Supreme Court Won't Hear Small Tobacco Companies' Case to Avoid Paying States

The Supreme Court on Tuesday refused to consider the case of three small cigarette companies trying to avoid making payments to 30 state governments that reached a huge financial settlement with the giants of the tobacco industry.

After the settlement eight years ago in which the four biggest tobacco companies paid $206 billion, each of the 30 states passed a law requiring companies that didn't participate to pay money into escrow funds to satisfy future damage awards in cigarette-related lawsuits.

The three small companies sued, alleging each state's escrow statute violated antitrust law. The laws each state passed were substantially identical to model legislation in an appendix to the settlement that had been reached with the biggest companies in the tobacco industry.

The 2nd U.S. Circuit Court of Appeals in New York, where the settlement negotiations had taken place, allowed the small companies to pursue the antitrust claims.

In asking the Supreme Court to take the case, the state governments say the appeals court is treating a state's most sovereign act, the passage of legislation, "as though it were the culmination of a commercial antitrust conspiracy."

The states wanted the court to consider whether principles of due process and state sovereignty permit a federal judge in New York to exercise jurisdiction over the state attorney general in another state.

The major companies that were part of the tobacco settlement manufacture over 97 percent of all cigarettes sold in the country.

The cigarette companies are Grand River Enterprises Six Nations Ltd., Nationwide Tobacco Inc., and 3B Holdings Inc.

The case is Troy King v. Grand River Enterprises Six Nations Ltd., 05-1343.