Debate and Issues Archive

draft settlement

Bennett & Fairshter File Suit on Behalf of Discount Cigarette Distributors to Challenge and Overturn Tobacco Settlement and Related Legislation

  Matthew J. Fairshter, 626/568-1200
  626/568-8930 (fax)

LOS ANGELES--(BUSINESS WIRE)--Aug. 19, 1999--The following statement was issued today by Bennett & Fairshter:

"A group of Discount Cigarette Distributors filed, in United States District Court, Central District of California, Case No. 99-0835NM, a multi Billion Dollar lawsuit which challenges the national tobacco settlement reached between the Philip Morris, R.J. Reynolds, Brown & Williamson, Lorrilard, and Liggett Group (Big Five Tobacco Companies) and the Attorneys General for 46 States.

"This lawsuit asserts anti-trust and constitutional violations and seeks remedies which will overturn this settlement, strike down two statutes which seek to implement the settlement, seek certain injunctive relief, and mandate that any settlement proceeds which do get paid to be deposited into a national trust to pay for health care costs of persons who are suffering smoking-related illnesses, instead of the pork barrel projects for which most of the States are now proposing to use the money.

"This lawsuit will also address the fact the Attorneys General, National Association of Attorneys General, and the tobacco Companies have engaged in a collusive monopolistic practice of acting like commercial thugs against the Discount Cigarette Distributors in violation of the law and constitution.

"Plaintiffs seek to invalidate the Master Settlement Agreement of November 23, 1998 (hereafter called the "MSA") between the Big Five Tobacco Companies and the Attorneys General of forty-six (46) States, and the settlement entered into by the State of Texas and Defendants Philip Morris, R.J. Reynolds, Brown & Williamson, Liggett Group, and others, on January 16, 1998 (the "Texas Settlement").

"The MSA and the Texas Settlement collectively and individually constitute an unconstitutional and coercive scheme and contract, combination and collusion made for the purpose and having the effect of limiting competition between existing tobacco manufacturers and excluding new competitors, such as Plaintiffs, who engage in domestic cigarette sales, thereby imposing artificially high prices on the consumers in that market. The MSA and the Texas Settlement collectively and individually are unconstitutional and violate the Sherman Act, Clayton, Act, Civil Rights Act, and other related statutes and the common law.

"On November 23, 1998 the Tobacco Companies and the Attorneys General did enter into a sweetheart deal, the MSA, which specifically crushes competition, is unfair, and perpetuates a monopoly in favor of the Tobacco Companies. As a result, the Attorneys General and States are now directly sharing in the cartel's profits. It should be noted that the MSA is not simply a twenty five year agreement. It is in fact a joint venture agreement in which the Attorneys General and States are going to share in the cartel's profits in perpetuity, i.e. Forever.

"The MSA is a permanent arrangement in which the Attorneys General and States now have a financial interest directly tied to the successful sale of cigarettes in the United States. The more cigarettes sold, the more the Tobacco Companies will pay to the Attorneys General and States, and the more the politicians become dependent on Cartel Profits to fund their pet projects. Although these payments will be made, there are no safeguards in place which mandate that these funds be used to pay for the costs of smoking related illnesses. In fact, in most States the vast majority of the money is being used for programs and projects having nothing to do with the healthcare costs of persons who suffer from smoking related illnesses.

"There are also no safeguards in place to prevent the Tobacco Companies from gouging the public with higher prices and racking in huge additional profits at the expense of the American Consumer. In 1999, it is estimated that the Tobacco Companies will use their November 24, 1998 huge price increase of 45 cents per pack, justified by Big Tobacco to pay for the settlement, to increase profits more than 100%. There are no safeguards in place which will prevent the Big Tobacco Companies from increasing prices further to generate even more profits.

"On June 20, 1997, a national settlement of lawsuits and claims brought by the Attorneys General in each of their States was agreed upon with the Big Five cigarette companies (the "National Settlement"). The basic allegations set forth in the Attorneys General's lawsuits and claims was that these companies, and others, were a cigarette cartel which had engaged in various violations of law, including state anti-trust, state unfair competition, state fraud, and state consumer protection laws.

"The Attorneys General were suing this cigarette cartel for the lies and deception they had practiced upon the public and the politicians for the last forty years, including their testimony before Congress that nicotine was not addictive. In suing the Tobacco Companies, the Attorneys General were seeking reimbursement for health care costs incurred over the last forty years which the states and territories had incurred due to the affects of smoking on health.

"The National Settlement was presented to the United States Congress, Senate Bill 1214 authored by Senator McCain, for approval and the enactment of legislation necessary to implement it. The United States Congress, after lengthy consideration, disapproved of the National Settlement and rejected it on June 17, 1998. Thereafter, the Tobacco Companies and the Attorneys General did proceed to defy the will and decision of the United States Congress by entering into the MSA.

"The Tobacco Companies, seeing that the Attorneys General needed a victory after the previous rejection by Congress, did play a shell game by offering a settlement in exchange for certain liability protections. The Tobacco Companies, as the cigarette cartel, has had a long history of monopolizing the cigarette market and crushing their competition.

"The Tobacco Companies saw an opportunity to take advantage, outmaneuver, and outwit the Attorneys General and ultimately further their monopoly in the cigarette market in which they could continue to sell cigarettes in the United States FOREVER, free from competition. The perpetuation of this monopoly has been the goal of the cigarette cartel for almost one hundred years. What the Tobacco Companies sought was a sweetheart deal, without letting the Attorneys General know what was going on. The Tobacco Companies succeeded in their game and the Attorneys General are now refusing to recognize the harm they are now causing to both the American marketplace and consumers.

"Because the Tobacco Companies and the Attorneys General were frustrated by the actions of the United States Congress, and in direct confrontation to the rule of law, the Attorneys General sold out the sovereignty of their States and their high office to the Tobacco Companies' cigarette cartel in exchange for a minuscule (less then 2% of the Tobacco Companies total revenue) share of the cigarette cartel's profits.

"Although the Attorneys General have stated that they settled with the Tobacco Companies to gain money for health care, the MSA specifically does not provide that the cartel profits are to be used by the Attorneys General and/or States for health care. In point of fact, the Attorneys General and States are largely using the cartel profits for everything but paying for the health care costs of smoking related illnesses.

"Plaintiffs are being represented by Matthew J. Fairshter, Esquire, of BENNETT & FAIRSHTER, P.A., 225 S. Lake Avenue, 9th Floor, Pasadena, Calif. 91101, 626-568-1200."