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Monday, April 14, 2014

Ind. Gov't. - A follow-up on: "State to lose $63M in tobacco payments next year" [Updated]

The ILB had several entries on this topic in 2013.

The ILB has now obtained and is posting a copy of the Dec. 2013 "State Of Indiana’s Motion To Vacate The September 11, 2013, Final Arbitration Award Entered By The Arbitration Panel In The 2003 NPM Adjustment Dispute Proceedings."

The ILB has been unable to determine the status of this case, filed in Marion County Superior Court. (Perhaps a reader can help?)

And why is all this suddenly news again?

For one, the issue was raised during the recently ended legislative session, e.g. this NUVO story headed "Lawmakers confused by cut in state's tobacco funds."

For another
, although there has been no sign of a ruling in the Indiana trial court challenge, a decision was reached last week in a similar challenge in Pennsylvania, another of the five states whose payments have been reduced because of lack of diligent enforcement of the MSA in 2003.

Here are some quotes from an April 10th story by Jeff Frantz at PennLive:

Last fall, an arbitration panel ruled that in 2003 the Commonwealth hadn't strictly enforced all the provisions in the landmark Tobacco Master Settlement Agreement. As a result, the arbiters ruled, Pennsylvania would receive about $150 million from the settlement this year, instead of the $330 million check the state typically receives every April.

The state appealed the ruling.

Knowing less money could be coming in this year, the state reduced funding for non-mandated programs like the CURE grants that settlement money helps to fund.

Thursday, Philadelphia Court of Common Pleas Judge Patricia McInerney modified the arbiters' ruling. While Pennsylvania won't receive its full sum, McInerney's order means it will only lose out on about $60 million this year.

Here, from The Pennsylvania Record, is an April 13th story by Jon Campisi. Some quotes:
The commonwealth will recoup $120 million from the Tobacco Master Settlement Agreement that was withheld because of an arbitration panel’s finding that Pennsylvania failed to “diligently enforce” tobacco tax collection laws.

The news stems from a decision by Philadelphia Common Pleas Court Judge Patricia McInerney, who determined that the arbitration panel ignored the plain language of the 1998 master settlement agreement, which did not allow for such a financial shift. * * *

The commonwealth argued that the panel’s final award disregarded the law and was “wholly irrational.”

Kane’s office contended that the panel announced the definition and the factors it would rely upon for the first time in the final award, or after the evidence was presented.

The panel also applied its own “manufactured definition irrationally,” the commonwealth had stated in its November 2013 motion.

The motion noted that the arbitration panel anchored its final award to the number of lawsuits Pennsylvania brought to enforce the settlement agreement and its collection rate of 44 percent.

However, the commonwealth’s litigation policy focused on those entities with significant noncompliant sales, the motion had stated.

The motion also noted that in 2003, Pennsylvania prosecuted a total of six civil actions against noncompliant companies, including five that represented 80 percent of applicable tobacco sales in Pennsylvania.

Three other states, Colorado, North Dakota and Illinois, however, failed to bring any civil litigation against noncompliant companies, yet those states were found diligent by the panel, Pennsylvania argued.

Here is the 57-page Pennsylvania trial ruling. It likely will be appealed.

[Updated at 12:52 PM] In answer to the ILB question re the status of the action in Marion County Superior Court, Bryan Corbin, Public Information Officer, Office of the Indiana Attorney General, responds:

The State’s appeal still is pending before the Marion County Superior Court, the motion to vacate is currently in briefing and a hearing is scheduled for mid-July.

Posted by Marcia Oddi on April 14, 2014 08:50 AM
Posted to Indiana Government