Court reins in state on tobacco

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PORTLAND (AP) – Maine’s attempt to circumvent arbitration to collect the state’s full share of the tobacco settlement was rejected by the state supreme court on Tuesday.

Attorney General Steven Rowe sued last year after the state received $44.5 million of its $50 million share for 2005 from the tobacco companies, which withheld more than $700 million from states in a dispute over how much cigarette makers owe under the settlement.

Maine was among the 46 states that agreed in 1998 not to sue cigarette makers for the public health harm caused by their products, in exchange for annual payments in perpetuity.

But the tobacco companies said they did not have to pay hundreds of millions of dollars because a provision in the settlement allows cigarette makers to pay less if they have lost market share to smaller companies that weren’t part of the deal.

In its unanimous ruling, the Maine Supreme Judicial Court said state law forbids the state from seeking any declaratory judgment from the courts during arbitration.

But the state is allowed to appeal the ultimate outcome of arbitration, it said.

“The Legislature explicitly determined what decisions concerning arbitration may be appealed,” Justice Warren Silver wrote.

For the time being, the tobacco companies will continue to withhold money. In April, the tobacco companies again withheld money while providing $46.3 million to the state.

That’s only a portion – more than 75 percent – of what the state is owed, officials said.

Barring a settlement during ongoing negotiations, the state will pursue arbitration pursuant to the ruling, Rowe said Tuesday.

But it remains unclear when or where the arbitration would take place. There could be one arbitration session involving all 46 states, or there could be separate arbitration sessions in individual states like Maine.

“We’re confident that in the end, the tobacco companies will not be able to reduce their payments to Maine,” Rowe said.

The state had contended it’s entitled to its full annual payment because the state has diligently enforced laws requiring cigarette manufacturers that did not participate in the settlement to pay into escrow accounts.

Rowe also contended that unlike some states, all of Maine’s money has been used for health-related and tobacco prevention and cessation programs.

The state has reduced smoking among young people by 60 percent and among adults by 20 percent, and the state won a perfect score from the American Lung Association for its tobacco-fighting efforts, said Assistant Attorney General Peter B. LaFond.

AP-ES-07-17-07 1632EDT

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