You are here

CEI Takes Corrupt Tobacco Deal to Supreme Court

On Monday, CEI took its constitutional challenge to the corrupt 1998 tobacco deal to the US Supreme Court, appealing the case from Fifth Circuit Court of Appeals.  I hope the court will take the case.  It goes way beyond tobacco.  The settlement amounted to a $200 billion tax foisted on smokers and a massive, Byzantine regulatory morass imposed on an entire industry -- not by state governors or legislators but by state attorneys general.  It was a unilateral power-grab by a handful of state AGs who wanted to stick it to Big Tobacco and haul in a chunk of revenue for their states and trial lawyer cronies ($13 billion!) using baseless lawsuits against the (then) four major tobacco companies.

Inconveniently, Article I, Section 10 of the US Constitution flat out prohibits states from entering into multi-state compacts, without the consent of Congress. That's important because the so-called "Compact Clause" was intended by the Founding Fathers to prevent states from taxing, regulating, and otherwise bullying across their own boundaries.  Looking at the language of the Article I, Section 10, you can see that the Founders were worried about states trying to take on such national powers (emphasis added):

State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

State shall, without the Consent of Congress, lay any duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

And, guess what?  Congress never approved the 1998 tobacco deal.  In fact, Sen. John McCain (R-Ariz.) introduced a resolution in 1997 to approve an earlier version of the tobacco deal, but that resolution failed in committee.  Isn't it interesting that there was an effort to get congressional approval?  It must have occurred to someone that the Constitution might actually, oh, require it.

At the end of the day, even state AGs who opposed the state lawsuits, such as Alabama's Bill Pryor, felt compelled to sign the 46-state settlement (while four other states reached individual settlements), because smokers in all states would be paying for the settlement in the form of higher cigarette prices.  What sense was there in allowing your own state's smokers to pay for the settlement while getting none of that money back to the state, at least?

Looking again at Article I, Section 10, doesn't this seem like exactly the sort of nefarious state bullying and multi-state tax schemes that would have concerned the Founding Fathers?  It's hard to believe they would've written the Compact Clause for no reason.  Surely it is past time to pay attention to the protections they gave us.

For more information about the case, visit cei.org/msa.