By TIM THORNBERRY
Kentucky Correspondent

LEXINGTON, Ky. — A hearing scheduled last week to determine whether General Tobacco’s (GT) products would be delisted, according to the terms of the Master Settlement Agreement (MSA), was cancelled when the company and states’ attorneys general reached an agreement.

A legal battle that began a couple of weeks ago created the need for the hearing. Arkansas Attorney General Dustin McDaniel, on behalf of all the attorneys general involved, sent a letter to GT’s executive vice president Ron Denman giving a 30-day notice to the company, warning of impending legal action should GT continue to withhold its portion of the MSA payments.

GT sued those states and 19 MSA-participating tobacco companies on Oct. 28 for more than $1 billion in damages and a stop in action by states against the company for its nonpayment of MSA funds. The suit was filed on grounds that the defendants violated “the Sherman Anti-Trust Act, (GT’s) constitutional rights under the Equal Protection and Due Process Clauses of the Fourteenth Amendment, the Compact Clause and the Commerce Clause of the U.S. Constitution, as well as violation of the Civil Rights Act, Title 42 USC Section 1983.”

GT joined the MSA in 2004 and has made a total of $470 million, with another $36 million in an escrow account.

On Oct. 16 the company announced “a payment of $27 million, for the benefit of the States under the MSA as part of its commitment to the multi-state agreement by tobacco companies setting forth strict guidelines for tobacco marketing and advertising, as well as the finance of a $1.5 billion dollar anti-smoking education campaign.”

Denman said, regarding the suit, “The structure for the MSA created an impossible business environment for future competitors, especially small players such as GT. All we are asking for is a level playing field for everyone.”

Terms of the MSA also include provisions to list acceptable tobacco products to be distributed and sold throughout the country. The company filed an emergency motion to keep its products on that approved list of tobacco products, a list states use to determine what can and cannot be sold in each state.

The agreement basically said that defendant states, for now, would not take action to delist the company’s products and would not attempt to take possession of GT’s escrow account.

“A few days before the hearing we reached an agreement with the states, whereby they gave us essentially the relief we would have been seeking from the court, which is they will agree they will not take any type retaliatory measures until such time they are either no longer in the case or until a judge has a greater opportunity to determine some of the greater issues,” said Denman.

GT, a relative newcomer to the tobacco industry, has become the sixth largest tobacco company in the country within an eight-year period. Under conditions of the MSA, those companies that were not initially involved in the original MSA agreement in 1998 and did not join with other MSA members or adhere to the provisions of the agreement would not receive “benefits” of the agreement, which included protection from future lawsuits.

Additionally, those products would be subject to a user fee equal to those made by participating members. While the lawsuit by GT will continue, last week’s agreement was a welcome sign of cooperation between the company and the states.

“We’ve always operated in good faith and we’re very appreciative the states gave us this,” Denman said. “Any time you can agree to something without having to go into court and it’s a fair agreement for everybody, that’s a victory for all sides.

“I just want (the company) to stay alive. We have a lot of people working here that are counting on us, as well as a lot of customers and distributors.”