Office of the Attorney General
Attorney General Stumbo Announces U.S. Court of Appeals Upholds Kentucky Statutes Regulating Tobacco Companies

Press Release Date:  Monday, October 30, 2006  
Contact Information:  Vicki Glass, 502-696-5643 Office  

Attorney General Greg Stumbo today announced that the Office of the Attorney General has prevailed in a federal lawsuit that challenged Kentucky’s tobacco laws.  The United States Court of Appeals for the Sixth Circuit in Cincinnati affirmed a decision by Judge Joseph Hood in the U.S. District Court in Lexington which upheld Kentucky’s tobacco statutes as being consistent with federal law.  This is the first Circuit Court of Appeals decision to fully reject an antitrust challenge to the tobacco laws although four other Courts of Appeals have such cases pending (2nd, 8th, 9th and 10th).

“I am very pleased that the Court of Appeals has upheld our important tobacco law enforcement efforts,” said Attorney General Stumbo.  “Each year my Office oversees the collection of approximately $115 million under the Master Settlement Agreement. I will continue to aggressively collect this money to benefit all Kentuckians.”

Three tobacco companies, including the lead plaintiff Tritent International Corporation, had argued that Kentucky’s laws were pre-empted by the federal Sherman Antitrust Act.  These Kentucky statutes were part of the legislation prompted by the Master Settlement Agreement (MSA), the landmark 1998 agreement between cigarette manufacturers and 52 states and U.S. territories to settle claims for health care costs caused by cigarette smoking.  The MSA requires all participating manufacturers to make payments to the states based on their cigarette sales.

Kentucky’s statutes regulate non-participating manufacturers (NPMs), who have not joined the MSA, by requiring them to place funds into an escrow account based on their cigarette sales in Kentucky.  Escrowed funds are retained for 25 years as a safeguard against future medical costs resulting from NPM tobacco products.  The U.S. Court of Appeals rejected the NPMs’ argument that the statutes authorized an illegal cartel involving the states and the tobacco industry or anticompetitive behavior.

Assistant Attorneys General Michael Plumley and James Herrick, with assistance from the National Association of Attorneys General, defended Kentucky’s statutes in the federal suit.