treasury bonds a asset which is universally recognized as being one of the most stable and secure in the country since world war two when americans viewed it as their patriotic obligation to invest in this country the us government obligations have stood as the investment that have held its value through domestic and global economic conditions in fact georgia has expressly declared that quote obligations of the united states government are not considered to have credit risk and do not require the disclosure of credit quality s and m brand's right to have it as crow account invested in thirty year treasury bonds is a material financial term of a contract that preexisted the investment restrictions so maybe you could explain the materiality a little better than appears in the briefs because as we all know the restriction that the change that was made limited as an m brands to twenty year bonds and also grandfathered in the thirty year bonds so and there's no quantification about what the damages to s and m brands so when i read the briefs i'm thinking to myself well as an m brand saying we made a calculated decision to come into georgia anticipating that this would be our liability to the escrow fund versus our revenues and now something's changed that we have no idea how material that impact is from what's been presented in the materiality of that impact is something to be resolved through discovery through unit at the pleading stage we believe it would be inappropriate to dismiss this case or they just repor because it dismisses case when there are clear allegations that this impacts the profitability of the company when there are allegations that the only reason the state of georgia's doing this is not here at least i think there's only one and that's a level playing field the state wants to keep a level playing field between the p m s and your client so you know i mean that's the objective is it not that is what the participating manufacturers gave up their first amendment rights and they were you know we understand that that they were far limited by the settlement more so than you were correct and we are being punished for exercising our first even and judge show flat because it's the master settlement agreement is skewed to benefit participating manufacturers the implementation of these investment restrictions or the right to engage in commercial speech which we like is the commercial speech that you've been precluded from exercising well for example we have engaged in what would be considered billboards placements of ads on vehicles in the past we have engaged in sponsorship of our great from doing that it's not that we are being kept from doing this it is that the state of georgia has  strong incentive to penalize as what you're saying or as a day it is that you're operating costs have gone up so your speech is gone down as that the buyout the size of it our operating costs have gone up for no good been implemented the idea was to keep a level playing field no your honor i would it was not the idea we the what the master settlement agreement does is these companies had engaged in numerous misconduct as the states allege things like advertising two years than that but after that savile been a great man is done and they're permitted to operate wasn't the idea they keep a level playing field as a constant doing but those are by and my missing the point the only way to keep that level playing field is to take away our right to engage in criminal speech or to penalize us too to impose additional on us because our commercial speech allows us to to cut into their market share and that creates an incentive to ratchet up the cost on us and that is exactly what that embed design your europe on your advertising funds it makes it neutralizes the effect that you can still get it you can do the same things you were doing before they made the change but it's an economic collapse that what you're arguing now we're saying that every time we advertise the state beats us with a stick that they ratchet up the cost of doing business because they cannot afford to have but at the end it they have thought was they keep you from advertising like you were doing before or is it to coerce you into becoming something other than an n p m in relationship to the master said these slowly the state would like in p m s to go right obviously they have more money for the state yes there are which which when you go through i mean that with the old idea of going way way back i mean that that's the real issue here is when you go to the contract clause cases the financial interest of the solvent the sovereign is not a legitimate public purpose so we have had these contracts in place we have had the right to invest the state wants to penalize us so we don't eat into their market share so that we don't use advertising to gain into their market share and they come up with a scheme to make it more costly for us and that scheme is to say the strongest investment in the world you can no longer hold even though the state of georgia has sad thirty year u s treasury bonds pose no credit risk that they are a stable and sound investment and i think that's also only part of their justification rather justification was that they're not as liquid as say twenty year bonds or other investments well there they are but these are assets that are bought and sold at the you know  the price there is no they but that's that is part of their other rationale is it not well that's not a legitimate rationale the same applies to the other assets which are or money market accounts and other investment vehicles so it's no different than anything else in our portfolio other than cash and of course the state if they're allowed to take away our ability to invest in this they'll say well you can hold his whatever it is to do business it is three point three cents per cigarette which is an excess of what i saw that in the complaint but what's that add up to your honor the areas that is proprietary information and something that the the point it's not that we don't have money to advertise it said every time we try to advertise and the fact that we have gained market share because advertising causes them to ratchet up what they just said you know they only ratcheted minimize your honor the allegations from the allegation yeah the allegations of the complaint make very clear that this has impacted the profitability of the company that we have been penalize as a right you'll see that it's a trade secret to tell us how much it's now here are made please the court for its peers here from the attorney general's office seated with me at council's table is robin cohen senior assistant attorney general the district court was correct to dismiss as an ems complaint tobacco companies like  been challenging escrow requirements basically sense the extra statutes were enacted about twenty years ago so i want to contribute a little confusion to this all right so i'm a little i and i am a little confused there's the master settlement agreement it's a national agreement it had a model escrow agreement and novel as great statute attached to it and there are provisions in there for changing the model escrow statute and agreement i'm really confused and don't understand how ga standing alone has the authority to make a change to the statute or regulations governing the escrows and and why the provisions in the master settlement agreement that address whether or not a qualifying statute is in fact a qualifying statute don't kick in here to have a binding determination by what's called the firm in the masters settlement agreement determined whether or not the change that george is proposing to make somehow makes this not a qualifying statute do you have any idea what i'm talking about i think i do your honor so the way that the master settlement agreement works is the states are required wash and say required they have an incentive to enact an escrow statute a qualifying statute but and there is a model in the n on these put part that's correct you're under not signatories that's correct and the state passes the qualifying escrow statute and as long as that in and forces that qualifying statute th n what's called the n pm adjustment well with which is where the independent auditor decides whether the participating manufacturers under the m s a have lost market share as a result of the provisions of the agreement if if they decide that there can be an adjustment to the end to the p m s payments but that adjustment doesn't apply to any state that is diligently enforce the qualifying statute but as to your question about whether georgia has the authority to enact an additional restrictions or change the statute the m s a doesn't restrict statue of so as to lessen the muck cut down on the model they could have an argument but we could have an argument at that point about what they haven't yet at the p m s could have an argument at that point about whether it's a qualifying statute that n s a sets forth a model with regard to these there's no agreement there's nothing to prevent georgia from exercising the police power that's absolutely correct your own absolute correct but it's one national escrow agreement so i'm having trouble understanding how georgia makes a change to the each state has a separate escrow statute that i understand but there is one escrow agreement and then there are some but counts for each state that's what i understand so how does george make a change to the escrow agreement when all there is is a national agreement with subcouncil and what the national agreement is the n s a and well the escrow agreement is it covers every so in the case of s and m brands maybe i don't understand something correctly but the georgia and other states some but not all have amended their agreements in the past so can because what is the what is the they can ok i mean i'm happy i'd love to be able to take your word for it they can because what is the authority for what it's there it's their contract i mean they as long as they're complying with the investment restrictions that the state has imposed and the other restrictions on the management of the escrow fund you know that as long as they're regarding and complying with any specific states minimum requirements then i don't i would see any problem with them changing the escrow agreement with regard to their deposits in that state keeping a level playing field so to ensure the continued flow of money from the pm well the purpose articulated by the georgia general assembly in the statute was to ensure that tobacco companies remain financial r purpose is now so the purpose is to ensure that tobacco companies remain financially responsible for the health care costs that their product creates and georgia has done that by entering a settlement with some companies and it requires other companies to deposit money into escrow so that if they are eventually found liable for the harm that we know their product is going to cause that there will be money available to satisfy a judgment and that they won't be able to have the for the judgment brought the cases brought by smokers that case will be brought by the state  that the concern is that we know that cigarettes are very harmful to citizens of the state and we know that they create great costs and we know that there is a good chance that the company selling a deadly product that makes a lot of cost what i want you to tell me the damages action of the state would bring that would require this money as a condition of doing but does well if the action if the state brought an action that alleged that ad as a result of deceptive many years and in the intervening period people incurred significant health damages as a result of relying on a deceptive advertisement would that what the state can bring a claim for damages in order to assist in the payment of the health care treatment for the people who had been deceived yes your honor i think that would be one possible action and i think that part of the problem is is twofold that there is a lag between the time when the product is sold and when the damages are incurred and so it is difficult to articulate ahead of time exactly what sort of damages are going to exist or what the cause of action is i'll buy that for hospitals and all i understand your point in that it's unique in that other industries are not i'm not saying you can't do it i'm just saying that that's you they understand your honor i think it is unique with regard to this industry with regard to other industries but i would note that fifty two jurisdictions have a requirement like this forty six states or you're going to have fertilizer interface and other cottage industry coming into the state to manufacture something that might get on there and cause all kinds of trouble and cause them to do the same thing  manufacturers was that they would not be put at a competitive disadvantage to the nonparticipating manufacturers in my misunderstanding nap or i mean it seemed to me like that was part of the m s a and i don't know if you're misunderstanding it but i would i would put a little more detail in there of what the n s a says so i let me before you do that i understand that there is another aspect to it from what you've said but is it not also the case that the m s a in order to in order to sort of induce the participating manufacturers to participate as a condition of that agreed that they would not be that states would create these pro funds and other kinds of regulations to ensure that they were not at any competitive disadvantage to nonparticipating manufacturers i wouldn't disagree with that but i would like to explain to just to be absolutely clear about why wouldn't i  just to make a qualification the way that it worked it's not a general agreement to protect the p m s from losing market share there is a specific provision in the n s a called the n p n adjustment that says that an independent auditor will determine if the p had lost market share as a result of the provisions of the n s a now if the independent auditor determines that then we ask whether georgia has enacted a qualifying and extra statute and whether it's enforcing that escrow statute and if it has then it doesn't matter how much market share the p m s have lost it and it doesn't matter what else georgia has done to the bill then in other words we can write an opinion which says level playing field has nothing whatsoever to do with the scheme nothing at all to do with it this is an exercise in police power or you have an industry coming to the state that may cause injury not only to people who would have personal cause of action and that's their problem but cause injury to the state and terms of health care or whatever you want to say and so that's why the money was put up yet and it's changed from time to time the the state in its wisdom the legislat if i could make a frown i do understand it that's the host game has nothing to do with level playing fields well your honor i even though i would characterize it as the master settlement agreement oh forget master set up well it now says that this is just exercising the police power and they make an estimate that must have a crystal ball how much damage your product is going to cost the state funding of research to mislead the public for decades somehow applies to this fifth generation of farmers who went into producing tobacco shortly before the master settlement agreement and have not engaged in any of the alleged wrongdoing that prompted the law suits that initially your argument is that the state doesn't have a basis in fact for the amount of money that they went your client and are or didn't but as that is that it basically your honor i would have had your speculation it is speculation but more importantly when you look at the allegations of the complaint when you look at the way everything it's been structured this is simply a range meant for the financial benefit of the stay to preserve the status quo and that as courts have repeatedly stated i would point out the second circuit's decision in buffalo's teacher foundation a legitimate public purpose may not be simply the financial benefit of the solvent that is what we are talking about here this has nothing to do with the police power this more health care problems than now and the problem here is the money that we're being asked to pay into escrow and the reason that these investment restrictions are making us unprofitable is because they simply want to shore up the market share of the participating manufacturers and that is not a legitimate exercise of police power  honor i would point out very briefly with regard to our equal protection claim that because this involves a fundamental right it should be to first show that you are similarly served in the same position and be participating manufacturers and it seems to me like you're not because they're they're paying into the settlement agreement they're not getting any money state of georgia has no legitimate police power that they are exercising in this case for the reasons set out in our brief we would ask that the decision of the district court be reversed thank you thank you