Civil Practice – Declaratory Judgment Action – Sovereign Immunity – Tobacco Settlement – Escrow Refund

As a manufacturer of tobacco products who did not participate in the 1998 settlement with other tobacco companies, plaintiff must pay into an escrow account required by G.S. § 66-291. Plaintiff alleges that it has paid more than required into the escrow account and that it is entitled to a refund; however, § 66-291 does not provide a cause of action allowing plaintiff to seek release of excess payments, and there is no administrative process in place that would allow plaintiff to seek release of escrow funds. Therefore, plaintiff’s only option for redress to protect its property rights is to seek a declaratory judgment; such a claim is not barred by the doctrine of sovereign immunity.

The court denies defendants’ motion to dismiss.

Section 66-291 provides in part, “To the extent that a tobacco product manufacturer establishes that the amount it was required to place into escrow on account of units sold in the State in a particular year was greater than the Master Settlement Agreement payments, as determined pursuant to Section IX(i) of that agreement, including after final determination of all adjustments, that the manufacturer would have been required to make on account of the units sold had it been a  participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer . . . .”

Under plaintiff’s interpretation, the language “including after final determination of all adjustments” serves as a recognition that adjustments made in the future may ultimately affect the total amount of excess funds plaintiff is entitled to, but does not prohibit the release of excess escrow funds until after those final determinations are made.

The court concludes that the complaint alleges an actual and existing justiciable controversy between the parties regarding interpretation of the statute, and regarding whether plaintiff has made escrow payments in excess of those required by the statute. That is all that is required of plaintiff at the pleadings stage.

The complaint also sufficiently alleges claims for declaratory judgment regarding whether the defendant-attorney general has applied § 66-291 in a manner that violates plaintiff’s rights under the North Carolina Constitution.

Motion denied.

S&M Brands, Inc. v. Stein (Lawyers Weekly No. 020-026-18, 23 pp.) (Gregory McGuire, J.) Christopher Browning Jr. and Bryan Haynes for plaintiff; Lauren Clemmons for defendants. 2018 NCBC 26