U.S. tobacco companies have the right to seek arbitration in order to reduce their payments under the 1998 nationwide tobacco settlement, a New York appeals court has ruled.

Reuters reported June 7 that the New York Court of Appeals ruled that the companies have the right to seek arbitration over claims that the settlement agreement resulted in loss of market share that could lower the payments due to the states.

In 2003, an independent auditor concluded that the settlement did decrease the market share of the companies that were parties to the settlement agreement, and that the terms of the settlement were "a significant factor contributing to this loss."

However, the auditor did not award any reduction in payments. The tobacco companies are seeking arbitration to challenge that decision. "It's clearly spelled out in the Master Settlement Agreement that a dispute over a payment, which this is, should be resolved through binding arbitration," said R.J. Reynolds spokesperson David Howard.