Relates to the undertaking required during the pendency of a stay of enforcement of a judgment under the master settlement agreement

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. 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

S.3852-B of 2013-2014

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.