Kentucky can continue to enforce laws requiring small cigarette companies to make payments to help cover smoking-related health costs, a federal appeals court ruled Monday.

The ruling means the state can continue collecting escrow payments from small cigarette companies that did not participate in the 1998 master settlement agreement between tobacco companies and 52 states and US territories. Attorneys said it was the first ruling by a federal appeals court addressing the issue of whether states can force smaller companies to make the payments.
The landmark agreement in 1998 required payments to be made over 25 years and settled all of the state's lawsuits over the public costs of treating sick smokers. More than 30 states passed laws requiring non-participating cigarette-makers to make escrow payments.
A three-judge panel from the 6th Circuit Court of Appeals in Cincinnati turned away a challenge from three companies that said Kentucky laws effectively barred the businesses from selling tobacco in the state.
Chicago-based Tritent International Corp, DWI, and Cibahia Tabacos Especias, a Brazilian company, each of which imports discount cigarettes, filed the lawsuit. A federal judge in Frankfort rejected the companies' claims in September 2005, prompting the appeal. (pi)