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General Tobacco Master Settlement Agreement Challenge Rejected By 6th Circuit

By Troutman Sanders Tobacco Law Team

Last month, the U.S. Court of Appeals for the Sixth Circuit rejected a challenge to the Master Settlement Agreement filed by General Tobacco against sixteen tobacco manufacturers and 52 Attorneys General.

General Tobacco joined the MSA in 2004. At the time, it had the largest market share among non-signatories. General Tobacco claimed that, at the time it joined, the states failed to adequately explain the payment exemption granted to so-called "grandfathered SPMs" - companies that joined the MSA within 90 days.

After being unable to meet its back-payment obligations (General Tobacco had to make back payments for the cigarettes it sold prior to joining the MSA), General Tobacco sought to lessen those obligations. Although the states agreed, the other signatory-manufacturers objected, invoking the MSA's most-favored nations clause. General Tobacco then challenged the MSA on antitrust and constitutional grounds. General Tobacco also alleged that it was fraudulently induced into signing because the states never provided information regarding other manufacturers' payment obligations.

The court found that the defendants were immune from antitrust claims, consistent with several other court decisions addressing the same issue. The court found that General Tobacco waived its constitutional claims by specifically agreeing to do so when it signed the MSA. Finally, the court found the fraudulent inducement claim to be barred by state sovereign immunity.

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