Tobacco Co. Can’t Sue State For Escrow Funds

     CINCINNATI (CN) – The 6th Circuit rejected two tobacco companies’ demand for the full amount of their 2003 cigarette sales, some of which had been deposited into an escrow account as part of the 1998 master settlement agreement between major tobacco companies and 46 states.

     The judges reversed a decision to let S&M Brands Inc. and International Tobacco Partners Ltd. pursue the funds in escrow. The reserved funds are required by a Tennessee statute aimed at preventing tobacco companies that did not participate in the settlement agreement from taking advantage of their participating competitors, who make annual payments and rein in their advertising.
     Plaintiffs, both regional tobacco companies, claimed the escrow provision violated their due-process rights.
     The appeals court dismissed the case on grounds that Tennessee is entitled to sovereign immunity and said plaintiffs should take their due-process claim back to state court.

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