Missouri Supreme Court clears the way for the state to get tobacco settlement money
JEFFERSON CITY -- The Missouri Supreme Court on Tuesday swept away what could be the last roadblock between the state and its $6.7 billion settlement with the nation's cigarette makers.
In a unanimous ruling, the court rejected arguments by two consumer groups, two individuals, a hospital and the city of St. Louis that they were entitled to a share of the settlement. The court agreed with state officials who argued that those groups could file their own lawsuits if they believed they had been damaged by tobacco products.
Attorney General Jay Nixon, who had warned that the appeals threatened to scuttle the largest settlement in state history, praised the decision. He said the settlement provided the state with a historic opportunity.
"There is enough money coming into the state from this settlement over the next 25 years to make great strides in the improved health, education and well-being of the citizens of Missouri," Nixon said.
The money is Missouri's share of the $206 billion that the major U.S. cigarette makers agreed to pay over 25 years to 46 states participating in the settlement. Four other states had reached separate settlements.
The payments are designed to reimburse states for the costs of treating smoking-related illnesses through the Medicaid program, which pays for health care for the poor.
Tuesday's ruling was the third time that Missouri courts had thrown out the groups' efforts to get a share of the settlement. The St. Louis Circuit Court ruled against them last year, and the state Court of Appeals upheld that ruling in a 2-1 decision in January.
The latest ruling was issued by an oddly constructed Supreme Court. Five of the seven judges recused themselves from the case. So the two remaining judges, Ronnie White and Michael Wolff, selected three members of the state's Court of Appeals, a circuit judge and an associate circuit judge, to act as special Supreme Court judges.
Attorneys for the city of St. Louis and other parties that tried to intervene could not be reached Tuesday. They have 15 days to ask for a rehearing, but such reconsideration of a major decision is rare, court spokeswoman Tracy Synan said.
They also could ask the U.S. Supreme Court to review the case. But Nixon predicted that such a move would be futile because no federal issues had been raised.
Nixon said the lengthy appeals already had given Missouri the distinction of being the only state that had not received any money. The states' lawsuit against Big Tobacco was settled in November 1998. But the settlement required each state to resolve all related legal issues before it could receive payments.
Missouri's payments have been placed in an interest-bearing escrow account in New York. The account has grown to $193 million. A $45 million payment is due next month, and an additional $80 million is scheduled to arrive in April.
Kansas, which expects to receive $1.6 billion over 25 years from the same settlement, received its first payment in 1999.
When the decision becomes final, the Supreme Court's ruling noted, the state will qualify to receive the money. That is expected to set off another series of legal and legislative battles over what to do with the money.
Conservatives in the legislature say the money should be refunded to taxpayers. They have sought to have the money included in the calculation of total state revenue. That could cause the state to exceed its revenue limit, known as the Hancock Amendment.
The Hancock Amendment requires excess state revenue to be refunded to taxpayers. Many Democrats, including the late Gov. Mel Carnahan, argued that the tobacco settlement was a reimbursement and therefore was exempt from Hancock.
The legislature has grappled without success for two years with how to spend the money. Carnahan last year proposed dividing the money among anti-smoking programs, health care for the elderly, early childhood development and life sciences research.
Gov.-elect Bob Holden has proposed using $75 million a year to provide a prescription drug benefit for seniors. Hospitals have asked the legislature for $1 billion from the settlement. Business groups have asked for money to spur development projects. Health care groups have sought funding for their programs.
Last week, an initiative petition was started to seek voter approval of a plan to spend the money for programs such as providing people with health-care insurance and drug benefits for seniors.
Nixon said he supported using part of the settlement for health care programs and anti-smoking efforts.
"Missouri consistently ranks in the top six states in teen and adult smoking, and it benefits our children and the future well-being of our state to use some of this money to help our young people avoid this deadly addiction," Nixon said.
Legislative leaders expect any spending plan that emerges from the General Assembly to be submitted to voters for approval. Such a vote would eliminate any question about whether the settlement money is subject to the Hancock revenue limit.
The Supreme Court decision also addressed a lawsuit filed by state Sen. Pete Kinder that challenged the fees paid to attorneys whom Nixon hired to prosecute the tobacco lawsuit. The attorneys, led by Tom Strong, took the case on a contingency basis -- if they did not win, they would be paid nothing; if they won, they would receive a percentage of the award.
Strong was hired in June 1998, and the case was settled five months later. Kinder said the fees were unreasonable because the contract potentially gave Strong's firm hundreds of millions of dollars for five months' work. And he argued that the fees were illegal because they should be appropriated by the legislature.
The court found that the contract was legal because Nixon had the authority to enter a contingency-fee contract. But the court also found that the legislature had the power to revoke that authority. The ruling gave the legislature until the end of 2001 to decide whether to change the fee arrangement.
Kinder said he planned to introduce legislation to put "reasonable caps" on the fees. Kinder -- who will be the Senate's top officer under a Republican majority in January -- said $500 an hour was more than fair.
"I want to see some documentation of their work," he said.
Nixon said the current agreement required cigarette makers to pay the attorneys' fees. If the legislature changes that agreement, the state might have to shoulder the cost.
"Hopefully, the Missouri legislature will stop the yammering over fees and will get on with the business" of deciding how to spend the $6.7 billion settlement, Nixon said.
The Star's Tim Hoover contributed to this report.