As mentioned in a previous blog post, on September 11, 2013, a three-member federal arbitration panel settled the on-going dispute among three participating manufacturers (“PMs”) and 15 states involving the 2003 payment obligations under the Master Settlement Agreement (“MSA”).

New York is one of the states that the arbitrators ruled in favor of in denying the PMs a credit under the non-participating manufacturer (“NPM”) Adjustment.  The arbitration panel concluded that “the MSA’s first condition for application of the 2003 NPM Adjustment was satisfied: the PMS had suffered a ‘Market Share Loss’ for 2003.”  In particular, the independent auditor calculated approximately an 8 percent market-share shift from the PMs to the NPMs from 1997-2003.  New York (nor any of the other 14 states) disputed the auditor’s finding that the PMs suffered a market share loss in 2003. 

As a result of the Master Settlement Agreement (“MSA”), each year every participating manufacturer (“PM”) is required to make an annual payment that is based on the number of cigarettes it sells nationwide.  This payment obligation does not apply to non-signatories to the MSA, known as non-participating manufacturers (“NPMs”).  In an effort to equalize the impact on the PMs, the MSA contains a provision requiring each Settling State to enact a statute to collect escrow from the NPMs, thereby imposing similar financial obligations on NPMs.

On August 2, 2013, the Smuggled Tobacco Prevention Act (“STOP Act”) was reintroduced in the 113th Congress in the form of H.R. 2990 by United States Congressman Lloyd Doggett of Texas.  H.R. 2990 has been referred to and currently awaiting review by the House Committee on Ways and Means.

The STOP Act has been introduced in various forms since 2004, and the legislation is designed to enhance law enforcement’s ability to combat illegal tobacco trafficking.  The most recent previous version of the STOP Act, H.R. 3186, was introduced in 2011 during the 112th Congress.  Referred to the House Committee on Ways and Means, neither chamber of Congress took action on the 2011 version of the bill after it was introduced.  

In a blog post on January 26, 2013, we discussed a case pending before the Idaho Supreme Court.  The State of Idaho and the Idaho State Tax Commission sued Native Wholesale Supply Company, a native-owned tobacco distributor.  Native Wholesale sold cigarettes that were not listed in the Idaho Directory to a native-owned business on an Idaho reservation. 

The United States Court of Appeals for the Fourth Circuit is scheduled to hear oral arguments on September 19, 2013 in an appeal filed by Philip Morris.  In October 2012, the United States District Court for the Eastern District of Virginia evaluated the methodology used by the United States Department of Agriculture (“USDA”) to determine the amount of assessments levied against tobacco product manufacturers and importers under the Fair and Equitable Tobacco Reform Act (“FETRA”).  Philip Morris sued the USDA, among others, claiming that the USDA improperly calculated the FETRA assessments.

Texas enacted a fee on certain tobacco products manufactured by non-participating tobacco products manufacturers (“NPM”), that goes into effect on September 1, 2013. Tex. H.B. 3536 passed the legislature on June 14, 2013. The fee is imposed on the sale, use, consumption, or distribution in Texas of NPM cigarettes and…

We enjoyed visiting with old friends and meeting new ones at the IPCPR conference and trade show in Las Vegas.

From our perspective, the talk of the show was FDA’s looming regulation of cigars. During the conference, Troutman Sanders participated in a legislative session on the potential for FDA regulation…

Troutman Sanders’ Tobacco team practice partner Bryan Haynes was quoted in a July 30 Washington Post article titled “FDA backs low-nicotine cigarette research as it weighs new regulatory power” about a new study regarding the effect of cigarettes with lower levels of nicotine, and how the FDA may choose to…

An article by the Troutman Sanders Tobacco practice appears in the June issue of Smokeshop Magazine. The article, titled “Regulating Cigars” discusses the FDA’s proposed regulation of cigars, and how that would affect the premium cigar industry.

The article can be found here.

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