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MAYODAN, N.C. -- Cigarette manufacturer and distributor General Tobacco (GT) filed a lawsuit in the U.S. District Court in Louisville, Ky., against 52 U.S. attorneys general and 19 tobacco companies—including Philip Morris USA, R.J. Reynolds Tobacco Co., Reynolds American Inc. and Lorillard—alleging the defendants conspired to set up the Master Settlement Agreement (MSA), which was created in 1998, so later market entrants including GT, which began operations in 2000, would have to pay "substantially more" than other tobacco companies, in an effort to "drastically limit future competitors from fair market competition," the company stated.
"The structure for the MSA created an impossible business environment for future competitors, especially small players such as GT," J. Ronald Denman, executive vice president of GT, said in a statement. "All we are asking for is a level playing field for everyone."
GT is asking for treble damages in excess of $1 billion. GT has paid approximately $470 million to the MSA, as well as put an additional $36 million in escrow, according to the company.
The action follows an Oct. 27, 2008, notice from 42 attorneys general stating they had ended negotiations to reduce GT’s MSA payment obligations, which included a notice of intent to sue. The suit filed by GT asks for a preliminary injunction preventing the MSA from enforcing penalties on GT including de-listing of or failing to certify its brands, or attempting to take the funds in escrow, the suit states.
The MSA was created by 46 states, the District of Columbia and five U.S. island territories, along with several tobacco companies that controlled more than 97 percent of the tobacco market at the time, according to GT, which claims the MSA was structured allowing companies in the market in 1998 to receive future preferential payment terms, while new members would have to pay more than the original preferred members.
The complaint claims the attorneys general violated the Sherman Anti-Trust Act; the Equal Protection and Due Process Clauses of the Fourteenth Amendment; the Compact Clause and the Commerce Clause of the U.S. Constitution; and the Civil Rights Act, Title 42 USC Section 1983, the company stated.