Title: State v. Philip Morris USA
Citation: N/A
Docket Number: 657, 2006
State: Delaware
Issuer: Delaware Supreme Court
Date: April 17, 2007

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
STATE OF DELAWARE, 
 
) 
 
 
 
 
 
 
)  No. 657, 2006 
 
 
Plaintiff Below, 
 
) 
 
 
Appellant,  
 
)  Court Below:  Court of Chancery 
 
 
 
 
 
 
)  of the State of Delaware in 
v. 
 
 
 
 
 
)  and for New Castle County 
 
 
 
 
 
 
) 
PHILIP MORRIS USA, INC., et. al., )  C.A. No. 2088-N 
 
 
 
 
 
 
) 
 
 
Defendant Below,  
) 
 
 
Appellee. 
 
 
) 
 
Submitted:   April 11, 2007 
Decided:  April 17, 2007 
 
Before STEELE, Chief Justice, BERGER, and JACOBS, Justices. 
 
O R D E R 
 
This 17th day of April, 2007, it appears to the Court that: 
 
(1) 
The State of Delaware, plaintiff below, appeals the judgment of the 
Court of Chancery in favor of Appellee Philip Morris USA, Inc. et al. contained in 
its Memorandum Opinion and Order, which held that the Master Settlement 
Agreement between 52 jurisdictions and the Original Participating Manufacturers 
compelled binding arbitration to determine whether each jurisdiction had diligently 
enforced its qualifying statute.  The Court of Chancery determined that the plain 
language of the Agreement’s broad arbitration clause covered the dispute and, 
therefore, the Agreement compelled arbitration.   
 
2
 
(2) 
The State argues that the Agreement does not compel binding 
arbitration on the issue of diligent enforcement for three reasons:  (a) the Court of 
Chancery has the authority and the responsibility to determine whether the State 
diligently enforced the qualifying statutes; (b) the dispute does not involve the 
calculation of market share loss by the independent auditor, and, therefore, is not 
subject to arbitration; and, (c) arbitration would frustrate the intent of the 
Agreement to achieve a timely, inexpensive, local determination of whether the 
State diligently enforced its qualifying tobacco statute, as prescribed by the MSA. 
 
(3) 
After oral arguments and consideration of the record, we hold that the 
vice chancellor correctly found that the Agreement compels arbitration to 
determine the issue of diligent enforcement.  The State and 51 other jurisdictions 
voluntarily entered into an Agreement with plain language compelling binding 
arbitration in matters concerning the operation or application of adjustments based 
on each jurisdiction’s qualifying statute.  We have no reason to believe that 
litigating a dispute limited to diligent enforcement in the Court of Chancery would 
be more timely and efficient than arbitration, even if not clearly anticipated by the 
parties, because any disputes concerning any adjustment the Independent Auditor 
might be persuaded to consider relevant to diligent enforcement are subject to 
arbitration in any event. 
 
 
 
3
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of 
Chancery is AFFIRMED. 
 
 
 
 
 
 
 
BY THE COURT: 
 
 
 
 
 
 
 
/s/ Myron T. Steele 
 
 
 
 
 
 
 
Chief Justice