A multi-year standoff between major tobacco companies and the state of Montana appears to be coming to a close after Attorney General Tim Fox on Monday announced a substantial settlement with tobacco industry defendants and a guarantee of future payments to the state totaling more than $100 million.
The settlement came out of a lawsuit Fox’s office filed in April, charging that defendants had since 2006 been improperly withholding payments totalling $43 million agreed upon in an earlier Master Settlement Agreement between tobacco companies and multiple states.
“At the heart of this lawsuit is the Montana principle: a deal is a deal,” said Fox, speaking at the Department of Justice in Helena. “The MSA releases the defendant tobacco companies from liability for their deadly product in return for funds to protect our people, especially our youth, from lifetimes of chronic, deadly diseases. [They] reneged on the deal . . . and this settlement holds them accountable.”
Under the agreement, industry payments that have accrued, plus interest, will be allocated to the Children’s Health Insurance Program (CHIP) and tobacco cessation programming within the Department of Public Health and Human Services. $10 million will go to the state general fund. The settlement also covers the state’s fees for retaining outside counsel.
The lump sum of roughly $53 million is anticipated to be paid to the state before the end of the calendar year.
“This money couldn’t have come soon enough or at a better time, with COVID-19 and the potential for budget shortfalls in the state of Montana,” Fox said. “$53.5 million is no small change.”
DPHHS released a statement after the announcement was made.
“Health coverage for children provides peace of mind for parents, and ensures youth receive the well-child checkups, vaccinations and dental visits they need to stay healthy,” the statement said. “We know that tobacco use continues to be the leading cause of preventable death and disease and youth usage of e-cigarettes is at epidemic proportions in Montana. This funding will help support these and many other health preventive measures across the state.”
An additional $50 million will be paid to the state in annual installments through 2030. The settlement also stipulates that the tobacco industry defendants waive their right to contest those payments, as they had done in previous years.
The basis for the industry’s refusal to pay, according to court filings, was that Montana had allegedly failed to fulfill its obligations under the 1998 agreement. Fox and outside counsel sought to debunk that defense in their April lawsuit, arguing that the claim was baseless and functioned solely as a tactic to delay payments.
Reaching a settlement now, Fox said, represents a historic win against the tobacco industry for Montana and the rest of the country.
“No other state in the union has received 100% of what was withheld by the defendants under a similar claim,” Fox said. “No other state has achieved a remedy protecting future payments in full for 10-plus years, and an agreement to not withhold funds under similar allegations in perpetuity.”
Advocates and other officials involved with the lawsuit praised the deal.
“This is a huge win for Montana, and for the citizens of the state,” said C.B. Pearson, campaign manager for Montana Kids vs Big Tobacco, a coalition of health nonprofits that have opposed the tobacco industry. “Big Tobacco are bad actors, they throw their money and political power around causing harm to our kids, and resulting in Montanans losing their lives [while] passing the health bill onto Montana taxpayers.”
While cigarette smoking has decreased in Montana in recent years, tobacco use remains widespread. Approximately 148,000 adults in the state were cigarette smokers last year, according to statistics provided by DPHHS. 58% of youth reported having tried flavored e-cigarettes in the 2019 Montana Youth Risk Behavior Survey, while 30% said they currently use the products.
Those statistics underscore the import of the settlement, according to attorneys and officials involved in the case.
“Moments like this is why people like me are in public service. We’re in public service to make a difference,” said Mark Mattioli of the Department of Justice’s Consumer Protection Bureau. “Every day we put money back in the pockets of people who have been ripped off. And today, I’m just proud to be a part of this historic settlement.”
David Paoli, of Paoli & Leisher in Missoula, which has been retained by the state to assist with tobacco-related litigation for decades, said, “It’s gratifying to be able to turn this money over to the DPHHS professionals so that they can do their wonderful work.”