Missouri’s battle to recoup lost tobacco settlement revenue is now being weighed by the state Supreme Court.
The Show-Me State’s share of the 1998 Master Settlement Agreement reached between the tobacco industry and 46 states is roughly $130 million a year. In 2003, an additional partial settlement with 24 states was made, which Missouri was not a part of because it was found not to be diligent in policing smaller tobacco companies that did not sign onto the 1998 agreement. Those companies were found to be undercutting their prices to compete with larger companies that did sign the agreement.
In 2013, an arbitration panel ruled that Missouri allowed smaller tobacco companies to pay less money into an escrow account than they were required to by state law. As a result, the panel lowered Missouri’s tobacco settlement payment to roughly $66 million for Fiscal Year 2014.
That decision was partially overturned by St. Louis Circuit Court Judge Jimmie Edwards, who ruled that the state could recover $50 million. But in September 2015, the eastern district appeals court tossed out Edwards' ruling.
In February, Attorney General Chris Koster announced a settlement allowing the state to recover the $50 million, but it depended on lawmakers passing legislation to close the loophole enjoyed by smaller tobacco companies that were not part of the original 1998 settlement.
That bill, however, died in the Senate without being brought up for a vote, which renewed the legal battle over whether Missouri is owed $50 million.
That battle was heard Tuesday by five members of the Missouri Supreme Court. Judges Laura Denvir Stith and Paul Wilson recused themselves; no reason was given by the court for their withdrawals.
“The reason that Missouri continues to suffer is that (a 2003 adjustment to the Master Settlement Agreement) did not address reallocation; it shifted all of the reallocated liability from the diligent states, away from those 24 states that took the (2003) deal, and put it onto Missouri to the tune of $50 million of extra liability,” argued Peggy Whipple, an attorney for the state attorney general’s office.
Whipple also told the high court that Missouri was not allowed to challenge the diligence of the 24 states that took the 2003 deal.
“I think we need to look simply at the language of the MSA (Master Settlement Agreement), and this court’s own precedent and order this arbitration to occur the way Missouri requested it,” she concluded.
Elli Liebenstein, an attorney for cigarette maker R.J. Reynolds, disagreed. He argued that Missouri is seeking to arbitrate independently of other states.
“You need to have a multi-state arbitration,” he said. “[You] want to have one standard being applied, you want to have one standard of what diligence means, you want to have one standard about how the statute should be enforced, you want to have one standard. If you have single-state arbitrations in what could be 21 states … then you’re going to have chaos … beyond the point that you’re going to have three arbitrators for each one, you’re going to have different standards, and if there are interventions by states other than Missouri, you’re going to have every state having multiple, multiple things.”
The Missouri Supreme Court will rule on the case later.
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