Item 3. Legal Proceedings.

The information required by this Item is included in Note 19 and Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K. Altria Group, Inc.’s consolidated financial statements and accompanying notes for the year ended December 31, 2016 were filed on Form 8-K on February 1, 2017 (such consolidated financial statements and accompanying notes are also included in Item 8). The following summarizes certain developments in Altria Group, Inc.’s litigation since the filing of such Form 8-K.

Recent Developments

Smoking and Health Litigation

In McKeever, in February 2017, PM USA filed a notice to invoke the discretionary jurisdiction of the Florida Supreme Court.

In Pardue, in February 2017, the trial court granted PM USA’s and R.J. Reynolds Tobacco Company’s (“R.J. Reynolds”) motion for a remittitur, reducing the compensatory damages award from approximately $5.9 million to approximately $5.2 million.

In Varner, in February 2017, PM USA paid plaintiff approximately $600,000 to satisfy the judgment, interest and related costs. PM USA will record a pre-tax provision of approximately $600,000 in the first quarter of 2017.

In J. Brown, in February 2017, a Pinellas County jury returned verdict in favor of plaintiff and against PM USA and R.J. Reynolds awarding $5.4 million in compensatory damages and allocating 35% of the fault to PM USA. The jury also awarded plaintiff $200,000 in punitive damages against PM USA. The court ruled that it will not apply the comparative fault reduction to the compensatory damages.

In Martin, in February 2017, PM USA and R.J. Reynolds filed a notice of appeal to the Florida Fourth District Court of Appeal.

In Allen, in February 2017, the Florida First District Court of Appeal affirmed the trial court’s verdict.

Health Care Cost Recovery Litigation

NPM Adjustment Disputes: As discussed in Note 19, in 1998, PM USA and certain other U.S. tobacco product manufacturers entered into the 1998 Master Settlement Agreement (the “MSA”). PM USA is participating in proceedings regarding potential downward adjustments (the “NPM Adjustment”) to MSA payments made by manufacturers that are signatories to the MSA (the “Participating Manufacturers”) for 2003-2015. In February 2017, the Supreme Court of Missouri denied Missouri’s motion to order the Participating Manufacturers to arbitrate the question of its diligent enforcement in a single-state arbitration for 2004, but granted Missouri’s motion to modify, with respect to Missouri, the pro rata judgment reduction related to the 2003 NPM Adjustment. As a result of the judgment reduction decision, PM USA will be required to return approximately $12 million of the 2003 NPM Adjustment and $7 million of the interest it received (in each case subject to confirmation by the independent auditor), plus applicable interest. In addition, PM USA will record a corresponding reduction to its pre-tax earnings in the first quarter of 2017.