Opinion ID: 2601911
Heading Depth: 1
Heading Rank: 5

Heading: Dispute over the original participating manufacturers' April 2006 payment obligations

Text: The present dispute concerns the independent auditor's determination that a settling tobacco company experienced a nationwide market share loss for the 2003 calendar year. In March 2006, the independent auditor concluded that the MSA was a significant contributing factor to the loss and calculated the 2003 NPM adjustment to be approximately $1.2 billion. The tobacco companies thus requested that the independent auditor apply the 2003 NPM adjustment to their 2006 payments to Nevada, asserting that Nevada failed to diligently enforce its qualifying statute in 2003. The independent auditor refused to apply an NPM adjustment to the tobacco companies' 2006 annual payments to Nevada because the independent auditor contended that it was not within the scope of his power under the MSA to make such a legal determination. Thereafter, the tobacco companies withheld millions of dollars from their 2006 settlement payment to Nevada because of the independent auditor's determination that the MSA was a significant contributing factor to the market share loss in 2003, the subsequent calculation of the NPM adjustment, and their belief that Nevada failed to diligently enforce its qualifying statute. In response, on April 20, 2006, the State filed a complaint for an enforcement order or a declaratory order under the MSA. In its cause of action, the State sought a declaration or enforcement order that Nevada had diligently enforced its qualifying statute during the 2003 calendar year, precluding the tobacco companies from applying the independent auditor's NPM adjustment to their 2006 payment. The tobacco companies answered the State's complaint and filed a motion to compel arbitration and to dismiss the State's complaint or stay the litigation. The State opposed the tobacco companies' motion to compel arbitration, asserting among other arguments, that the MSA's arbitration clause did not extend to issues with regard to a state's enforcement of its qualifying statute. That is, the State argued that Nevada did not agree to arbitrate the diligent enforcement dispute. The district court ultimately granted the motion to compel arbitration. In reaching its decision, the district court found that Nevada courts encourage arbitration and liberally construe arbitration clauses in favor of granting arbitration. See Phillips v. Parker, 106 Nev. 415, 417, 794 P.2d 716, 718 (1990). The district court also found that the relevant arbitration clause was quite expansive. Thus, the parties were ordered to pursue arbitration pursuant to section XI(c) of the MSA.