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Tobacco Settlement Challenge To Be Argued In Court

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Tobacco Settlement Challenge To Be Argued In Court

Federal Court To Hear MSA Lawsuit Amid Embarrassments Over Settlement Spending

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
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.