ILNews

State must arbitrate with tobacco companies

Jennifer Nelson
January 1, 2008
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States involved in a settlement agreement with certain tobacco companies to recover health care costs for smoking-related illnesses must participate in a single, national arbitration panel when arbitrating issues, ruled the Indiana Court of Appeals today.

In State of Indiana, ex rel., Stephen R. Carter, Attorney General of Indiana v. Philip Morris Tobacco Company, et al., No. 49A02-0706-CV-494, the state appealed the trial court order requiring Indiana to arbitrate with Philip Morris and other tobacco companies the decision of the independent auditor to not apply a particular adjustment for 2003 regarding a master settlement agreement.

In the late 1990s, certain states - including Indiana - created a master settlement agreement (MSA) with certain tobacco companies in order for the states to receive health care costs for smoking-related illnesses developed by the states' residents. Other tobacco companies later became parties to the agreement. All of the participating manufacturers (PMs) were required to make substantial annual payments based upon certain data and calculations set forth in the MSA.

An independent auditor is required to calculate the amount of all payments owed under the MSA and also determines any applicable adjustments or reductions.

In 2003, the independent auditor did not apply a non-participating manufacturers (NPM) adjustment to the PMs' payments. The NPM adjustment potentially reduces the annual payment of the PMs in compensation for their market share loss to NPMs.

The settling states agreed with the auditor's final calculations for 2003, but the PMs moved the trial court to compel arbitration of the matter. The trial court held a hearing and determined the matter should be arbitrated per the MSA. The state filed a motion to correct error, which the trial court denied.

Indiana appealed, arguing the trial court erred when it ordered the state to participate in arbitration pursuant to the MSA; also, the state believed the trial court erred when it ordered arbitration by a single, national arbitration panel.

The arbitration clause in the MSA states any dispute, controversy, or claim arising out of or relating to calculations made by the independent auditor shall be submitted to binding arbitration before a panel of three, neutral arbitrators. The state argued that this issue is not arbitrational because the state had enforced a qualifying statute, which allowed for the denial of the NPM adjustment, and the enforcement of the qualifying statute is not arbitrational.

Senior Judge George Hoffman Jr. wrote in the opinion that under the MSA, the NPM adjustment is an arbitration issue because the NPM adjustment is a calculation determined by the independent auditor. The dispute between the settling states and the tobacco companies arose out of the auditor's calculation, which must be arbitrated per the MSA. In fact, the independent auditor is charged with making the determination of the state's diligent enforcement of its qualifying statute because it is a part of the NPM adjustment determination.

In regards to the state claim that the trial court erred in ordering it to arbitrate the issue by a single, national panel instead of a panel of three, neutral arbitrators, the state cited the arbitration clause in the MSA that stated each of the two sides of the dispute select an arbitrator, and those two arbitrators then pick the third one.

Senior Judge Hoffman wrote the language and the structure of the MSA require that the dispute must be submitted to a single, national arbitration panel, expressly providing "each of the two sides to the dispute shall select one arbitrator." The two sides in the dispute are the settling states - not just Indiana - and the PMs.

"If the parties had meant for each Settling State to have its own arbitrator or arbitration panel, this sub-section of the MSA would not have specified a panel of only three arbitrators, which clearly indicates a national arbitration," he wrote.

Also, the MSA is an agreement of nationwide concern with national effect and structure. The language as well as the structure of the MSA requires disputes such as this to be determined by a single, national arbitration panel, Senior Judge Hoffman wrote.
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  3. All these sites putting up all the crap they do making Brent Look like A Monster like he's not a good person . First off th fight actually started not because of Brent but because of one of his friends then when the fight popped off his friend ran like a coward which left Brent to fend for himself .It IS NOT a crime to defend yourself 3 of them and 1 of him . just so happened he was a better fighter. I'm Brent s wife so I know him personally and up close . He's a very caring kind loving man . He's not abusive in any way . He is a loving father and really shouldn't be where he is not for self defense . Now because of one of his stupid friends trying to show off and turning out to be nothing but a coward and leaving Brent to be jumped by 3 men not only is Brent suffering but Me his wife , his kids abd step kidshis mom and brother his family is left to live without him abd suffering in more ways then one . that man was and still is my smile ....he's the one real thing I've ever had in my life .....f@#@ You Lafayette court system . Learn to do your jobs right he maybe should have gotten that year for misdemeanor battery but that s it . not one person can stand to me and tell me if u we're in a fight facing 3 men and u just by yourself u wouldn't fight back that you wouldn't do everything u could to walk away to ur family ur kids That's what Brent is guilty of trying to defend himself against 3 men he wanted to go home tohisfamily worse then they did he just happened to be a better fighter and he got the best of th others . what would you do ? Stand there lay there and be stomped and beaten or would u give it everything u got and fight back ? I'd of done the same only I'm so smallid of probably shot or stabbed or picked up something to use as a weapon . if it was me or them I'd do everything I could to make sure I was going to live that I would make it hone to see my kids and husband . I Love You Brent Anthony Forever & Always .....Soul 1 baby

  4. Good points, although this man did have a dog in the legal fight as that it was his mother on trial ... and he a dependent. As for parking spaces, handicap spots for pregnant women sure makes sense to me ... er, I mean pregnant men or women. (Please, I meant to include pregnant men the first time, not Room 101 again, please not Room 101 again. I love BB)

  5. I have no doubt that the ADA and related laws provide that many disabilities must be addressed. The question, however, is "by whom?" Many people get dealt bad cards by life. Some are deaf. Some are blind. Some are crippled. Why is it the business of the state to "collectivize" these problems and to force those who are NOT so afflicted to pay for those who are? The fact that this litigant was a mere spectator and not a party is chilling. What happens when somebody who speaks only East Bazurkistanish wants a translator so that he can "understand" the proceedings in a case in which he has NO interest? Do I and all other taxpayers have to cough up? It would seem so. ADA should be amended to provide a simple rule: "Your handicap, YOUR problem". This would apply particularly to handicapped parking spaces, where it seems that if the "handicap" is an ingrown toenail, the government comes rushing in to assist the poor downtrodden victim. I would grant wounded vets (IED victims come to mind in particular) a pass on this.. but others? Nope.

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