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Attorney General Donovan Settles Additional Tobacco Claims

September 21, 2020

Vermont to Receive $10.5 Million in Settlement

Contact: Charity R. Clark, Chief of Staff, 802-828-3171

Attorney General T.J. Donovan announced today that Vermont will receive approximately $10.5M over three years in a structured settlement with major tobacco companies, including Philip Morris and R.J. Reynolds. Today’s settlement relates to an earlier 2018 settlement in which Vermont settled a series of disputes with major tobacco companies arising from the 1998 Master Settlement Agreement (MSA).

“Vermont has always diligently enforced its tobacco laws, and we will continue to do so,” said Attorney General Donovan. “This settlement avoids lengthy arbitrations and puts money in Vermont’s pocket now. I encourage the Legislature to use these funds to support the public health for those who are most vulnerable.”

In November 1998, 46 state attorneys general and five major tobacco companies signed the “Master Settlement Agreement” (MSA). The MSA resolved lawsuits brought by the attorneys general under consumer protection laws to further state policies regarding public health, including reducing youth smoking. The MSA requires signatory tobacco companies to collectively pay Vermont millions of dollars each year. In return, Vermont must “diligently enforce” certain laws against tobacco companies that did not sign the MSA. Under the MSA, the tobacco companies can challenge whether Vermont diligently enforced these laws for each given year. These challenges go to arbitration. If Vermont loses a “diligent enforcement” arbitration, it stands to lose a substantial portion of its multi-million-dollar MSA payment for that year.

In 2018, Attorney General Donovan settled “diligent enforcement” disputes for 2004-2017, bringing $28M to Vermont. As part of that settlement, and along with other states, the Attorney General negotiated for the option to settle “diligent enforcement” disputes for 2018-2022 on favorable terms to Vermont if certain criteria were met—namely, if the tobacco companies satisfied themselves that settlement for those years would be tax deductible. These criteria were recently met. Accordingly, “diligent enforcement” disputes for 2018-2022 are now settled as well, bringing an approximately $10.5M to Vermont.

For more background on the 2018 settlement and today’s announcement, click here.