A unanimous Pennsylvania Commonwealth Court, acting en banc, today ruled that the Commonwealth of Pennsylvania is entitled to retain a $125.8 million payment by Big Tobacco as part of the 1998 Tobacco Master Settlement Agreement. David H. Pittinsky and Burt M. Rublin of Ballard Spahr represented the Pennsylvania Cancer Alliance – a group of leading hospitals and cancer centers, including the Children's Hospital of Philadelphia, Drexel University, Jefferson Hospital, Temple University, and the University of Pennsylvania – pro bono in the matter.

The court affirmed a Philadelphia Court of Common Pleas ruling that set aside an earlier decision by a three-judge arbitration panel that had allowed Big Tobacco to withhold the $125.8 million from the annual payments made to Pennsylvania under the tobacco settlement. The case is being closely watched nationally because similar litigation is pending in several other states. This is the first appellate court decision in any of those cases.

Said Mr. Pittinsky, who argued the appeal: “The money that will be paid to the Pennsylvania hospitals in this matter will go toward groundbreaking research and much-needed cancer treatment. We are delighted for our clients and for the Commonwealth. With the growing cost of health care, this is an enormous victory.”

Under the 1998 nationwide tobacco settlement, a group of the nation’s leading tobacco companies agreed to make annual payments in perpetuity to the 52 settling states and territories totaling billions of dollars each year in exchange for release from civil liability. The tobacco companies that entered into the settlement argued that they were losing market share to tobacco companies that did not participate in the settlement. To mitigate potential losses to the non-participating tobacco companies, laws were passed to level the playing field.

In 2013, arbitrators penalized Pennsylvania – cutting its $370 million allocation for the year 2003 by more than half – because they found that the Commonwealth was not diligent in enforcing its law in 2003. Pennsylvania filed suit to overturn the arbitration decision. In 2014, Philadelphia Court of Common Pleas Judge Patricia McInerney ruled that Pennsylvania’s tobacco payment for 2003 should be reduced by only $116 million, which was $125.8 million less than the total reduction by the arbitrators. The ruling today upheld the decision to allow the Commonwealth to retain the $125.8 million.

“Pro bono work is particularly gratifying when it benefits such a large number of people,” said Mr. Rublin, who leads Ballard Spahr’s Appellate Group. “This case will likely pave the way to more equitable settlement arrangements for states throughout the country and help them in what has become one of the largest public health issues of our time.”

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Pro Bono