HOUSE BILL NO. 102 "An Act imposing certain requirements relating to cigarette sales in this state by tobacco product manufacturers, including requirements for escrow, payment, and reporting of money from cigarette sales in this state; providing penalties for noncompliance with those requirements; and providing for an effective date." Co-Chair Therriault observed that Mr. Gardner, Department of Law responded to questions by the Committee in a letter dated 3/24/99 (copy on file). DOUG GARDNER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW reviewed his letter to Co-Chair Therriault. He observed that the Committee questioned if the word "generally" could be deleted on page 3, line 11. He conferred with counsel for Phillip Morris. Phillip Morris takes the position that it would not be a qualifying statute with the deletion of "generally". He stated that the state of Alaska would not necessarily agree with Phillip Morris, but acknowledged that the change would open the state to litigation. He recommended that "generally" not be deleted. He emphasized that any benefit for clarification purposes would be outweighed by the risks of litigation. Mr. Gardner discussed the second question that was posed by the Committee: What is the meaning of the phrase "generally perform its financial obligations under the Master Settlement Agreement." He observed that counsel for Phillip Morris would take the position that the change would render the statute a non-qualifying statute. The Department of Law takes the position that the term "generally perform its financial obligations" is a catch all phrase used to describe the myriad of financial obligations in the Master Settlement Agreement and in and of itself does not alter the obligations that are individually enforceable throughout the rest of the agreement. He recommended that the proposed change not be made. Mr. Gardner discussed the third question: Can the committee amend HB 102 by deleting page 3, lines 10 - 12. He concluded that the need for the section still exists. He explained that a company could still become a Subsequent Participating Manufacturer (SPM). Mr. Gardner discussed the fourth questioned: Does the bill have the affect of limiting a Non-Participating Manufacturer's liability to the amount a manufacturer would be required to place in escrow under Sec. 45.53.020? He concluded that it would not. He noted that if a Non- Participating Manufacturer put a million dollars into an escrow account and was found to be liable to a plaintiff in Alaska for $2 million dollars, than the plaintiff could recover a million dollars from the escrow fund and continue to collect the judgement as allowed by Alaska law against the company. The fund is a vehicle for providing for compensation but not the only available source. Co-Chair Therriault clarified that the finding language is part of the model legislation. Representative J. Davies asked what obligations and advantages would exist under the Subsequent Participating Manufacturer status. Mr. Gardner explained that a small manufacturing company could sign the agreement and take themselves out of the situation of possible liability. They would not have the ability to increase market share without any financial repercussions as they would have if they had signed as a SPM earlier. If they do not become a SPM they would have to deal with the escrow issue. Representative J. Davies questioned if they would be subject to advertising sanctions. Mr. Gardner replied that they would have to comply with SPM restrictions on advertising. Representative Grussendorf maintained that "generally" is vague. He stressed that without "generally" the original agreement would be clear. Representative J. Davies MOVED to ADOPT Amendment 1 (copy on file). Page 3, line 27 Delete "Such money itself:" Insert "Money placed into escrow and interest earned on money in escrow" Representative J. Davies expressed the concern that the phase "Such money itself" could be interpreted as relating only to the principle. Mr. Gardner concluded that the phrase applies to both the interest and the principle amount. He emphasized that the language is clarified with the addition of page 4, lines 12 - 15. Representative J. Davies Withdrew Amendment 1. Co-Chair Therriault questioned if the language on page 4 line 12 should read "subsection". Mr. Gardner stated that he thought the language should be "subsection". Co-Chair Therriault noted that there are two zero fiscal notes. Vice-Chair Bunde MOVED to report HB 102 out of Committee with the accompanying fiscal notes. HB 102 was REPORTED out of Committee with a "do pass" recommendation and two zero fiscal notes, one by the Department of Law and one by the Department of Revenue.