Senate Bill S5108A

                                BILL NUMBER:S5108A

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
tobacco
product master settlement agreement
signatories or their successors or affiliates

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 nonparticipating
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 legislation 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 important 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
guarantees 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 automatic stay under a provision
granting the state and state agencies an automatic 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 stabilizing government
payments to include stabilizing government MSA revenues.

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 dissipating 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.