Philip Morris USA Makes Master Settlement Agreement Payment of Approximately $3.1 Billion
Philip Morris USA (PM USA) today made its annual Master Settlement
Agreement (MSA) payment of approximately $3.1 billion. The payment
reflects a $483 million credit that PM USA received pursuant to a
settlement of the non-participating manufacturer (NPM) adjustment
disputes for 2003-2012 that it and other participating manufacturers
reached in December with 17 states, the District of Columbia and Puerto
Rico. Since then, one other state joined the settlement, bringing the
total number of signatory jurisdictions to 20.
A panel of three retired federal judges presiding over the pending NPM
adjustment arbitration entered a stipulated award on March 12, 2013,
directing that the December settlement be implemented.
“We believe the settlement resolves the NPM adjustment disputes on
financial terms that are fair to the parties and in a way that we
believe will lead to a better method of resolving these issues in the
future,” said Denise Keane, Altria Group’s executive vice president and
general counsel, speaking on behalf of PM USA. “We hope other states
will see the benefits of the settlement and consider joining.”
The settlement provides the signatory states a release of approximately
$2.0 billion from the disputed payments account (DPA), which represents
their share of over $4.7 billion that is currently in the DPA. For the
signatory states, the settlement is net cash positive and also removes
the risk of substantial reductions of MSA revenues in future years
related to the 2003-2012 disputes.
Last week, courts in two states denied preliminary injunctions against
provisions of the panel’s award that had been sought by two of the
states that have not joined the settlement (non-signatory states). In
addition, a number of non-signatory states have brought actions to
vacate or modify the panel’s award. Those actions remain pending.
Additional non-signatory states may pursue similar actions. While PM USA
intends to oppose these actions vigorously, no assurance can be given
that these actions will be resolved in a manner favorable to PM USA or
as to what remedy might be ordered.
To date, Alabama, Arizona, Arkansas, California, District of Columbia,
Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire,
New Jersey, North Carolina, Oklahoma, Puerto Rico, Tennessee, Virginia,
West Virginia and Wyoming have agreed to join the NPM adjustment
settlement.
Today’s MSA payment also includes approximately $203 million that PM USA
disputes it owes as a result of the 2010 NPM adjustment. As permitted by
the MSA, PM USA deposited the disputed funds into the DPA. As part of
the DPA releases described above, the signatory states’ shares of the
disputed amount for 2010 is being released to them from the DPA in
connection with the settlement.
PM USA has paid more than $62 billion to the states under the tobacco
settlement agreements signed in 1997 and 1998.
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