TITLE 23
Health and Safety

CHAPTER 23-71
Tobacco Product Manufacturers' Escrow Funds

SECTION 23-71-3


§ 23-71-3 Requirements.

Any tobacco product manufacturer selling cigarettes to consumers within the state (whether directly or through a distributor, retailer, or similar intermediary or intermediaries) after the date of enactment of this chapter shall do one of the following:

(1) Become a participating manufacturer (as that term is defined in section II (jj) of the Master Settlement Agreement) and generally perform its financial obligations under the Master Settlement Agreement; or

(2)(i) Place into a qualified escrow fund by April 15 of the year following the year in question the following amounts (as those amounts are adjusted for inflation):

1999: $.0094241 per unit sold after the date of enactment of this chapter [June 29, 1999];

2000: $.0104712 per unit sold;

For each of 2001 and 2002: $.0136125 per unit sold;

For each 2003 through 2006: $.0167539 per unit sold;

For each of 2007 and each year thereafter: $.0188482 per unit sold.

(ii) A tobacco product manufacturer that places funds into escrow pursuant to subdivision (i) shall receive the interest or other appreciation on the funds as earned. The funds themselves shall be released from escrow only under the following circumstances:

(A) To pay a judgment or settlement on any released claim brought against the tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this subparagraph: (I) in the order in which they were placed into escrow, and (II) only to the extent and at the time necessary to make payments required under the judgment or settlement.

(B) To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to section IX(i) of that agreement including after final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to the tobacco product manufacturer; or

(C) To the extent not released from escrow under subparagraphs (A) or (B), funds shall be released from escrow and revert back to the tobacco product manufacturer twenty-five (25) years after the date on which they were placed into escrow.

(iii) Each tobacco product manufacturer that elects to place funds into escrow pursuant to this subsection shall annually certify to the attorney general that it is in compliance with this subsection. The attorney general may bring a civil action on behalf of the estate against any tobacco product manufacturer that fails to place into escrow the funds required under this section. Any tobacco product manufacturer that fails in any year to place into escrow the funds required under this section:

(A) Is required within fifteen (15) days to place any funds into escrow that will bring it into compliance with this section. The court, upon a finding of a violation of this subsection, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed five percent (5%) percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent (100%) of the original amount improperly withheld from escrow;

(B) In the case of a knowing violation, is required within fifteen (15) days to place any funds into escrow that will bring it into compliance with this section. The court, upon a finding of a knowing violation of this subsection, may impose a civil penalty to be paid to the general fund of the state in an amount not to exceed fifteen percent (15%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent (300%) of the original amount improperly withheld from escrow;

(C) In the case of a second knowing violation, is prohibited from selling cigarettes to consumers within the state (whether directly or through a distributor, retailer or similar intermediary) for a period not to exceed two (2) years; and

(D) Will be ordered to pay the costs and attorney's fees of the state in a civil action in which the court finds that a violation of this section has occurred.

(3) Each failure to make an annual deposit required under this section shall constitute a separate violation.

History of Section.
(P.L. 1999, ch. 178, § 1; P.L. 2001, ch. 10, § 1; P.L. 2004, ch. 382, § 1; P.L. 2004, ch. 461, § 1.)