N.C. Court Aids County Farmers

Source from:  By Aileen Humphreys, Intelligencer Journal Staff 08/31/2005

Says tobacco firms must make payments for '04 North Carolina Supreme Court overturned a lower-court ruling that would have relieved four large tobacco companies of 2004 payments to a trust fund for tobacco farmers in 14 states, including Pennsylvania. Hundreds of Lancaster County tobacco farmers who didn't receive an annual check this winter from Big Tobacco may receive the funds by the end of this year or the beginning of 2006, state Agriculture Secretary Dennis Wolff said. North Carolina Supreme Court ruled Aug. 19 that the tobacco companies must make 2004 payments of as much as $424 million from a trust fund to tobacco farmers in 14 states, including Pennsylvania. The decision reversed a lower-court ruling in December that favored the tobacco companies, relieving them of the 2004 payment to farmers. "I read it as a total victory for the states," said Pennsylvania Chief Deputy Attorney General Joel Ressler, who appeared before the court in North Carolina. The tobacco companies -- Philip Morris USA Inc., R.J. Reynolds Tobacco Co., Brown and Williamson Tobacco Corp. and Lorillard Tobacco Co. -- already have made three quarterly payments to the trust, which sends each farmer an annual check at the end of every fourth quarter. A spokeswoman for the attorney general's office said 416 tobacco farmers in Pennsylvania are slated to receive .43 percent of payments to the trust. So far, $318 million has been paid into the trust for 2004, giving Pennsylvania farmers about $1.4 million. If the tobacco companies are ordered to make their final quarterly payment to the trust, it would raise the total to $424 million, and Pennsylvania farmers would share about $1.8 million. The payments made to the trust are called Phase II funds. They are part of the Master Settlement Agreement, a $206 billion settlement to compensate states for tobacco-related health care costs. Phase II funds were intended to compensate growers for the effects of decreased demand for their crops after tobacco companies raised the price of their products to cover the cost of the MSA. The agreement, between tobacco companies and tobacco growers in 14 states, called for growers to receive $5.15 billion from a trust fund over 12 years, beginning in 1999. In December, the companies argued before the lower court that the Fair and Equitable Tobacco Reform Act, signed in October 2004 by President Bush, relieved them of obligations to the trust for 2004 because it was signed in that year. The legislation includes a deal in which tobacco companies will pay $10.1 billion dollars over 10 years to holders of tobacco quotas, beginning in 2005. The buyout payments replaced Phase II payments. The quotas were created by the government in the 1930s and dictated the amount of certain types of tobacco farmers could grow. The buyout has plunged Pennsylvania into separate court proceedings on behalf of tobacco farmers here. Of the 14 states included in the Phase II trust, all but Pennsylvania and Maryland hold quotas and will receive buyout payments. This leaves Pennsylvania and Maryland without Phase II payments and without the compensation of buyout payments. The buyout was in part a boon to Pennsylvania farmers because they are now permitted to grow in-demand burley tobacco, which they were not permitted to grow under the quota system. But now, in separate court proceedings, Pennsylvania and Maryland are fighting jointly for Phase II trust payments to continue to farmers in both states. Ressler said the ruling on the 2004 payments is "helpful" in moving forward the fight for continued funds for Pennsylvania and Maryland. Ressler said if the issue goes to trial, it would not begin until next year. "The companies tried to have our case thrown out, and they lost," he said. Enditem