ATLANTA --- Any hope that the nation's tobacco wars would end when the largest cigarette manufacturers and 46 states signed a landmark legal settlement 10 years ago this month has long since dissipated.

Yes, the largest legal battle has ended and smoking rates have declined in the wake of the massive deal, in which the tobacco companies agreed to pay the states billions in perpetuity to settle claims that smoking-related illnesses had caused huge health-care bills which strained state budgets.

Other fights rage on, however. Anti-smoking advocates are outraged that some states have used much of the proceeds to fund economic-development needs or plug budget holes rather than bankroll aggressive campaigns to persuade Americans to kick the habit.

Moreover, the tobacco companies and states have waged a battle to crack down on small manufacturers whose market share blossomed in the wake of the price increases caused by the settlement. Some of those smaller manufacturers are lashing back, attacking the agreement as unconstitutional and filing a federal lawsuit to have it thrown out.

The initial growth and the recent decline of those "nonparticipating manufacturers" provide a case study of how, in some cases, the master settlement agreement was only a tentative step toward ending the legal struggles over the role of tobacco in American life.

David Redmond had sold low-cost cigarettes in Russia and other countries when the first effort to settle state claims against the companies was put before Congress, which needed to approve the first version of the agreement. When that measure failed, the states and companies retooled the agreement to bypass Congress.

By then, Mr. Redmond had prepared a business plan for the U.S. In 1999, he launched Carolina Tobacco Co. to take advantage of the price increases caused by the master settlement agreement.

Mr. Redmond decided not to sign the master settlement because the basis of the claims against the big tobacco companies -- a pattern of public deception and efforts to market tobacco to young people -- didn't apply to Carolina Tobacco, which hadn't been in the American market before the agreement was signed.

"Therefore, we felt and I felt very strong that it was an admission of guilty to sign the master settlement agreement," Mr. Redmond said.

He didn't, and he wasn't alone. From 1998 to 2007, the market share of nonparticipating manufacturers surged from 0.5 percent to 5.7 percent, creating a new reality in the industry, said Bill Phelps, a spokesman for Altria, the parent company of Philip Morris USA.

"It's more competitive now than it was in 1998," he said.

Mr. Redmond was aware of a provision in the agreement that would affect his ability to compete in the U.S. market -- "escrow statutes," which require Carolina Tobacco and other nonparticipating manufacturers to pay into an escrow account roughly the same amount per pack as tobacco companies that did decide to join.

"The idea of an escrow for nonparticipating companies that were not involved in the tort action, not involved in misadvertising, I think is a travesty," he said.

At first, companies such as his could recoup some money paid into the escrow accounts relatively quickly, but states then changed their laws, and the full payments now sit in escrow for 25 years unless a state decides to pursue a claim against the manufacturer.

That removes much of Mr. Redmond's original advantage in keeping down costs; now, he chooses to keep his company lean.

"Why should a new company like ours, entering the market, have to pay the same penalty as a misbehaving company?" he said.

Nonparticipating manufacturers say the only reason they are required to make the escrow payments is to artificially increase their prices, preventing them from undercutting the prices of manufacturers that signed on.

"Effectively, it's a penalty for not agreeing to limit your lobbying, advocacy and advertising. You pay whether you join or you don't join," said Hans Bader, the counsel for special projects at the Competitive Enterprise Institute. He represents a nonparticipating manufacturer, a cigarette distributor, a retailer and a smoker in a federal suit challenging the pact.

Manufacturers that did sign onto the agreement say it's not that simple. Mr. Phelps, of Altria, declined to answer questions about whether nonparticipating manufacturers have an unfair advantage over companies such as Philip Morris.

A briefing book distributed to reporters by the company says the reason for the escrow statutes is not necessarily to level the playing field. For one thing, nonparticipating manufacturers have to put in escrow only an amount equal to the portion of the settlement payments based on health-care cost, not any of the other claims settled by the agreement.

"The escrow funds were established to ensure that funds are available to satisfy state claims, such as for health-care costs, in the event a state obtains a judgment at some point against the NPM (nonparticipating manufacturers), which has not settled with the state and thus has not been released from such claims," the book states.

Mr. Bader said those judgments will probably never happen. In most of the states involved, he said, the company would have to do something else wrong other than sell a product that can cause health problems. The nonparticipating manufacturer would have to be guilty of the kinds of fraud and abuse that caused the tobacco companies to face a lawsuit in the first place.

"In most states, there's no general right to sue companies because their products raise health-care costs," he said.

Mr. Redmond said his company is careful not to deceive anyone about the dangers of tobacco, making certain it avoids the ethical lapses he says laid the groundwork for the agreement in the first place.

"Whenever I'm asked, 'Will cigarette smoking be harmful to your health?' -- I say, 'yes,' " he said.

For now, at least, that makes no difference when it comes time to pay.