Master Settlement Agreement

Tobacco farmers collect tobacco leaves

Tobacco farmers collect tobacco leaves

Have you ever heard of the McDonald’s settlement to the lady who complained the coffee was too hot?  Many thought the settlement was ridiculously high.  But that settlement is not the largest settlement in the United States.  The largest settlement in the United States is the Master Settlement Agreement and it involved a $206 billion award.  You saw that right, $206 billion.  So what exactly was this lawsuit?

The Master Settlement Agreement was a settlement where seven tobacco companies actually agreed to alter the way they market their tobacco products. They also agreed to pay the states involved that large sum of $206 billion.  In addition to that sum, those tobacco companies also agreed to an anti-smoking campaign that they financed for $1.5 billion.  The companies involved were the Phillip Morris Company, Brown and Williamson, R.J. Reynolds and Lorillard, the 4 largest tobacco companies.

All of this began in the mid 1990’s.  Forty states came together to start litigation stated that the tobacco industry was causing health problems for the population and sought monetary compensation for the strain it put on those states health care systems.  Florida, Texas, Minnesota and Mississippi were the only states not included in the Master Settlement agreement due to previously settling with the tobacco industry on individual lawsuits. In addition, the 46 states in the lawsuit, it also included Puerto Rico, the Virgin Islands and the District of Columbia.

The four Original Participating Manufacturers (OPMs) in the settlement agreed to the following in addition to the monetary compensation.  This language is directly from the agreement:

  • To restrict their advertising, sponsorship, lobbying, and litigation activities, particularly as those activities were seen as targeting youth;
  • To disband three specific “Tobacco-Related Organizations,” and to restrict their creation and participation in trade associations;
  • Generally, to make available to the public documents the OPMs had disclosed during the discovery phase of their litigation with the settling states;
  • To create and fund the National Public Education Foundation, dedicated to reducing youth smoking and preventing diseases associated with smoking.
  • To make annual payments to the settling states in perpetuity.

The amount of money the tobacco industry has to pay and the other restrictions seem like a huge win for the states involved.  Even though the tobacco industry paid a hefty price, they are still going strong.  Smoking is still a popular habit for many and the disease caused by the cigarettes still causes a strain on the nation’s healthcare systems.

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