Judge to Rule on Leaf Dispute

Source from:  By PAUL NOWELL, The Associated Press 11/22/2004

Farmers say payments should continue A North Carolina judge expects to rule before Christmas in a legal dispute over whether U.S. cigarette companies are obliged to make another payment to tobacco farmers now that the leaf quota system is being bought out. "I'll put this on a shorter fuse, rather than a longer one," Business Court Judge Ben F. Tennille told lawyers after a 90-minute hearing Tuesday. At the hearing, cigarette company lawyers told Tennille that the quota buyout passed by Congress last month should negate payments they were required to make this year under the agreement known as Phase II. Those payments to farmers were negotiated following a landmark 1998 settlement in which cigarette makers Brown & Williamson, Lorillard, R.J. Reynolds and Philip Morris agreed to pay 46 states $206 billion over 25 years for smoking-related health claims. Four other states settled separately for an additional $40 billion. Phase II payments were intended to compensate tobacco growers over 12 years for losses they were expected to suffer as a result of higher cigarette prices following the 1998 settlement. Members of a board that oversees Phase II payments said they are counting on a final $189 million payment at the end of this year. According to the board, Congress's buyout bill does not specify when Phase II payments should end. Tobacco company attorneys told the judge the companies should be entitled to refunds on some of the hundreds of millions of dollars now sitting in a Phase II escrow account. "Tobacco companies will pay three to four times the amount under [the buyout] than they did under the" settlement, said attorney Jim Phillips, who represented Philip Morris, Reynolds American (formerly R.J. Reynolds) and Lorillard. Phillips said the companies already have paid $330 million to the Phase II board this year. Attorneys for the Phase II board told the judge that farmers are counting on the last installment of a series of annual payments from cigarette-makers. Those checks are scheduled to go out to farmers Dec. 30. Tennille has scheduled a hearing in the case Dec. 20. Tom Blue, attorney for the Phase II board, said the key issue for the judge to rule on is whether the money now in the escrow account belongs to farmers or the tobacco companies. Last year, three of the tobacco companies briefly stopped making payments to the fund when it appeared that Congress might pass tobacco buyout legislation. Payments were resumed after some tobacco-state attorneys general sued. In a letter to the tobacco companies, U.S. Rep. Bob Etheridge, D-N.C., said they should honor the Phase II obligation because there was no specified cutoff for the Phase II checks. Etheridge, a member of the House Agriculture Committee, urged the companies not to seek a refund. "These hardworking, God-fearing folks have been hanging on by a thread for the buyout, and they can't afford for these payments to disappear or to get tied up in legal wrangling," Etheridge said. In North Carolina, the nation's top tobacco-growing state, 80,000 farmers received Phase II payments last year totaling $154 million, Etheridge said. Though the suit is being heard in a special state court in North Carolina, any ruling by Tennille will apply to tobacco companies and farmers in other states. Enditem