A federal judge has approved the request by three out-of-state cigarette manufacturers to seek communications between cigarette maker Philip Morris and the state – including members of the General Assembly – as they seek to void a portion of the voter-approved cigarette tax increase. 

Liggett Group LLC, Vector Tobacco Inc. and Xcaliber International Ltd., LLC, plus Littleton resident and cigarette user Jennifer A. Smith, filed a federal complaint following the passage of Proposition EE, which created a tax on nicotine products and raised cigarette and tobacco taxes. They argue the voter-approved measure and the 2020 legislation that enabled it violate the U.S. Constitution by placing a minimum price on cigarettes.

“Section 10 will increase the minimum retail price of a pack of 20 cigarettes to $7.00,” wrote the plaintiffs, referring to a provision of House Bill 1427. “Plaintiff Smith voted for Proposition EE because she understood from the State’s disclosures in the Bill and the 2020 Ballot Information Booklet that the Bill would only impose new cigarette taxes to generate revenue for public purposes, including education, which she favored.”

Had she known that the measure would have substantially raised the price on discount cigarettes like those the plaintiff manufacturers produce, she would have voted against it.

U.S. District Judge Raymond P. Moore will hear on Dec. 21 the plaintiffs’ request for a preliminary injunction to prevent enforcement of the provision. Moore, in a Dec. 3 order, did not grant the plaintiffs the ability to seek depositions from Gov. Jared Polis and Attorney General Phil Weiser, who are named as defendants.

Philip Morris and its parent group, Altria, supposedly negotiated the ballot measure’s language. The plaintiff manufacturers said they compete with Philip Morris “almost exclusively on price,” and any minimum price in excess of the listed tax increase would accrue to the retailers on discount cigarette purchases.

As such, the complaint alleges, Section 10 violates the Commerce Clause by favoring in-state interests at the expense of out-of-state enterprises.

“Unless enforcement of Section 10 is preliminarily enjoined, the Manufacturer Plaintiffs will lose millions of dollars of annual sales and profits of their discount cigarettes in Colorado, as well as customers, market share and good will it took them years to establish, all of which they will be unable to recover even if they ultimately prevail in this lawsuit,” the plaintiffs wrote.

Alan Chen, a constitutional law professor at the University of Denver, said that prevailing on such challenges is typically a bigger hurdle.

“The U.S. Constitution prohibits states from enacting laws that discriminate against businesses from other states or that otherwise impose a substantial burden on interstate trade. This is known as the ‘dormant’ Commerce Clause, and is a doctrine designed to stop states from engaging in protectionism,” Chen explained. 

“Because Proposition EE applies to all cigarette manufacturers, wherever they are located, the plaintiffs will have to show that the burden on commerce are clearly excessive in relation to the relative social benefits of the law,” he said.

A spokesperson for Healthier Colorado, an advocacy group that favored Proposition EE’s passage, said that the organization “believes that the court system will uphold the will of the overwhelming majority of Coloradans who voted in favor of Proposition EE.”

Voters approved the measure by a margin of nearly 68% to 32%. By 2027, Proposition EE would result in a tax of $2.64 per pack of cigarettes, up from the current 84 cents. The revenue would go toward K-12 education, tobacco programs and general state spending, and then to preschool.

The Blue Book narrative mentioned to voters the new minimum price for cigarettes, which will rise to $7.50 per pack in 2024.

In accusing Colorado of price fixing, the plaintiffs claimed that if other states enacted similar laws around the country, that would destroy price competition and allow manufactures of premium cigarettes like Philip Morris to dominate the market. Further, they allege HB1427 violated the Colorado constitution after there was no explicit reference in the bill’s title – or Proposition EE’s – to the minimum price of cigarettes.

“We also want to understand why key elements of the bill have been omitted from the description that will be presented to Colorado voters in November,” said Len Feiwus, an attorney for Liggett Group, at the time.