Criminal Justice Division

What is the Master Settlement Agreement (MSA)?

The Master Settlement Agreement (MSA) is a legal contract established in November 1998 between 46 states, including Hawaii, five U.S. Territories, and the District of Columbia, with participating tobacco manufacturers. As of August 2006, over 40 tobacco product manufacturers have signed. The MSA provides numerous restrictions and prohibitions, including: bans on the use of cartoons in tobacco advertisements, youth exposure to sampling, certain sponsorships, and the use of most outdoor advertisements.

How much money will Hawaii receive from the MSA?

Hawaii will receive 0.601865% of the total $206 billion settlement amount, which is approximately $1.24 billion over 25 years. As of August 2006, Hawaii has received payments in excess of $286 million. The settlement payments are not fixed, but are subject to various adjustments such as overall sales volume loss, inflation, market share shifts between manufacturers who settled and those who didn’t, and adjustments for states that previously settled their claims against the defendants on their own

How are the settlement proceeds to be spent?

With regard to the settlement proceeds, our state has decided to allocate the money as set forth in Hawaii Revised Statutes Chapter 328L: (1) the first $350,000 every fiscal year is disbursed to the Department of the Attorney General for the purposes of enforcing the MSA and HRS Chapter 675; from the remaining moneys, (2) twenty-four and a half percent (24.5%) is allocated to the emergency and budget reserve fund (the “rainy day” fund); (3) twelve and a half percent (12.5%) goes into a trust fund to be administered by a private, non-profit entity for tobacco prevention and control (i.e., reducing cigarette smoking and tobacco use among youth and adults through education and enforcement activities and controlling and preventing chronic diseases where tobacco use is a risk factor), the Advisory Board overseeing this trust are limited to spending only the income for these purposes, the principal must remain in the trust fund; (4) thirty-five percent (35%) is allocated to the Department of Health, of which ten percent (10%) is transferred to the Department of Human Services for the children’s health insurance program (CHIP). The Department of Health then spends the remaining twenty-five percent (25%) on health promotion and disease prevention programs such a maternal child health, promotion of healthy lifestyles, and prevention oriented public health programs; and (5) twenty-eight percent (28%) to the University of Hawaii revenue undertaking fund (i.e., UH Medical School construction).

Which tobacco product manufacturers must pay Hawaii and the other states and territories?

The tobacco companies are Anderson Tobacco Co.,  Bekenton, Canary Islands Cigar Co., Caribbean-American Tobacco Corp., The Chancellor Tobacco Co. UK Ltd., Commonwealth Brands, Inc., Cutting Edge Enterprises, Inc., Daughters & Ryan, Inc., Dhanraj International, Eastern Co., Farmer’s Tobacco Co. of Cynthiana, Inc., General Tobacco, House of Prince, ITL (USA) Limited, International Tobacco Group (Las Vegas), Inc., Japan Tobacco International USA, Inc., King Maker Marketing, Konci G&D Management Group, Kretek International, Lane Limited, Liberty Brands, Liggett Group, Inc., Lignum-2, Inc., Lorrillard Tobacco Co., LTD Corporation, MacBaren Tobacco Company, Monte Paz, NASCO Products, Inc., Pacific Stanford Manufacturing Corp., Peter Stokkebye, Philip Morris, Planta of Berlin, Premier Marketing Inc., PT Djarum, R.J. Reynolds Tobacco Co., Santa Fe Natural Tobacco Co., Inc., Sherman’s 1400 Broadway N.Y.C. Ltd., SEITA, TABESA, Top Tobacco, US Flue-Cured Tobacco Growers, Vector Tobacco, Virginia Carolina Corp., Von Eicken Group, Wind River Tobacco Co., and VIP Tobacco USA. These companies (and any subsequent signors to the MSA) will be responsible for paying Hawaii and the other states the billions of dollars agreed upon in the MSA.

What are the non-financial benefits of the settlement?

In addition to the financial obligations imposed on the settling defendants, there are restrictions on advertising such as the use of cartoon and outdoor advertising, restrictions on brand name sponsorship, e.g., Winston car races, and advertising targeted toward youth. Many of these non-economic restrictions are being worked out in practice.

What generally happens is that a state observes what appears to be a violation of the MSA, such as the use of a cartoon character to advertise cigarettes, and brings the practice to the attention of the defendants with a demand to cease the practice. The settling manufacturer then responds, generally denying a violation but stopping that particular advertisement nonetheless, and moves onto a different advertising campaign. We foresee that implementing these restrictions will be continually evolving.

Now that the lawsuit between the State of Hawaii and the tobacco industry has been settled, what will be the ongoing responsibilities of the Department of the Attorney General?

The Attorney General has formed the Tobacco Enforcement Unit and has charged the Unit with the responsibility of enforcing the MSA and the requirements by Hawaii Revised Statute, Chapter 675. To that end, the Unit is gathering data, investigating, and initiating litigation against those tobacco product manufacturers that violate the MSA or the provisions of Chapter 675.

Can the Department of the Attorney General represent me in a private lawsuit against the tobacco industry?

No. The Department of the Attorney General cannot represent private individuals. A private person must consult with a private attorney to explore any legal rights that may exist against the tobacco industry.  The Hawaii State Bar Association maintains a lawyer referral service.

Where can I view tobacco industry documents?

You may find some tobacco related documents at www.naag.org. This is the National Association of Attorneys’ General web page. Also, the MSA requires the tobacco industry documents to be available for viewing until June 30, 2010 on web sites maintained by all original participating tobacco manufacturers.