N.C. Court Gives Victory to Maryland Tobacco Farmers

BALTIMORE (August 20, 2007) - Attorney General Douglas F. Gansler announced today that the State of Maryland and its tobacco farmers have achieved a victory in their efforts to hold the nation's largest tobacco companies accountable to a 1999 Trust Agreement. The North Carolina court ruling requires Philip Morris, USA, Inc., R.J. Reynolds Tobacco Company, and Lorillard Tobacco Company to make payments through 2010 totaling about $13 million for the benefit of Maryland farmers, and $9 million for Pennsylvania farmers.

The 1999 Trust Agreement between the tobacco companies and tobacco-grower states was intended to address the economic consequences of the 1998 Master Settlement Agreement (MSA). The controversy centered on a provision in the Agreement that states that the payments to the farmers could end in the event of federal legislation benefitting farmers. The tobacco companies contended they no longer needed to make payments to Maryland and Pennsylvania farmers after Congress passed the Fair and Equitable Tobacco Reform Act (FETRA) in 2004. The legislation provided payments to tobacco farmers from other tobacco-grower states, but no payments for Maryland and Pennsylvania farmers. When the tobacco companies stopped paying, Maryland and Pennsylvania pursued action in North Carolina court.

"This decision protects our farmers from the tobacco companies' efforts to deny them the benefits bargained for in the Trust Agreement," said Attorney General Gansler. "The Court agreed with us that the Trust Agreement was intended to provide a safety net to Maryland farmers and that our farmers must continue to receive these benefits."

Despite the fact that farmers in other tobacco growing states benefitted from FETRA because they participate in the tobacco quota system, the tobacco companies asserted that they no longer had to make Trust payments for the benefit of Maryland and Pennsylvania farmers. The North Carolina court ruled that FETRA did not affect the tobacco companies' obligation under the 1999 agreement and must still make payments to Maryland and Pennsylvania.

"We applaud the North Carolina court ruling in the challenge to get the tobacco companies to live up to their agreement with Maryland farmers," said Maryland Agriculture Secretary Roger Richardson. "This is an important first step to ensure Maryland farmers will receive payments under the National Tobacco Grower Settlement Trust."

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