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.