Tobacco company challenges states' authority

By Chris Rizo | Feb 1, 2010

LITTLE ROCK, Ark. (Legal Newsline)-General Tobacco, which owes the states approximately $284.5 million and faces delisting, said Monday that the company feels protected after an Arkansas judge said the company's brands cannot be taken off store shelves there over its failure to make payments under the multistate Master Settlement Agreement.

Vibo Corporation Inc., which does business as General Tobacco, is based in Mayodan, N.C. Its cigarette brands include Bronco, Champion, GT, Silver and 32⁰.

General Tobacco could be barred from selling its cigarette products in 18 states over its failure to make the MSA payments.

On Friday, a Pulaski County judge rejected Arkansas Attorney General Dustin McDaniel's motion to delist General Tobacco's cigarette brands.

Rather than remove General Tobacco brands from the directory of approved brands to sell in that state, the attorney general was ordered to arbitrate the dispute, the company said in a statement.

"None of the states that have announced the delisting of GT's brands sought any court's permission to do so. Now that a court has ruled that delisting of the brands may not proceed, General Tobacco has asked all of the states in the MSA to comply with that court's order," the statement said.

States owed by General Tobacco are: Arizona, California, Idaho, Illinois, Iowa, Maryland, Massachusetts, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, Ohio, Oregon, Tennessee, Utah, Vermont and Washington.

In Missouri, General Tobacco's wholesalers and retailers have been told that if they owe the company money for purchases to instead send payment to the state.

The Tobacco Master Settlement Agreement, reached in 1998 between tobacco companies and 46 states and six U.S. territories, was intended to settle lawsuits that states had filed to recover government costs associated with people who became ill from smoking or tobacco-related illnesses.

General Tobacco says the MSA was structured so that certain companies in the market in 1998 would receive future preferential payment terms while newer members such as GT would have to pay more than the original members.

The company said that it has challenged the validity of the MSA's unequal payment terms.

The settlement agreement was reached originally by the nation's four largest tobacco companies: Philip Morris USA, R. J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp., and Lorillard Tobacco Company. More than 40 other tobacco companies later joined the agreement.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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