Altria said yesterday that Philip Morris USA expected to receive a credit of about $145 million, plus interest, following the findings of an arbitration panel looking into payment disputes relating to the U.S. Master Settlement Agreement.
“An arbitration panel has determined that six out of 15 states failed in 2003 to diligently enforce laws that require escrow payments from the cigarette manufacturers that have not signed the Master Settlement Agreement (MSA),” Altria said in a note posted on its website. “The states enacted these Non-Participating Manufacturer (NPM) escrow laws after the MSA was signed in 1998. Manufacturers that participate in the MSA … receive downward adjustments in their MSA payments if, among other things, states fail to diligently enforce NPM escrow laws.”
As a result, PM USA expects to receive a credit of about $145 million, plus interest, against its next year’s MSA payment. This is the full remaining amount available to PM USA as part of the 2003 arbitration.
The panel’s decision does not affect the 22 states and jurisdictions that joined a December 2012 settlement of the NPM adjustment disputes.
Meanwhile, R.J. Reynolds Tobacco said the arbitration panel had determined that it was entitled to about $266 million in disputed payments from Indiana, Kentucky, Maryland, Missouri, New Mexico and Pennsylvania.
“We are pleased that the arbitration panel found that six jurisdictions failed to meet their diligent enforcement obligations under the MSA,” said Martin L. Holton III, executive vice president and general counsel for Reynolds. “Between today’s rulings and a settlement reached with 22 jurisdictions earlier this year, R.J. Reynolds should recover nearly $549 million with respect to its 2003 NPM adjustment claim.”
The announcements of the arbitration panel’s findings are at http://www.altria.com/Media/Press-Releases/Pages/PressReleaseDetails.aspx?reqID=1854037 and http://files.shareholder.com/downloads/RAI/2320600200x0x690190/5d76d4b4-7d8d-40ba-ab23-bfc3ce5b5ffa/R.J._Reynolds_receives_favorable_rulings_from_arbitration_panel.pdf.