AG Gansler Confident Maryland Will Prevail in Clash with Big Tobacco
The State "diligently enforced and far exceeded" agreement requirements
MD ( Nov. 4, 2011) - Maryland Attorney General Douglas F. Gansler today expressed confidence that Maryland will prevail against Big Tobacco's unfounded dispute with the State under the 1998 tobacco Master Settlement Agreement (MSA). Big Tobacco (all companies party to the 1998 MSA, including the major tobacco manufacturers) claims 35 states, including Maryland, did not adequately enforce state laws governing tobacco manufacturers other than those that participate in the MSA.
"Big Tobacco has no grounds for pursuing this action against Maryland for tens of millions of dollars," said Attorney General Gansler. "Maryland diligently enforced and far exceeded the MSA's requirements. We are confident that a fair evaluation will show that we surpassed what was required to protect Maryland's MSA payments and the interests of Maryland taxpayers."
The comments came in response to Big Tobacco's filings on Thursday with an arbitration panel that will decide a $1.1 billion dispute related only to the MSA payment made to states during 2003. No other annual payment is being ruled on by the arbitration panel. Under the 1998 tobacco MSA, Maryland has received approximately $150 million each year beginning in 1999.
The MSA incorporates a model state law, which if enacted and diligently enforced by the State for the year in question, protects the State from the downward adjustment to its MSA payment. The model law requires manufacturers not participating in the MSA to make deposits into escrow for certain cigarettes they sell in the State. Maryland's potential liability, if found non-diligent in enforcing the model law, would range from approximately $26 million to $125 million.
During 2003, Maryland not only vigorously enforced its model law, but also enacted and implemented complementary legislation to fix problems with the model law so that it could effectively enforce the escrow obligation against noncompliant tobacco companies. Once the complementary legislation was implemented in 2003, Maryland was able to end virtually all noncompliance, not only for the remainder of 2003, but for all years since then. The State's enactment and implementation of complementary legislation went far beyond what the MSA requires to avoid the adjustment.