Tobacco Payment Dispute Goes to Arbiter

Source from:  March 28, 2008 (Thomson Financial delivered by Newstex) 03/31/2008

The Nebraska Supreme Court says the state will have to go through arbitration to settle its dispute with three tobacco companies over a $4.5 million reduction in the state's 2006 settlement payment. Nebraska and several other states sued R.J. Reynolds Tobacco Co. (NYSE:RAI) , Lorillard Tobacco Co. and Philip Morris (NYSE:MO) USA over the payment discrepancy. But the 1998 settlement between the companies and 46 states calls for an arbiter to resolve disputes over adjustments to the payments. The Nebraska Supreme Court said in its ruling released Friday that nearly every court that has examined disputes about these settlement payments has concluded the issue does not belong in court because the settlement language is clear. The big tobacco companies reduced payments because states are supposed to diligently enforce laws governing smaller tobacco companies that are not part of the settlement to make sure the small companies don't gain a price advantage. The big tobacco companies have used that provision to reduce payments to states, including a $4.5 million reduction in Nebraska's 2006 payment. The total reduction that year to all states was about $775 million. The big tobacco companies used the same reasoning for reducing Nebraska's 2007 settlement payment by $4 million, handing the state $35.8 million. So far, state officials haven't taken any action regarding that payment. Nebraska maintains it has vigorously pursued the smaller companies and enforced the agreement. Now state officials will have to convince an arbiter that is true. The 1998 tobacco settlement resolved states' legal claims over tobacco marketing and the cost of treating tobacco-related health problems. The tobacco companies that took part agreed to pay more than $200 billion to the states over 25 years. So far, the companies have paid more than $54 billion, according to the National Association of Attorneys General. Of that, more than $319 million has been paid to Nebraska. The Nebraska Supreme Court's ruling upheld Lancaster County District Court Judge Paul Merritt's August 2006 decision to send the dispute to arbitration. Enditem