North Dakota to receive $34 million tobacco settlement

Attorney General Wayne Stenehjem announced a settlement agreement that will release over $34 million belonging to North Dakota that has been held in an escrow account during a decade-long dispute between the state and the major tobacco companies. The agreement settles a dispute over enforcement of the 1998 Tobacco Master Settlement Agreement, which requires the tobacco companies to make annual payments to the states that signed onto the agreement – including North Dakota.

“This is a win-win proposition for North Dakota. We will see an immediate payment of more than $34 million, and will also eliminate the need for an expensive arbitration process year after year,” Stenehjem said.

 The tobacco companies have withheld part of their combined annual settlement payments, claiming the states, including North Dakota, had not diligently enforced a specific tobacco-control statute. The adjustment, which is subject to arbitration, has forced North Dakota to devote considerable resources and money to prove it diligently enforced its laws. North Dakota won its first arbitration dispute, concerning funds withheld in 2003. If it had not prevailed, the state risked losing more than $20 million.

Without this settlement, North Dakota was scheduled to arbitrate the 2004 payment dispute this month, worth approximately $23 million. “By settling the dispute for 2004, and all potential disputes through 2017, the settlement agreement resolves all disputes concerning past annual payments and eliminates decades of potential litigation,” Stenehjem said.

Under the terms of the structured settlement, the tobacco companies are required to release 100 percent of the disputed payments held in escrow. In addition to the lump sum payment, North Dakota will continue to receive the annual payments due under the Master Settlement Agreement. In return, the tobacco companies receive a partial credit on the next five years of annual payments. The tobacco companies are also required to release the state from any claims to the balance of annual payments for a certain number of years, which they might otherwise be able to arbitrate on an ongoing basis over the course many years, or even decades.

“If North Dakota had been forced to continue with these annual arbitrations it risked losing the entire annual payment for any year it was found non-diligent. Through the end of the 2015-17 biennium, North Dakota has received more than $470 million in tobacco settlement payments,” Stenehjem noted.