US Supreme Court upholds decision by Oklahoma Court of Civil Appeals that state law requiring payments under tobacco settlement applies to all cigarettes sold with a state excise tax stamp

OKLAHOMA CITY , December 3, 2013 () – The U.S. Supreme Court on Monday upheld Oklahoma's right to collect payments from a tobacco company for cigarettes sold to American Indians.

Without comment, the high court let stand a decision by the Oklahoma Court of Civil Appeals that a state law requiring payments under the tobacco settlement applies to all cigarettes sold with a state excise tax stamp.

Grand River Enterprises Six Nations, a tribal-owned Canadian company, asked the U.S. Supreme Court to intervene in the case, claiming the state could not tax cigarettes sold to Indians at the same rate as those sold to non-Indians.

The case grew out of the 1998 settlement between 46 states and the nation's four largest tobacco companies. The settlement required those four companies to make payments in perpetuity for the states' cost of treating people with smoking-related illnesses.

An Oklahoma law then required tobacco companies that didn't participate in the settlement to deposit money in escrow, based on the number of cigarettes sold. Under the law, the money would be refunded to the companies in 25 years if not needed to pay health-related judgments or settlements against them.

The U.S. Supreme Court has ruled that tribal tobacco retailers don't have to charge taxes on tribal members, but the state law on the escrow payments encompassed all packs of cigarettes bearing a state tax stamp.

The Oklahoma appeals court ruled that a decision for Grand River Enterprises would allow the company to evade its escrow obligation "by distributing its cigarettes to be sold only on tribal lands." Then, the court said, the company also could avoid the intent of the tobacco settlement -- shifting the health care costs from the states "to the entities who profit from the smoking enterprise."

A state court judge found Grand River Enterprises owed more than $5 million in escrow payments for 2005 and 2006 and fined the company about $508,000.

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