BILL NUMBER: S3129                Revised 12/05/17

SPONSOR: DEFRANCISCO
 
TITLE OF BILL:

An act to amend the civil practice law and rules, in relation to enact-
ing the "local government jobs and revenue protection act of 2017"

 
PURPOSE:

The purpose of this bill is to enact the Local Government Jobs and
Revenue Protection Act of 2017 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 succes-
sors and affiliates and nonparticipating manufacturers must post to stay
the execution of a judgment during appeal to two-hundred fifty million
dollars 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 nonpar-
ticipating manufacturer shall not exceed $250 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, 1999 by the state and leading United States tobacco product
manufacturers, as defined in Section 1399-00 of the Public Health Codes.

 
JUSTIFICATION:

Currently the Tobacco Master Settlement Agreement delivers hundreds of
millions of dollars in revenues to the state and its localities annual-
ly, and it will continue to do so in perpetuity. In 2017 alone, New York
State, New York City and other New York Counties received approximately
$617,458,922 under the MSA and total payments to date under the MSA to
New York State, New York City and other New York Counties are reaching
$15.2 billion. These funds have either been bonded by recipients or are
used each year as a critical funding stream for jobs, programs and
infrastructure.

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, succes-
sors, 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. This under-
taking limit would not in any way affect the outcome of the appeal or
the ultimate ability of the plaintiff to prevail in the appeal. Plain-
tiffs 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 deter-
mines that .the appellant is dissipating assets to avoid .paying a judg-
ment 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 interests of the state, counties, and New
York City in the continued receipt of its MSA funds during the course of
appeal.

 
LEGISLATIVE HISTORY:

S.8002 of 2016;
S.249, S.6857 of 2015;
S.3852-B of 2013-2014

 
FISCAL IMPLICATIONS:

The DOB expects that MSA payments of approximately $125 million in FY
2018, and $400 million annually thereafter, will be available for State
purposes alone. The 2017-18 Budget directed these funds be used to cover
the State's share of Medicaid. The City of New York and remaining New
York counties received nearly $400 million in 2017.  Absent this legis-
lation, future payments could be in jeopardy.

 
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.