Tobacco Sued Over MSA Payments

Iowa Attorney General Tom Miller accuses Philip Morris USA, R.J. Reynolds Tobacco Co., and 16 other tobacco companies of defrauding Iowa of more than $133 million, according to a lawsuit filed Thursday.

The lawsuit stems from the 1998 Master Settlement Agreement, which requires tobacco manufacturers to pay billions annually to participating states in exchange for the states agreeing not to sue for health-related damages to citizens. The motion, filed in Polk County District Court, alleges that the companies have withheld a portion of their annual payments to Iowa in bad faith and “through a scheme of false claims and feigned ignorance.”

The tobacco companies demand that Iowa must go to arbitration to recover each year’s withheld payment. According to Miller, it has taken years to litigate each dispute, creating a long backlog and a growing amount of withheld payments. Iowa has prevailed in every dispute, most recently in September 2021, but the companies still refused to pay the amount they withheld from Iowa.

“We have fought, and won, these legal battles for years, and there is no end to these disputes in sight,” Miller said in a statement. “We now must escalate the matter and force the tobacco companies to pay what they owe the state of Iowa.”

The lawsuit seeks to recover actual and punitive damages, plus attorneys’ fees and other costs. Under Iowa’s False Claims Act, the state seeks three times the amount of actual damages.