440 August 26, 2026 No. 799
IN THE COURT OF APPEALS OF THE
STATE OF OREGON
XCALIBER INTERNATIONAL LTD, LLC,
an Oklahoma limited liability company,
Plaintiff-Respondent,
v.
STATE OF OREGON
and Dan Rayfield, in his official capacity as
Attorney General of the State of Oregon,
Defendants-Appellants.
Marion County Circuit Court
23CV52166; A184673
Lindsay R. Partridge, Judge.
Argued and submitted February 19, 2026.
Carson L. Whitehead, Assistant Attorney General,
argued the cause for appellants. Also on the reply brief were
Dan Rayfield, Attorney General, and Benjamin Gutman,
Interim Deputy Attorney General. On the opening brief
were Ellen F. Rosenblum, Attorney General, Benjamin
Gutman, Solicitor General, and Dustin Buehler, Assistant
Attorney General.
Edward A. Piper argued the cause for respondent. Also
on the brief was Glenmorrie Law LLC.
Before Ortega, Presiding Judge, Joyce, Judge, and
Hellman, Judge.
JOYCE, J.
Reversed and remanded.
Cite as 352 Or App 440 (2026) 441
442 Xcaliber Int. LTD, LLC v. State of Oregon
JOYCE, J.
The state appeals from a judgment granting summary judgment in favor of plaintiff. Plaintiff, an Oklahomabased company that sells tobacco products in Oregon, sued
Oregon’s Attorney General in his official capacity. Plaintiff
sought, as relevant to this appeal, a declaratory judgment
that House Bill (HB) 2128 (2023) violates Article IV, section 25(2)—the Supermajority Clause—of the Oregon
Constitution because the bill is one for raising revenue for
purposes of that provision, such that a supermajority was
needed to pass it. The parties filed cross-motions for summary judgment. The trial court granted plaintiff’s motion
and denied the state’s, concluding that HB 2128 violates
the Supermajority Clause. We disagree. HB 2128 is not a
bill for raising revenue and it therefore does not violate the
Supermajority Clause; accordingly, we reverse and remand.
I. BACKGROUND
Although the legislature enacted HB 2128 in 2023,
the contextual history of its origins began 30 years ago when
the State of Oregon entered into the Master Settlement
Agreement to settle litigation that it brought against major
tobacco companies. We thus begin with that historical
background.
In 1997, Oregon sued several major tobacco manufacturers, claiming that the tobacco companies’ alleged
unlawful conduct—including engaging in unfair trade practices and committing Oregon Racketeer Influenced and
Corrupt Organizations Act violations—had caused the state
to incur hundreds of millions of dollars in increased Medicaid
expenses and health insurance premiums. Williams v. RJ
Reynolds Tobacco Company, 351 Or 368, 372, 271 P3d 103
(2011). In 1998, Oregon’s attorney general, along with the
attorneys general of 45 other states, entered into the “Master
Settlement Agreement” (MSA). Id. at 372-73. Under the
MSA, a global settlement agreement, “the tobacco companies agreed, among other things, to make annual payments
to the settling states to compensate the states for past and
future health care expenses,” and the settling states agreed
to release the companies from certain past and future claims.
Cite as 352 Or App 440 (2026) 443
Id. at 373. Tobacco companies that are parties to the MSA—
both those that joined at its inception and those that chose to join later—are called “Participating Manufacturers” (PMs)
under the MSA. Those companies that have not joined are
called “Non-Participating Manufacturers” (NPMs).
The MSA incentivizes the settling states to enact
laws that require NPMs to make payments in amounts similar to those paid by PMs, aiming to offset any disadvantages that PMs could otherwise suffer in the market due to
the MSA. The MSA allows for the annual payment from a
PM to be adjusted downward if the PM loses market share
that year and the MSA was a significant factor in the loss. A
state can avoid such a downward adjustment to the annual
payment by enacting and enforcing a “Qualifying Statute.”
A Qualifying Statute is a state law that neutralizes the cost
disadvantages a PM would suffer due to the MSA within
the settling state by requiring NPMs to make payments in
amounts similar to those made by PMs.
Oregon enacted a Qualifying Statute when it
enacted the Qualifying Escrow Act, ORS 323.800 to 323.806.
See State v. Maybee, 235 Or App 292, 294, 232 P3d 970,
rev den, 349 Or 56 (2010) (explaining that Oregon enacted
the Qualifying Escrow Act, pursuant to the MSA, to neutralize any market advantage NPMs would have enjoyed
due to not having to make payments under the MSA). Under
that act, which mirrored the MSA’s Model Statute, NPMs
were required to make payments into an escrow fund; those
funds were to be used to “ensure payment of any future
judgment in favor of the state against those companies.”1
Id. While the funds paid by the NPMs were in escrow, they
remained the property of the NPM that paid, and any interest or appreciation of the funds were also the property of
the NPM. After 25 years in escrow, funds that had not been
used to satisfy a judgment or settlement regarding a smoking-related claim made by the state against the NPM was
to be returned to the NPM. The state has not brought any
claims against NPMs that would, if successful, have authorized disbursement of funds in escrow accounts.
1
When a state enacts the Model Statute provided in the MSA, that law automatically qualifies as a Qualifying Statute.
444 Xcaliber Int. LTD, LLC v. State of Oregon
In 2023, the Oregon legislature amended the state’s
Qualifying Statute by enacting HB 2128.2 HB 2128 replaced
the system of escrow payments with a system that required
NPMs to make direct, annual payments—or “equity assessments”—to the state.3 HB 2128, § 8 (1) (requiring tobacco
product manufacturers that are not PMs to pay “an equity
assessment for units sold within the State of Oregon after
January 1, 2024”). Like the annual payments under the
escrow system, the equity assessments are calculated based
on units sold, should ultimately not exceed what would be
paid under the MSA, and are credited against any judgment or settlement obtained by the state against the NPM.
Id. at § 8 (2), (3). However, unlike the escrow payments, the
equity assessments do not revert to NPMs if the state does
not make claims against them. Id. at § 8 (3)(c). Once paid,
the assessments belong to the state and are to be deposited
in the Oregon Health Authority Fund (OHA Fund) to pay
Oregon Health Plan (OHP) expenses. Id.
In urging the legislature to amend the Qualifying
Statute, the Oregon Attorney General and Department
of Justice argued that by requiring NPMs to make payments through direct payments, rather than through payments into escrow where the funds, the state argued, were
essentially inaccessible to the state, the original intent of
the Qualifying Statute would be better fulfilled. See, e.g.,
Testimony, House Committee on Judiciary, HB 2128, Feb
14, 2023 (statement of Attorney General Ellen F. Rosenblum
and Deputy Attorney General Lisa Udland) (“HB 2128 will
fulfill the original intent of [the Qualifying Statute] by
requiring NPMs to compensate Oregon for the public health
costs associated with their cigarettes.”). That purpose is
captured in the text of HB 2128:
2
One of plaintiff’s claims below was that the changes made by HB 2128 deprive Oregon of a Qualifying Statute. Having held that HB 2128 violated the Supermajority Clause and granted plaintiff’s motion for summary judgment for that reason, the trial court dismissed plaintiff’s remaining claims, without prejudice, for lack of standing. Neither party contends that the trial court’s resolution of those claims is before us on appeal. Therefore, we do not address them.
3
Although a prior version of HB 2128 would have converted prior escrow payments into direct payments to the state, the version as enacted left the escrow system intact for payments made prior to 2023.
Cite as 352 Or App 440 (2026) 445
“The State of Oregon owes its public health obligations
equally to all persons in this state who smoke, regardless
of the brand of cigarette smoked or the status of the tobacco
product manufacturer under the Master Settlement
Agreement.
“It is consistent with the policy of the State of Oregon
to require tobacco product manufacturers that have not
entered into a settlement with the state to pay directly to
this state an amount that is intended to:
“Prevent the manufacturers from deriving large, shortterm profits and then becoming judgment-proof;
“Require the manufacturers to assume the health care
costs imposed on this state by cigarette smoking;
“Increase the retail prices of cigarettes sold by the manufacturers, thereby reducing smoking rates, particularly
among youth, as consistent with this state’s policy of discouraging youth smoking; and
“Serve as partial compensation for the financial burdens imposed on this state by cigarette smoking.”
HB 2128, § 1. HB 2128 passed by less than a three-fifths
majority in both chambers of the Legislative Assembly.
After HB 2128 was enacted, plaintiff, an NPM,
brought this action against Oregon’s Attorney General. As
relevant to this appeal, plaintiff sought a declaratory judgment that HB 2128 is unconstitutional, void, and unenforceable because it violates the Supermajority Clause due to
having been passed by fewer than a supermajority of votes
in both legislative houses.
On cross-motions for summary judgment, the trial
court, as relevant to this appeal, granted plaintiff’s motion
and denied the state’s. The court determined that “HB 2128
violates Article IV, Section 25(2) of the Oregon Constitution,
and is unconstitutional, void, and unenforceable for that
reason.” The trial court stated that “the fact that the money
goes to * * * the Oregon Healthcare Fund is somewhat persuasive that the legislature was attempting to address a
public harm that they saw that they had every right to do.
On the other hand, they stopped short of directing the funds
to be used in that particular manner.” Ultimately, the court
446 Xcaliber Int. LTD, LLC v. State of Oregon
held that “[HB 2128] is a tax, and I’m going to grant the
plaintiff’s motion for summary judgment because I don’t
believe that the funds that are required to be paid by the
NPM are simply incidental to the legislation.” The state
appeals.
II. ANALYSIS
Where, as here, there are no disputed issues of material fact, we review a trial court’s ruling on cross-motions for summary judgment to determine whether either party was
entitled to judgment as a matter of law. Anantha v. Clarno,
302 Or App 196, 200, 461 P3d 282 (2020).
A. Framework
The fundamental question is whether HB 2128 is
a “bill for raising revenue.” To answer that question, we
consider not just the Supermajority Clause but also the
Origination Clause. That is because both clauses use identical
phrasing, “bills for raising revenue.” Under the Origination
Clause, which was adopted as part of the original Oregon
Constitution, “bills for raising revenue shall originate in
the House of Representatives.” Or Const, Article IV, § 18.
The Supermajority Clause, which was added in 1996 when
voters approved Measure 25, invokes similar language: “[t]
hree-fifths of all members elected to each House shall be
necessary to pass bills for raising revenue.” Or Const, Art
IV, § 25(2). Given the identical phrasing, the Supreme Court
has explained that the phrase “bills for raising revenue” has
the same meaning in the Supermajority Clause as it does
in the Origination Clause. Bobo v. Kulongoski, 338 Or 111,
123, 107 P3d 18 (2005) (“[N]othing in the text or context of
[the Supermajority Clause] suggests that the phrase ‘bills
for raising revenue’ in [the Supermajority Clause] has a different meaning than it has in [the Origination Clause].”).
Courts ask two questions to determine whether a
bill is one for raising revenue:
“The first [question] is whether the bill collects or brings
money into the treasury. If it does not, that is the end of
the inquiry. If a bill does bring money into the treasury,
the remaining question is whether the bill possesses the
essential features of a bill levying a tax.”
Cite as 352 Or App 440 (2026) 447
Bobo, 338 Or at 122 (citing Northern Counties Trust v. Sears,
30 Or 388, 402, 41 P 931 (1895)). The parties agree, as do we,
that HB 2128, by replacing the escrow system with the equity
assessment system that deposits funds paid by NPMs into
the OHA Fund, brings money into the treasury. Therefore,
we answer the first question that Bobo poses in the affirmative. We move to the second—determining whether HB 2128
possesses the essential features of a bill levying a tax.
The answer to that question is more complicated,
in part because no court has set forth a precise definition
(beyond the two guiding questions in Bobo) of what a “bill
for raising revenue” is. And, to the extent that courts have
attempted to define what that phrase means, it has largely
been by doing so in the negative, i.e., what is not a bill for
raising revenue. That said, we are aided by a deep history
of courts—both the Oregon Supreme Court and the United
States Supreme Court—examining the historical meaning
of that phrase, which is used not only in the Origination and
Supermajority Clauses of the Oregon Constitution, but also
in the Origination Clause of the United States Constitution.
See US Const, Art I, § 7 (“All Bills for raising Revenue shall
originate in the House of Representatives; but the Senate
may propose or concur with Amendments as on other Bills.”).
We thus turn to that history. “The phrase ‘bills for
raising revenue’ has been a part of the basic constitutional
law of the State of Oregon for the [167] years since statehood, and a part of the basic constitutional law of this country for
over [250] years since nationhood.” Dale v. Kulongoski, 322
Or 240, 242-43, 905 P2d 844 (1995). Requiring bills for raising revenue to originate in the House of Representatives has
“roots in the practices of the British Parliament, and comparable provisions appeared in both the federal constitution and various state constitutions before Oregon adopted
its constitution.” Bobo, 338 Or at 120. Thus, when Oregon
adopted its constitution, “the phrase ‘bills for raising revenue’ had acquired an accepted meaning.” Id. at 121. “[B]
ills for raising revenue” encompassed “bills to levy taxes in
the strict sense of the words” and did not “extend to bills
for other purposes, which may incidentally create revenue.”
Id. (quoting Joseph Story, Commentaries on the Constitution
448 Xcaliber Int. LTD, LLC v. State of Oregon
of the United States 343 (1883)); see also Bobo, 338 Or at
121 n 11 (“[T]he court has recognized that [the history of
the federal Origination Clause] also informs the meaning
of [Oregon’s Origination Clause].”). Thus, “a bill for raising
revenue” was limited to a narrow subset of revenue measures: bills primarily aimed at levying taxes. City of Seattle
v. Dept. of Rev., 357 Or 718, 733-34, 357 P3d 979 (2015) (citing Northern Counties Trust, 30 Or at 400-01).4
Consistent with that narrow construction, “bills for
raising revenue” has been understood to mean “ ‘bills to levy
taxes, in the strict sense of the words, and has not been understood to extend to bills for other purposes, which may incidentally create revenue.’ ” See Northern Counties Trust, 30 Or at
402 (quoting Story, Commentaries on the Constitution § 880)
(emphases added)). If a bill’s “direct and principal object” is to raise revenue, it is a bill for raising revenue; however, bills “out of which money may incidentally go into the treasury, or
revenue incidentally arise[s]” do not qualify. Id. (quoting The Nashville, 4 Biss 188, 17 F Cas 1176, 1178 (1868)).
By way of example, the Oregon Supreme Court has
concluded that bills for raising revenue do not include measures that impose a fee for government services. Id. at 402-03 (measure exacting a charge from litigants for use of the
courts was not a bill for raising revenue). It has likewise
concluded that charges for a regulatory purpose—such as
those primarily aimed at using the state’s police power to
“regulate behavior or legal relationships outside the area
of taxation” that impose “fines, penalties or other charges
merely as an incident to regulation”—are not bills for raising revenue. Boquist v. Dept. of Rev., 23 OTR 263, 275 (2019)
(citing State v. Wright, 14 Or 365, 374, 12 P 708 (1887), overruled on other grounds by Warren v. Crosby, 24 Or 558, 34
P 661 (1893) (bill increasing liquor license charge was not a
bill to raise revenue because it was enacted for “the purpose
4
In Northern Counties Trust, the court referenced a “trend” in federal case law to interpret the federal Origination Clause narrowly and adopted the reasoning and conclusions of those cases for purposes of the Oregon Constitution’s Origination Clause. 30 Or at 402-03 (“Considering the similarity of the state and national constitutions touching bills for raising revenue, and the high and unbroken line of authority upon the proper construction of the latter, it is certainly a very persuasive and weighty argument for applying the same construction of the former.”). Cite as 352 Or App 440 (2026) 449
of regulating a business that is detrimental to the public
morals,” an exercise of the state’s police power)); see also The Nashville, 17 F Cas at 1178 (law requiring steamboat operators to place an inspector’s certificate where passengers
would be most likely to see it was not one for raising revenue because, rather than being designed to raise revenue,
its “sole design clearly was the protection of the persons and
lives of steamboat and steamship passengers”).
By interpreting “bills for raising revenue” to encompass “bills to levy taxes in the strict sense of the words” and not extending it to cover “bills for other purposes, which may
incidentally create revenue,” the Oregon Supreme Court
“adopted the federal test for determining whether a bill
raises revenue” for purposes of the Origination Clause. City
of Seattle, 357 Or at 732-33 (internal quotation marks omitted). Therefore, we also find cases interpreting the federal
Origination Clause instructive. With respect to the federal
Origination Clause, the United States Supreme Court has
concluded that when general revenue generation is incidental
to a bill’s primary purpose, the bill is not one for raising revenue. See, e.g., Twin City Bank v. Nebeker, 167 US 196, 202-03,
17 S Ct 766, 42 L Ed 134 (1897) (bill was “clearly not a revenue bill” for purposes of the Origination Clause because the
“main purpose” of the bill was to provide a national currency,
not to raise revenue for the government, and the imposition
of the relevant tax was a means to that end); United States v.
Munoz-Flores, 495 US 385, 397-401, 110 S Ct 1964, 109 L Ed
2d 384 (1990) (holding that a provision was not a bill for raising revenue for purposes of the Origination Clause where the
provision’s primary purpose was to create and raise revenue
for the Crime Victims Fund and the provision created revenue for the general Treasury only incidentally).
In short, “bills for raising revenue” does not cover all
bills that generate revenue. Rather, courts have construed
that phrase in its strictest sense to apply to a narrow set of
bills, the purposes of which are principally to raise revenue.
If a bill is enacted for purposes other than generating revenue but generates revenue incidentally, it is not a bill for
raising revenue under the Origination and Supermajority
clauses of the Oregon Constitution.
450 Xcaliber Int. LTD, LLC v. State of Oregon
Despite that long history of purpose-driven analysis,
plaintiff, relying on City of Seattle, argues that Oregon
courts no longer consider the purpose of a bill in determining whether it is a bill for raising revenue. In City of Seattle, in concluding that a bill that repealed a tax exemption did
not run afoul of the Origination Clause, the court stated that
although the legislature likely had more than one purpose
in enacting the challenged bill, the court’s task was “not to
determine the primarily legislative purpose for enacting”
the bill. 357 Or at 735. Plaintiffs’ reliance on that sentence
is understandable, inasmuch as City of Seattle is the only
Oregon Supreme Court case addressing the second prong of
the Bobo framework. Moreover, if read in isolation, it is difficult to understand that sentence, given that federal courts,
and Oregon courts generally, have answered the question of
whether a bill is one for raising revenue and possesses the
essential features of a tax by reference to the bill’s purpose. Indeed, the explanatory statement in the voters’ pamphlet
that circulated during Measure 25’s consideration told voters that “Ballot Measure 25 would apply only if a bill has a
primary purpose of raising revenue” and would not extend
to “[a] bill that only incidentally raises revenue and that
has a primary purpose other than raising revenue.” Official
Voters’ Pamphlet, Oregon Biennial Primary Election, May
21, 1996, 23.
But when that sentence from City of Seattle is
read in context, we do not understand the court to have
meant that we are never to look to a bill’s purpose in considering whether it passes constitutional muster under the
Origination Clause, particularly in cases such as this one,
which do not involve the repeal of a tax exemption. Instead,
we understand the court to have meant that it is not necessary to consider the purpose of a bill that removes a tax
exemption, because such a bill categorically does not levy a
tax. See City of Seattle, 357 Or at 736 (“In this case, [the senate bill under consideration] removes a tax exemption—it
does not directly levy a tax].”). Indeed, rather than departing from the purpose-driven analysis that, as described above,
has long been the law of the land, the court in City of Seatle
emphasized that Oregon had adopted “the federal test for
determining whether a bill raises revenue,” and accordingly,
Cite as 352 Or App 440 (2026) 451
the reach of the Origination Clause is “confined to bills to
levy taxes in the strict sense of the words, and has not been
understood to extend to bills for other purposes[.]” Id. at 732-33 (second emphasis added).
B. HB 2128
With the legal background so framed, we turn to
HB 2128 and whether its purpose was to raise revenue, i.e.,
whether it possesses the essential features of a bill levying
a tax. We begin with its text in context. See State v. Gaines,
346 Or 160, 171-72, 206 P3d 1042 (2009) (explaining that the
appropriate methodology for interpreting a statute includes
examining the statute’s text, context, and, if the court deems
it useful, the statute’s legislative history). Because HB 2128
imposes charges for a regulatory purpose and only incidentally creates revenue, we conclude that it does not possess
the essential features of a bill levying a tax.
As explained above, the changes that HB 2128 made
to the Qualifying Statute centered on replacing the escrow
system with the equity assessment system for NPMs. It did
so to prevent NPMs from gaining unfair advantages in the
market relative to PMs and from harming Oregonians without accountability:
“The State of Oregon owes its public health obligations
equally to all persons in this state who smoke, regardless
of the brand of cigarette smoked or the status of the tobacco
product manufacturer under the Master Settlement
Agreement.
“It is consistent with the policy of the State of Oregon
to require tobacco product manufacturers that have not
entered into a settlement with the state to pay directly to
this state an amount that is intended to:
“Prevent the manufacturers from deriving large, shortterm profits and then becoming judgment-proof;
“Require the manufacturers to assume the health care
costs imposed on this state by cigarette smoking;
“Increase the retail prices of cigarettes sold by the manufacturers, thereby reducing smoking rates, particularly
among youth, as consistent with this state’s policy of discouraging youth smoking; and
452 Xcaliber Int. LTD, LLC v. State of Oregon
“Serve as partial compensation for the financial burdens imposed on this state by cigarette smoking.”
HB 2128, § 1.
So framed, we conclude that although HB 2128
certainly generates revenue, the revenue generated by the
equity assessments is incidental to the bill’s regulatory purpose and is not a bill to raise revenue. See Wright, 14 Or at
374 (a bill that required a license for selling liquor was an
exercise of the state’s police power “for the purpose of regulating a business that is detrimental to the public morals,”
not a bill for raising revenue). As described above, HB 2128
is part of a broader regulatory scheme. Under the MSA,
PMs are already required to make payments directly to the
state to compensate Oregon for past and future health care
expenses. The MSA incentivizes states to require similar
payments from NPMs in order to neutralize the cost disadvantages PMs would otherwise suffer due to the MSA.
Without comparable payments from NPMs, NPMs could
gain an advantage in the market, making it possible for
them to sell tobacco products at a lower price than PMs.
Under the escrow payment system, payments were going to
be returned to NPMs, with interest, such that NPMs would
not be internalizing the same costs as PMs and would subsequently gain an advantage in the market. The direct and
principal object of HB 2128 was to neutralize such cost
advantages by changing from the escrow system to equity
assessments. In other words, the purpose for passing HB
2128 was to protect public health, and the bill generates revenue incidentally such that legislating was an exercise of
the state’s police power. Thus, HB 2128 does not possess the
essential features of a bill levying a tax.
Because HB 2128 does not possess the essential features of a bill levying a tax, it is not a bill for raising revenue for purposes of the Supermajority Clause. Therefore,
the Oregon legislature’s enactment of HB 2128 with less
than a supermajority of votes in each house did not violate
the Supermajority Clause. The trial court erred in holding
otherwise and in its rulings on plaintiff’s and the state’s
motions for summary judgment on that issue.
Reversed and remanded.