2011-05-24 MSC Order Reversing Stay of MT Litigation

7/28/2019 2011-05-24 MSC Order Reversing Stay of MT Litigation

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IN THE SUPREME COURT OF THE STATE OF MONTANANo. OP 11-0150 T T - '

STATE OF MONTAN A,I' 2 Z011

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Petitioner,LEPK:E COURTV. MalMONTANA FIRST JUDICIAL DISTRICT COURT,LEWIS AND CLARK COUNTY, THE HONORABLEJEFFREY M. SHERLOCK, DISTRICT JUDGE ,Respondent.

The State of Montana (State) has filed a petition asking us to exercise supervisorycontrol over the First Judicial District Court in relation to that court's Cause N o. BDV -1997-306, now pending in the District Court for Lewis and Clark County. The case relates to a1998 settlement, known as the Master Settlement Agreement (M SA), between a num ber oftobacco manufacturers (the participating manufacturers, or "PMs") and 52 states andterritories, including M ontana. The M SA requires the PMs to make ann ual payments to thestates and territories according to a formula that is contingent in part upon the states'"diligent enforcemen t" of a "qualifying statute" under the agreem ent.

The State filed a declaratory judgment action in 2006 that sought to adjudicate theissue of whether the State diligently has enforced its qualifying statute. The court'sresolution of this issue likely would bear upon whether the PMs should be entitled to anadjustment in their payments to Mon tana pursuant to the MSA . The District Court compelledarbitration of the diligent enforcement issue. We reversed. We determ ined that the State ofMontana had not agreed to arbitrate the question of whether it diligently had enforced itsqualifying statute. State ex rel. Bullock v. Philip Mo rris, Inc., 2009 MT 261, 352 M ont. 30,217 P.3d 475.

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The District Court granted the PMs' motion on remand to stay the proceedings,howev er, pending the outcome of the nationwide arbitration. The State now asks us to directthe District Court to vacate its January 28, 2011, order that stays the Montana judicialproceedings until after the com pletion of the nationwide arbitration of other states' diligentenforcement cases. The defendants in Lewis and Clark County Cause N o. BDV -1997-306have filed a response objecting to the petition for a w rit.

Supervisory control constitutes an extraordinary remedy that sometimes is justifiedwhen urgency or emergency factors exist that make the normal app eal process inadequate.The case generally must involve purely legal questions. Finally, in a civil case such as theone at issue here, the petitioners must demon strate that the other court is proceeding under amistake of law and causing a gross injustice or that constitutional issues of state-wideimportance are involved. M. R. App . P. 14(3); Lamb v. Fourth Jud. Dist. Ct., 2010 MT 141, 10, 356 Mont. 534, 234 P.3d 893.

We have exercised supervisory control when a district court enters a stay order ofindeterminate duration. Lamb, 11. Stay orders do not constitute appealable orders. Id.; M.R. App. P. 6(3). The stay we reversed in Lamb effectively could hav e lasted for a lifetime.Id. The District Court here ordered the stay pending the resolution of the nationwidearbitration. The court add ed that it would entertain a motion to lift the stay if the nationwidearbitration did not proceed w ithin a reasonable time frame. The court's stay carries similarrisks caused by delay and the susceptibility to dilatory tactics as the lifetime stay in Lamb.

We note that the present litigation began over 13 years ago. The State filed thisdeclaratory judgment action in 2006. We already h ave heard an app eal in Philip Morris an dissued an opinion on August 5, 2009. The PMs appealed our decision to the United StatesSupreme Court, which denied the PMs' petition on June 1, 2010. R. I Reynolds TobaccoCo. v. Mo nt. ex rel. Bullock, 130 S. Ct. 3354 (2010).

The PMs opposed the State's motion to set a scheduling conference on remand inDistrict Court. The PMs moved to stay litigation pending arbitration on June 18, 2010.

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Almost two years have passed since we decided that "the State of M ontana did not agree toarbitrate the question of w hether it diligently enforced a Qualifying Statute." Philip Morris, 27. The State's efforts to prosecute its rights could continue to be delayed indefinitelyunder the stay. The stay essentially nullifies our decision in Philip Morris by forcing theState to postpone its judicial action un til after the com pletion of the nationw ide arbitration.

We reject the PMs' argument that no urgency or emergency exists, however, becausethe disputed funds now held in escrow cannot be released to the states before comp letion ofthe nationwide arbitration. The court's stay has halted all proceedings. The State may notengage in discovery. The State may not file any new motions or pleadings. The DistrictCourt's stay, in effect, has ended an y other steps toward resolution. This outcome has put theState at a significant disadvantage in pursuing its rights. Lamb, 11 (citing State ex rel.Burlington N. R.R. v. Eighth Jud. Dist. Ct., 239 Mont. 207, 211-12, 779 P.2d 885, 888-89(1989)). The State must be able to conduct discovery, preserve its claims, and pursue itsaction pursuant to our ruling in Philip Morris. Sufficient urgency exists to justify theexercise of supervisory control.

As to the second supervisory control factor, the issue of whether the court should granta stay presents a purely legal question. The decision to stay these proceedings did notinvolve factual disputes that would preclude su pervisory control. The many factual disputesthat remain to be resolved b y the nationwide a rbitration do not involve the court's decision tostay the State's prosecution of its declaratory judgm ent action.

As to the third supervisory control factor, the State asserts that, by issuing a stay in thematter until after the completion of other states' diligent enforcement cases, the DistrictCourt is acting inconsistently with this Co urt's decision in Philip Morris and depriving theState of the benefits of that decision during the stay, and possibly permanen tly. We generallyreview district court orders related to trial adm inistration matters, such as a m otion to stay,for an abuse of discretion. Lamb, 14. We conduct plenary review to the extent that thedistrict court bases its discretionary ruling on a conclusion o f law. Id. A court determines

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whether to grant a stay by balancing com peting interests and considering whether the pu blicwelfare or convenience w ill be benefitted by a stay. Hen ry v. Seventeenth Jud. Dist. Ct., 198Mon t. 8, 13, 645 P.2d 1350, 1353 (1982).

The State sought a d eclaratory ruling "(1) whether the State 'diligently enforced' itsQualifying Statute and (2) whether certain 2003 settlement agreements waived any claim bythe 'OPM' Defendants based on enforcement actions Montana might have taken in 2003regarding cigarette sales that had occurred in 2002." Pl.'s Resp. Defs.' Mot. Stay Procs., 5(July 2, 2010). The District Court acknowledged that we had reversed the compelledarbitration on the first issue in Philip Morris. The D istrict Court expressed its uncertaintyregarding whether the State was entitled to proceed on the second issue. The District Courtopted to resolve this uncertainty by granting the stay order rather than determining whetherthe State could proceed on the second issue raised by the State. The Court explained (1) thatthe State would not be entitled to access the escrow money even if it prevailed on the diligentenforcement issue, (2) that the court could gain some guidance from the nationwidearbitration, and (3) that the court would con serve resources for the parties and the court bystaying the proceedings. We disagree.

Regardless of whether the State can collect on its share of the money held in escrow ,the State should be allowed to conduct discovery and litigate the issues consistent with PhilipMorris. We concluded that "the question of whether Montana diligently enforced itsQualifying Statute does not depend, in any way, on what the other Settling States have orhave not done." Philip Morris, 25. We disagree that the nationwide arbitration willprovide the court with valuable guidance. As we stated in Philip Morris, "[i]f Montanadiligently enforced a Qualifying Statute, the NPM Adjustment does not apply to it; whetherthe other Settling States did the same is immaterial." Id . We already have determined thatthe State did not agree to arbitrate the question of wh ether it diligently enforced a qualifyingstatute. Id. at 27. We agree that the District Court's stay order operates under a mistake oflaw and causes a gross injustice to the State.


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THEREFORE, IT IS ORDERED that the petition for writ of supervisory control isGRANTED.

IT IS FURTHER ORDERED that the District Court's January 28, 2011, Order OnMotion to Stay Proceedings in cause number DV-1997-306 granting a motion to stayproceedings is REVERSED .

IT IS FURTHE R OR DERE D that this case is REMA NDE D to the District Court forfurther proceedings consistent with this Order.

The Clerk is directed to provide copies of this Order to all counsel of record and to theHonorable Jeffrey M. Sherlock, Presiding Judge.

DATED this qday of May, 2011.

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Justice James C. Nelson, concurring.I concur in and have signed the Court's Order for the reasons stated therein.

How ever, the stay imposed by the D istrict Court was premised on certain misconceptionsinvolving the nationwide arbitration and this Court's decision in State ex rel. Bullock v.Philip Morris, Inc., 2009 MT 261, 352 Mont. 30, 217 P.3d 475. These misconceptionsdemonstrate, in the first instance, that a stay of proceedings never should have been aconsideration. I address that aspect of the case below.

BackgroundFor purposes of this discussion, four original Participating Manufacturers and a

number of subsequent Participating Manufacturers (collectively, PMs) entered into the1998 Master Settlement Agreement (MSA) with 46 states, the District of Columbia, andfive territories (collectively, Settling States), including Montana. In exchange for theSettling States' release of all claims, the PMs agreed to make annual payments to theSettling States for the implementation of tobacco-related public health measures. PhilipMorris, J 2-3.

The PMs do not make payments directly to individual Settling States, however.Rather, each PM makes a single, nationwide payment into an escrow account, and theamounts are then allocated among the Settling States. Each PM's individual contributionto the account is based on its market share. Likewise, each Settling State receives anallocable share of the sum of all payments made by the PMs in a given year. Montana'sallocable share is 0.4247591 percent. Philip Morris, 3.

Furthermore, in calculating the PMs' annual payments, the Independent Auditor(PricewaterhouseCoopers) takes the base amount owed by the PMs for the calendar yearand then applies a series of adjustments, reductions, and offsets. One of the adjustmentsis the Non-Participating Manu facturer Adjustm ent (NPM A djustment), which reduces thePMs' annual payment obligations if it is determined that (1) the PMs collectively lostmore than two percent of their pre-MSA aggregate market share to non-participatingmanufacturers during the year in question and (2) the disadvantages experienced as aresult of the provisions of the MSA were a significant factor contributing to that loss.

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Philip Morris, 4. In 2003, the PMs lost the requisite market share to non-participatingmanufacturers, and the disadvantages imposed by the MSA were a significant factorcontributing to that loss. Thus, the PMs asked the Independent Auditor to offset their2006 payments by the amount of the 2003 NPM Adjustment. Philip Morris, 6.

The NPM Adjustment typically applies to the allocated payment received by eachSettling State. A Settling State can avoid the NPM Adjustment, however, if it diligentlyenforced a Qualifying Statute during the year in question. A "Qualifying Statute" is astatute, regulation, law, or rule that "effectively and fully neutralizes the costdisadvantages that the Participating M anufacturers experience vis--vis Non-ParticipatingManufacturers within such Settling State as a result of the provisions of [the MSA]."Philip Morris, 5. Importantly, if a Settling State dem onstrates diligent enforcemen t of aQualifying Statute, "then the N PM Adjustm ent is inapplicable to that Settling State and isreallocated among the other Settling States on a pro rata basis." Philip Morris, 5(emphasis added). Consequently, as the PMs stated in their brief on appeal in PhilipMorris, "the diligent enforcement determination as to any one State has a direct impacton the annu al payments received by every other State."

Wh en the PMs asked the Indep endent Aud itor to offset their 2006 payments by the2003 NPM Adjustment, the Settling States responded that they had each diligentlyenforced a Qualifying Statute that year. The Independent Auditor refused to decide thisissue, however, noting that it was "not charged with the responsibility under the MSA ofmaking a determination regarding this issue" and, for that matter, was "not qualified tomake the legal determination as to whether any particular Settling State has 'diligentlyenforced' its Qualifying Statute." Philip Morris, 7.

Theoretically, the "diligent enforcement" question could be resolved by havingeach Settling State go to its own state court and obtain a d eclaratory judgm ent stating thatit did (or did not) diligently enforce a Qualifying Statute during the year in question. TheSettling State could then submit this judgment to the Independent Auditor who, afterreceiving all such judgments from all Settling States, could calculate how much moneyeach state is entitled to based on which states are exempt from the NPM Adjustment.

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This, in fact, was the procedure which most of the Settling States attempted to pursue inrelation to the 2003 NPM Adjustm ent.

Montana, in particular, commenced the instant action on May 8, 2006, alleging:that it had enacted a Qualifying Statute ( 16-11-401 to -404, MCA) in 1999; that theseprovisions were continuously in full force and effect during 2003; and that the State haddiligently enforced them during that year. The State asked the District Court to enter adeclaratory order to this effect. Alternatively, the State asked the District Court todetermine that the PMs "have released, waived, or are estopped to assert any claim thatMontana did not diligently enforce the Model Statute with regard to the 2003 escrowpayment." Philip Morris, 9.

In response, the PMs argued that "the diligent enforcement determination as to anyone State affects every other State pursuant to [the MSA's] 'reallocation' provision,which makes it particularly critical that the States' diligent enforcement defense beresolved in a single, nationwide proceeding."' The PMs further argued that litigatingdiligent enforcement in state courts across the country "ignores the efficiencies ofapplying one uniform set of standards in a nationwide proceeding in which all parties canparticipate and are subject to final and binding determinations."

Many of the state courts, to which these policy arguments were made, agreed withthem. This Court, however, did not. We observed that "our decision must be based onMontana law and the plain language of the arbitration provision, not on the PMs' policyarguments. If the PMs intended for the 'diligent enforcement' question to be arbitratedpursuant to 'one clearly articulated set of rules' and with all Settling States present in onenationwide forum, the PMs certainly were capable of negotiating for this requirement inthe MSA. As it is, no such language and no such rules appear in the MSA." PhilipMorris, 25.

1 If this approach were so "critical" to protect each Settling State's interests, as the PMsclaim, then one would expect all of the Settling States to be in favor of resolving the "diligentenforcement" question together in a single forum, rather than having to run around to 52 statecourts objecting to each other's claims of diligent enforcement. And yet, that is not the case. Itis the PMs wh o want to force all of the Settling States into one forum.8


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Ultimately, this Court held that (1) Montana never agreed to submit the questionof its "diligent enforcement" of 16-11-401 to -404, MCA, to nationwide arbitrationand (2) resolution of whether Montana diligently enforced its statutes does not depend onthe outcome of the nationwide arbitration. Philip Morris, J 25, 27. These holdings setour decision apart from the decisions of other Settling State courts on this issue. Thosecourts ruled that their respective states had agreed to submit the "diligent enforcement"question to nationwide arbitration, while this Court ruled that Montana had not agreed todo so and that Montana's diligent enforcement is to be decided in state court.

As a result, following our decision, the PMs filed a Petition for Rehearing inwhich they asserted that "[c]ourts in 47 States . . . have un animou sly reached the oppositeconclusion from this Court and compelled arbitration of the entire 2003 NPM Adjustm entdispute, including individual States' diligent enforcement" (emphasis added). The PMsthen proceeded to rehash their argument that "the only construction that gives effect tothe MSA's plain language is one that requires arbitration of diligent enforcement." Whilewe again rejected this argument, se e Or. at 2-3, DA 07-0299 (Sept. 9, 2009), 352 Mont. at45a-45b, 217 P.3d at 486-87, the key point here is that the "diligent enforcement" effortsof the other Settling States is going to be decided in the nationwide arbitration, whileMontana's diligent enforcement is supposed to be decided simultaneously in MontanaDistrict Court, as contemplated by our Philip Morris decision.

The PMs' filed a Petition for Writ of Certiorari, which the Supreme Court denied.RJ. Reynolds Tobacco Co. v. Montana ex rel. Bullock, 130 S. Ct. 3354 (June 1, 2010).Accordingly, upon return to the District Court, this case should have proceeded forthwithinto a determination whether the State diligently enforced the aforementioned statutes.The PMs, however, sought to delay these proceedings. More to the point, they essentiallysought to circumvent our Philip Morris decision. To that end, they objected to the State'srequest for a scheduling conference and instead moved the District Court to stay theproceedings while they fully litigated their claims against the other Settling States in thenationwide arbitration. In considering this motion, the District Court acknowledged that"[c]learly, under the decision rendered by the su preme co urt, the State could proceed with


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the issue of diligent enforcement." Nevertheless, the court concluded "that a stay wouldbe equitable and fair to all parties." I disagree and conclude that granting the stay underthe circumstances here was erroneous as a m atter of law.

Limited DiscretionAt the outset, while trial administration is ordinarily a matter within the court's

discretion, this is not a run-of-the-mill "stay" case. By the time the District Courtimposed the stay, this case had already been to this Court on appeal, and law of the casehad been established with our decision. Thus, while this Court ordinarily reviews stayorders for abuse of discretion, Lamb v. Fourth Jud. Dist. Ct., 2010 MT 141, 14, 356Mont. 534, 234 P.3d 893, the District Court's discretion here was exercised followingremand and, therefore, had to be exercised within the boun ds of our decision.

As noted, this Court held in Philip Morris that Montana did not agree to arbitratethe question of its diligent enforcement of a Qualifying Statute, and resolution of thisquestion does not depend on the outcome of the nationwide arbitration. 2 Thus, while adistrict court should otherwise be afforded broad discretion in managing the proceedingsbefore it, the District Court here was not at liberty to impose a stay which con travenes thelaw of the case established by our Philip Morris decision and which hands the PMs,through the back d oor, the victory they were unable to obtain in the ap peal.

"Damage to the State"In granting the stay, the District Court observed that even if Montana wins the

"diligent enforcement" issue, the State will not be able to receive any of the proceeds inescrow until the nationwide arbitration is completed. Thus, the court reasoned that "thereis no dam age shown to the State if this matter is stayed" and, further, that "the State gains[no] advantage by proceeding to litigate the diligent enforcement issue" now. Theseobservations are incorrect.

As explained above, the final calculation of funds to which each Settling State isentitled depends on how man y Settling States are exempt from the NPM A djustment; and

2 Indeed, as I explain below, a decision as to Montana's diligent enforcement is actually aprerequisite to concluding the nationwide arbitration on the 2003 NPM Adjustment.10


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that, in turn, depends on determinations, as to each and every Settling State, whether aQualifying Statute was diligently enforced in that statesince diligent enforcement of aQualifying Statute in one state results in reallocation of the NPM Adjustment among theother Settling States on a pro rata basis. Philip Morris, 5. Necessarily, then, the finalcalculation of each Settling State's share of the PMs' 2006 annual payments cannot bemade until it has been determined whether Montana diligently enforced its QualifyingStatute in 2003. The District Court, however, stayed the proceedings on this question"pending the resolution of the nationwide arbitration on the NPM adjustment." Yet, asjust noted, resolution of the NPM Adjustm ent cannot occur until a determination has beenmade whether Montana diligently enforced its Qualifying Statute. The court's stay,therefore, will theoretically last in perpetuity.Moreover, the stay is premised on the occurrence of an implausible series ofevents: first, the arbitration panel (three former Article III federal judges) will decide thediligent enforcement efforts of the other Settling States; next, the nationw ide proceedingswill be stayed so that Montana, at last, can litigate its diligent enforcement in state court;and finally, after that determination is made and the inevitable appeal to this Court isdecided, the nationwide proceedings will resume and the final determination as to theapplicability of the 2003 NPM Adjustment will be made. It is highly doubtful, however,that the arbitration panel and the other the Settling States will delay disbursement of themoneys just so that "diligent enforcement" litigation can proceed in Montana. Rather, itis far more likely that Montana's diligent enforcement will effectively be decided in thenationwide arbitration and in M ontana's absence, no less.

Indeed, the PMs state in their brief in the present proceedings that each SettlingState has "the right to [contest Montana's diligence]" in the nationwide arbitration. And,according to the PMs' brief on appeal in Philip Morris, the Settling States have anincentive to do so because "the granting of an exemption by one settling state willautomatically lead to the reallocation of its allocated portion of the NPM Adjustment toall other nonexempt settling states, [and thus] each governmental signatory has its ownself-interest at stake in the outcome of this issue, which is necessarily in conflict with

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every other state." See New York v. Philip Morris Inc., 813 N.Y.S.2d 71, 76 (App. Div.1St Dept. 2006). Consequently, in their Petition for Rehearing, the PMs pointed out thatwhile the parties are bound by this Court's ruling in Philip Morris, "it cannot bind the 47other States that are MSA parties. Any one of those States would remain free tochallenge Montana's diligent enforcement in the nationwide arbitration. Should thatoccur, it will result in a decision the Auditor is bound to follow" (emphasis added). Bythe PMs' own account, therefore, the question of Montana's diligent enforcement couldbe raised and decided, to Montana's detriment, in the nationwide arbitrationin whichMontana is not participating. Meanwhile, as a result of the stay, Montana has been left tosit idly by and await the arbitration pan el's decision.

Montana is entitled under our Philip Morris decision to have its 2003 diligentenforcement promptly adjudicated in Montana state court and then to submit the DistrictCourt's judgment to the Independent Auditor or the arbitrators so that they may use it tocalculate the NPM Adjustment in light of which states are exempt and which states arenot. But instead, under the District Court's stay order, once the "diligent enforcement"efforts of the other Settling States (and possibly Montana) are decided by the arbitrationpanel, the PMs will return to Montana and ask the District Court to lift the stay and either(1) accept whatever decision has been reached in the nationwide arbitration regardingMontana's diligent enforcement or (2) defer to whatever approach was used in thoseproceedings. Effectively, the District Court proceedings will serve no purpose other thanto rubber-stamp what the arbitration panel has already determined. In fact, the court hasindicated it intends to defer to the panel's approach vis--vis the other Settling States'diligent enforcement, and the PMs have indicated they intend to import the panel's"diligent enforcement" analysis into Montana. This undermines the central point of ourPhilip Morris decision, which is that Montana is entitled to obtain a decision on its"diligent enforcemen t" in a Montana court based on Montana law.

Even if the issue is not effectively decided by the federal arbitrators in Montana'sabsence, Montana's ability to litigate fairly its diligent enforcement is being seriouslyundermined by the stay. The Attorney General needs to present witnesses and evidence

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to show that Montana diligently enforced in 2003 a statute, regulation, law, or rule that"effectively and fully neutralizes the cost disadvantages that the ParticipatingMan ufacturers experience vis--vis Non-Participating M anufacturers within such SettlingState as a result of the provisions of [the MSA]." Philip Morris, 5. The problem withany litigation is that the further away in time one gets from the act, the harder it is toprove. Witnesses may become unavailable; evidence may be lost or degraded; the claimbecomes stale. Forcing Montana to await the resolution of the nationwide arbitration inanother two to three years inherently prejudices the State from an ev identiary standpoint.

For these reasons, the District Court's "no damage" rationale is erroneous."Guidance from the Arbitrators"

Next, in granting the stay, the District Court opined that it might "gain someguidance from the nationwide arbitration." The court reasoned that it might find "thestandard set forth by the panel of arbitrators to be persuasive." This approach, however,is contrary to Philip Morris, J 25-26, where we rejected the notion that Montana'sdiligent enforcement should be decided pursuant to a national standard. Such a standard(which is being developed in the nationwide arbitration without Montana's input) is notrequired by the MSA, which instead contemplates that such issues "shall be governed bythe laws of the relevant Settling State." Indeed, applying a national standard to Montanawould be impractical in any event. What constitutes "diligent enforcement" in states likeIllinois, New York, and Massachusetts is not necessarily equivalent to, or even insightfulof, what constitutes "diligent enforcement" in Montana. Montana's specific populationdensity, land area, and budgetary resources present unique considerations on the questionof whether it enforced its Qualifying Statute "diligently." The District Court's proposalto await a national standard is, therefore, misplaced. Again, Montana's diligentenforcement is to be decided based on Montana law. 3 Philip Morris, 26 .

According to the PM s, the supposed "guidance" that the nationw ide arbitration willprovide includes "the procedures for resolving diligent enforcement claims, the types of evidencethat might be relevant, and the factual records in other states as to what measures we re generallyavailable and could be emp loyed to enforce the Qualifying Statutes." Mon tana courts, however,are capable of applying Montana p rocedural rules and determining relevance according to1 3


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"Mootness"The District Court also reasoned that the stay would conserve resources for the

parties and the court because if the arbitrators ruled that the PMs had waived their claimto a 2003 NPM Adjustment, then the question of Montana's diligent enforcement wouldbe mooted. This reasoning assumes, however, that the waiver issue (vis--vis Montana)is to be arbitrated in the nationwide forum, rather than addressed on the merits by theDistrict Courta dubious assumption under the reasoning of Philip Morris. In anyevent, as the State points ou t in its brief, the arbitration panel has already ruled (nine daysprior to the District Court's stay order) that the PMs did not waive their claim to the 2003NPM Adjustment. Thus, the court's mootness rationale does not justify the stay.

ConclusionMontana has the right and obligation under Philip Morris to litigate its 2003

diligent enforcement in state court nowsimultaneously with the litigation of the otherSettling States' diligent enforcement in the nationwide arbitration. Montana is beingdenied that right by virtue of the stay. Moreover, Montana is being put at a disadvantagein having to await the completion of the nationwide arbitration because (1) Montana's2003 diligent enforcement may well be raised in the nationwide forum and decided, forall intents and purposes, by the federal arbitrators in Montana's absence, (2) the standardultimately imposed on Montana may be developed without input from Montana and maynot reflect the unique characteristics of Montana, and (3) Montana will be placed at anevidentiary disadvantage, assuming it is even given a genuine opportunity to provediligent enforcement in the District Court at some future date.

The defendant tobacco manufacturers' historicaland ongoingapproach to thislitigation has been to prevaricate, dissemble, and delay, and that is exactly wh at they havedone here. Contrary to the PMs' arguments, resolution of the "diligent enforcement"question in Montana does not depend on the outcome of the nationwide arbitrationaswe held in Philip Morris. The State is entitled to the benefit of our decision. With its

Montana law. Also, as we stated in Philip Morris, 25, what other states have done simply hasno bearing on M ontana's diligent enforcement efforts.14


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stay order, however, the District Court has effectively abdicated its responsibility todecide this question, leaving it to the arbitration panel to determine Montana's diligentenforcementexactly what the PMs sought, and exactly what our Philip Morris decisionsaid should no t happen.

Indeed, litigation to determine whether Montana has diligently enforced itsQualifying Statute is long overdue. The State is entitled to have its day in court now.The D istrict Court should refuse to coun tenance any further tactics from the PM s to derailthis litigation and our Philip Morris decision.

The District Court's current approach is contrary to the law of the case anderroneous as a matter of law. I accordingly c1n111r

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Documents

2011-05-24 MSC Order Reversing Stay of MT Litigation