MONTPELIER, Vt.—A dispute over how much the state of Vermont gets under a 1998 settlement with tobacco companies should be resolved through arbitration, not the courts, the Vermont Supreme Court ruled Friday.
In a victory for the tobacco companies, the court -- upholding a Chittenden County court's ruling -- said an arbitration clause in the 1998 agreement between them and 52 states and territories covers Vermont's complaint about payments and that it should be resolved through arbitration.
"We wanted to litigate it here in Vermont, and the court said `No, you essentially agreed to arbitration under the agreement,'" said state Attorney General William Sorrell.
"We'd rather litigate here than travel somewhere across the country. It's not all that efficient for us to bring witnesses to Chicago or wherever the proceeding might be. But at the end of the day, we feel good about the case we have to tell about what we've done to enforce the law," Sorrell said.
Vermont gets an average of $25 million a year forever under the agreement, which called for the cigarette makers to restrict advertising, among other things.
It also provided that when the participating companies lose market share to other cigarette makers not part of the agreement, each state's payment is reduced, unless a state can show that it "diligently enforced" a statute under which it keeps count of how many cigarettes the non-participating companies sell.
The tobacco companies contend that none of the states diligently enforced their "qualifying statutes."
Lawyers for R.J. Reynolds Tobacco Co. and
About $4 million in cash and another $4 million in credits toward the tobacco companies' future obligations have been withheld so far, according to Sorrell.
"In all likelihood, there'll either be a national arbitration proceeding or a bunch of states will combine and demand the arbibtrations to go forward. We'll be one that says we want it convened as soon as possible," Sorrell said.
