In 1998, the State of Rhode Island was one of 52 states and territories (Settling States) that entered into the Tobacco Master Settlement Agreement (MSA) with the major tobacco manufacturers (Manufacturers). The Tobacco Enforcement Unit’s primary responsibility is to hold the Manufacturers accountable for strict compliance with the MSA namely its public health, marketing and payment provisions. This is done by regularly collaborating with Attorneys General throughout the country on compliance and enforcement strategies and tobacco prevention, and working to make laws dealing with tobacco work more effectively.
In 2013, Rhode Island, through the Office of Attorney General, collected over $46M from the Manufacturers in accordance with their MSA payment obligations. The Tobacco Enforcement Unit oversaw manufacturers’ certification, and worked with the Rhode Island Division of Taxation to enforce the provisions of Rhode Island’s Escrow Statute (Qualifying Statute).
The MSA has given rise to numerous lawsuits and legal issues. For example, the long-standing dispute between the Manufacturers and the Settling States relating to the Non Participating Manufacturer (“NPM”) Adjustment Disputes. The MSA requires Manufacturers to make annual payments into an account that is distributed to the Settling States based upon a formula related to each state's respective shares to the Settling States. Many adjustments are included in the calculation of these annual payments, such as the NPM Adjustment. A condition of the MSA allows for this downward adjustment in payments by the Manufacturers if their market share drops by more than 2% nationally and if an independent auditor determines that the MSA was a significant factor in that drop.
Pursuant to the MSA, each Settling State could avoid a recovery from the Manufacturers if it enacted and "diligently enforced", a Qualifying Statute by which it compelled tobacco manufacturers, who are not parties to the MSA, to make payments into escrow accounts that would approximate the charges required from the settling Manufacturers.
Earlier in the year, the Panel, which was convened for the 2003 NPM Dispute, issued an Award that incorporated certain provisions of a Term Sheet in connection with a Settlement Agreement the Manufacturers reached with certain MSA States & Territories; the Term Sheet resolved claims relating to NPM Adjustment Disputes, including the 2003 Dispute. Rhode Island is among the 30 states and territories that did not accept the terms of the Term Sheet, so the NPM Adjustment disputes between Rhode Island and the Manufacturers remain unresolved.
Rhode Island is engaging in the necessary steps to assert that Rhode Island had both, enacted a Qualifying Escrow Statute, and diligently enforced its statue for year 2004 (and in all other years).