United States

Texas law imposed a higher tax on the tobacco products of manufacturers who were not members of any settlement agreements ("Small Tobacco"), compared to the tax rate for manufacturers who had entered into settlement agreements. The settlement agreements required annual payments and restricted advertising and lobbying activities in exchange for releasing claims against manufacturers. Some manufacturers who were members of the settlement agreements did not make any annual payments to the State of Texas, although their products were taxed at a lower rate pursuant to the law. Small Tobacco argued that the difference in the tax between their products and products produced by those manufacturers who were not making annual payments to Texas violated the constitutional guarantees of due process and equal protection. The Court rejected Small Tobacco's arguments and held that the law was constitutional.