Opinion
No. 177.
Argued October 19, 2010.
Decided November 17, 2010.
APPEAL, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the First Judicial Department, entered April 23, 2009. The Appellate Division dismissed an appeal from so much of an order of the Supreme Court, New York County (Charles E. Ramos, J.), as had granted motions to compel arbitration of a dispute.
In 1998, New York, along with many other jurisdictions, signed a master settlement agreement (MSA) with the largest tobacco manufacturers in the United States settling claims brought against those manufacturers alleging wrongful marketing and advertising of cigarettes and other tobacco products. In exchange for a release of liability, the tobacco manufacturers agreed to make annual payments to be allocated among the settling states. They also agreed to extensive marketing and advertising restrictions. Not all American tobacco manufacturers joined the MSA. In order to neutralize cost disadvantages suffered by the participating manufacturers (PMs) relative to nonparticipating manufacturers (NPMs), the MSA provided the settling states with a strong incentive to enact statutes requiring NPMs to make annual payments toward the costs of treating smoking-related illnesses equivalent to those made by the PMs. The MSA set out a model statute, which, if appropriately enacted, "shall constitute a Qualifying Statute." If a settling state failed to enact, or did not diligently enforce, a qualifying statute, PMs' payments to that state may be subject to the NPM adjustment, which may be applied to reduce PMs' payments to a settling state under certain circumstances. New York enacted a qualifying statute (Public Health Law art 13-G) which based the amount of money NPMs must deposit in escrow on the number of "units sold," which in turn was calculated on the amount of excise tax collected. The PMs complained that New York's failure to collect taxes from tobacco sales on Native American tribal lands amounted to the State not diligently enforcing its qualifying statute, thereby triggering the NPM adjustment. The State commenced the present action seeking a declaration that "units sold" excluded cigarette sales on which excise taxes had not been collected as a matter of public policy Certain PMs then moved to compel arbitration, citing language in the MSA that required disputes over diligent enforcement of qualifying statutes to be resolved by arbitration. The State opposed the motion as did certain NPMs.
Supreme Court granted the motion to compel arbitration and stayed the action. The only entities who appealed Supreme Court's order were NPMs. The Appellate Division concluded that the NPMs were not aggrieved by the order and dismissed their appeal.
State of New York v Philip Morris Inc., 61 AD3d 575, appeal dismissed.
Troutman Sanders LLP ( William H. Hurd, of the Virginia bar, admitted pro hac vice, and Ashley L. Taylor, Jr., of the Virginia bar, admitted pro hac vice, of counsel), Law Offices of Lisa M. Solomon, New York City ( Lisa M. Solomon of counsel), Fredericks Peebles Morgan, LLP ( Joseph V. Messineo, of the Arizona and Nebraska bars, admitted pro hac vice, of counsel), and Jones Garneau LLP, Scarsdale ( Michael K. Stanton, Jr., of counsel), for appellants.
Kirkland Ellis LLP ( Stephen R. Patton, of the Illinois bar, admitted pro hac vice, and Douglas G. Smith, of the Illinois bar, admitted pro hac vice, of counsel), Winston Strawn LLP New York City ( Alexander Shaknes of counsel), Kirkland Ellis LLP (Peter A. Bellacosa and Mark A. Rasmussen of counsel), Howrey LLP (Robert J. Brookhiser, of the District of Columbia bar, admitted pro hac vice, and Elizabeth B. McCallum of counsel), Leader Berkon LLP, New York City ( Joshua K. Leader of counsel), Greenberg Traurig, LLP ( Irving Scher and Jeffrey B. Sklaroffof counsel), and Paul B. Garland, New York City, for respondents.
Before: Chief Judge LIPPMAN and Judges CIPARICK, GRAFFEO, READ, SMITH, PIGOTT and JONES.
OPINION OF THE COURT
Appeal dismissed, without costs. As the nonparticipating tobacco manufacturers are not required by Supreme Court's order to arbitrate and will not be bound by the arbitration, they are not aggrieved.