Products Liability Law Reporter

In 1998, Iowa and 51 other jurisdictions settled claims against various tobacco companies for increasing the cost of publicly funded health care, marketing to children, and distorting the science of nicotine addiction. The Master Settlement Agreement (MSA) between the parties included an agreement by the defendants to make annual payments in perpetuity to settle Iowa’s past and future claims against them. Notwithstanding the MSA, each year, participating tobacco companies disputed whether a provision in the MSA known as the NPM Adjustment applied to Iowa for that year. The adjustment reduced the amount of money an MSA state received in a given year if the state did not enact a certain model statute attached to the MSA or did not diligently enforce the statute for that year. The disputed amounts were then withheld until Iowa arbitrated each year’s dispute, which led to a backlog.

Iowa, through its attorney general, sued multiple tobacco companies, including Philip Morris, USA, and R.J. Reynolds Tobacco Co., seeking the withheld portions of the MSA payments. The state asserted that the defendants had engaged in a bad faith conspiracy to reduce each tobacco company’s annual payment obligation under the MSA.

The parties reached a settlement in which Iowa will receive extra payments of more than $171 million over the next six years. The state is expected to receive approximately $136 million in additional payments in April 2024 and the remaining amounts annually from 2025 to 2029.

Citation: State v. Philip Morris, USA, No. LACL071048 (Iowa Dist. Ct. Polk Cnty. Aug. 2023).

Plaintiff counsel: Brenna Bird, Thomas Miller, and Matthew Gannon, all of Des Moines; Paul Leisher and AAJ member David Paoli, both of Missoula, Mont.; and AAJ member James Young, Juan Martinez, and Tim Fox, all of Jacksonville, Fla.