A judge’s ruling that releases tobacco companies from making Phase II payments because of the tobacco buyout drew quick comparison to the Grinch that Stole Christmas and left tobacco growers out in the cold.

Tobacco companies in 1999 agreed to make $5.15 billion in Phase II payments over 12 years to tobacco growers to compensate them for expected losses because of higher cigarette prices resulting from the $206 billion Master Settlement Agreement. Cigarette companies had already deposited three quarters of the 2004 payments when Congress passed the $10.1 billion tobacco buyout bill.

An appeal is likely, delaying the final decision for months.

The companies contended that they were due a refund of the payments for 2004. North Carolina Business Judge Ben Tennille ruled that the companies should receive a refund.

In the decision, Tennille recognized that the decision would “impose hardship on small farmers in particular. It would be far more pleasing to the court to play the role of Santa’s helper on this twenty-third day of December rather than be subjected to the inevitable comparison to the Grinch.”

Attorneys for the 14 state boards that administer Phase II funds argued that the tobacco companies’ obligation did not stop until the companies actually make payments for the buyout to the USDA.

Tobacco growers were counting on the final payment at the end of 2004 to tide them over before the tobacco buyout takes effect.

“(The) ruling leaves farm families out in the cold and lets tobacco companies escape their obligations to our farmers,” said Bob Etheridge, D-N.C., and a part-time tobacco farmer. “They’ve held on too long, waiting for a buyout, and now the tobacco companies are pulling the rug out from underneath them before those buyout payments are issued. I know this ruling will be appealed because justice and fairness are on the side of the farmer.”

North Carolina Farm Bureau president Larry Wooten said the judge failed to recognize the important and clear difference in the purpose of Phase II and the payments to be received under the buyout.

“Phase II was designated to compensate growers for losses resulting from the MSA,” Wooten says. “The buyout payments are intended to pay back quota holders and growers for an investment they made in the old federal tobacco program.”

Wooten said the tobacco companies are no more entitled to a Phase II refund than they are to ask the states to refund Master Settlement Agreement monies.

“Judge Tennille said his decision wouldn’t be the last word on this issue,” Wooten says. “He was right. A deal is a deal.”

e-mail: cyancy@primediabusiness.com