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Apr 10, 5:53 PM EDT

Pennsylvania wins a round in tobacco settlement case



HARRISBURG, Pa. (AP) -- Pennsylvania won another round Friday in its long-running legal fight over $126 million that the major tobacco companies are trying to recover under the national tobacco settlement.

A five-judge Commonwealth Court panel unanimously upheld a Philadelphia judge's ruling that overturned an arbitration panel's 2013 decision against the state.

"The court's decision ensures Pennsylvania receives the funding it needs to forward the important goals of smoking cessation and to invest in medical research and health programs," said state Attorney General Kathleen Kane.

The 1998 tobacco settlement requires the companies to make annual payments to the states in exchange for immunity from state lawsuits.

Pennsylvania has earmarked its share of the money to help finance health care and research. This year's payment is expected to total about $349 million, said Senior Deputy Attorney General Tad Berger.

At issue in the court case is the state's 2003 payment and particularly the adjustments that the settlement agreement allows to compensate the companies for loss of market share to competitors that did not participate in the settlement.

The court said the arbitrators did not enforce the master settlement agreement and inflated the adjustment. It said the adjustment should be $126 million less than the arbitrators calculated.

"Although the panel had jurisdiction over the dispute, it was not authorized to disregard (settlement agreement) language or fashion a new remedy based on its own notions of economic justice," Judge Robert Simpson wrote in the opinion.

Lawyers for the Pennsylvania Cancer Alliance, a coalition of several major Pennsylvania hospitals and cancer centers that participated in the case, said the settlement payments are critical to the fight against cancer.

"Millions of dollars flow into the commonwealth as a result of the settlement," said Philadelphia lawyer David Pittinsky.

Peter John Biersteker, a Washington-based attorney for some of the tobacco companies, said his clients have not decided whether to appeal to the Pennsylvania Supreme Court.

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