JEFFERSON CITY, Mo. – Missouri Supreme Court Judge Jimmie M. Edwards ruled that an arbitration panel overstepped its authority in the state's suit against tobacco companies.
In his Feb. 14 opinion, Edwards wrote that the arbitration panel overstepped its authority in the suit against American Tobacco Co. and Commonwealth Brands Inc. by changing the pertinent terms of its master settlement agreement without approval from Missouri and other states that experienced negative and material effects from the agreement.
He added that those pertinent terms of the master settlement agreement were clear.
Edwards stated in his opinion that the arbitration panel's adjustment to the master settlement agreement greatly changed the rights and expectations of all those who participated in the master settlement agreement, including Missouri.
He explained that after the arbitration panel reduced the adjustment amount for tobacco manufacturers that did not take part in the agreement, Missouri still saw a $50 million decline in pay in 2003 from the tobacco companies that did participate in the agreement.
The reduction occurred because the adjustment of the manufacturers not taking part in the agreement was transferred.
Edwards wrote that Missouri provided calculations supporting its argument that unless the arbitration panel found more than 66 percent of the 22 states deemed as term-sheet states to be diligent in enforcing legislative enactment, the state would be better off if the agreement was left unchanged.
He opined that Missouri's calculations revealed that the change the arbitration panel made in regards to the non-participating manufacturers greatly effected expectations and obligations for the tobacco companies taking part in the agreement, term-sheet states and non-term-sheet states – expectations and obligations that they had negotiated for.
Edwards wrote that because the arbitration panel's edited provisions affected Missouri, the state had to agree to the amendment, in accordance with a section of the agreement itself.
As a result, the arbitration panel's award went against clear amendment provisions of the agreement.
Edwards opined that the arbitration panel overstepped its authority even though it gave an award that it felt was lawful.
He also wrote that the trial court correctly held that the arbitration panel could only stop its award from affecting Missouri's rights in the agreement by calling those 20 term-sheet states not diligent after determining how much of the 2003 non-participating manufacturer adjustments Missouri would be responsible for.
Edwards stated in the opinion that both parties had agreed that the dispute is subject to arbitration, but they disagreed about the nature of the dispute.
He explained that Missouri thought the arbitration panel had to decide whether the state diligently enforced its qualifying statute in 2004.
However, the tobacco companies thought the dispute was whether they had a right to a non-participating manufacturer adjustment. They also argued that the case pitted the states that did not believe the tobacco companies deserved the adjustment against the tobacco companies taking part in the agreement.
According to the opinion, the Missouri Supreme Court agreed with the tobacco companies taking part in the agreement regarding what the dispute was about.