A federal arbitration panel on Tuesday rejected Big Tobacco’s demand for a drastic reduction in the annual payment it makes to New York state under the industry’s landmark 1998 master settlement agreement with state governments.
The tobacco companies — including the industry’s three largest manufacturers, Altria Group Inc. (formerly Philip Morris Cos. Inc.), Reynolds American Inc. and Lorillard Inc. — were ordered to return more than $92 million they withheld from annual payments to New York State in 2003.
Alongside settlements with 49 other state governments, the tobacco companies agreed in 1998 to make annual payments in perpetuity to New York to settle claims that the industry knowingly concealed the health hazards and addictive properties of cigarettes from both regulators and the public at large.
However, the tobacco companies have been locked in a years-long dispute with New York over the propriety of its annual payments, which are based on the number of cigarettes sold in the state. Specifically, the companies argue they should not be charged under the settlement agreement for cigarettes sold on Indian reservations in 2003 and afterward because the state has failed to collect excise taxes on those sales.
On Tuesday, an arbitration panel of three retired federal judges rejected the companies’ claim.
“This ruling is a huge victory for all New Yorkers, and I applaud the panel for denying Big Tobacco’s efforts to avoid responsibility for illnesses caused by cigarettes — and paid for by taxpayers,” New York Attorney General Schneiderman said in a statement on Tuesday, adding that the state will continue to seek full payment from the tobacco companies for years after 2003.
“This office will make every effort to force the tobacco companies to give New York the money they are unlawfully withholding from the State, including going to court if necessary,” Mr. Schneiderman said.