By Timothy S. Donahue

Top Takeaways:

• No Offsets: Tobacco companies cannot deduct potential Baltimore City damages from payments owed to Maryland.
• Lawsuit Advances: Baltimore’s environmental claims over discarded cigarette filters can proceed.
• First-of-Its-Kind Ruling: The court found that the 1998 MSA does not cover local government claims for environmental damage.

Tobacco companies can’t make Maryland pay for Baltimore’s cigarette butts.

A Baltimore City Circuit Court judge ruled that tobacco manufacturers cannot reduce their annual payments to Maryland under the 1998 Master Settlement Agreement (MSA) to offset potential damages from Baltimore City’s lawsuit over cigarette filter pollution.

The decision allows the city’s environmental lawsuit to proceed while protecting Maryland’s annual settlement payments, which fund healthcare and public health programs.

Maryland Attorney General Anthony G. Brown announced the ruling, calling it the first decision in the country to address whether the MSA covers environmental damage claims brought by local governments against tobacco companies.

Baltimore City sued several tobacco manufacturers, including Philip Morris USA and R.J. Reynolds Tobacco Company, alleging that discarded cigarette filters have caused environmental harm.

The companies argued that the MSA entitled them to offset any damages they might owe Baltimore against their settlement payments to Maryland.

The Maryland Attorney General’s Office intervened to protect the state’s settlement revenue and moved for summary judgment.

The court ruled in favor of the state, finding that the MSA addresses youth smoking and public health harms associated with tobacco use, not environmental damage caused by discarded tobacco products.

Accordingly, the court ruled that the companies “are not entitled to an offset” against Maryland’s settlement payments for any damages awarded in Baltimore’s lawsuit.

The MSA, reached in 1998 between major tobacco manufacturers and 52 states and territories, resolved claims for reimbursement of Medicaid expenses for smoking-related diseases.

The agreement also imposed restrictions on tobacco marketing and requires participating manufacturers to make annual payments to the states indefinitely.

The Baltimore ruling distinguishes environmental pollution claims from the public health claims settled under the agreement, potentially serving as a legal reference point for similar litigation involving cigarette waste.

Importantly, the decision does not determine whether the tobacco companies are liable for Baltimore’s alleged environmental damage or set the amount of any potential damages.

Instead, it prevents the companies from using the MSA to reduce their obligations to Maryland if Baltimore ultimately prevails.

Baltimore City’s underlying lawsuit is still pending.