Deposits Into Escrow Accounts; Violations

  1. Law
  2. Georgia Code
  3. Commerce and Trade
  4. Tobacco Product Manufacturers
  5. Deposits Into Escrow Accounts; Violations

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Any tobacco product manufacturer selling cigarettes to consumers within the state (whether directly or through a distributor, retailer, or similar intermediary or intermediaries) after the date of enactment of this chapter shall do one of the following:

  1. Become a participating manufacturer (as that term is defined in section II(jj) of the Master Settlement Agreement) and generally perform its financial obligations under the Master Settlement Agreement; or
    1. Place into a qualified escrow fund on a quarterly basis, no later than 30 days after the end of each calendar quarter in which sales are made, the following amounts (as such amounts are adjusted for inflation):
      1. 1999: $0.0094241 per unit sold after the date of enactment of this chapter;
      2. 2000: $0.0104712 per unit sold;
      3. For each of 2001 and 2002: $0.0136125 per unit sold;
      4. For each of 2003 through 2006: $0.0167539 per unit sold; and
      5. For each of 2007 and each year thereafter: $0.0188482 per unit sold.
    2. A tobacco product manufacturer that places funds into escrow pursuant to subparagraph (A) of this paragraph shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under the following circumstances:
      1. To pay a judgment or settlement on any released claim brought against such tobacco product manufacturer by the state or any releasing party located or residing in the state. Funds shall be released from escrow under this division: (I) in the order in which they were placed into escrow; and (II) only to the extent and at the time necessary to make payments required under such judgment or settlement;
      2. 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 such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to such tobacco product manufacturer; or
      3. To the extent not released from escrow under division (i) or (ii) of this subparagraph, funds shall be released from escrow and revert back to such tobacco product manufacturer 25 years after the date on which they were placed into escrow.
    3. Each tobacco product manufacturer that elects to place funds into escrow pursuant to this paragraph shall quarterly and annually certify to the Attorney General that it is in compliance with this paragraph. The Attorney General may bring a civil action on behalf of the state against any tobacco product manufacturer that fails to place into escrow the funds required under this paragraph. Any tobacco product manufacturer that fails in any calendar quarter or year to place into escrow the funds required under this paragraph shall:
      1. Be required within 15 days to place such funds into escrow as shall bring it into compliance with this paragraph. The court, upon a finding of a violation of this paragraph, may impose a civil penalty (to be paid to the general fund of the state) in an amount not to exceed 5 percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 100 percent of the original amount improperly withheld from escrow;
      2. In the case of a knowing violation, be required within 15 days to place such funds into escrow as shall bring it into compliance with this Code section. The court, upon a finding of a knowing violation of this paragraph, may impose a civil penalty (to be paid to the general fund of the state) in an amount not to exceed 15 percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 300 percent of the original amount improperly withheld from escrow; and
      3. In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within the state (whether directly or through a distributor, retailer, or similar intermediary) for a period not to exceed two years.
    4. An importer shall be jointly and severally liable for escrow deposits due from a nonparticipating manufacturer with respect to any nonparticipating manufacturer cigarettes that it imported and which were then sold in this state.

      Each failure to make a quarterly or annual deposit required under this Code section shall constitute a separate violation.

(Code 1981, §10-13-3, enacted by Ga. L. 1999, p. 725, § 1; Ga. L. 2000, p. 136, § 10; Ga. L. 2004, p. 340, § 1; Ga. L. 2016, p. 528, § 2/HB 899.)

The 2016 amendment, effective July 1, 2016, in the introductory language of subparagraph (2)(A), substituted "on a quarterly basis, no later than 30 days after the end of each calendar quarter in which sales are made," for "by April 15 of the year following the year in question"; in division (2)(A)(i), substituted "$0.0094241" for "$.0094241"; in division (2)(A)(ii), substituted "$0.0104712" for "$.0104712"; in division (2)(A)(iii), substituted "$0.0136125" for "$.0136125"; in division (2)(A)(iv), substituted "$0.0167539" for "$.0167539"; in division (2)(A)(v), substituted "$0.0188482" for "$.0188482"; inserted a comma in division (2)(B)(ii); in the introductory language of subparagraph (2)(C), substituted "quarterly and annually" for "annually" in the first sentence, and inserted "calendar quarter or" near the end; added subparagraph (2)(D); and substituted "a quarterly or annual" for "an annual" in the ending undesignated paragraph of paragraph (2).

Editor's notes.

- Ga. L. 2004, p. 340, § 2, not codified by the General Assembly, provides that: "If this Act, or any portion of the amendment to division (ii) of subparagraph (B) of paragraph (2) of Code Section 10-13-3 made by this Act, is held by a court of competent jurisdiction to be unconstitutional, then such division (ii) shall be deemed to be repealed in its entirety. If subparagraph (B) of paragraph (2) of Code Section 10-13-3 shall thereafter be held by a court of competent jurisdiction to be unconstitutional, then this Act shall be deemed repealed, and division (ii) of subparagraph (B) of paragraph (2) of Code Section 10-13-3 shall be restored as if no such amendments had been made. Neither any holding of unconstitutionality nor the repeal of division (ii) of subparagraph (B) of paragraph (2) of Code Section 10-13-3 shall affect, impair, or invalidate any other portion of Code Section 10-13-3, or the application of such Code section to any other person or circumstance, and such remaining portions of Code Section 10-13-3 shall at all times continue in force and effect." As of May, 2019, no ruling of unconstitutionality has been made.

Ga. L. 2004, p. 340, § 3, not codified by the General Assembly, provides that the amendment to division (2)(B)(ii) shall govern all requests for the release of escrow moneys made on or after May 7, 2004.

JUDICIAL DECISIONS

Sovereign immunity.

- Tobacco producer's claim that the attorney general was required to release escrow funds to the producer because the producer paid more into escrow than the producer was required to under Georgia law was properly dismissed because the producer was barred by state sovereign immunity. S&M Brands, Inc. v. Georgia ex rel. Carr, 925 F.3d 1198 (11th Cir. 2019).

No Equal Protection violation shown.

- All provisions of a revised escrow agreement that the tobacco producer challenged under the Equal Protection clause were provisions with respect to which participating manufacturer's and nonparticipating manufacturers were not similarly situated, so the producer had not plausibly alleged an Equal Protection violation. S&M Brands, Inc. v. Georgia ex rel. Carr, 925 F.3d 1198 (11th Cir. 2019).

Cited in Carolina Tobacco Co. v. Baker, 295 Ga. App. 115, 670 S.E.2d 811 (2008).


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