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State Survives Challenge to Big Tobacco Settlement

(CN) - The Supreme Court on Monday declined to review an amendment to Louisiana's 1998 settlement with major tobacco companies for antitrust violations.

In August, the 5th Circuit had rejected a challenge to the settlement brought by Xcaliber International, a discount cigarette dealer that was not a party to the state's tobacco settlement. Xcaliber had claimed that a 2003 amendment to the original escrow agreement "destroyed" its ability to compete within a regional market.

As a nonparty to the settlement, Xcaliber is required to put money in an escrow account to guard against future tobacco-related lawsuits. Before the amendment, Xcaliber could recover escrow funds when they exceeded the state's "allocable share," which was equal to that of participating members./

The amended law, however, set a limit on the amount of escrow funds that would be released to a nonparty in a particular year by removing the "state's allocable share" language.

Xcaliber claimed the amendment violated the federal Sherman Act, but a federal judge and the New Orleans-based federal appeals court both sided with the state.

"The [settlement] has brought about a substantial reduction in cigarette consumption and substantial reimbursements to the states for the public costs of cigarette consumption," the 5th Circuit's decision states. "By implementing the [settlement], Louisiana has ensured these beneficial achievements are not corrupted by allowing [nonparties] to sell cigarettes at prices unburdened by any payment obligation, and potentially to dodge liability by closing up shop and selling elsewhere.

As is their custom, the justices did not issue an opinion with their order rejecting Xcaliber's petition for review.

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