Vibo Corp. v. State ex rel. McDaniel
2011 Ark. 124
| Ark. | 2011Background
- General Tobacco appeals from a circuit court order granting the State of Arkansas summary judgment, delisting General Tobacco’s brands, ordering $296,846,112.93 in backpayments, and denying a request to enforce the stay pending arbitration.
- MSA background: Masters Settlement Agreement (MSA) with Settling States and Original Participating Manufacturers created backpayment and ongoing payment structures to settle past/future claims.
- General Tobacco’s status: began as a Non-Participating Manufacturer in 2000, signed an Adherence Agreement in 2004, and became a Subsequent Participating Manufacturer with a total backpayment obligation of $320,641,232.07 (reduced to $242,313,843.53 after escrow releases).
- Backpayments and escrow: under unitary payment structure, payments into escrow are allocated pro rata to Settling States; Arkansas’ allocable share is 0.8280611%, requiring the full backpayment sum to be deposited to the escrow for proper distribution.
- Key procedural posture: independent auditor decided not to apply the Non-Participating Manufacturer Adjustment for 2003 due to Arkansas’ statute; State sought declaratory relief and arbitration; 2006 stay limited to that issue; 2009 enforcement petition led to 2010 summary judgment and a remand to determine joinder of other Settling States (Rule 19) for complete relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the circuit court had subject-matter jurisdiction to award damages for all Settling States. | Arkansas argues unitary payment requires a full judgment for all States. | General Tobacco argues jurisdiction is limited to Arkansas-only disputes. | Yes; court has subject-matter jurisdiction and may award proportional damages across Settling States. |
| Whether other Settling States are indispensable parties. | State seeks full allocation; others must be joined to avoid prejudicing interests. | Joinder not preserved; arbitration controls allocation. | Rule 19 authorizes permissive/sua sponte joinder; remand to join indispensable parties. |
| Scope of the 2006 stay order. | Stay should bar current enforcement and arbitration issues. | Stay limited to 2003 adjustment; not to enforcement of backpayments. | Stay did not enjoin the 2009 enforcement petition; current action not stayed. |
| Whether General Tobacco can set off contingent/unliquidated amounts (NPM Adjustment) against fixed backpayments. | NPM Adjustment is liquidated/offset against backpayments. | Adjustment is contingent and unliquidated; may offset. | NPM Adjustment is contingent and unliquidated; cannot be used to set off fixed backpayments. |
| Whether collateral estoppel and waivers bar antitrust/constitutional defenses. | — | Prior Kentucky decision governs; collateral estoppel applies. | Collateral estoppel bars relitigation of federal antitrust/constitutional claims. |
Key Cases Cited
- Servewell Plumbing, LLC v. Summit Contractors, Inc., 362 Ark. 598, 210 S.W.3d 101 (2005) (jurisdiction cannot be conferred by contract)
- Allen v. Circuit Court of Pulaski County, 2009 Ark. 167, 303 S.W.3d 70 (2009) (distinguishes subject-matter vs personal jurisdiction)
- Milberg, Weiss, Bershad, Hynes & Lerach, LLP v. State, 342 Ark. 803, 310-11, 28 S.W.3d 842 (2000) (waiver/Rule 19-related considerations)
- Taylor v. Hamilton, 90 Ark.App. 235, 205 S.W.3d 149 (2005) (waiver of indispensable party defense)
- Sims v. First Nat’l Bank, Harrison, 267 Ark. 253, 590 S.W.2d 270 (1979) (ratification defense context)
- Stokes v. Home Life Ins. Co., 187 Ark. 972, 68 S.W.2d 657 (1933) (contingent liability cannot be set off against unliquidated liability)
- Powell v. Lam, 375 Ark. 178, 289 S.W.3d 440 (2008) (elements of collateral estoppel)
- Vibo Corp., Inc. v. Conway, 594 F.Supp.2d 758 (2009) (federal antitrust/constitutional claims barred by collateral estoppel)