State v. Philip Morris, R.J. Reynolds
158 Idaho 874
| Idaho | 2015Background
- Idaho and other states entered the 1998 Master Settlement Agreement (MSA) with major tobacco manufacturers (PMs); PMs make annual payments allocated to states via an Independent Auditor; Idaho’s allocable share is 0.36%.
- The MSA includes the Non-Participating Manufacturer (NPM) Adjustment to offset market-share gains by non‑MSA manufacturers; states that enact and diligently enforce a Qualifying Statute avoid the NPM Adjustment for their share.
- Dispute arose over whether the PMs’ 2003 market-share loss triggered the NPM Adjustment and which states were diligent; the MSA required arbitration of Independent Auditor calculations and related determinations.
- A multi‑state arbitration panel (three former federal judges) presided; 22 states (Signatory States) settled with PMs via a Term Sheet resolving 2003–2012 adjustments and providing DPA (Disputed Payments Account) distributions; Idaho was an Objecting State and did not sign.
- The Panel issued a Stipulated Partial Settlement and Award (Partial Award) implementing the Term Sheet and directing the Independent Auditor to release certain DPA funds to Signatory States while assuring Non‑Signatory States’ aggregate allocable share would remain in the DPA.
- Idaho moved to vacate portions of the Partial Award (challenging post‑2003 provisions); the district court denied the motion for lack of standing (no injury in fact). Idaho appealed; the Idaho Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Idaho) | Defendant's Argument (PMs) | Held |
|---|---|---|---|
| Whether Idaho had standing to move to vacate portions of the Partial Award under the FAA | Idaho claimed it need only allege an injury in fact and did so: it was excluded from post‑2003 DPA distributions that Term Sheet allowed Signatory States to receive | PMs argued Idaho must prove a concrete, particularized injury; Idaho’s alleged injury was speculative because it was not entitled to DPA funds under the MSA until disputes were finally resolved | Idaho lacked standing because it failed to show a concrete, particularized injury in fact; affirmed denial of motion to vacate |
| Whether a court considering a FAA vacatur motion must require proof of injury or may vacate without party-specific harm when arbitrators exceed powers | Idaho argued vacatur under 9 U.S.C. §10(a)(4) does not require showing legal prejudice — excess of power alone suffices | PMs argued traditional justiciability (standing) still applies to FAA challenges; party invoking court jurisdiction must show injury | Court held standing principles (injury in fact, causal traceability, redressability) apply to FAA vacatur motions; Idaho failed to meet injury requirement |
| Whether the Partial Award’s incorporation of the Term Sheet prejudiced Non‑Signatory States by releasing DPA funds outside MSA structure | Idaho argued release of post‑2003 DPA funds via Term Sheet displaced MSA rights and injured Idaho | PMs argued releases were permissible consideration for settlement and the Panel required Independent Auditor to preserve Non‑Signatory States’ aggregate allocable share in the DPA; no reasonable likelihood of loss to Idaho | Court agreed with PMs: Idaho was not entitled to DPA funds under MSA until final resolution; Panel’s assurances meant no present injury to Idaho |
| Whether court should reach merits of Idaho’s vacatur arguments given standing defect | Idaho contended the district court improperly delved into merits when deciding standing | PMs contended standing inquiry may require examination of award and whether alleged injury is speculative | Court affirmed that standing is threshold and that factual review of the award was appropriate to determine whether alleged injury was concrete; therefore merits not reached |
Key Cases Cited
- In re Jerome County Board of Commissioners, 153 Idaho 298, 281 P.3d 1076 (Idaho 2012) (jurisdictional issues, including standing, reviewed de novo)
- Young v. City of Ketchum, 137 Idaho 102, 44 P.3d 1157 (Idaho 2002) (standing requires allegation or demonstration of injury in fact and causal link)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (federal standing test: injury in fact, causation, redressability)
- Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334 (2014) (injury-in-fact must be concrete, particularized, actual or imminent)
- Martin v. Camas County ex rel. Bd. of Comm’rs, 150 Idaho 508, 248 P.3d 1243 (Idaho 2011) (standing requires specific, traceable harm; speculative claims insufficient)