Wednesday, December 17, 2008, 3:50 PM

Split COA Rules For Tobacco Companies In MSA-Related Dispute

Yesterday in State v. Philip Morris USA, Inc., a divided Court of Appeals (COA) held that the Business Court erred in interpreting a trust agreement that resulted from the tobacco Master Settlement Agreement. In the trust agreement the tobacco companies pledged economic assistance to tobacco farmers in certain States. As a result of federal legislation and related events, the tobacco companies no longer were required to fund the trust. Some States, however, brought this action to require the tobacco companies to continue making payments. Relying on its view of the trust's purpose rather than the plain language of the trust agreement, the Business Court held that the tobacco companies must make additional payments. The COA reversed, holding that the Business Court failed to apply correct principles of contract interpretation because it elevated the trust's purpose over the plain meaning of the language. Judge Elmore dissented, focusing on the agreement's purpose instead of its text.

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