Archived Issues

Judge ends “Phase II” payments

A judge has ruled that cigarette companies are not responsible for millions of dollars in so-called Phase II payments to U.S. tobacco farmers for 2004, because of the tobacco buyout. He also ruled that cigarette companies are entitled to a refund on payments made earlier in 2004.

The Phase II payments were intended to compensate farmers over 12 years for losses they were expected to incur as a result of higher cigarette prices following the 1998 Master Settlement Agreement. The Phase II agreement said that if a buyout were to occur, the payments would stop, but it failed to specify when they would end. Cigarette makers argued that because the buyout was approved this fall, they were not obligated to make their final 2004 payments, which totaled $189 million.