FILE - Cigarettes

(The Center Square) – Iowa Attorney General Tom Miller filed a lawsuit Thursday in which he alleges 18 tobacco companies defrauded Iowa out of more than $133 million.

The 1998 Master Settlement Agreement requires tobacco manufacturers to pay billions annually to participating states, which agree not to sue them for health-related damages to citizens, a news release from his office said. Iowa has received $1.41 billion under the Master Settlement Agreement in the past 24 years. Each company is supposed to pay annually. Iowa law says tobacco companies selling in Iowa must join the agreement or deposit a certain dollar amount per unit sold in an escrow account.

A non-participating manufacturer adjustment allows tobacco companies participating in the agreement to reduce their annual payments in certain circumstances, including loss of market share to non-participating competitors and showing that a state failed to “diligently enforce” state laws against tobacco companies that did not sign the agreement.

The state’s motion in Polk County District Court alleges the companies have withheld some of their annual payments to Iowa in bad faith and “through a scheme of false claims and feigned ignorance.”

According to the motion, the tobacco companies demand Iowa go to arbitration to recover each year’s withheld payment and it takes years to litigate the disputes, creating backlogs and growing withheld payments.

“We have fought, and won, these legal battles for years, and there is no end to these disputes in sight,” Miller said. “We now must escalate the matter and force the tobacco companies to pay what they owe the state of Iowa.”

The state wants the court to hold defendants liable for the breach, conversion, conspiracy, and statutory violations and resulting contract, statutory, and punitive damages, and declaratory relief. It wants a jury involved in addressing any triable issues, the motion said.

Under Iowa’s False Claims Act, the state seeks three times the amount of actual damages, the release said.

The companies repeatedly allege Iowa hasn’t diligently enforced its law. In September 2021, an arbitration panel ruled unanimously that Iowa had indeed “diligently enforced” its state laws.

Arbitration for a 2003 dispute took seven years, and Iowa received the withheld portion of its payment in 2014. A 2004 dispute was resolved in September 2021, but the state hasn’t yet received its payment of about $7 million.

Each arbitration cost the state about $3.5 million. 

“Iowa and other states who signed on the MSA have lived up to their end of the bargain. It’s time tobacco companies do the same,” Miller said. “They should pay us what they owe us.”

Montana filed a similar lawsuit against the companies in 2020 and reached a $100 million settlement that year, the release said. Former Montana attorney general Tim Fox is assisting with Iowa’s lawsuit, the release said. In January, the Executive Council of Iowa approved the hiring of outside law firms to assist in the litigation against the tobacco companies, the release said.

The defendants in the lawsuit are Philip Morris USA; R.J. Reynolds; Commonwealth Brands, Inc.; Farmer’s Tobacco Company of Cynthiana, Inc.; ITG Brands, LLC; Japan Tobacco International USA, Inc.; King Maker Marketing, Inc.; Kretek International, Inc.; Liggett Group, LLC.; Peter Stokkebye Tobaksfabrik A/S; Premier Manufacturing Incorporated; Santa Fe Natural Tobacco Company, Inc.; Scandinavian Tobacco Group Lane Ltd; Sherman 1400 Broadway N.Y.C., Inc.; Tabacalera del Este, S.A. (“TABESA”); Vector Tobacco Inc.; the Von Eicken Group; and Wind River Tobacco Company, LLC.