Cigarette companies sue US states over escrow laws
NEW YORK, July 1 (Reuters) - Five cigarette manufacturers sued a group of state attorneys general Monday over state laws that force them to contribute to escrow accounts to cover future tobacco litigation over health care claims.
The plaintiff companies, which did not participate in the 1998 national settlement between states and major tobacco companies, filed suit in Manhattan federal court alleging the laws passed by more than 30 states are unconstitutional.
The plaintiffs in the case include Grand River Enterprises Six Nations, a Canadian company owned by Native North Americans on tribal land in Ontario; Jash International, a DeKalb, Ill. company that imports cigarettes into the United States that are made in India; and Sun Tobacco, a North Miamai Beach, Fla. company that makes cigarettes in Colombia and sells them to distributors and wholesalers in Florida.
The suit stems from litigation filed by a majority of states against major tobacco companies, including Philip Morris Cos. (NYSE:MO - News) seeking reimbursement for money the states spent to treat sick smokers. The states alleged Big Tobacco hid the health hazards of smoking. The major tobacco companies agreed in 1998 to settle the litigation for more than $200 billion and to abide by sweeping marketing and advertising restrictions.
Because the settlement did not include smaller companies, many states passed escrow laws aimed at ensuring the non- participating companies would not have a competitive edge.
The plaintiffs said they had never been sued by any states for the health claims that were brought against major manufacturers. However, since January 1999 they have been sued or threatened with prosecution by the defendant attorneys general for failing to comply with the escrow laws seeking to cover claims for future health claim litigation.