Opinion ID: 2743635
Heading Depth: 2
Heading Rank: 2

Heading: Washington’s Escrow Statute

Text: In 1998, forty-six states, the District of Columbia, and five United States territories settled a lawsuit against four major cigarette manufacturers, creating a Master Settlement Agreement (MSA). The MSA requires the manufacturers to make substantial annual cash payments to the settling states and territories, in perpetuity, to offset the increased cost to the health care system created by smoking. In return, the manufacturers obtained a release of specified past and future tobacco-related claims against them. Not all cigarette manufacturers joined the MSA, either initially or later. The states feared that these nonparticipating manufacturers (NPMs) would become insolvent against future liability for smoking-related health care costs. Because of this concern, many states adopted escrow statutes. The escrow statutes require NPMs to either join the MSA or pay into a qualified escrow fund. See, e.g., Wash. Rev. Code § 70.157.020(b) (2013). Washington adopted an escrow statute to offset smokingrelated health care costs caused by NPMs. Id. § 70.157.005. For each qualifying unit of tobacco sold, NPMs must make a flat-fee payment into an escrow fund. Id. § 70.157.020(b)(1). The NPMs earn interest on the escrow account balances. Id. § 70.157.020(b)(2). The money in the escrow account may be released only: (1) to pay a judgment or settlement; (2) as a refund to the NPM for overpayment to the account; or (3) 6 KING MOUNTAIN TOBACCO CO. V. MCKENNA as a refund to the NPM after the funds have been in the account for 25 years. Id. King Mountain initially complied with Washington’s escrow statute; but in 2011, it filed this lawsuit to contest its obligation to comply.