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master settlement tobacco

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LED TO CREATION OF RAGA

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...The coordinated litigation strategies and actions of Republican state attorneys general in defense of fossil fuel and other industries stem from an organization called the Republican Attorneys General Association (RAGA), which Graves said was created in the wake of the tobacco industry being held accountable through the 1998 Master Settlement Agreement.

The organization, which currently lists 29 Republican state attorneys general as members, has been funded through donations from conservative judicial activists like Leonard Leo as well as from corporate interests including those in the fossil fuel industry. The American Petroleum Institute gave over $125,000 to RAGA in 2024, and in the first six months of this year Chevron’s Policy, Government and Public Affairs division donated $25,000 to the organization, for example.

Graves describes RAGA as a “pay-to-play organization.”

“It has a pay sheet listing what kind of access you get to attorneys general based on how much you give,” she told Inside Climate News.

“These attorneys general use the prestige of their office and their power and the resources that their taxpayers are providing to serve the interests of industry, select industries that they are most tied to, and that certainly includes the fossil fuel industry,” Graves added.

https://en.wikipedia.org/wiki/Tobacco_Master_Settlement_Agreement

The Tobacco Master Settlement Agreement (MSA) was entered in November1998, originally between the four largest United States tobacco companies (Philip Morris Inc., R. J. Reynolds, Brown & Williamson and Lorillard – the "original participating manufacturers", referred to as the "Majors") and the attorneys general of 46 states.

The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs.[1]:25 In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses.

The money also funds a new anti-smoking advocacy group,called the Truth Initiative, that is responsible for such campaigns as Truth and maintains a public archive of documents resulting from the cases. Study of this archive revealed the "tobacco industry playbook" and its parallels with techniques used in climate change denial.

The settlement also dissolved the tobacco industry groups Tobacco Institute, the Center for Indoor Air Research, and the Council for Tobacco Research. In the MSA, the original participating manufacturers (OPM) agreed to pay a minimum of $206 billion over the first 25 years of the agreement.

History of adoption

Private lawsuits before the settlement

In September 1950, an article was published in the British Medical Journal linking smoking to lung cancer and heart disease.[2] In 1954 the British Doctors Study confirmed the suggestion, based on which the government issued advice that smoking and lung cancer rates were related.[3] In 1964 the United States Surgeon General's Report on Smoking and Health likewise began suggesting the relationship between smoking and cancer.

By the mid-1950s, individuals in the United States began to sue the companies responsible for manufacturing and marketing cigarettes for damages related to the effects of smoking. In the forty years through 1994, over 800 private claims were brought against tobacco companies in state courts across the country.[4] The individuals asserted claims for negligent manufacture, negligent advertising, fraud, and violation of various state consumer protection statutes. The tobacco companies were successful against these lawsuits. Only two plaintiffs ever prevailed, and both of those decisions were reversed on appeal.[5] 

As scientific evidence mounted in the 1980s, tobacco companies claimed contributory negligence as the adverse health effects were previously unknown or lacked substantial credibility. [b/c actively and knowingly undermined by tob corps?!]

State litigation

In the mid 1990s, more than 40 states commenced litigation against the tobacco industry, seeking monetary, equitable, and injunctive relief under various consumer-protection and antitrust laws.[6] The first was declared in May 1994 byMississippi Attorney General Mike Moore.

The general theory of these lawsuits was that the cigarettes produced by the tobacco industry contributed to health problems among the population, which in turn resulted in significant costs to the states' public health systems. As Moore declared, "'[The] lawsuit is premised on a simple notion: you caused the health crisis; you pay for it.'"[7] The states alleged a wide range of deceptive and fraudulent practices by the tobacco companies over decades of sales.[8] Other states soon followed.

The state lawsuits sought recovery for Medicaid and other public health expenses incurred in the treatment of smoking-induced illnesses. Importantly, the defenses of personal responsibility that were so effective for the tobacco industry in suits by private individuals were inapplicable to the causes of action alleged by the states.

Proposed "Global Settlement Agreement"

This proposed congressional remedy (1997National Settlement Proposal (NSP), a.k.a. the "June 20, 1997 Proposal") for the cigarette tobacco problem resembled the eventual Multistate Settlement Agreement (MSA), but with important differences. For example, although the congressional proposal would have earmarked one-third of all funds to combat teenage smoking, no such restrictions appear in the MSA.[11] 

In addition, the congressional proposal would have mandated Food and Drug Administration oversight and imposed federal advertising restrictions. It also would have granted immunity from state prosecutions; eliminated punitive damages in individual tort suits; and prohibited the use of class actions, or other joinder or aggregation devices without the defendant's consent, assuring that only individual actions could be brought.[12] The congressional proposal called for payments to the states of $368.5 billion over 25 years.[13] 

By contrast, assuming that the Majors would maintain their market share, the MSA provides baseline payments of about $200 billion over 25 years.[14] This baseline payment is subject to...?

Faced with the prospect of defending multiple actions nationwide, the Majors sought a congressional remedy, primarily in the form of a national legislative settlement.[9] In June 1997, the National Association of Attorneys General and the Majors jointly petitioned Congress for a global resolution. On June 20, 1997, Mississippi Attorney General Michael Moore and a group of other attorneys general announced the details of the settlement. The settlement included a payment by the companies of $365.5 billion, agreement to possible Food and Drug Administration regulation under certain circumstances, and stronger warning labels and restrictions on advertising. In exchange the companies would be freed from class-action suits and litigation costs would be capped.[10]:422

the Inflation Adjustment, the Volume Adjustment, the Previously Settled States Reduction, the Non-Settling States Reduction, the NPM Adjustment, the offset for miscalculated or disputed payments described in subsection XI(i), the Federal Tobacco Legislation Offset, the Litigating Releasing Parties Offset, and the offsets for claims over described in subsections XII(a)(4)(B) and XII(a)(8).

— MSA § IX(c).

The attorneys general did not have the authority to grant all this by themselves: the Global Settlement Agreement would require an act of Congress. Senator John McCain of Arizona carried the bill, which was much more aggressive than even the global settlement.[10]:422, ^427 However, in the spring of 1998, Congress rejected both the proposed settlement and an alternative proposal submitted by McCain.

While the proposed legislation was being discussed in Congress, some individual states began settling their litigation against the tobacco industry. On July 2, 1997, Mississippi became the first. Over the next year, Florida, Texas, and Minnesota followed, with the four states recovering a total of over $35 billion.

Four states (Mississippi, Florida, Texas and Minnesota) settled with the OPMs before the MSA.The OPMs pay those four states (the "previously settled states") 17 per cent of the MSA per-cigarette payment amount for each cigarette sold in any state. Thus, the OPMs pay the settling and previously settled states 104.55 per cent of the per-cigarette amount for each cigarette sold.[dubious – discuss] In 2005, OPM payments totaled about 2.2 cents per cigarette or 44 cents per box.[15]

Adoption of the "Master Settlement Agreement"

In November 1998, the Attorneys General of the remaining 46 states, as well as of the District of Columbia, Puerto Rico, and the Virgin Islands, entered into the Master Settlement Agreement with the four largest manufacturers of cigarettes in the United States. (Florida, Minnesota, Texas and Mississippi had already reached individual agreements with the tobacco industry.) The four manufacturers—Philip Morris USA, R. J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp., and Lorillard Tobacco Company—are referred to in the MSA as the Original Participating Manufacturers (OPMs).

This settlement process yielded two other national agreements:

Smokeless Tobacco Master Settlement Agreement

In the Smokeless Tobacco Master Settlement Agreement, which was executed at the same time as the Master Settlement Agreement, the leading manufacturer in the smokeless tobacco market (United States Tobacco Company, now known as U.S. Smokeless Tobacco Company) settled with the jurisdictions who signed the MSA, plus Minnesota and Mississippi.

Phase II settlement

The next year, the major cigarette manufacturers settled with the tobacco-growing states to compensate tobacco growers for losses they were expected to suffer due to the higher cigarette prices resulting from the earlier settlements. Called the "Phase II" settlement, this agreement created the National Tobacco Growers' Settlement Trust Fund. Tobacco growers and quota holders in the 14 states that grow flue-cured and burley tobacco used to manufacture cigarettes are eligible to receive payments from the trust fund. The states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

Subsequent signatories

At the time the Master Settlement Agreement became effective, the OPMs collectively controlled approximately 97% of the domestic market for cigarettes. In addition to these "originally settling parties" (OSPs), the Master Settlement Agreement permits other tobacco companies to join the settlement; a list of these "subsequently settling parties" (SSPs) is maintained by the National Association of Attorneys General.[16] Since 1998, approximately 41 additional tobacco companies have joined the Master Settlement Agreement. These companies, referred to as the Subsequent Participating Manufacturers (SPMs), are bound by the Master Settlement Agreement's restrictions and must make payments to the settling states as set forth in the Master Settlement Agreement. Collectively, the OPMs and the SPMs are referred to as the Participating Manufacturers (PMs). Any tobacco company choosing not to participate in the Master Settlement Agreement is referred to as a Nonparticipating Manufacturer (NPM).

As an incentive to join the Master Settlement Agreement, the agreement provides that, if an SPM joined within ninety days following the Master Settlement Agreement's "Execution Date," that SPM is exempt ("exempt SPM") from making annual payments to the settling states unless the SPM increases its share of the national cigarette market beyond its 1998 market share, or beyond 125% of that SPM's 1997 market share. If the exempt SPM's market share in a given year increases beyond those relevant historic limits, the MSA requires that the exempt SPM make annual payments to the settling states, similar to those made by the OPMs, but based only upon the SPM's sales representing the exempt SPM's market share increase.[17]

SPMs joining the Master Settlement Agreement after this ninety-day exempt period must, instead, make annual payments based upon all of the SPM's national cigarette sales for a given year. In addition to its annual payment obligations, in order [**9] to join the Master Settlement Agreement now, a non-exempt SPM must, "within a reasonable time after signing the" Master Settlement Agreement, pay the amount it would have been obligated to pay under the Master Settlement Agreement during the time between the Master Settlement Agreement's effective date and the date on which the SPM joined the agreement.[17]

The addition of the Subsequent Participating Manufacturers meant that nearly all of the cigarette producers in the domestic market had signed the Multistate Settlement Agreement. Their addition was significant. The Majors allegedly feared that any cigarette manufacturer left out of a settlement (Non-Participating Manufacturers or NPMs) would be free to expand market share or could enter the market with lower prices, drastically altering the Majors' future profits and their ability to increase prices to pay for the settlement.

Summary of terms

The Original Participating Manufacturers (OPMs) agreed to several broad categories of conditions:

A section on enforcement gave jurisdiction to individual state courts to implement and enforce the term, and established a state enforcement fund ($50 million one-time payment). The participating manufacturers also paid the states' Attorney Fees.

Restrictions on youth targeting

Generally, the participating manufacturers agreed not to "take any action, directly or indirectly, to target Youth within any Settling State in the advertising, promotion or marketing of Tobacco Products, or take any action the primary purpose of which is to initiate, maintain or increase the incidence of Youth smoking within any Settling State." (§III(a))

The restrictions specified included bans on outdoor billboards, advertising on transit vehicles, as well as restrictions on sports marketing, event sponsorships and promotional products.

Financial provisions

Receipts by the states

States were to receive over $206 billion over 25 years:

Payments by the Participating Manufacturers (PMs)

The amount of money that the PMs are required to annually contribute to the states varies according to several factors. All payments are based primarily on the number of cigarettes sold.

For the OPMs (Original Participating Manufacturers), the payments are determined in accordance with their relative market share as of 1997. The payment amount of a particular OPM is also dictated by the "Volume Adjustment," which compares the number of cigarettes sold in each payment year to the number of cigarettes sold in 1997. If the number of cigarettes sold by an OPM in a given year is less than the number it sold in 1997, the Volume Adjustment allows that OPM to reduce its payment to the settling states. In other words, a reduction in the amount of cigarettes sold by the OPMs results in the settling states receiving less money.

The MSA sets forth specific amounts that the OPMs have agreed to pay the settling states each year. Those annual amounts are subject to a number of adjustments. The OPMs each pay a portion of the total annual payment according to each OPM's "Relative Market Share" for the preceding year.[18][20]

For the SPMs (Subsequent Participating Manufacturers), the payments are determined by their relative market share as compared to other SPMs. For the SPMs that joined the MSA within 90 days of its execution, the annual payments are determined by the number of cigarettes an SPM sells beyond the "grandfathered" volume—calculated as the higher of either the individual SPM's market share in 1998 (the year the MSA was executed) or 125% of the SPM's market share in 1997. If an SPM's sales volume or market share declines below the grandfathered amount, then it is not required to make any payments to the settling states. SPMs that failed to join the MSA within 90 days of its execution do not receive the benefit of any grandfathered amount.

Both exempt and non-exempt SPMs' annual payment obligations under the MSA are "calculated on the basis of the percentage of the four original participating manufacturers' total domestic market share represented by the SPM[s'] domestic market share . . . . In other words, the denominator in the calculation is the total OPM market share, not the total OPM and SPM market share."[21] Furthermore, the parties agree that the amount the SPMs pay per cigarette is roughly the same as the per-cigarette amount that the OPMs pay under the MSA. To the extent the amount differs, the OPMs pay slightly more than the SPMs on a per cigarette basis.[17]

Escrow account

The payments from all the PMs are deposited into an escrow account until disbursement to the settling states.

The MSA includes a model escrow (or qualifying) act and provides strong incentives for settling states to adopt it.[22] "[A] Qualifying Statute . . . is one that effectively and fully neutralizes the cost disadvantages that the Participating Manufacturers experience vis-a-vis Nonparticipating Manufacturers within the state."[23]

The MSA encouraged settling states to adopt the model escrow act by providing that a settling state's allocated payment—that is, the portion of the annual MSA payment that a particular state receives in a given year—could be reduced by applying a non-participating manufacturers ("NPM") adjustment. That adjustment lowers a state's allocated share of the annual MSA payment if the OPMs lose market share to NPMs and if "a nationally recognized firm of economic consultants" determines that the MSA was "a significant factor contributing to the Market Share Loss for the year in question." The NPM adjustment does not apply to any state that has enacted and has in "full force and effect" a "qualifying" or model escrow statute. All settling states have enacted qualifying statutes.[24]

The escrow statute is premised on the legislative finding that, in light of the MSA settling the states' claims against the major cigarette manufacturers, [i]t would be contrary to the policy of the State if tobacco product manufacturers who determine not to enter into such a settlement could use a resulting cost advantage to derive large, short-term profits in the years before liability may arise without ensuring that the State will have an eventual source of recovery from them if they are proven to have acted culpably. It is thus in the interest of the State to require that such manufacturers establish a reserve fund to guarantee a source of compensation and to prevent such manufacturers from deriving large, short-term profits and then becoming judgment-proof before liability may arise.[25][26]

In light of that, the model escrow statute requires an NPM selling cigarettes in [*1122] a given state to do one of two things: 1) join the MSA, agreeing to "become a participating manufacturer (as that term is defined in section II(jj) of the [MSA]) and generally perform its financial obligations under the [MSA]," or 2) make similar annual payments into a state "liability reserve" escrow account, the funds of which can only be used to pay a judgment or settlement on a claim against the NPM. (After 25 years, any amount remaining in the escrow account is returned to the NPM.)[27][28] An NPM's annual escrow payments in a particular state are calculated by multiplying a per-cigarette amount, established by the state's legislature and set forth in the statute, by the number of cigarettes the NPM sold in that state in the year for which payment is being made.[29] The parties agree that this per-cigarette amount is roughly equivalent to the per-cigarette amount the MSA requires from OPMs and SPMs for sales which are not exempt. To the extent it differs, the OPMs pay slightly more than the SPMs, which pay slightly more than the NPMs.[30]

The escrow statute specifically requires that the NPM place into a qualified escrow fund by April 15 of the year following the year in question the following amounts (as such amounts are adjusted for inflation)—

Allocable share

Each state receives a payment equal to its "Allocable Share," a percentage of the funds held in escrow that has been agreed upon by the settling states and memorialized in the MSA. This "Allocable Share" (as measured by a percentage of the total funds in escrow) does not vary according to how many cigarettes are sold in a particular state in a given year.

...

Criticism

Some anti-smoking advocates, such as William Godshall, have criticized the MSA as being too lenient on the major tobacco companies. In a speech at the National Tobacco Control Conference, Godshall stated that "[w]ith unprecedented future legal protection granted by the state A.G.s in exchange for money, it appears that the tobacco industry has emerged from the state lawsuits even more powerful".[47]

An article in the Journal of the National Cancer Institute described the MSA as an "opportunity lost to curb cigarette use", citing public health researchers' views that not enough of the MSA money was being spent on anti-smoking measures.[48] Dr. Stephen A. Schroeder wrote in the New England Journal of Medicine that "Although U.S. smoking rates are slowly declining, progress toward that end [decreasing smoking] would be faster if federal policymaking matched both the rigor of the scientific evidence against tobacco use and the resolve of antitobacco advocates."[49] Cigarette consumption in the United States fell to a 50-year low in 2004.[citation needed]

Another criticism is the alleged favoritism shown to the major tobacco companies over smaller independent tobacco growers and sellers. Proponents of this argument claim that certain restrictions on pricing make it more difficult for small growers to compete with "Big Tobacco". Twelve states have successfully fought against this argument in court during the last two years and the enforcement of the MSA continues throughout the United States in perpetuity.[citation needed]

Fellows within the Cato Institute, such as Robert Levy, assert that the lawsuit that brought on the tobacco settlement was instigated by a need to make beneficiary payments to Medicaid recipients. Following the passage of laws that eliminated the tobacco companies' ability to provide evidence in court for their defense, the tobacco companies were forced to settle. The big four tobacco companies agreed to pay the state governments several billion dollars but the government in turn was to protect the big four tobacco companies from competition. The Master Settlement Agreement, they argue, created an unconstitutional cartel arrangement that benefited both the government and big tobacco.[50][51]

Robert Levy states:

For 40 years, tobacco companies had not been held liable for cigarette-related illnesses. Then, beginning in 1994, led by Florida, states across the country sued big tobacco to recover public outlays for medical expenses due to smoking. By changing the law to guarantee they would win in court, the states extorted a quarter-trillion-dollar settlement, which was passed along in higher cigarette prices. Basically, the tobacco companies had money; the states and their hired-gun attorneys wanted money; so the companies paid and the states collected. Then sick smokers got stuck with the bill.[52]

The argument the Master Settlement Agreement created a cartel of the major U.S. cigarette makers, allowing them to charge "supracompetitive" prices for their product, was rejected by the U.S. Court of Appeals for the Ninth Circuit in 2007.[53] The appellate court concluded that the Plaintiffs had not alleged sufficient facts to show that the MSA and two related state laws violated the federal Sherman Act.[54]

Securitization

In the ten years following the settlement, many state and local governments have opted to sell so-called Tobacco Bonds. They are a form of securitization. In many cases the bonds permit state and local governments to transfer the risk of declines in future master settlement agreement payments to bondholders. In some cases, however, the bonds are backed by secondary pledges of state or local revenues, which creates what some see as a perverse incentive to support the tobacco industry, on whom they are now dependent for future payments against this debt.[55]

Tobacco revenue has fallen more quickly than projected when the securities were created, leading to technical defaults in some states. Some analysts predict that many of the bonds will default entirely. Many of the longer-term bonds have been downgraded to junk ratings.[56] More recently, financial analysts began raising concerns that the rapid growth of the electronic cigarette market is accelerating the decline of $97 billion outstanding in tobacco bonds.[57][58][59] States with large populations, such as New York and California, are affected to a greater degree than others.[59] Lawmakers in several states proposed measures to tax e-cigarettes like traditional tobacco products to offset the decline in TMSA revenue. They anticipate that taxing or banning e-cigarettes would be beneficial to the sale of combustible cigarettes.[58]

Individual state settlements

There is technically a distinct MSA signed separately with each state. While these MSAs are identical, the states have had to enact enabling legislation which differs from state to state. Furthermore, each state's court system is entitled to create its own jurisdictional interpretations of the MSA text. As a result, legal understanding of the MSA differ from state to state.

By state

Documents relating to the initial lawsuits filed by each individual state are available at the UCSF website.[60]

See also

References

==

https://www.pbs.org/wgbh/pages/frontline/shows/settlement

FRONTLINE tells the inside story of how two small-town Mississippi lawyers declared war on Big Tobacco and skillfully pursued a daring new litigation strategy that ultimately brought the industry to the negotiating table. For forty years tobacco companies had won every lawsuit brought against them and never paid out a dime. In 1997 that all changed. The industry agreed to a historic deal to pay $368 billion in health-related damages, tear down billboards and retire Joe Camel.

This report recounts how it all started when Mississippi's Attorney General Mike Moore joined forces with his "Ole Miss" classmate attorney Dick Scruggs and sued tobacco companies on behalf of the state's taxpayers to recoup money spent on health care for smokers. Scruggs and Moore criss-crossed the country in a private jet hawking their battle strategy to other state attorneys general and eventually built an army of forty states.

Moore and Scruggs had a number of secret weapons. They took charge of explosive tobacco industry internal documents that no one else would touch. And they protected two of the most important whistleblowers in the history of the tobacco wars: Jeffrey Wigand, the first high-level tobacco executive to turn against the companies; and Merrell Williams, a paralegal who secretly copied thousands of internal documents.

And these Missippippi "boys" held another trump card. They offered a deal to Bennett LeBow, CEO of Liggett & Myers: break ranks with the industry and cooperate with the state attorneys general in return for financial stability. FRONTLINE tells how they also managed to get a back channel to President Clinton and Senate Majority Leader Trent Lott through political advisor Dick Morris.

But Scrugg's and Moore's success was not limited to getting the industry to a national settlement. FRONTLINE details for the first time how their efforts triggered a massive criminal investigation of Big Tobacco that threatens to put some in jail for deceiving the American public.

Partly because of this criminal investigation, strong forces in the public health community opposed settlement talks. FRONTLINE interviews Minnesota State Attorney General Hubert Humphrey III and former FDA Chairman David Kessler who balk at any "deal with the devil."

As of May 1998, the Senate is poised to pass broad anti-smoking legislation which would cost the industry over $500 billion. The tobacco firms have denounced this new deal claiming it will bankrupt them. But Congress -- once a servant of the industry in large part because of tobacco's massive political clout and contributions -- has now turned against

https://www.pbs.org/wgbh/pages/frontline/shows/settlement/timelines/fullindex.html

950American scientists Ernst L. Wyndner and Evarts A. Graham publish a report that 96.5 percent of lung-cancer patients are moderate to heavy smoker.
1952Liggett publicizes a study by Arthur D. Little showing that smoking Chesterfields has no adverse effect on the throat.1953A landmark study by Ernst Wyndner shows that painting cigarette tar on the backs of mice creates tumors.1954Eva Cooper sues R.J. Reynolds Tobacco Co. for the death of her husband from lung cancer. Cooper loses the case.1954The Tobacco Industry Research Committee (later becomes Council on Tobacco Research) issues a "Frank Statement" to the public. It's a nationwide two-page ad that states cigarette makers don't believe their products are injurious to a person's health.1963Brown & Williamson general counsel Addison Yeaman notes in a memo, "Nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug."1964U.S. Surgeon General Luther Terry issues the first surgeon general report citing health risks associated with smoking.1965U.S. Congress passes the Federal Cigarette Labeling and Advertising Act, requiring a surgeon general's warning on cigarette packs.1971All broadcast advertising for cigarettes is banned.