States awaiting revenues from a national settlement with tobacco companies face a delay because a legal challenge resurfaced in Virginia, a spokesman for the Virginia Attorney General said on Friday.

Virginia was the state that had been expected to achieve the final approval needed to trigger the release of tobacco money to all the states participating in the agreement. Randy Davis, spokesman for Virginia Attorney General Mark Earley, said, ``We are optimistic that the Virginia Supreme Court will not be swayed from its earlier finding of 'no reversible error' in the case and we look forward to a swift dismissal of this petition for rehearing.'' The $206 billion, 25-year settlement was reached between 46 states and major tobacco manufacturers last year. States can't receive any tobacco funds until they achieve ``state specific finality,'' a level that can't be reached until all outstanding appeals are settled. Eighty percent of the states receiving 80 percent of the tobacco allocation must reach that final stage before the money can be released earlier than a June 30, 2000 deadline. Virginia was the state that was seen boosting the percentages to the proper threshold. On Sept. 29, the Virginia Supreme Court denied an appeal in Vaughan v. Gilmore, a case that represented the last major obstacle to the state reaching state specific finality. The court found ``no reversible error'' and refused the petition for appeal after an earlier lower court ruling dismissed the case as ``frivolous.'' But earlier this week the plaintiffs filed a motion for rehearing with the state Supreme Court, creating another delay. Randy Davis, spokesman for Virginia Attorney General Mark Earley, said, ``We are optimistic that the Virginia Supreme Court will not be swayed from its earlier finding of 'no reversible error' in the case and we look forward to a swift dismissal of this petition for rehearing.''

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