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THE CASES THAT SET
the stage for the
big tobacco arbitration on
americanlawyer.com.
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23 Manatt’s Caribbean Misadventure
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BAR TALK
An upcoming arbitration—details unknown—
will decide whether the states owe billions to
the tobacco companies. BY D.M. LEVINE
Illustration By ROBERT NEUBECKER
SMOKING
THE STATES
EMEMBER THE MASSIVE TOBACCO
settlement that poured billions of
dollars into state coffers over the
last decade? It’s about to be relitigated.
In an arbitration scheduled to get under way
late this year or early next, the tobacco companies will argue that they are entitled to a refund of
some of the annual payments that they have made
to the states—payments that have amounted to
about $75 billion since 1998—because they have
lost market share to smaller tobacco companies.
The states, desperate for revenue in these budget-crunch days, will take the opposite position.
Participants in the arbitration will include attorneys general from nearly every state and six U.S.
territories, as well as lawyers representing every
major American tobacco manufacturer. Over $1
billion will be at stake. And that’s just for the year
2003. According to the National Association of Attorneys General (NAAG), $5.3 billion could be at
stake for the period 2003–08.
The whole dispute is rooted in the 1998 Tobacco Master Settlement Agreement (MSA),
which resolved a slew of lawsuits filed by the states
against the big tobacco companies. The litigation
was seeking, among other things, repayment of
Medicaid dollars used to treat smoking-related
illnesses. The final agreement called for a ban on
cartoon advertising characters, like Joe Camel, and
the creation of the Truth antismoking campaign.
It also required the tobacco companies to make
annual payments to the states who sued them.
Under the terms of the deal, tobacco companies could have their annual payments reduced
if they lost sales to the companies that didn’t sign
the agreement. (There are scores of these so-called
nonparticipating manufacturers.) To that end, the
