Tobacco Master Settlement Agreement

Background

In 1994, four states—Massachusetts, Mississippi, Minnesota, and West Virginia—filed separate lawsuits in their respective state courts against individual tobacco companies in order to seek compensation for the health care costs of dealing with conditions resulting from the use and abuse of tobacco. Florida subsequently filed a similarly crafted lawsuit in 1995. Most other states and jurisdictions soon took similar steps to join in this emerging litigation trend. Thus, on June 20, 1997, a group of state attorneys general presented a proposed settlement to cover this pending and growing body of class action suits against tobacco manufacturers, also covering other pending actions brought by states and other governmental entities. It was hoped that a substantial proportion of the funds from such a settlement would also be allocated for state and local tobacco control efforts to support strategies by governmental officials, public health professionals, and other advocates to reduce youth tobacco access, to limit exposure of environmental tobacco smoke to nonsmokers, and to assist with smoking cessation programs and other treatment services. The considerable economic burden borne by the individual states and jurisdictions in providing Medicaid and other health care services for treating diseases associated with the use and abuse of tobacco served as the primary economic rationale by the attorneys general for initiating the multistate tobacco master settlement agreement.

Overview of the Tobacco Master Settlement Agreement

The tobacco master settlement agreement was concluded on November 23, 1998. The state attorneys general of 46 states, the District of Columbia, and five U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands) signed this agreement with the major American tobacco companies (Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company, [Page 918]Philip Morris Incorporated, R. J. Reynolds Tobacco Company, Commonwealth Tobacco, and Liggett & Myers). The four other states (Florida, Minnesota, Mississippi, and Texas) settled individual agreements with the tobacco industry totaling $40 billion. The tobacco master settlement agreement settled all consumer protection claims, antitrust claims, and claims for equitable, monetary, restitutionary, and injunctive relief sought by any of the participating states and other covered entities for the settlement year and for all previous years. State legislatures were encouraged, but not required, to establish a version of the model statute that dealt with a method for tobacco manufacturers not participating in the master settlement agreement to make payments to a reserve fund to cover possible future claims. This was intended to level the playing field between participating and nonparticipating tobacco manufacturers. However, not all states and jurisdictions have passed such proposed legislation.

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