General Tobacco Co. is targeting the landmark 1998 Master Settlement Agreement between the U.S. tobacco industry and state attorneys general in a lawsuit filed today in federal district court in Louisville, Ky.
The discount tobacco manufacturer said it is suing 52 attorneys general and 19 U.S. and foreign tobacco companies.
It is pursuing treble damages in excess of $1 billion from its competitors, which include R.J. Reynolds Tobacco Co., Philip Morris USA and Lorillard Tobacco Co. General Tobacco also is pursuing preliminary injunctive relief from the settlement agreement.
General was founded in 1997 and is the sixth largest U.S. tobacco manufacturer, with $300 million in sales in 2007. It moved its headquarters from Miami to Mayodan last year, and began production there in March, as part of a strategic move to be closer to the heart of the U.S. tobacco industry.
It has 110 local employees, according to Kelly Dickerson, its marketing director. The company has pledged to create at least 200 jobs by June 2010 as part of becoming eligible for up to $3 million in performance-based local incentives.
The settlement agreement is a comprehensive accord formed in 1998 with the attorneys general of 46 states and five territories that has fundamentally changed how tobacco is marketed, advertised and promoted.
General Tobacco claims its competitors conspired with the states to set up the agreement so that later market entrants would have to pay the states substantially more than some competitors pay.
General Tobacco Co. said on Oct. 16 that it made a payment of $27 million toward the agreement. The company said it has contributed $36 million to the agreement this year and more than $502 million since joining the agreement in 2004.
"The structure for the MSA created an impossible business environment for future competitors, especially small players such as General Tobacco," Ronald Denman, the executive vice president of General Tobacco, said in a statement. "All we are asking for is a level playing field for everyone."
The lawsuit comes a day after Dustin McDaniel, the attorney general of Arkansas, sent General Tobacco a letter notifying the company that it had failed to make full payment on its settlement agreement obligations.
McDaniel said that the letter serves as a 30-day notice that one or more of the attorneys general for "may bring an action to enforce the provisions of the MSA and the terms of the adherence agreement against General Tobacco."
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