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State Settles Dispute With Tobacco Companies Over '98 Lawsuit Settlement

Indiana has reached a deal to end a legal battle with the big tobacco companies over how much money the state is entitled to receive from a 1998 lawsuit settlement.

Indiana has received an average of $137 million a year from the tobacco industry as compensation for the health costs of smoking. But an arbitrator ruled in October the state hadn't done enough to enforce a provision aimed at preventing smaller tobacco companies from seizing the opportunity to undercut the big companies' prices.

Attorney General Greg Zoeller had sued to reverse the ruling, but an out-of-court settlement will reduce Indiana's 2014 payout by $38 million -- $25 million less than the arbitrator's original ruling. The deal also short-circuits potential litigation over future payouts by reworking the payment formula for the next three years.

Zoeller's office estimates the state will receive an average of 130-million dollars a year over the next three years.

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