S5108-2011 Actions

• Jun 12, 2012: referred to judiciary
• Jun 12, 2012: DELIVERED TO ASSEMBLY
• Jun 12, 2012: PASSED SENATE
• Jun 12, 2012: ORDERED TO THIRD READING CAL.1149
• Jun 12, 2012: COMMITTEE DISCHARGED AND COMMITTED TO RULES
• Jan 4, 2012: REFERRED TO JUDICIARY
• Jan 4, 2012: returned to senate
• Jan 4, 2012: died in assembly
• Jun 17, 2011: referred to judiciary
• Jun 17, 2011: DELIVERED TO ASSEMBLY
• Jun 17, 2011: PASSED SENATE
• Jun 17, 2011: ORDERED TO THIRD READING CAL.1356
• Jun 17, 2011: COMMITTEE DISCHARGED AND COMMITTED TO RULES
• May 16, 2011: PRINT NUMBER 5108A
• May 16, 2011: AMEND (T) AND RECOMMIT TO JUDICIARY
• May 3, 2011: REFERRED TO JUDICIARY

S5108-2011 Votes

S5108-2011 Memo

BILL NUMBER:S5108

TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to the
undertaking required during the stay of enforcement of the tobacco prod-
uct master settlement agreement

PURPOSE:
To safeguard the flow of funds under the tobacco master settlement
agreement ("MSA") to the state by limiting the supersedes bond that MSA
signatories and their successors and affiliates and nonparticipating
manufacturers must post to stay the execution of a judgment during
appeal to one-hundred million dollars, regardless of the value of the
judgment.

SUMMARY OF PROVISIONS:
This bill would provide that the maximum aggregate undertaking required
to stay the execution of a judgment involving a signatory, a successor
to a signatory, or an affiliate of a signatory to the MSA or a nonpar-
ticipating manufacturer shall not exceed $100 million.  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, 1998 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
and the 45 other states that are parties to the settlement. From 2004 to
2009, the states received over $90 billion in MSA payments.  In 2010
alone, New York State, New York City and other New York counties
received approximately $764,600,000 under the MSA.

However, the tobacco companies that make payments to the state pursuant
to the MSA can be 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. (N.Y.  C.P.L.R. 5519). If a tobacco
company is subject to a large judgment and cannot afford to post an
appeal bond in the amount required by New York law, the company's assets
could be seized by the plaintiff during the appeal. This could disrupt
payments by the company, including payments to New York and the other
states under the MSA.

Many states have enacted appeal bond caps to prevent the disruption of
MSA funds: To date, 38 states have recognized the possibility that a
large appeal bond could prevent the tobacco companies from meeting their
obligations to the states under the MSA. These states have passed legis-
lation or amended court rules to limit the size of the required bond in
cases involving large judgments. In addition, five other states do not
require a defendant to post a bond at all during an appeal. It is impor-
tant to understand that these limits on the size of appeal bonds do not
in any way limit the damages a plaintiff can recover or change the law
to make it more likely that a defendant will win its appeal. Some states
have passed legislation that applies broadly to all litigants, while
other states have passed more limited legislation that applies only to
MSA signatories, successors, and affiliates. The bond limits vary in
amount. Nearly all of the statutes include a provision that allows the
court to increase the 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.

By limiting the amount of the undertaking that defendants must post to
stay the execution of the judgment during appeal, this legislation guar-
antees that MSA signatories, affiliates, successors and nonparticipating
manufacturers will be able to appeal a judgment while continuing to make
their payments to New York and other states.

The proposed $100 million limit on appeal bonds is an appropriate and
sensible measure: Capping the amount of potential appeal bonds is a
matter of fundamental fairness and due process. Speaking of a case in
Illinois, where an enormous appeal bond was required, The New York Times
wrote, "[w]hatever the merits of the underlying decision, it is absurd
to require someone - even a cigarette manufacturer - to put up a $12
billion bond to file an appeal. That is the kind of ruling that erodes
the credibility of our legal system." (Too Costly an Appeal, N.Y. Times,
April 4, 2003, at A20.) The Times continued, "in making an appeal so
prohibitively costly," a court "renders the right to an appeal nearly
meaningless, thus violating the defendant's due process rights." The New
York legislature has recognized the danger of requiring appeal bonds
from certain defendants. For example, bonding for five of the thirteen
largest New York verdicts in 2004 and 2005 was subject to a $1 million
statutory cap for "medical, dental or podiatric malpractice" actions.
N.Y. C.P.L.R. 5519(g). Two of the verdicts were eligible for an automat-
ic stay under a provision granting the state and state agencies an auto-
matic stay without a requirement of bond. N.Y.  C.P.L.R. 5519(a)(1).
This provision supports a public policy of stabilizing "the effect of
adverse determinations on governmental entities and prevent[ing] the
disbursement of public funds pending an appeal that might result in a
ruling in the government's favor."  Summerville v. City of New York, 97
N.Y.2d 427, 434 (2002) In light of the damaging consequences if MSA
payments to New York state and its cities and counties were terminated,
the legislature should consider extending this public policy of stabi-
lizing government payments to include stabilizing government MSA reven-
ues.

Adopting an appeal bond limit for MSA signatories and their successors
and affiliates is important to New York. Plaintiffs would be protected
by the limited but large bond and by the provision in the bill allowing
a judge to require a higher bond if a defendant is improperly dissipat-
ing assets. A defendant's right to appeal would be fully protected by
limiting the bond requirement to an appropriate sum. And New York and
the other states would be protected by ensuring that the

MSA signatories can appeal an adverse judgment, thereby avoiding the
necessity of seeking a stay in the bankruptcy court. This, in turn, will
benefit New York and its citizens by preserving the uninterrupted flow
of revenue from the MSA signatories.

LEGISLATIVE HISTORY:
Passed Senate in 2006.

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.

S5108-2011 Text

 S T A T E   O F   N E W   Y O R K
 
 
                                         5108
 2011-2012 Regular Sessions
 I N  SENATE
 May 3, 2011
 
 Introduced  by  Sen. JOHNSON -- 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  stay of enforcement of the tobacco
 product master settlement agreement
 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1. 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 TOBACCO PRODUCT MASTER SETTLEMENT
 AGREEMENT OR AN AFFILIATE OF SUCH A PARTICIPATING  OR  NON-PARTICIPATING
 MANUFACTURER. (A) IN CIVIL LITIGATION UNDER ANY LEGAL THEORY INVOLVING A
 PARTICIPATING MANUFACTURER OR A 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
 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 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 ONE HUNDRED MILLION DOLLARS, REGARDLESS OF
 THE VALUE OF THE JUDGMENT APPEALED.
 (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.
 

S  2.  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.
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD11326-01-1

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