Tobacco Settlement Could Go to the Supreme Court

A 1998 tobacco settlement may be headed to the Supreme Court because it violates the U.S. Constitution.


For anti-smoking advocates the 1998 tobacco settlement was a major step forward that brought industry money to their side of the cause and would ultimately reduce the number of people in America who smoke.

Now, thanks to the efforts of a pro-free market organization called the Competitive Enterprise Institute, the agreement may be headed to the United States Supreme Court because, the groups argues, it violates the Compact Clause of the U.S. Constitution.

[See which members of Congress get the most in campaign donations from the tobacco industry.]

In a nutshell, the Tobacco Master Settlement Agreement, as it is formally known, resulted from an agreement between the nation’s four largest tobacco companies and the attorneys general of 46 states that let the industry get out from under a series of lawsuits, some of which were intended to force the tobacco companies to help states recoup the costs to Medicaid of smoking-related illnesses as well as exempt the industry from what one expert called “private tort liability regarding harm caused by tobacco use.”

For their part, the industry “agreed to curtail or cease certain tobacco marketing practices” as well as pay, in perpetuity, money to the states to compensate them for healthcare related smoking costs and to help pay for anti-smoking advocacy campaigns, although that section of the deal has come under criticism for not being aggressive enough.

In a December 2009 report the anti-smoking Campaign for Tobacco Free Kids charged that “states are collecting record amounts of tobacco revenue--$25.1 billion this year alone--but are spending less of it on programs to prevent kids from smoking and help smokers quit.” According to the Campaign, states have “cut funding for tobacco prevention programs by more than 15 percent in the past year.”

Like it or not tobacco products are still a cash-cow for states and for the federal government. Even President Barack Obama, a smoker himself, is on board, having early in his administration signed into a law an increase in the federal excise tax on cigarettes, violating his campaign pledge not to raise taxes on anyone making less that $250,000 a year. In this economy, with government revenues down almost across the board, the urge to tax is apparently almost a strong as the urge to smoke.

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In its petition for Supreme Court review, CEI alleges the tobacco agreement “violates the constitutional provision against multi-state agreements that have not been approved by Congress.”

In a release announcing the petition for cert had been filed, CEI General Counsel Sam Kazman called the settlement agreement a deal “hatched in a smoke-free backroom between tobacco companies and state attorneys general.”

“The state AGs imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it,” Kazman went on to say, adding it “was a major power grab by state attorneys general at the expense of citizens.”

It’s a complicated issue, but one that runs to the core of many of the constitutional issues currently being argued in federal courts, like the lawsuit challenging the requirement in Obamacare that individuals must purchase some form of health insurance or face a penalty.

[Read more about healthcare reform.]

“The Compact Clause was specifically aimed at preventing states from collectively encroaching on federal power or from ganging up on the citizens of other states,” CEI says, arguing the way the tobacco settlement was reached “plainly violates that provision” while setting “a dangerous precedent in disregarding constitutional protections against government power.”

Whether the court agrees to hear the case or not, it poses some interesting questions about whether the limits on governmental power the Constitution imposed more than 200 years ago still stand.

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