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Judge tosses suit challenging tobacco settlement
2009-01-06
LOUISVILLE, Ky. - A federal judge has dismissed a challenge to the 1998 Master Settlement Agreement between the states and 19 tobacco product makers saying there's no legal basis for attacking the compact. U.S. District Judge Jennifer Coffman ruled Tuesday that the lawsuit, brought by General Tobacco, failed on all fronts because the company couldn't prove the settlement amounted to either a conspiracy or anti-competitive behavior by the government. The Master Settlement Agreement was a product of work by state attorneys general, who represented their states in the negotiation, the judge ruled. "While such acts are not immune from every kind of challenge, they are immune from challenge as a violation of antitrust laws," Coffman wrote. General Tobacco, the sixth-largest tobacco company in the U.S. and maker of GT-One brand cigarettes, sued 52 attorneys general and the tobacco makers, seeking more than $1 billion in damages. It also asked the court to stop states from penalizing the company for not making payments while the lawsuit was pending in U.S. District Court in Louisville. The company argued that the Master Settlement Agreement between tobacco companies and states is more expensive for new entrants to the industry. The 1998 agreement requires tobacco manufacturers who signed on to make annual payments to the states, partly to pay for billions of dollars in health care costs related to treating tobacco-related diseases under state Medicaid programs. "We appreciate Judge Coffman's consideration of this case. It was our position that General Tobacco was party to the negotiations and agreed to the terms of the settlement," said Allison Martin, a spokeswoman for Kentucky Attorney General Jack Conway. General Tobacco's executive vice president, J. Ronald Denman, was traveling and did not immediately return a call seeking comment. A message left with the National Association of Attorneys General in Washington, D.C., was not immediately returned Tuesday morning. General Tobacco said it has paid about $470 million under the MSA and has another $36 million in escrow. The Mayodan, N.C.-based company said it sued after the attorneys general ended two years of negotiations over proposed changes to the agreement. The Master Settlement Agreement ultimately prevented companies from being sued by state governments for the costs of health care for smokers. The settlement required a combination of yearly payments to states and voluntary restrictions on tobacco advertising and marketing. The settlement also covers cigarette wholesalers and retailers from liability. General Tobacco claims that nonparticipating companies are almost excluded from selling tobacco products in the United States because no wholesaler or retailer will risk selling a brand not covered by the agreement. The settlement separated participants into two camps -- original participants and subsequent participants. General Tobacco, which was a latecomer to the settlement, said it is unfairly required to pay millions more because it signed on to the agreement later than 19 other companies.
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