Cigarette Makers May Pay New York State $92M

Tobacco companies may owe the New York state $92M in unpaid dues from the 1998 tobacco settlement. This tobacco settlement affected 46 states and requires the companies to make annual payments to resolve their liability in health-care cost litigation. Much of the litigation was regarding the poor health effects of cigarettes. Some states and municipalities borrowed against their payments which are normally based on cigarette shipments.

The Arbitration Panel and Cigarette Payment Decisions

According to Bloomberg News, the state created an arbitration panel made of three retired federal retired judges in San Francisco. These judges were responsible for the ruling, and rejected demands by the tobacco companies to have a 2003 annual payment of the state of New York reduced. The arbitrators threw out an $800 million claim against the state by companies Philip Morris USA, Lorillard Inc., and Reynolds American Inc.

Instead, the panel ordered them to pay $82 million that they withheld from the state and is expecting to receive the funds sometime soon. One dispute between tobacco makers and states later rose to more than $7 billion due under the deal for the years 2003 to 2012. This stemmed from claims that the market-share erosion reduced the companies' obligation to pay such high amounts of money.

The Indian Reservation Debate

In New York, there was another disagreement regarding the state's policy of not taxing cigarette sales that took place on Indian reservations. The state didn't collect payments from tobacco companies that didn't join the national settlement on their reservation sales. This could protect the state from many billions of dollars in future claims. These payments are made in the form of tobacco bonds. There is still a risk that the bonds won't be paid if anti-smoking laws change or if cigarette tax increases and causes cigarette sales to drop more than 5% per year.

Essentially, these cigarette making companies must pay these costs to cover the settlements for litigating parties who fall ill after smoking cigarettes. Studies show that inhaling tobacco can cause lung cancer and other health complications and respiratory issues. If you want more information about cigarette lawsuits and product liability then contact a personal injury attorney at Arnold & Itkin LLP today!


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