Legislature(2003 - 2004)
04/21/2004 09:09 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 307(JUD)
"An Act relating to the amount of the bond required to stay
execution of a judgment in civil litigation involving a
signatory, a successor of a signatory, or an affiliate of a
signatory to the tobacco product Master Settlement Agreement
during an appeal; amending Rules 204 and 205, Alaska Rules of
Appellate Procedure; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken explained that this bill, which is sponsored by the
Senate Judiciary Committee, would establish "a $100 million limit
on the appeal bond" that the State requires tobacco Master
Settlement Agreement signatories to "post to stay of payment in
regard to a Court judgment."
SENATOR RALPH SEEKINS, Chair, Senate Judiciary Committee, voiced
that he is not associated in any manner with the tobacco industry
and therefore has no conflict of interest in this regard. He
explained that this bill relates to tobacco product Master
Settlement Agreement (MSA), which provides millions of dollars to
Alaska as well as to 45 other participatory states. He cautioned
that the continuing receipt of those funds is being jeopardized "by
huge settlements and judgments that have been awarded against the
tobacco companies" that fund the settlement. Continuing, he
explained, "that defendants facing large judgment almost always
have the right to appeal them" and oftentimes, their appeal is
successful in either reducing the level of the judgment or negating
it. "In order to stay the execution" of a judgment on appeal," he
continued, "the defendant must post an appeal bond "that usually
equals the amount of the judgment." He disclosed that other states
have enacted regulations placing limits on the amount of the appeal
bond.
Senator Seekins informed that the appeal bond required in Alaska is
"ordinarily the amount of the judgment remaining unsatisfied, plus
appeal costs and interest." This bill, he explained would instill
"a $100 million dollar limit on the appeal bond that MSA
signatories must post to stay the execution of any future
judgment."
Senator Seekins clarified that this bond limit would not alter any
other existing component in law including such things as how a
trial is conducted or who might win or lose a lawsuit, and it does
not affect plaintiff's rights to fully collect a judgment were it
upheld on appeal. Furthermore, he stressed that provisions in the
bill would allow the court "to require a bond amount up to the
value of the judgment" were it determined that "the appellant were
dissipating his assets to avoid paying a judgment."
Senator Seekins declared that were this legislation adopted, Alaska
would join with 30 other states that have enacted similar efforts
in order to protect the continuation of the Master Settlement
Agreement payments.
Co-Chair Wilken noted that CS SB 307(JUD), Version 23-LS1609\I is
before the committee. He pointed out this version differs from the
original bill in that it would increase the level of the required
bond from $25 million to $100 million.
Senator Seekins concurred.
Co-Chair Wilken pointed out that Members' packets contain a
spreadsheet titled "Enacted Appeal Bond Legislation" [copy on file]
that denotes other states' legislative action regarding the appeal
bond limit and a handout titled "Alaska Should Join Other State To
Limit The Size Of Appeal Bonds and Protect Its Tobacco Settlement
Revenues," [copy on file], both of which have been provided by the
Covington & Burling law firm.
KEITH TEEL, Attorney with Covington & Burling, a Washington D.C.
law-firm representing the four principal payers of the MSA: Philip
Morris USA, R.J. Reynolds, Lorillard Tobacco Company, and Brown &
Williamson Tobacco Corporation, noted that while Senator Seekins is
correct in that 46 states are participants in the MSA, the
remaining four states had established individual settlement
agreements with the tobacco companies prior to the MSA. Therefore,
he clarified that all 50-states are receiving settlement agreement
payments.
Mr. Teel communicated that the MSA awards eight billion dollars
annually to the fifty States "and would do so into perpetuity." He
clarified that by perpetuity he means that the payments would
continue, "as long as states are around and the companies are
around and solvent." He warned however, that the litigation issue
has surfaced since the inception of the MSA. This issue, he
communicated, consists of such things as class action law suits
"which have proven to be particularly troublesome" at the trial
level. He noted that twelve of these class action lawsuits have
gone to trail, and he noted that the Engle case in Florida resulted
in an award of $145 billion, and he stated that, as part of the due
process rights afforded in this country, the tobacco companies
appealed that judgment. However, he noted that difficulty could
arise were a plaintiff to request, as is their right, an immediate
start to the payment of the judgment. This payment, he communicated
could transpire via such means as attaching the plaintiff's bank
account, "and basically taking its working capital." Therefore, he
noted, plaintiffs "who get hit" with these types of large judgments
often choose to put a stay on the execution of these payments.
Avenues to do this, he disclosed, would be to file a supersedeas,
or appeal, bond or, he noted a notice to appeal without a bond as
is permissible in some states. He reviewed the history of appeal
bonds, and stated that, in Alaska, the amount of the appeal bond
would equate to the amount of the judgment plus interest and appeal
costs.
Mr. Teel disclosed that "the problem" with the appeal bond is that,
in the Florida case for instance, the cost of the bond amounted to
$181 million. Some bond expenses, he declared, could result in
bankruptcy and ultimately a company's going out of business. Were a
company unable to afford to post a bond in the amount determined by
the Court, he attested, that company could be forced to file for
bankruptcy in order to stop the plaintiff from taking its assets
during the appeal. He disclosed that, "the problem with being
driven into bankruptcy is that it impacts all kinds of things,"
including the company's payment obligations. He noted that the
Florida case, which took more than three years to appeal, was
important to the companies as the judgment was ultimately reduced
to zero. He also noted that had Florida Legislature not reduced its
limit on the appeals bond prior to the judgment, the companies
might have been forced into bankruptcy, which would have prohibited
any MSA payments.
Mr. Teel stressed that absent a limitation on the expenses
associated with appeal bonds, the ability of companies to pay MSA
payments would be interrupted. Therefore, he attested, legislation
such as this is important.
Mr. Teel referred the Committee to the aforementioned spreadsheet
depicting legislation that states have adopted to address the
appeal bond situation. Some states, he noted, have expanded the
legislation to apply to other types of appeals. He warned that,
without addressing this situation in Alaska, were a class action
lawsuit to transpire and result in a multi-billion dollar verdict,
a negative impact could arise.
Mr. Teel stressed that the goal of this legislation is to limit the
amount of the appeal bond "under State law and to avoid a
bankruptcy situation that might impair" the State or the company's
finances rather than to affect any other aspect of the litigation
process. He noted that the only opposition that has been presented
during the bill's committee process has been from public health
groups who were concerned that this legislation would protect the
industry from liability. This concern, he communicated, is
misplaced as due process allows the right to appeal.
Mr. Teel pointed out that were MSA payers driven into bankruptcy
and thereby placing MSA payments in jeopardy, the State might
suffer a huge fiscal impact during the appeal process. He stressed
that adoption of the legislation would incur no fiscal impact to
the State.
Senator Olson commented that it appears that the plaintiffs in the
Florida class action lawsuit suffered "a disservice" by the action
of the Florida court to reduce the $145 billion judgment to zero.
Mr. Teel agreed that at the end of the appeal process, a lot of
people ended up with zero. However, he reiterated that the appeals
process is very important to defendants dealing with class action
lawsuits, particularly those dealing with personal injury
situations such as the Florida case. He noted that there are
tremendous law requirements involved in getting a class action suit
properly certified. He noted that the duration of that trial was
one year at a cost of millions of dollars.
Co-Chair Wilken ordered the bill HELD in Committee.
| Document Name | Date/Time | Subjects |
|---|