) Betwixt Tobacco Companies and Various States, and Land Statutes Implementing Agreement; Use and Distribution of MSA Proceeds. 25 A.L.R.6th 435
  5. ^ 25 A.L.R.6th 435
  6. ^ See Michael Janofsky, Mississippi Seeks Damages from Tobacco Companies, N.Y. Times, May 24, 1994, at A12 ("Mississippi today became the starting time state to demand that cigarette makers comport the health care costs of smoking."); Gordon Slovut, State, Blue Cross Sue Tobacco Manufacture, Star Tribune, August 18, 1994, at A1 (stating Minnesota filed suit against the tobacco industry); Andrew Wolfson, West Virginia Takes on Tobacco Over Health Costs, The Courier-Periodical, Sept. 22, 1994, at A1; Amy Goldstein, Maryland to Sue Makers of Cigarettes; Outcome of Smoking on Medicaid at Consequence, Washington Mail, Nov. 17, 1995, at B1 (reporting Maryland Governor Parris Glendening'south announcement of conclusion to sue tobacco companies).
  7. ^ Janofsky, Mississippi Seeks Damages from Tobacco Companies, North.Y. Times, May 24, 1994, at A12 (quoting Mississippi Attorney General Mike Moore).
  8. ^ For instance, Pennsylvania brought suit alleging a "conspiracy in concealing and misrepresenting the addictive and harmful nature of tobacco/nicotine[,] . . . industry control and manipulation of nicotine to foster addiction and thus profits[,] . . . intentionally attracting and addicting children to tobacco products," and "targeting African Americans" (complaint in Commonwealth of Pennsylvania v. Philip Morris, Inc.). These claims encompass civil conspiracy, willful and negligent breach of a special duty, fraudulent misrepresentation, fraudulent concealment, negligent design, strict liability, unfair trade practices, public nuisance, and negligent and intentional entrustment.
  9. ^ "Utah Sues Tobacco Companies". The Washington Postal service. October 1, 1996. p. A9.
  10. ^ a b Brandt, Allan K. (2007). The Cigarette Century: the Rise, Fall and Deadly Persistence of the Product That Defined America . New York: Bones Books, a member of the Perseus Books Group. ISBN978-0-465-07047-iii.
  11. ^ "1997 NSP, Title 7". CNN. Retrieved June eighteen, 2001.
  12. ^ See id. at Title Five(A), VIII(A), Viii(B).
  13. ^ 1997 National Settlement Proposal, Championship VI
  14. ^ See Multistate Settlement Agreement, §§ IX(a), (b), (c).
  15. ^ Int'50 Tobacco Partners, Ltd. 5. Kline, 475 F. Supp. second 1078, 1081–1082 (D. Kan. 2007)
  16. ^ "naag.org". [ permanent dead link ]
  17. ^ a b c KT&G Corp. v. AG of Okla., 535 F.3d 1114, 1120 (tenth Cir. Okla. 2008)
  18. ^ a b KT&G Corp. v. AG of Okla., 535 F.3d 1114, 1119 (tenth Cir. Okla. 2008)
  19. ^ "Overview" (PDF). www.publichealthlawcenter.org. 2015. Retrieved 2019-07-fourteen .
  20. ^ The MSA specifically provides that"Relative Market place Share" means an [OPM's] respective share (expressed as a percentage) of the total number of individual Cigarettes shipped in or to the fifty U.s.a., the District of Columbia and Puerto Rico past all the [OPMs] during the calendar yr immediately preceding the twelvemonth in which the payment at issue is due (regardless of when such payment is fabricated), every bit measured by the [OPMs'] reports of shipments of Cigarettes to Direction Science Associates, Inc. (or a successor entity acceptable to both the [OPMs] and a majority of those Attorneys Full general who are both the Attorney Full general of a Settling State and a member of the NAAG [National Association of Attorneys General] executive committee at the fourth dimension in question). A Cigarette shipped by more than than one Participating Manufacturer shall exist deemed to have been shipped solely past the first Participating Manufacturer to do so. For purposes of the [**vii] definition and determination of "Relative Marketplace Share," 0.09 ounces of "whorl your ain" tobacco constitutes one individual Cigarette.
  21. ^ Miller, Validity, Structure, Awarding, and Effect of Master Settlement Understanding (MSA) Between Tobacco Companies and Various States, and Country Statutes Implementing Agreement; Use and Distribution of MSA Gain, 25 A.Fifty.R. 6th 435, 461n.xiii (2007), at 465–66.
  22. ^ See Miller, Validity, Construction, Application, and Effect of Primary Settlement Agreement (MSA) Between Tobacco Companies and Diverse States, and State Statutes Implementing Agreement; Apply and Distribution of MSA Proceeds, 25 A.L.R. 6th 435, 461n.13 (2007), at 466–67.
  23. ^ Id. at 467 (quotation omitted).
  24. ^ See Miller, Validity, Construction, Application, and Outcome of Master Settlement Agreement (MSA) Between Tobacco Companies and Various States, and State Statutes Implementing Agreement; Utilise and Distribution of MSA Proceeds, 25 A.L.R. 6th 435, 461n.13 (2007), at 467.
  25. ^ Run across Kan. Stat. § l-6a01(f); Okla. Stat. tit. 37, § 600.21(D).
  26. ^ KT&G Corp. five. AG of Okla., 535 F.3d 1114, 1121 (10th Cir. Okla. 2008)
  27. ^ "SANDERS v. Dark-brown USA, No. 05-15676, U.s.a. Court of Appeals, Ninth Circuit". FindLaw. 2007-09-26. Archived from the original on 2010-11-04. Retrieved 2018-07-21 .

    Under the "Qualifying Act," non-signatory tobacco companies (besides known as "Non-Participating Manufacturers," or "NPMs") take to pay a portion of their revenues into an escrow account.   The coin in the escrow business relationship acts equally a liability reserve.   If the NPMs are successfully sued for cigarette-related harms, the money in the escrow accounts volition pay the damage awards.   Each NPM'south payment is based on market place share, and is roughly the same per-cigarette cost as the corporeality that OPMs must pay to abide by the MSA. The payments can but be used to pay a judgment or settlement on a claim against the NPM, up to the amount that the NPM would otherwise pay nether the MSA. Any remaining funds in the escrow account revert back to the NPM afterward twenty-5 years.

  28. ^ See also Kan. Stat. § l-6a03; Okla. Stat. tit. 37, § 600.23(A).
  29. ^ See too Kan. Stat. § 50-6a03(b)(one); Okla. Stat. tit. 37, § 600.23(A)(ii).
  30. ^ KT&Grand Corp. v. AG of Okla., 535 F.3d 1114, 1122 (10th Cir. Okla. 2008)
  31. ^ Kan. Stat. § 50-6a03(b)(ane); see also Okla. Stat. tit. 37, § 600.23(A)(2).
  32. ^ The pre-amendment Kansas statute, for example, provided that if an NPM established that its payments were greater than the Country's "allocable share of the payments that it would have been required to make in that year under the principal settlement agreement . . . had information technology been a participating manufacturer," the NPM was entitled to an immediate release of its over-payment. See K.Southward.A. l-6a03(b)(2)(B) (earlier 2005 amendment).
  33. ^ Come across also Kan. Stat. § 50-6a03(b)(2)(B); Okla. Stat. tit. 37, § 600.23(B)(two).
  34. ^ See K.Southward.A. § fifty-6a03(b)(two)(B).
  35. ^ See Miller, Validity, Construction, Application, and Consequence of Master Settlement Understanding (MSA) Betwixt Tobacco Companies and Diverse States, and State Statutes Implementing Agreement; Apply and Distribution of MSA Proceeds, 25 A.L.R. 6th 435, 461n.13 (2007), at 464.
  36. ^ Run into id. at 469.
  37. ^ KT&G Corp. v. AG of Okla., 535 F.3d 1114, 1123 (10th Cir. Okla. 2008)
  38. ^ Encounter Kan. Stat. § fifty-6a03(b)(ane)(D).
  39. ^ Miller, Validity, Construction, Application, and Issue of Master Settlement Agreement (MSA) Between Tobacco Companies and Various States, and Land Statutes Implementing Agreement; Employ and Distribution of MSA Proceeds, 25 A.50.R. 6th 435, 461n.xiii (2007), at 469 (footnotes omitted).
  40. ^ Int'l Tobacco Partners, Ltd. v. Kline, 475 F. Supp. 2nd 1078, 1083 (D. Kan. 2007)
  41. ^ Kan. Stat, § fifty-6a03(b)(2)(B) (2005); run across also Okla. Stat. tit. 37; § 600.23(B)(2). n5
  42. ^ KT&G Corp. v. AG of Okla., 535 F.3d 1114, 1124 (10th Cir. Okla. 2008)
  43. ^ The NPMs sharply increased their share of the domestic market from one.6 per cent in 1999 to 8.ane percentage in 2003. OPM operating incomes declined substantially in 2003, simply with the repeals of the allocable share release starting in 2003, their operating incomes increased. In the jump of 2004, Phillip Morris (the largest OPM) and Liggett (the largest SPM) attributed the increase of their gross turn a profit margins to the widespread enactment of the ASR Repealers. PXs 125, 126.
  44. ^ The NAAG advised the settling states to enact these model Contraband Statutes promptly or receive lower MSA payments due to increased Volume Adjustments and substantial NPM Downward Adjustments. PX 21. The Volume Adjustment is determined by comparison the number of cigarettes sold nationally by OPMs in a given year with the number sold in the base year of 1997. The resulting percentage reduces the base payment to the states by the PMs. The NPM Downwards Aligning can reduce a settling land'due south share of the MSA payments if PMs have lost market place share due to participation in the MSA and the state did non diligently enforce escrow payments past NPMs.
  45. ^ Earlier the contraband statutes, usa did not accept a machinery to enforce the escrow statute.
  46. ^ Int'l Tobacco Partners, Ltd. 5. Kline, 475 F. Supp. 2d 1078, 1084 (D. Kan. 2007)
  47. ^ Godshall, William T. (1999). "Giving 10% to gain eternity". Tobacco Control. 8 (4): 437–439. doi:10.1136/tc.8.4.437. PMC1759749. PMID 10629252.
  48. ^ Renee Twombly, Journal of the National Cancer Constitute, Vol. 96, No. ten, 730–732, May 19, 2004 doi:10.1093/jnci/96.10.730, jncicancerspectrum.oxfordjournals.org
  49. ^ Steven A. Schroeder, Tobacco Command in the Wake of the 1998 Master Settlement Agreement, New England Journal of Medicine, January fifteen, 2004.
  50. ^ "Since the MSA was adopted, the tobacco companies take paid a total of more than than $138 billion, with Michigan receiving more than $5.9 billion".
  51. ^ "Tobacco Settlement Funds Sprinklers, Golf game Carts and a Grease Trap".
  52. ^ "Who Is Really Benefiting From the Tobacco Settlement Coin?".
  53. ^ Free-market groups and the tobacco manufacture - full database The Guardian.
  54. ^ O'Brien, Thomas (2000-05-18). "Constitutional and Antitrust Violations of the Multistate Tobacco Settlement" (PDF). Cato Institute. Archived (PDF) from the original on 2015-04-03. Retrieved 2018-07-19 .
  55. ^ Olson, Walter (2000-01-01). "Puff, the Magic Settlement". Reason. Archived from the original on 2011-11-20. Retrieved 2018-07-20 .
  56. ^ "The Cato Institute Speakers Bureau". Cato Establish. Archived from the original on 2006-xi-02.
  57. ^ "FindLaw's Us Ninth Circuit case and opinions". Findlaw.
  58. ^ "Highlights – Tobacco Litigation & Enforcement".
  59. ^ "redtape.msnbc.com". Archived from the original on 2008-12-05. Retrieved 2008-11-22 .
  60. ^ "Land Bonds in Jeopardy as Tobacco Cash Fades," New York Times, May 4, 2012, p. B1, https://www.nytimes.com/2012/05/04/business concern/state-bonds-backed-by-tobacco-payments-in-jeopardy-of-default.html
  61. ^ Ress, D (1 December 2014). "Slowing cigarette sales could put Virginia tobacco bail payments at take a chance". Retrieved i Dec 2014.
  62. ^ a b Kuriloff, A (24 June 2014). "Tobacco Bonds Feel Heat From East-Cigarettes". WSJ. Retrieved thirty Oct 2014.
  63. ^ a b Respaut, Robin (24 June 2014). "E-cigarettes could stub out tobacco bonds sooner than idea". Yahoo Finance . Retrieved 30 October 2014.
  64. ^ "library.ucsf.edu".

External links [edit]

  • Text of the Master Settlement Agreement
  • Tobaccodocuments.org annal, 2004 Database of documents released nether the terms of the MSA.
  • CRS Study for Congress, "Tobacco Master Settlement Agreement (1998): Overview, Implementation by States, and Congressional Issues" (1999) [this is in the public domain, and may be copied verbatim into the article with citations.]
  • New York State'due south Tobacco Settlement Financing Corp. website

riverafiresom1957.blogspot.com

Source: https://en.wikipedia.org/wiki/Tobacco_Master_Settlement_Agreement

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