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U.S. Supreme Court Will Not Hear Challenge to State Cigarette Fee

CNBC.com
Tuesday, 20 Feb 2007 | 11:27 AM ET

The U.S. Supreme Court today declined to hear a constitutional challenge by tobacco companies to Minnesota's 75-cent-per-pack health impact fee on cigarettes.

The justices refused to review a Minnesota Supreme Court ruling that upheld the constitutionality of the fee enacted in 2005 to recover state health costs caused by tobacco use.

The state high court reversed a judge's ruling that the fee violated a 1998 settlement agreement between the state and tobacco companies meant to reimburse Minnesota for the cost of caring for sick smokers.

Philip Morris USA, a unit of Altria Group, R.J. Reynolds Tobacco Company, a unit of Reynolds American, and other tobacco companies sued, claiming the law violated constitutional provisions that prohibit the impairment of contracts.

The companies appealed to the U.S. Supreme Court and said the Minnesota high court ruling "presents an important question concerning the extent to which a state must keep its word when it enters into a proprietary contract with a private party."

Minnesota officials opposed the appeal. They argued the fee, expected to raise about $400 million over a two-year period, represented a valid legislative act that was not prohibited by the 1998 settlement agreement.

The U.S. Supreme Court denied the appeal without any comment or recorded dissent.

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