U.S. Supreme Court rules: cigarette fee stays

02/20/2007

Staff and wire reports
Pioneer Press


Minnesota smokers will continue to pay a 75 cents-a-pack fee on cigarettes for the foreseeable future after the U.S. Supreme Court on Tuesday refused to consider a lawsuit by Philip Morris that alleged the fee violates a contract with the cigarette company.

"In legal terms: case closed," Brian McClung, Gov. Tim Pawlenty's spokesman, said in a statement.

The Minnesota Supreme Court upheld the "health impact fee" last year, reversing Ramsey County District Court Judge Michael Fetsch's 2005 ruling that the tobacco charge violated a multibillion-dollar settlement the state and three tobacco companies reached in 1998. Pawlenty and the Legislature imposed the fee in 2005 to erase a budget deficit.

If the high court had struck down the fee, it would have blown a $185 million-a-year hole in the state budget.

"The U.S. Supreme Court's decision was expected and proper," McClung said.

It also was policy and political vindication for Pawlenty. Two years ago, Democratic legislators criticized the Republican governor for jeopardizing the budget by being too cute in labeling the charge a fee, not a tax. The Supreme Court's decision validated his fee approach.

Under the 1998 settlement, the tobacco companies have paid Minnesota more than $2 billion to offset health-care costs attributable to tobacco and continue making payments. That agreement settled past and future state claims against the tobacco industry for health-related costs.

At the state court level, the cigarette manufacturers argued the fee violated the terms of the 1998 settlement. But the state Supreme Court ruled that smokers, not the companies, pay the fee, and the settlement was not intended to protect smokers from additional charges.

In asking the Supreme Court to take the case, Philip Morris said the Minnesota Supreme Court decision against the company violates nearly 130 years of U.S. Supreme Court case law on contracts.

Pawlenty had warned that the appeal to the nation's top court would be frivolous.