Did you know that some states are taking the position that a contract cigarette manufacturer can be held liable for escrow payments as a “successor” manufacturer simply because the manufacturer made the same brand of cigarettes as a prior manufacturer? Although the basis for the states’ position is not entirely clear, the position appears to be contrary to the definitions of “successor manufacturer” typically used by courts. Generally, these definitions require that the successor assume the burdens and legal obligations of the predecessor manufacturer or purchase the property of the predecessor. Simply contracting to manufacture a cigarette brand does not seem to fall within the scope of these definitions. Nevertheless, some states are seeking to impose successor liability against manufacturers on this basis.
All contract manufacturers should be aware of this trend. The Troutman Sanders Tobacco practice will continue to monitor and report on developments in this area.