STATE OF MINNESOTA

 

IN SUPREME COURT

 

A03-2020

 

 

Council of Independent Tobacco

Manufacturers of America, et al.,

 

                                                Appellants,

 

vs.

 

The State of Minnesota, et al.,

 

                                                Respondents.

 

 

O R D E R

 

 

            Based upon the files, records, and proceedings herein,

 

            IT IS HEREBY ORDERED that the petition of the Council of Independent Tobacco Manufacturers of America, et al., for rehearing be, and the same is, denied.

            IT IS FURTHER ORDERED that the paragraph that begins on page 11 and ends on page 12 of the slip opinion filed on March 16, 2006, is hereby modified to read as follows: 

Our conclusion comports with the result reached by a federal district court that addressed a First Amendment challenge to the national tobacco settlement.  S & M Brands, Inc. v. Summers, 393 F. Supp. 2d 604 (M.D. Tenn. 2005).  Under the national tobacco settlement, as a condition of receiving full settlement payments, participating states are required to enact “Qualifying Statutes” that obligate each tobacco product manufacturer to either become a “participating manufacturer” (as defined in the national tobacco settlement agreement) or make payments to an escrow fund.  Those manufacturers that elect to become “participating manufacturers” make payments to the state and voluntarily agree to the same restrictions on advertising, lobbying, and product placement as the original signatories to the settlement.  Those manufacturers that choose not to become “participating manufacturers” pay a fee that for the years 2003 through 2006 is $.0167539 per cigarette sold in the state, and for the years 2007 and thereafter is $.0188482 per cigarette sold.  In S & M Brands, the federal district court upheld the escrow requirement on the same grounds we employ here:  the escrow payments required under the national tobacco settlement are no greater than the amounts the manufacturer would be obligated to pay by participating in the settlement.

Thus, the focus of the unconstitutional conditions doctrine is on whether a governmental entity is denying a benefit to Plaintiffs that they could obtain by giving up their freedom of speech, or is penalizing them for refusing to give up their First Amendment rights.  The Court finds that no such conditions are imposed upon Plaintiffs under Tennessee’s legislative scheme.  The Escrow Act, as amended by the ASR Amendment, leaves Plaintiffs no worse off financially than they would be under the [Master Settlement Agreement], because it expressly provides that Plaintiffs are entitled to a refund on any amounts paid into escrow that they can demonstrate is in excess of the amount they would have paid under the [Master Settlement Agreement].  Further, Plaintiffs retain all of the First Amendment and other rights that the [participating manufacturers] gave up when they signed the [Master Settlement Agreement].  Because Defendant is neither denying a benefit to Plaintiffs that they could obtain by giving up their freedom of speech nor punishing Plaintiffs for refusing to give up their free speech rights, the unconstitutional conditions doctrine does not apply.

Id. at 637-38 (citations omitted). 

Said paragraph previously read as follows:

            Our conclusion comports with the results reached by other courts that have addressed First Amendment challenges to the national tobacco settlement.  Under the national tobacco settlement, as a condition of receiving full settlement payments, participating states are required to enact “Qualifying Statutes” that obligate each tobacco product manufacturer to either become a “participating manufacturer” (as defined in the national tobacco settlement agreement) or make payments to an escrow fund.  Those manufacturers that elect to become “participating manufacturers” make payments to the state and voluntarily agree to the same restrictions on advertising, lobbying, and product placement as the original signatories to the settlement.  Those manufacturers that choose not to become “participating manufacturers” pay a fee that for the years 2003 through 2006 is $.0167539 per cigarette sold in the state and for the years 2007 and thereafter is $.0188482 per cigarette sold.  Courts that have examined the First Amendment impact of these provisions have upheld them.  Xcaliber Int’l Ltd., LLC v. Ieyoub, 377 F. Supp. 2d 567 (E.D. La. 2005); S & M Brands, Inc. v. Summers, 393 F. Supp. 2d 604 (M.D. Tenn. 2005).  In particular, in Xcaliber the federal district court upheld the escrow requirement on the same grounds we employ here:  the escrow payments required under the national tobacco settlement are no greater than the amounts the manufacturer would be obligated to pay by participating in the settlement.

The focus of the unconstitutional conditions doctrine is on whether Louisiana is denying a benefit to plaintiffs that they could obtain by giving up their freedom of speech, or is penalizing plaintiffs for refusing to give up their First Amendment rights.  The court finds the amended escrow statute leaves plaintiffs no worse off financially than they would be under the Agreement, and plaintiffs retain all of the First Amendment and other rights that the participating manufacturers relinquished by signing the Agreement.  Because defendant is neither denying a benefit to plaintiffs that they could obtain by giving up their freedom of speech, nor is it punishing plaintiffs for refusing to give up their free speech rights, the unconstitutional conditions doctrine does not apply.

Xcaliber, 377 F. Supp. 2d at 573; accord, S & M Brands, Inc. v. Summers, 393 F. Supp. 2d at 637-38 (concluding that the First Amendment did not bar the requiring of payments to state’s escrow account because the requirement leaves plaintiffs no worse off financially than they would be under the Master Settlement Agreement).

            Dated:   May 16, 2006

                                                                                    BY THE COURT:

 

                                                                                      /s/                                                          

                                                                                    Alan C. Page

                                                                                    Associate Justice

 

ANDERSON, Russell A., C.J., and GILDEA, J., took no part in the consideration or decision of this case.