S3852-2013 Actions

• Feb 22, 2013: REFERRED TO JUDICIARY

S3852-2013 Memo

BILL NUMBER:S3852

TITLE OF BILL:  An act to amend the civil practice law and rules, in
relation to the undertaking required during the pendency of a stay of
enforcement of a judgment against a participating or non-participating
manufacturer under the master settlement agreement

PURPOSE: The purpose of this bill is to safeguard the flow of funds
under the tobacco master settlement agreement ("MSA") to the state and
local governments by limiting the bond that MSA signatories and their
successors and affiliates and nonparticipating manufacturers must post
to stay the execution of a judgment during appeal to two-hundred fifty
million dollars of which 30 percent must be posted in cash, regardless
of the value of the judgment.

SUMMARY OF PROVISIONS: This bill would provide that the maximum
aggregate undertaking required staying the execution of a judgment
involving a signatory, a successor to a signatory, or an affiliate of
a signatory to the MSA or a nonparticipating manufacturer shall not
exceed $250 million of which 30 percent must be in cash. This bill
also would provide that a court may require a higher bond in an amount
not to exceed the total amount of the judgment if the appellee
demonstrates by preponderance of the evidence that a defendant is
improperly dissipating assets outside the ordinary course of business
in order to avoid Payment of a judgment.

For purposes of this bill, the term "master settlement agreement"
shall mean the settlement agreement (and related documents) entered
into on November 23, 1999 by the state and leading United States
tobacco product manufacturers, as defined in Section 1399-00 of the
Public Health Codes.

JUSTIFICATION: The Tobacco Master Settlement Agreement is vitally
important to New York State, its local governments and other states.
It delivers hundreds of millions of dollars in revenues to the state
and its localities annually, and it will continue to do so for years
to come. In 2012 alone, New York State, New York City and other New
York Counties received approximately $740,000,000 under the MSA and
total payments to date under the MSA to New York State, New York City
and other New York Counties are approaching $11 billion.  However, the
tobacco companies that make payments to the state pursuant to the MSA
are involved in extensive litigation, which on occasion produces
verdicts in the hundreds of millions or billions of dollars.

Many of these large verdicts are reduced or overturned on appeal. But
if such a verdict were entered against the tobacco companies in New
York, the only way the companies could prevent a plaintiff from
collecting on the judgment during the appeal would be to post an
undertaking equal to the full amount of the judgment. If the companies
could not afford to post an undertaking in this amount, they would be
unable to protect their assets and hence their ability to make their
MSA payments to the states during the appeal.  Thirty-eight states
have recognized the possibility that a large undertaking may cause the
tobacco companies to be unable to meet their obligations to the states
under the MSA, and these states have passed legislation that limits
the size of the required undertaking in cases involving large
judgments. In addition, five other states do not require a defendant


to post an undertaking at all during an appeal, and two states'
Supreme Courts have amended their court rules to limit the maximum
amount of an undertaking so 90% of the states currently limit the
undertaking requirement. Some states have passed legislation that
applies to all litigants, while other states have passed legislation
that applies only to MSA signatories, successors, and affiliates.

The undertaking limits in most of these states range from $1 -million
to $250 million. By limiting the amount of the undertaking that
defendants must pest to stay the execution of the judgment during
appeal, such legislation guarantees that New York State, New York City
and other New York Counties will continue to receive their MSA
payments while the MSA signatories, affiliates, successors and
nonparticipating manufacturers appeal such a judgment.

This bill would impose a $250 million limit on the undertaking that
MSA signatories, affiliates, successors and nonparticipating
manufacturers must post to stay the execution of a judgment in New
York and require that at least 30 percent of the bond be posted in
cash. This undertaking limit would not in any way affect the outcome
of the appeal or the ultimate ability of the plaintiff to prevail in
the appeal. Plaintiffs are protected by the provision in the bill
allowing for a higher bond amount up to the full value of the judgment
if the court determines that the appellant is dissipating assets to
avoid paying a judgment on appeal. This same provision is included in
nearly all of the laws passed in thirty-eight other states that place
a maximum amount on the size of the undertaking that must be posted in
order to stay execution of judgment during an appeal. This legislation
thus would not injure plaintiffs in any way, but would merely ensure
that the tobacco companies are able fully to utilize their
constitutional right to appeal, while protecting the interest of the
state in the continued receipt of its MSA funds during the course of
appeal.

LEGISLATIVE HISTORY:; New bill

FISCAL IMPLICATIONS: No fiscal impact protects revenues of the state
and counties.

EFFECTIVE DATE:

This act shall take effect on the thirtieth day after it shall have
become a law, and shall apply to any cause of action pending on or
filed on or after such effective date.

S3852-2013 Text

 S T A T E   O F   N E W   Y O R K
 
 
                                         3852
 2013-2014 Regular Sessions
 I N  SENATE
 February 22, 2013
 
 Introduced  by  Sen.  DeFRANCISCO -- read twice and ordered printed, and
 when printed to be committed to the Committee on Judiciary
 

AN ACT to amend the civil practice law and rules,  in  relation  to  the
 undertaking required during the pendency of a stay of enforcement of a
 judgment  against  a  participating  or non-participating manufacturer
 under the master settlement agreement
 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section  1.  This  act  shall  be known and may be cited as "state and
 local government master settlement agreement proceeds safeguard act."
 

S 2. Legislative intent. New York state,  New  York  city  and  county
 governments  throughout  the  state  are  the  recipients of hundreds of
 millions of dollars each year under the master settlement agreement. The
 total of all master settlement payments to these  governments  over  the
 years has so far exceeded eleven billion dollars. These funds are vital
 ly  important and any disruption in these payments would put the recipi
 ents at financial risk. The legislature hereby finds that it is  in  the
 public  interest to enact the "state and local government master settle
 ment agreement proceeds safeguard act" in order to continue the flow  of
 these  funds  to  the  state  and local governments which depend on this
 revenue during the appeal of a judgment against master settlement agree
 ment signatories, affiliates, successors and non-participating  manufac
 turers.
 

S  3.  The  civil  practice  law  and rules is amended by adding a new
 section 5519-a to read as follows:

 

S 5519-A. STAY OF ENFORCEMENT FOR MASTER SETTLEMENT AGREEMENT  PARTIC
 IPATING OR NON-PARTICIPATING MANUFACTURERS OR THEIR SUCCESSORS OR AFFIL
 IATES.  (A)  IN  CIVIL  LITIGATION  UNDER  ANY  LEGAL THEORY INVOLVING A
 PARTICIPATING MANUFACTURER OR NON-PARTICIPATING MANUFACTURER,  AS  THOSE
 TERMS  ARE  DEFINED  IN THE MASTER SETTLEMENT AGREEMENT, OR ANY OF THEIR
 SUCCESSORS OR AFFILIATES, THE UNDERTAKING REQUIRED DURING  THE  PENDENCY
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD08897-01-3
 
       S. 3852                             2
 OF ALL APPEALS OR DISCRETIONARY REVIEWS BY ANY APPELLATE COURTS IN ORDER
 TO STAY THE EXECUTION OF ANY JUDGMENT OR ORDER GRANTING LEGAL, EQUITABLE
 OR  OTHER RELIEF DURING THE ENTIRE COURSE OF APPELLATE REVIEW, INCLUDING
 REVIEW  BY THE UNITED STATES SUPREME COURT, SHALL BE SET PURSUANT TO THE
 APPLICABLE PROVISIONS OF LAW OR COURT RULES; PROVIDED, HOWEVER, THAT THE
 TOTAL UNDERTAKING REQUIRED OF  ALL  APPELLANTS  COLLECTIVELY  SHALL  NOT
 EXCEED TWO HUNDRED FIFTY MILLION DOLLARS, REGARDLESS OF THE VALUE OF THE
 JUDGMENT  APPEALED.  THIS LIMITATION SHALL APPLY ONLY IF APPELLANTS FILE
 AT LEAST THIRTY PERCENT OF THE TOTAL AMOUNT OF THE  UNDERTAKING  IN  THE
 FORM  OF  CASH,  A  LETTER OF CREDIT, A CERTIFICATE OF DEPOSIT, OR OTHER
 CASH EQUIVALENT WITH THE COURT. THE CASH OR  CASH  EQUIVALENT  SHALL  BE
 DEPOSITED BY THE CLERK OF THE COURT IN THE ACCOUNT OF THE COURT, AND ANY
 INTEREST EARNED SHALL BE UTILIZED AS PROVIDED BY LAW.
 (B) NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION (A) OF THIS SECTION,
 UPON  PROOF  BY A PREPONDERANCE OF THE EVIDENCE, BY AN APPELLEE, THAT AN
 APPELLANT IS DISSIPATING ASSETS OUTSIDE THE COURSE OF ORDINARY  BUSINESS
 TO  AVOID  PAYMENT  OF  A JUDGMENT, A COURT MAY REQUIRE THE APPELLANT TO
 POST A BOND IN AN AMOUNT UP TO THE TOTAL AMOUNT OF THE JUDGMENT.
 (C) AS USED IN THIS SECTION, "MASTER SETTLEMENT AGREEMENT" SHALL  HAVE
 THE  SAME  MEANING  AS SET FORTH IN SUBDIVISION FIVE OF SECTION THIRTEEN
 HUNDRED NINETY-NINE-OO OF THE PUBLIC HEALTH LAW.
 

S 4. This act shall take effect on the thirtieth day  after  it  shall
 have  become a law, and shall apply to any cause of action pending on or
 filed on or after such effective date.

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