No decision yet on McGraw appeal in tobacco case

By John O'Brien | Nov 21, 2007


CHARLESTON, W. Va. - The appeal of a March Kanawha Circuit Court decision against West Virginia Attorney General Darrell McGraw made its first appearance in the state's Supreme Court Tuesday.

The justices are currently deciding if they want to hear oral arguments from McGraw on why the appeal, which would empower a state judge to make a decision concerning a tobacco settlement instead of a panel of federal judges, should be granted.

Wednesday, Supreme Court public information specialist Kandi Greter said a decision is not imminent.

"That motion has been deferred to a later date, and I do not have that date," she said.

Tobacco companies that are signed into 1998's Master Settlement Agreement are attempting to compel arbitration in order to determine the amount of money they should have paid in 2003. The MSA requires participating companies to make annual payments as compensation for the health care costs 46 states and six territories say they incur because of tobacco use.

According to a report by the Competitive Enterprise Institute, trial lawyers hired to negotiate on behalf of the states earned $13 billion. The settlement was worth a total of $246 billion.

Every year, an accounting firm is hired to calculate the amount of the payments that will be made by the approximately 40 companies who are signed into the agreement. Other measures, like taxes, are placed on companies that never signed into it (Non-Participating Manufacturers) to ensure fair competition between all companies.

Concerning the 2003 payment, the accounting firm said it could not calculate an adjustment for Participating Manufacturers because it could not determine if the states were diligently enforcing statutes against NPMs.

McGraw wanted Kanawha Circuit Judge Irene Berger to go ahead and make that determination. Tobacco companies, however, claimed that under the wording of the MSA, any disagreement had to go before a panel of three federal judges in order to prevent 52 different jurisdictions from making conflicting decisions.

In one of their motions, several of the tobacco companies stated that McGraw's argument has been repeatedly rejected around the country.

"So far, courts in 44 MSA jurisdictions, including 10 appellate courts, have compelled arbitration of this same dispute under the same unambiguous MSA language," they wrote, adding that only once has the argument succeeded.

"The Auditor's determination not to apply the NPM Adjustment cost the (Subsequent Participating Manufacturers) about $80 million and the (Original Participating Manufacturers) more than $1 billion in increased payments."

The tobacco companies also feel an appeal is the inappropriate means for McGraw. Instead, he should be seeking a writ of prohibition, which carries different standards of proof because it deals with lower courts exceeding their jurisdictional authority. Ninety-four pages of filings can be viewed here, here and here.

Berger wrote in her order denying McGraw's argument that she, like all other state judges, needed to stay out of the matter.

"(The MSA) broadly requires that 'any' dispute 'arising out of or relating to calculations performed by, or any determinations made by, the Independant Auditor... shall be arbitrated,'" she wrote.

"This dispute, including the State's diligent enforcement defense, clearly arises out of, and relates to, determinations the MSA requires the Independent Auditor to make each year -- whether to apply the NPM Adjustment and the diligent enforcement exemption to that Adjustment."

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