CONCORD, N.H. -- New Hampshire Attorney General Michael A. Delaney (pictured) has announced that the state has brought suit in Merrimack County Superior Court against two tobacco retailers to enforce RSA 541-C, the Non-Participating Manufacturers (NPM) Act and RSA 541-D, the Directory Act. The retailers allow their customers to roll their own cigarettes.
The retailers, East-West Distributors dba Smoke N Discounts of Epsom, N.H., and Tobacco Depot of Seabrook, N.H., have recently installed cigarette-making machines that are capable of making a carton of cigarettes in approximately [image-nocss] eight minutes. The retailers are selling all the materials needed to make cigarettes and providing access to the machines to their customers.
The state claims that the stores are therefore cigarette manufacturers and must comply with the NPM Act and the Directory Act.
The lawsuits also state that the retailers are selling tobacco intended to be smoked in a pipe for use in the cigarette machines. The lawsuit highlights a recent Merrimack County Superior Court ruling in the case of State v. North of the Border LLC where the court ruled that a retailer who is engaged in the commercial manufacturing of cigarettes using pipe tobacco is a cigarette manufacturer.
A temporary hearing has been set for Aug., 27, 2010, in Merrimack County Superior Court.
At issue is the $50 million a year the state gets from a 1998 settlement with tobacco companies over Medicaid costs incurred by patients suffering from tobacco-related illnesses, said a report by The Union-Leader. The fear is if the state does not enforce the Master Settlement Agreement (MSA) of 1998, that the tobacco companies will stop paying the annual $50 million.
David A. Rienzo, assistant attorney general in the Consumer Protection & Antitrust Bureau, last year filed suit against North of the Border Tobacco, which operated Tobacco Haven in Brookline, said the report. Tobacco Haven sold tobacco to customers who rolled cigarettes on two machines at the store. Customers paid $26 a carton, about $30 less than the going price of a prepackaged carton.
At the time that lawsuit was filed, Rienzo explained that manufacturers in the MSA increased their prices to cover the annual $7 billion payment to all 50 states.
Under state law, cigarette manufacturers have to join the MSA but those who do not must pay into an escrow account which is maintained in the event the states decide to sue them as well. The amount paid is based on the number of cigarettes madeabout two-cents per cigarette or about $4 a carton, according to Rienzo.
The lawsuit does not address the issue of state taxes, which is $1.78 per pack, the report said.
A Merrimack County Superior Court judge found in the state's favor in the suit against North of the Border Tobacco, ruling that the company was engaging in the commercial manufacture of cigarettes using pipe tobacco, the report added.
Rienzo said while the lawsuit was pending, Tobacco Haven owner Joseph Correia started another company, RYO, and moved the cigarette making machines to the new store, next door to Tobacco Haven in the same building that he owns. Correia maintained the court order no longer applied, according to Rienzo.
The state went back to court and amended its original lawsuit to include the new enterprise. The court notified the state Rienzo told the newspaper, that its prior order applies to the new limited-liability corporation as well.
Rienzo said he does not know how many cigarettes have been manufactured, but believes it will be easy to determine since the computerized cigarette machines keep a running tally. The manufacturer of the computerized machines which cost $30,000 each, Rienzo said, are paid in advanced for a specific number of cigarette batches.
The machines, which are connected through a telephone line, will not work if the manufacturer has not been paid, he said.
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