$7.1 billion Payment Dispute   A proposed settlement between big tobacco and the states to resolve a $7.1 billion payment dispute was rejected the states last month.  The deal requires the approval of a “critical mass” of states in order to be finalized, and certain states, including Utah, New Jersey and Missouri, representing more than half of the market share have rejected the deal, thus putting the parties at an impasse. The proposed settlement have allowed large tobacco companies to recoup approximately $2 billion from funds that have been withheld from states or otherwise disputed under the 1998 master settlement agreement, with the states collecting approximately $5.1 billion of the disputed payments.  In exchange for allowing the allowing cash-strapped states to collect several billion dollars of the disputed payments, the 1998 master settlement agreement would be revised with respect to how the states collect fees and taxes from smaller companies that have not joined the 1998 master settlement. The tobacco giants argue that they should not be required to pay on sales from 2003 through 2010, calling into question an amount totaling more than $7.1 billion.   The tobacco conglomerates also argue that they have lost market share because the states have failed to seek payments from smaller tobacco companies that are not party to the 1998 settlement. Those familiar with the matter are growing increasingly doubtful that the parties will reach a finalized settlement agreement. Profit Reporting Dispute Sales in Mississippi The $7.1 billion dispute between big tobacco and the states isn’t the only tobacco settlement dispute currently playing itself out in the legal system.  On July 25, 2011, a Mississippi judge heard arguments from R.J. Reynolds and the State of Mississippi regarding whether or not the tobacco giant failed to fulfill obligations under the master tobacco settlement when it failed to report profits from the sale of 7.8 billion cigarettes made by one of its subsidiaries to the independent tobacco company Star Tobacco, which sold the cigarettes in Mississippi under the brand names Gunsmoke and Vegas between 1999 and 2002. An attorney for R.J. Reynolds, which manufactures six of the 10 best-selling U.S. cigarette and moist snuff brands and is the second-largest tobacco company in the United States, argued that, because the sales of those cigarettes were not directed at customers’ whose health could be affected, the sales should be exempted from the master settlement agreement. Mississippi Attorney General[READ MORE…]