State ex rel. Stenehjem v. Philip Morris Inc.

20060207 State of North Dakota,
ex rel. Wayne Stenehjem,
Attorney General, Plaintiff and Appellee
v.
Philip Morris, Incorporated,
Brown & Williamson Tobacco
Corporation, Lorillard Tobacco
Company, R. J. Reynolds Tobacco
Company, Liggett Group Inc.,
United States Tobacco
Manufacturing Company Inc.,
and United States Tobacco Sales
and Marketing Company Inc., Defendants
--------------
Philip Morris, Incorporated,
Lorillard Tobacco Company,
and R. J. Reynolds Tobacco Company, Defendants and Appellants

Appeal from: District Court, East Central Judicial District, Cass County
Judge Steven L. Marquart
Nature of Action: Contracts
Counsel:
Appellant: Zuger Kirmis & Smith
Appellant: Lawyer not licensed in N.D.
Appellant: Pearce & Durick
Appellant: Lawyer not licensed in N.D.
Appellant: Lawyer not licensed in N.D.
Appellee: Todd Adam Sattler , Att. General Office
Appellant: Zuger Kirmis & Smith
Term: 03/2007   Argument: 03/01/2007  9:30am
ND cite: 2007 ND 90
NW cite: 732 N.W.2d 720

Listen to recording of oral argument in MP3 format

Issues: Appellant's Statement of the Issues:
Issue of Original Participating Manufacturers

Whether the District Court erred in refusing to compel arbitration pursuant to the Tobacco Litigation Master Settlement Agreement ("MSA") of the parties' dispute concerning the MSA Independent Auditor's refusal to apply an "NPM Adjustment" to the Participating Manufacturers' April 2006 annual nationwide payment, including the State's defense that it qualifies for a "diligent enforcement" exemption to that Adjustment, where the MSA's Arbitration Clause broadly requires arbitration of "any dispute . . . arising out of or relating to calculations performed by, or any determinations made by, the Independent Auditor," and specifically lists "any dispute concerning the operation or application of" the NPM Adjustment and the diligent enforcement defense to that Adjustment as examples of disputes that must be arbitrated?

Issue of Subsequent Participating Manufacturers

The issue presented for review is whether the parties' dispute over the 2003 NPM Adjustment, including the issue of diligent enforcement, is arbitrable under the MSA provision requiring arbitration of "any dispute . . . arising out of or relating to" the Independent Auditor's calculations and determinations, including "without limitation" any disputes "concerning the operation or application" of the MSA's adjustments and allocations.
RYB
I. The State Mischaracterizes the MSA'S plain language.
A. The arbitration clause is not limited to "appeals" from specific determinations the auditor has "actually made."
B. Arbitration would be required even under the State's "Interpretation" because the auditor, in fact, made a diligent enforcement determination.
C. The Auditor had express authority to make the diligent enforcement determination.
D.The MSA expressly excludes this dispute from MSA Court jurisdiction.
II. The State misconstrues the MSA'S nationwide payment provisions.
III. The State does not purport to rebut the well-settled presumption favoring arbitration.


Appellee's Statement of the Issues:
The Master Settlement Agreement ("MSA") and the Consent Decree And Final Judgment With Respect To Master Settlement Agreement ("Consent Decree) give the North Dakota MSA Court general jurisdiction to decide MSA disputes. An arbitration clause in the MSA limits arbitration to disputes that arise out of or are related to a calculation performed by or a determination made by the accounting firm PricewaterhouseCoopers. PricewaterhouseCoopers did not determine -- and told the parties that it could not and would not determine -- whether any state diligently enforced its Qualifying Statute. On May 1, 2006, North Dakota moved to have the North Dakota MSA Court decide whether North Dakota diligently enforced its Qualifying Statute, N.D.C.C ch. 51-25 (N.D. Br. Add. at 1-3). Should the dispute over whether North Dakota diligently enforced N.D.C.C. ch. 51-25 be decided by the North Dakota MSA Court or by PricewaterhouseCoopers and a national arbitration panel?

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Docket entries:
107/27/2006 NOTICE OF APPEAL: 07/25/2006
207/27/2006 ORDER FOR TRANSCRIPT: 07/25/2006
307/31/2006 (Consolidated w/20060213. Make all docket entries, except DIS & MAN codes, in this case.)
409/14/2006 TRANSCRIPTS DATED May 30, 2006 & June 28, 2006
509/14/2006 DISK - tra (5/30/06 & 6/28/06) (e-mailed)
609/20/2006 RECORD ON APPEAL (3 volumes and separates); Not received: 17 & 61 (tapes). Note: there are no
709/20/2006 attachments to entry 6 and entry 23 as indicated in the register of actions
810/13/2006 Affidavit of Stephen R. Patton
910/13/2006 Affidavit of Gayle E. Rosenstein
1010/19/2006 MOT. EXT/TIME APPELLANT BRIEF, Affidavits of Lawrence Bender, Lawrence King,& Gary Wolberg
1110/19/2006 ACTION BY CLERK. Granted: 11/23/2006
1210/25/2006 Affidavit of Thomas J. Frederick Pursuant to ND Admission to Practice Rule 3 (authorized)
1311/22/2006 APPELLANT BRIEF (Original Participating Manufacturers - 20060207)
1411/22/2006 APPELLANT APPENDIX (Original Participating Manufacturers & Subsequent Participating Manufacturers)
1511/22/2006 Addendum to ATB of Original Participating Manufacturers
1611/22/2006 DISK - ATB Original Participating Manufacturers (CD-R)
1711/22/2006 Certificate of Service by Mail
1811/22/2006 APPELLANT BRIEF (Subsequent Participating Manufacturers - 20060213)
1912/06/2006 MOT. EXT/TIME APPELLEE BRIEF & Aff/Support
2012/06/2006 ACTION BY CLERK. Granted: 01/25/2007
2101/18/2007 MOTION for Leave to File Brief in Excess of Page Limits, Affidavit of Todd Sattler, Affidavit
2201/19/2007 ACTION BY CHIEF JUSTICE (additional 2,625 words). Granted
2301/25/2007 APPELLEE BRIEF
2401/25/2007 Addendum to Appellee's Brief
2501/25/2007 DISK - AEB
2601/25/2007 APPELLEE APPENDIX w/ separate Master Settlement Agreement
2701/29/2007 Table of Contents for Appellee's Appendix
2802/02/2007 MOTION of Original Participating Manufacturers to File a Reply Brief in Excess of 2500 wds. &
2902/02/2007 Affidavit in Support
3002/02/2007 ACTION BY CHIEF JUSTICE (Mot/Excess/of Words for RYB - 1250 additional words). Granted
3102/08/2007 REPLY BRIEF of Subsequent Participating Manufacturers in 20060213
3202/08/2007 Addendum to RYB of Subsequent Participating Manufacturers
3302/09/2007 DISK - ryb (Subsequent Participating Manufacturers) (e-mailed)
3402/08/2007 REPLY BRIEF of Original Participating Manufacturers
3502/08/2007 Addendum to RYB of Original Participating Manufacturers
3602/08/2007 DISK of ryb (Original Participating Manufacturers)
3702/13/2007 Corrected p.20 for Brief of Appellants Subsequent Participating Manufacturers (20060213)
3802/13/2007 DISK of ATB (Subsequent Participating Manufacturers -- 20060213)
3902/26/2007 Request for Radio/TV Coverage KXMB - TV (approved)
4002/26/2007 Letter from Gary Wolberg dated 2-23-07 RE: Corrections to RYB in 20060213
4103/01/2007 APPEARANCES: For Original Participating Manufacturers: Stephen R. Patton, Lawrence Bender,
4203/01/2007 Patrick J. Ward, Lawrence King, Thomas J. Frederick; For Subsequent Participating Manufacturers:
4303/01/2007 Robert J. Brookhiser, Gary R. Wolberg. For Appellee: Asst. Attorney General Todd A. Sattler,
4403/01/2007 Attorney General Wayne K. Stenehjem, Solicitor General Douglas A. Bahr
4503/01/2007 ARGUED: Patton; Brookhiser; Sattler
4603/01/2007 ORAL ARGUMENT WEBCAST
4704/05/2007 Ltr from Lawrence Bender w/copies of IL Appellant Court Decision
4804/19/2007 Letter dated 4-19-07 from Lawrence Bender w/8 cc of Deleware Supreme Court decision
4904/24/2007 Letter dated 4-24-07 from Lawrence Bender w/8 cc of Massachusetts Supreme Court decision
5005/29/2007 Letter dated 5-29-07 from Lawrence Bender w/8 cc of Arizona Court of Appeals decision
5106/07/2007 DISPOSITION: REVERSED AND REMANDED
5206/07/2007 UNANIMOUS OPINION: Sandstrom, Dale V.
5306/07/2007 Costs on appeal taxed in favor of Appellants
5406/08/2007 Order/Judgment Mailed to Parties
5506/29/2007 MANDATE
5607/05/2007 RECEIPT SIGNED BY DISTRICT COURT CLERK'S OFFICE

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