OLYMPIA – Washington state sued more than a dozen tobacco companies on Wednesday, joining several other states that are seeking $1.2 billion they say they is owed by cigarette makers under the landmark 1998 legal settlement.
Attorney General Rob McKenna filed suit in King County Superior Court in Seattle, seeking to collect the money from R.J. Reynolds and Lorillard Tobacco Co., who both withheld money from the annual payment of tobacco settlement funds that were due to the state on Monday. The suit also names Philip Morris USA and several other companies that are trying to have the payments reduced.
Attorneys general in California, Massachusetts, New Jersey and Ohio filed lawsuits on Tuesday, and Maine and Kentucky filed lawsuits on Wednesday. Officials in New York and Connecticut have said they, and other states, would probably take similar steps.
In all, 45 tobacco companies are involved in the settlement that Washington Gov. Chris Gregoire, then state attorney general, helped negotiate on behalf of 46 states. Those states settled their suit against the industry for $206 billion, payable over 25 years. Four states settled separately for $40 billion. The states sought to recovered the costs of treating sick smokers.
As of Monday, more than $5.6 billion had been paid to the states.
McKenna said Washington was expecting $130 million this week, but the payment was $15.5 million short.
R.J. Reynolds and Lorillard Tobacco said Monday they put more than $750 million aside rather than hand it over to the states.
R.J. Reynolds paid the states about $1.4 billion, but withheld $647 million, putting it in an escrow account until the dispute is resolved. Lorillard paid the states a little more than $550 million but put another $108 million aside.
Industry leader Philip Morris USA made all of its $3.4 billion payment but is seeking to have that sum reduced.
Other companies also made full payment but claim they are entitled to adjustments to pay less.
The companies cite a provision in the deal that allows the cigarette makers to pay less if they have lost market share to smaller companies that weren’t part of the settlement.
An economic consulting firm concluded in March that the agreement was a “significant factor” contributing to the loss of market share.
The state attorneys general say the companies would be entitled to a reduction only if states did not adequately enforce laws requiring cigarette makers outside the settlement to put money in escrow for future legal obligations.
“We’ve done everything that is required under the master settlement agreement,” McKenna said. “We believe that when we show that in court, they’ll be ordered to make the full payment to our state.”
The tobacco companies want to take the issue to arbitration, in which a three-judge panel would weigh in on the matter, but the states want it resolved in state court.
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