A.B. Coker Co., Inc.
A.B. Coker Co., Inc. is a cigarette distributor based in Lawrence, Kansas with a principal distribution center in Sherman, Texas. The company was founded in 1921 by Mr. A.B. Coker and passed on through several generations of family members. The company sells cigarettes in many states, including Louisiana.
| |
|
| |
 |
| |
Plaintiff - AB Coker Employees
|
Despite the fact that A.B. Coker was not a target of lawsuits brought by state attorneys general and trial lawyers in the 1990s, the settlement agreement signed by major tobacco companies and 46 state attorneys general in 1998 increased costs for distributors like A.B. Coker.
“The MSA has forced us to ask for more and more outside legal counsel in determining which brands we may sell,” says David Butler, the company’s vice president. “Our company’s growth has been impacted by the limiting of the products that we offer.”
“It seems that almost every law that is passed in the states that we operate has been specifically written to help the big tobacco companies and limit the growth of discount brands,” Butler added. “Frankly, I am not sure who is writing the bills anymore, the state legislatures or Philip Morris and R.J. Reynolds.”
S&M Brands, Inc.
Mac Bailey, the CEO of S&M Brands, comes from five generations of tobacco growers, “ever since 1892 when Cornelius Bailey broke the sod in the rich soil and chose tobacco as his crop.” Now his son, Steven Bailey, is also part of the family business, as president of the family’s small tobacco manufacturing business in Keysville, Virginia.
Prior to the tobacco settlement, the Bailey’s had hoped to grow their namesake brand into a national product. But because S&M Brands is not a signatory to the tobacco settlement, the financial burden is too great to expand their business into many states like Louisiana.
Like fellow plaintiff CLP, S&M Brands is regulated by the laws enacted by the states to enforce the MSA, despite the fact that it was never a target in the lawsuits brought by state attorneys general in the 1990s. Thus, the company is forced to make burdensome escrow payments to the states where its cigarettes are sold. Though the escrow payments are refunded after 25 years, for a small company like S&M Brands, it takes a big bite out of their budget. That raises the cost of their products and makes it nearly impossible to expand sales into additional states. And, unlike the settlement payments made by big tobacco companies, the escrow payments made by “nonparticipating manufacturers” like S&M Brands are not tax deductible.
CLP
CLP is a small tobacco manufacturer based in Ayden, North Carolina. The company was founded by Chris Sutton, 42, whose family ran a tobacco warehouse business in the state for three generations.
Sutton employs 34 people in his business, including his wife and uncle, and describes all his employees as part of the “company family.” He would like to be able to offer them health insurance if business improves. But, he adds, the tobacco settlement and a subsequent law that increased his mandatory escrow payments to the states have had an “extreme, major impact” on the company’s bottom line.
CLP sells Bridgeton cigarettes and several varieties of roll-your-own tobacco (such as Railroad and Southern Harvest) to distributors and retailers, many of whom are “mom and pop” businesses, in Louisiana and other states. But often a small retailer balks at the special paper work required when doing business with a “nonparticipating manufacturer,” like CLP. Such paper work isn’t required when doing business with major tobacco companies, who are “participating manufacturers” in the “Master Settlement Agreement” (MSA).
Still, Sutton scoffs at the notion of signing the MSA. That would mean “giving up all your rights” and admitting to wrong-doing, Sutton explains. “I couldn’t do that in good conscience,” he says, because the product he sells is legal. Besides, he says, what he wants is a fair market.
Sutton’s company is regulated by the laws enacted by the states to enforce the MSA, despite the fact that it was never a target in the lawsuits brought by state attorneys general in the 1990s. Those lawsuits alleged that major tobacco companies had lied about the health risks of smoking and run up Medicaid costs for treating sick smokers. Yet under the MSA, CLP, as a nonparticipating manufacturer, must make escrow payments in states where any of its cigarettes are sold.
To be able to make such escrow payments in Louisiana and other states, CLP is forced to raise its prices to cover the costs, resulting in reduced sales. CLP must also take costly and elaborate steps to prevent its products from being sold in certain states. The MSA requires small companies like CLP to make escrow payments to every state in which its products are sold.
Tobacco Discount House #1, Inc.
The Tobacco Discount House #1, Inc. is a tobacco retail store in Shreveport, Louisiana owned by Juan Martinez. Martinez, 46, is proud of the life he has made for himself and his family since immigrating to the U.S. in 1980 from Colombia, South America. He calls America the “land of opportunities.”
With help from his brothers, Martinez went about creating his own opportunity by starting a convenience store business in the 1980s. A decade later, Martinez felt he could do even better by moving into the tobacco business. He calls his customers “one of the best things I’ve gotten out of this business,” describing them as “dependable and nice.”
| |
|
| |
|
| |
|
| |
Plaintiff - Tobacco House 1 |
“We give them good service without a hostile environment and offer the best products at the best price,” says Martinez.
Martinez offers his employees health and vacation benefits but would like to do more. “I would like to offer a 401(k) and grow my business” by selling other products, says Martinez. But that is hard to do, he says, because of higher costs imposed by the tobacco settlement.
Like fellow plaintiff A.B. Coker, Martinez is forced to pay higher prices for cigarettes as a result of the MSA. Participating Manufacturers charge more for cigarettes to finance their MSA payments, while Non-Participating Manufacturers charge more to make escrow payments.
A.B. Coker and Tobacco Discount House #1 are also subject to Louisiana’s “Complementary Statute,” which prohibits the sale of cigarettes whose makers do not make payments. If they sell any such cigarettes, they can be criminally prosecuted and jailed, fined $5,000 for each such violation, have their cigarettes seized and destroyed, be sued by the Attorney General, and lose their license to sell cigarettes.
By prohibiting the sale of cigarettes whose manufacturers do not make MSA or escrow payments, the Complementary Statute also reduces the variety of cigarettes A.B. Coker and Tobacco Discount House #1 can offer to their customers and reinforces the government-Big Tobacco cartel and high prices resulting from the MSA.
| 
