3.2-4201 - Requirements on tobacco product manufacturers; escrow of funds; civil penalties for violations.
§ 3.2-4201. Requirements on tobacco product manufacturers; escrow of funds;civil penalties for violations.
A. Any tobacco product manufacturer selling cigarettes to consumers withinthe Commonwealth, whether directly or through a distributor, retailer orsimilar intermediary or intermediaries, after July 1, 1999, shall do one ofthe following:
1. Become a participating manufacturer (as that term is defined in section II(jj) of the Master Settlement Agreement) and generally perform its financialobligations under the Master Settlement Agreement; or
2. Place into a qualified escrow fund by April 15 of the year following theyear in question the following amounts (as such amounts are adjusted forinflation):
Year Amount per unit sold in such year
(except for 1999, the amount per
unit sold after July 1, 1999)
1999 $.0094241
2000 $.0104712
each of 2001 and 2002 $.0136125
each of 2003 through 2006 $.0167539
each of 2007 and each year thereafter $.0188482
B. A tobacco product manufacturer that places funds into escrow pursuant tosubdivision A 2 shall receive the interest or other appreciation on suchfunds as earned. Such funds themselves shall be released from escrow onlyunder the following circumstances:
1. To pay a judgment or settlement on any released claim brought against suchtobacco product manufacturer by the Commonwealth or any releasing partylocated or residing in the Commonwealth. Funds shall be released from escrowunder this subdivision (i) in the order in which they were placed into escrowand (ii) only to the extent and at the time necessary to make paymentsrequired under such judgment or settlement;
2. To the extent that a tobacco product manufacturer establishes that theamount it was required to place into escrow on account of units sold in thisCommonwealth in a particular year was greater than the Master SettlementAgreement payments, as determined pursuant to section IX(i) of thatAgreement, including after final determination of all adjustments, that suchmanufacturer would have been required to make on account of such units soldhad it been a participating manufacturer, the excess shall be released fromescrow and revert back to such tobacco product manufacturer; or
3. To the extent not released from escrow under subdivisions 1 or 2, fundsshall be released from escrow and revert back to such tobacco productmanufacturer 25 years after the date on which they were placed into escrow.
C. Each tobacco product manufacturer that elects to place funds into escrowpursuant to subdivision A 2 shall annually certify to the Attorney Generalthat it is in compliance with that subdivision. The Attorney General maybring a civil action on behalf of the Commonwealth against any tobaccoproduct manufacturer that fails to place into escrow the funds required underthis section. Any tobacco product manufacturer that fails in any year toplace into escrow the funds required under this section shall:
1. Be required within 15 days to place such funds into escrow as shall bringit into compliance with this section. The court, upon a finding of aviolation of this subsection, may impose a civil penalty in an amount not toexceed five percent of the amount improperly withheld from escrow per day ofthe violation and in a total amount not to exceed 100 percent of the originalamount improperly withheld from escrow;
2. In the case of a knowing violation, be required within 15 days to placesuch funds into escrow as shall bring it into compliance with this section.The court, upon a finding of a knowing violation of this subsection, mayimpose a civil penalty in an amount not to exceed 15 percent of the amountimproperly withheld from escrow per day of the violation and in a totalamount not to exceed 300 percent of the original amount improperly withheldfrom escrow; and
3. In the case of a second knowing violation, be prohibited from sellingcigarettes to consumers within the Commonwealth (whether directly or througha distributor, retailer or similar intermediary) for a period not to exceedtwo years.
Each failure to make an annual deposit required under this section shallconstitute a separate violation.
(1999, cc. 714, 754, § 3.1-336.2; 2004, c. 1029; 2005, cc. 4, 870; 2008, c.860.)