With discussions at an impasse over future payments stemming from the 1998 nationwide tobacco settlement, tobacco companies are withholding money and states are filing lawsuits.

The Boston Globe reported April 18 that discussions between Big Tobacco lawyers and state attorneys general broke down this week, shortly after R.J. Reynolds and Lorillard decided to escrow a portion of their 2006 payments rather than paying the states. States from California to New Jersey to Massachusetts responded by filing lawsuits seeking the full amount due.

"We had tried to work hard with the states to resolve this very difficult matter and are disappointed an agreement couldn't be reached," said David Howard, a spokesman for R.J. Reynolds.

Replied California Attorney General Bill Lockyer: "We were, and remain, entitled to full payment."

Philip Morris took a different tack, paying states the full amount but saying that it still believes the payments should be reduced.

About $1.2 billion in tobacco-settlement payments are being disputed by tobacco firms, which cite a provision in the agreement that allows them to pay less if their market share is reduced.