Opinion
02 Civ. 2939 (AKH).
October 6, 2004
OPINION AND ORDER DENYING RECONSIDERATION
Defendants move for reconsideration of that portion of my Opinion and Order of September 14, 2004 that granted a preliminary injunction, enjoining the State of New York from enforcing N.Y. Pub. Health Law § 1399-pp(2)(b)(ii)) (Oct. 15, 2003), the Allocable Share Release Amendment. The motion is denied.
Defendants argue that plaintiffs' claims for relief alleged in their Amended Complaint did not include a prayer for preliminary or permanent injunction with regard to the Allocable Share Release Amendment, for the complaint was filed "18 months prior to the enactment of the Allocable Share Release Amendment," (Def'ts' brief, Sep. 27, 2004, p. 15, n. 6), and that the issue did not arise until the argument of plaintiffs' motion. Both sides, however, argued their contentions fully, including the implications and consequences of the Allocable Share Release Amendment, and both sides developed their points further in supplemental submissions. My decision was based on the entire record, including all that the parties wished to present. Defendants' reconsideration papers do not present any facts or arguments that I have not previously considered. The State's argument, that it had "neither a reason nor an opportunity to explain to the Court the purpose of enacting that amendment" (Def'ts' brief, Sep. 27, 2004, p. 8), is not an accurate statement. The Allocable Share Release Amendment was argued by the plaintiffs, and opposed by the defendants, as an inextricable part of the MSA and Escrow provisions, and I had a full picture on which to rule.
Acronyms used herein are defined in my Opinion and Order of September 14, 2004.
Defendants argue that if the Allocable Share Release Amendment is enjoined, the effectiveness of the Escrow provisions will be "significantly undercut," and the NPMs will "flood New York with cheap cigarettes." (Def'ts' brief, Sep. 27, 2004, pp. 5, 16). But that is conjecture, not proof. There was no proof that the escrow deposits that the State will be retaining will not be adequate to cover anticipated medical expenses, and to deter inappropriate conduct of NPMs. And if proof of such is developed, the State can petition for appropriate relief.
The State points out that there has been little or no experience with the Allocable Share Release Amendment. My order, enjoining the implementation of the Amendment, will allow relevant experience to be gathered. If, in the light of experience, as compared to conjecture, the State finds that the Escrow provisions of the law are "significantly undercut," (Def'ts' brief, Sep. 27, 2004, p. 5), and that escrow funds will not adequately protect the State against potential judgments or settlements in future lawsuits against NPMs, the State may petition me to vacate my injunction. In the meantime, the competitive capabilities of NPMs will not have been adversely affected.
The State argues that I have shifted to it the burden of proof required of plaintiffs in order to obtain a preliminary injunction. I have not. I was persuaded by the affidavits submitted by the NPMs that the Amendment would cause irreparable damage to their competitive capabilities. My consideration of the Allocable Share Release Amendment, its legislative history, and the purposes expressed by the OPMs in their corporate literature persuaded me that the purpose of the Amendment was discriminatory against the NPMs, and unnecessary for the legitimate public health needs of the State. The State's current argument, that "the Allocable Share Release Amendment was not intended and promulgated as a market restriction, and is not anticompetitive," (Def'ts' brief, Sep. 27, 2004, p. 12), presents a pleasant gloss but, in my opinion, does not accurately reflect the purpose animating the Amendment. The provisions of the MSA motivating State action, MSA Art. IX, and the pressures imposed by the OPMs in light of their declining profits, offer a more cogent reason.
Again, in relation to all these arguments, the relief I granted to the plaintiffs is preliminary. Nothing prevents defendants from gathering experiential statistical information, and seeking appropriate relief from the Court.
Plaintiffs, in opposing defendants' motion for reconsideration, represent that a large-sized NPM recently became an SPM, agreeing to surrender a certain portion of accumulated escrow payments to the States in exchange for SPM status and, presumably, to end its exposure to lawsuits by the States. Plaintiffs seek discovery of the negotiations. Since, at a Case Management Conference held October 4, 2004, I granted wide-ranging discovery to both sides in accordance with their requests, and since I have denied defendants' motion for reconsideration on the basis of the existing record and without embarking on a review of "new" facts, plaintiffs' arguments are moot.
The Attorneys-General of 41 States, the District of Columbia, and two Commonwealths and Territories, led by the Attorney-General of Vermont, seek status as Amici Curiae on the side of defendants. I grant them the status they request, but I find that their arguments are insufficient to persuade me to change my ruling that the Allocable Share Release Amendment should not now be enforced. The Amici argue that Kentucky has been able to retain only 11.2% of escrow deposits; Oklahoma, only 19%; Georgia, only 35.56%; and West Virginia, only 35.5%; that the millions of dollars thereby retained by the States are nevertheless insufficient for their "tobacco prevention and cessation programs" (Brief, p. 6); that NPMs thereby have been able to undercut Participating Manufacturers in price and gain unfair competitive advantage; and that the States enacted the Amendment "after careful consideration and debate in order to protect and fulfill the essential goals of the MSA and the related escrow and complementary enforcement statutes." (Brief, p. 11) However, assertions such as these are propositions to be tested by examination and cross-examination, in the light of statistical accumulations reviewed by experts. My ruling will enable necessary experiences to be gathered and proofs to be developed. Nothing prevents plaintiffs and defendants to move for appropriate relief during the course of these proceedings if, in the light of actual market conditions, either side believes that it is threatened with irreparable injury.
For all the reasons stated, I deny defendants' motion for reconsideration of my Opinion and Order of September 14, 2004.
SO ORDERED.