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Supreme Court Won't Hear Tobacco Settlement Challenge

WASHINGTON, D.C. - (Mealey's) A challenge to the $200 billion tobacco Master Settlement Agreement (MSA) reached the end of the road March 7 when the U.S. Supreme Court declined to hear the case, which claims that the settlement violates the Sherman Act and the compact clause of the U.S. Constitution (S&M Brands, Inc. v. James D. ''Buddy'' Caldwell, in his official capacity as Attorney General, State of Louisiana, No. 10-622, U.S. Sup.). 

S&M Brands Inc., a small, nonsettling manufacturer, Tobacco Discount House #1 Inc. and smoker Mark Heacock had filed a petition for a writ of certiorari on Nov. 8, saying it is undisputed that the settlement would violate antitrust laws if entered into by the tobacco companies without the participation of the states.  They said the MSA discourages price competition for market share by allocating the costs of the MSA among the large manufacturers proportional to their current national market share of cigarette sales, including sales in states that have not joined the MSA.  This discourages price competition, the petitioners said, because that would increase MSA expenses and reduce profits. 

The case attracted a diverse cast of amici, including a team of conservative and liberal legal scholars who argued that even if the MSA fell under the implied exception to the antitrust laws created in Parker v. Brown (317 U.S. 341 [1943]) for state restraint of trade with a clear regulatory purpose, it would still violate the Constitution's compact clause. 

Louisiana Attorney General James D. Caldwell countered that courts of appeals have uniformly held that the MSA and related legislation are not subject to challenge under the antitrust laws.  Moreover, he said, the issue of state action immunity was neither raised in nor decided by the Fifth Circuit U.S. Court of Appeals' ruling upholding the MSA. 

The Fifth Circuit's ruling was in accord with "every other court that has considered a Compact Clause challenge to the MSA," Caldwell said. 

[Editor's Note:  Full coverage will be in the March issue of Mealey's Litigation Report: Tobacco.  For all of your legal news needs, please visit] 

For more information, call editor Michael Lefkowitz at 215-988-7732, or e-mail him at