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Tobacco Settlement Challenge to Be Argued in Court

News Releases

Washington, D.C., February 9, 2009—A lawsuit challenging the 46-state tobacco “Master Settlement Agreement” (MSA) will be argued today in federal district court in Shreveport, Louisiana, amid fresh reports of states misspending settlement revenue.

The lawsuit was brought by the Competitive Enterprise Institute on behalf of a small cigarette maker that refused to join the MSA, as well as a tobacco shop owner and individual smoker.  The lawsuit seeks to overturn the $206 billion tobacco settlement reached by 46 state attorneys general and major tobacco companies in 1998.

“The tobacco settlement was an unconstitutional, corrupt power grab by state attorneys general and trial lawyers,” said Sam Kazman, CEI General Counsel. “It imposed a massive, permanent tax on consumers and funded countless wasteful government programs, while largely ignoring its original health objectives,” said Kazman.

The case against the settlement proceeds just as new reports emerged about wasteful spending of MSA funds. In Virginia, for example, lawmakers have questioned whether more than $1 billion in settlement money had been spent well (see story). In fact, the Government Accountability Office reports annually on how states are spending settlement money and found that very little of it goes to health or smoking-related programs.

The CEI lawsuit alleges that the MSA violates the Compact Clause of the Constitution, which prohibits states from entering into agreements (“compacts”) with one another without the consent of Congress. The purpose of that provision is to prevent states from forming coalitions that might grab control of national policies, but in recent years states have increasingly sought to regulate such issues.