Superior Court tells tobacco shop to cease and desist

Friday, November 20, 2009

By HATTIE BERNSTEIN

Staff Writer

BROOKLINE – Customers are still rolling their own smokes at Tobacco Haven, despite a superior court ruling Monday that says the Brookline shop is a cigarette manufacturer that hasn’t been paying either the mandatory Tobacco Settlement tax, or making escrow payments.

Merrimack County Superior Court Judge Larry Smukler issued a temporary injunction against Tobacco Haven on Monday, ordering the shop on Route 13 to either ensure that its supplier has paid the required tax or escrow payment, pay itself, or stop operating its two high-speed cigarette-rolling machines.

The machines take loose tobacco and roll 200 cigarettes in a matter of minutes. A carton costs $25.99, while cartons of many name brand cigarettes can cost twice as much. Customers have flocked to the store, often lining up to use the machines.

What’s at stake here is a lot more than where people can buy cheap smokes. The state filed suit against the company in August because New Hampshire stood to lose about $50 million in tobacco settlement money.

As part of the 1998 tobacco Master Settlement Agreement, all tobacco product manufacturers make required payments of about 42 cents per pack. Each year the manufacturers generate a total pot around $7 billion. New Hampshire gets about six-tenths of 1 percent of that pot, or about $50 million a year.

New Hampshire had an obligation to enforce the agreement, or forfeit its share of the tobacco dough, the attorney general’s office explained.

“If the state loses its diligent enforcement obligation, it can lose up to an entire MSA payment for that year – that could be a $50 million hit to the state of New Hampshire,” Assistant Attorney General David Rienzo said. “Every state is on this like a hawk.” The attorney for the small business said Monday the store will abide by the decision for the time being, by collecting 2 cents per cigarette that is rolled from loose “pipe” tobacco.

“We’ll abide by it until the judge changes his mind or sends the case to the New Hampshire Supreme Court,” said Attorney Jeffrey Burd, a Cincinnati lawyer who is a member of the legal team representing Tobacco Haven.

The tobacco shop has maintained that it is selling “pipe” tobacco and that customers are rolling their own cigarettes, using the high-speed bulk-rolling machines.

The cost of cigarettes has spurred a growth in the roll-your-own market, but most consumers use small hand-rolling machines. The larger industrial machines like the ones used in Brookline had become more popular around the country.

Rienzo, who works for the AG’s consumer and antitrust bureau, said the case was the first in the state, and possibly the country.

The newspaper contacted Joe Correia Jr., owner and operator of Tobacco Haven, but he referred all calls to his attorney in Ohio.

Burd, the attorney, said the legal team representing Tobacco Haven would be filing a motion that argues that the decision is “not consistent with the statute.” Until the case is decided, however, Tobacco Haven will “monitor” the type of tobacco the customers put in the machines,” Burd said, adding, “We’re asking the court to reconsider.” In a prepared release, Attorney General Michael Delaney announced that the court had rejected Tobacco Haven’s arguments.

“Tobacco Haven must either use cigarette tobacco on which its supplier has made the required escrow payments, make the escrow payments itself, or halt the use of the cigarette-making machines,” the attorney general said.