R. J. Reynolds Tobacco, Philip Morris USA and Lorillard have reached an agreement with 17 USstates, the District of Columbia andPuerto Rico to settle 10 years of claims related to the Non-Participating Manufacturer (NPM) adjustment provisions of the Master Settlement Agreement (MSA).
Under the agreement, Reynolds will receive credits currently estimated to be worth more than $1 billion for its claims relating to 2003 through 2012. The credits will be applied to the company’s MSA payments during the next five years.
The agreement includes a mechanism that allows additional states to join under certain conditions. If additional states join the settlement, the amount R.J. Reynolds and the other participating manufacturers will recover under the settlement will increase, and the cost of the settlement to participating states could decrease.
PM USA’s credit is estimated to total about $450 million. ‘This estimate is subject to change depending on a variety of factors related to the calculation of the credit,’ the company said in a note posted on its website. ‘The agreement is also subject to approval by an arbitration panel. ‘Upon final determination of the amount and approval of the arbitration panel, PM USA is expected to record a corresponding increase in its reported pre-tax earnings.
‘The agreement also puts into place revised and streamlined NPM adjustments for future years.’
Lorillard expects to receive credits during the next five years of at least $198 million on its outstanding claims, with the majority of the credits occurring in April next year and the remainder during the following four years.
“We are very pleased to have settled this long-standing dispute with the signatory states and believe that it is an equitable resolution for all parties involved,” said Ronald S. Milstein, executive vice president and general counsel of Lorillard. “Importantly, today’s announcement also puts into place a new method to better determine future adjustments – providing greater clarity for the states and Lorillard.”
The NPM adjustment disputes arose out of the MSA, which the leading cigarette manufacturers entered into with 46 states to resolve the states’ health care cost recovery litigation against the manufacturers. ‘The MSA imposed significant restrictions on how cigarettes are advertised, marketed and sold in the United States and required participating manufacturers to make annual payments to the states in perpetuity,’ PM USA said in its note. ‘So far, states participating in the MSA have received more than $85 billion.
‘The NPM adjustment disputes relate to the state escrow statutes, under which non-participating cigarette manufacturers are required to make escrow payments for volume sold in each MSA state. The MSA allows participating manufacturers to receive downward adjustments in MSA payments if the MSA is a significant factor in market share loss for the participating manufacturers. States that demonstrate that they diligently enforced state escrow statutes during a disputed year can avoid the downward payment adjustment for that year.’
The jurisdictions that have agreed to join are Alabama, Arizona, Arkansas, California, District of Columbia, Georgia,Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Puerto Rico, Tennessee, Virginia, West Virginia and Wyoming.
Category: Breaking News