Settlement Between New York, Tobacco Companies Provides $550M For Smoking-Related Health Costs

A decades-long dispute between the New York Attorney General’s Office and major tobacco firms over payments the companies were required to make for smoking-related public-health costs, but refused to dish out, has come to an end. A new settlement between the parties directs the tobacco companies to deliver $550 million to the state, New York City and other counties. 

New York Attorney General Eric Schneiderman announced Tuesday that the state had reached a deal with the companies regarding their violation of the 1998 Tobacco Master Settlement Agreement.

Under that agreement, tobacco companies were required to pay billions of dollars to states and territories over 25 years to help cover the public-health costs of smoking-related illnesses.

Despite that arrangement, the companies have been able to withhold a portion of New York’s nearly $775 million annual settlement payments to the state, NYC and the counties outside the city every year since 2003.

They have also been able to require multi-year arbitrations of New York’s entitlement to keep the portion of each individual year’s payment that was not withheld. The companies argued it was within their rights to withhold the funds because New York failed to properly enforce the MSA with other manufacturers.

As a result of the drawn out legal battle, more than $700 million in New Yorkers’ money has been put in escrow. Previously, in 2013, the AG’s office was able to unlock about $92 million in withheld funds.

Under the newly announced settlement, Schneiderman was able to negotiate that tobacco companies release 90% of currently held funds from other years.

The state will receive about half of the $550 million in settlement funds. One quarter will go to New York City, and the remaining quarter is to go to counties outside the city.

Additionally, the deal eliminates the possibility of future arbitration proceedings and ensures that future payments be issued following a set formula.

“Big Tobacco must pay for the damage it has done and continues to inflict on communities across New York State,” Schneiderman said in a statement. “My office will continue to hold these companies accountable … to ensure that the people of New York are compensated for the enormous harms they have suffered.”

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