Judge to make ruling on Phase II payments by Christmas

A judge expects to rule before Christmas whether U.S. cigarette companies will have to make another payment to tobacco farmers now that the tobacco buyout is final, according to published reports.

North Carolina Business Court Judge Ben. F. Tennille told attorneys that he’d put the issue “on a shorter fuse, rather than a longer one.” He said he hoped to have a decision on the key issues at a hearing Dec. 20.

At issue is the cigarette companies’ contention the passage of a tobacco buyout should negate the payments required under Phase II. The companies have already paid $300 million to the Phase II board this year in an escrow account for the first three quarters of 2004. A final payment of $189 million is due at the end of the year. The Phase II board says the buyout does not specify when Phase II payments should end.

An attorney representing the companies said they are entitled to refunds. An attorney for the Phase II board said farmers are counting on the checks, scheduled to go out on Dec. 30, and that the money in the escrow account belongs to growers.

The payments were negotiated in the 1998 Master Settlement Agreement, when Brown & Williamson, Lorillard, R.J. Reynolds and Philip Morris agreed to pay 46 states $206 billion over 25 years for smoking-related health claims. The payments over 12 years were intended to compensate growers for losses that were expected because of higher prices for cigarettes after the settlement.

“A deal is a deal,” North Carolina Farm Bureau President Larry Wooten said in an interview with Southeast Farm Press. “That money is owed by the tobacco companies to the growers. The Master Settlement Agreement impacted the amount of the tobacco that could be grown in 2004.

“The money is owed by manufacturers as much as a farmer who rented quota in 2004 would owe it,” Wooten says. “It’s like a farmer who grew the crop, but came back after the tobacco buyout was passed and said he didn’t owe it because there was no longer a tobacco program,” Wooten says.

Members of the North Carolina congressional delegation weighed in on the issue.

In a letter to tobacco companies, U.S. Rep. Bob Etheridge, D-N.C., urged the tobacco companies to honor their obligation. Etheridge also urged the tobacco companies “to call off any effort to seek a return of those funds. Please do not jeopardize the livelihoods of thousands of farm families and allow the last Phase II payment to be made as scheduled.”

“These hard-working, God-fearing folks have been hanging on by a thread for a buyout, and they can’t afford for these payments to disappear or to get tied up in legal wrangling,” Etheridge says. “It just makes good, common sense that the Phase II payments end when the buyout assessments begin — in 2005.”

Etheridge said he was glad to see the North Carolina Business Court judge move quickly on the matter, so “North Carolina’s farm families can have peace of mind.

“Growers and quota holders are counting on those checks, and it would be a tough holiday season for too many North Carolina families if these checks disappeared or got caught up in legal wrangling.

“I urge the tobacco companies to do the right thing and deliver the payments and promises that are due,” Etheridge says.

The lawsuit is being heard in a special state court in North Carolina, but the decision would apply to tobacco companies and farmers in other states as well.

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