Supreme Court Declines to Hear Case Challenging Tobacco Settlement

Supreme Court Declines to Hear Case Challenging Tobacco Settlement

Backroom Tobacco Deal Violates US Constitution
March 07, 2011

Washington, D.C., March 7, 2011 — The U.S. Supreme Court today declined to hear CEI’s constitutional challenge to the 1998 tobacco settlement, a $200 billion backroom deal between major tobacco companies and 46 state attorneys general. The case, in litigation for more than five years, alleged that the tobacco “Master Settlement Agreement” violated the constitutional provision against multi-state agreements that have not been approved by Congress.

“We regret the court’s decision not to take up a case of major constitutional and policy importance,” said Sam Kazman, CEI General Counsel. “The tobacco settlement imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it. This was a major power grab by state attorneys general at the expense of both citizens and our structure of government.”

Constitutional law experts from opposite sides of the political spectrum – Alan Morrison and Richard Epstein - had joined in supporting review.

CEI’s challenge to the tobacco settlement focused on the Constitution’s Compact Clause (Article I, Section 10):

“No State shall, without the Consent of Congress …enter into any Agreement or Compact with another State, or with a foreign Power ….”

The Compact Clause was specifically aimed at preventing states from collectively encroaching on federal power or from ganging up on the citizens of other states. The tobacco settlement, a multi-state compact, plainly violates that provision. The settlement sets a dangerous precedent in disregarding constitutional protections against government power.

The deal also violates federal antitrust laws, setting up a national tobacco cartel that allows Big Tobacco to raise prices while severely restricting its competitors. According to the terms of the deal, major tobacco companies would make annual payments to the states in perpetuity, with an estimated cost of over $200 billion over 25 years. Even small tobacco companies that were never part of the state lawsuits or subsequent settlements are required to make major escrow payments to the states.

The plaintiffs in the case include a discount tobacco company, a tobacco shop, and an individual smoker. Erik Jaffe served as lead counsel in the case, assisted by former federal appellate judge and Stanford constitutional law professor Michael McConnell, and CEI attorneys Hans Bader and Sam Kazman.

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