Legislature(2003 - 2004)
03/16/2004 01:10 PM House JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 468 - APPEAL BONDS: TOBACCO SETTLEMENT PARTIES Number 0240 CHAIR McGUIRE announced that the final order of business would be HOUSE BILL NO. 468, "An Act relating to the amount of the bond required to stay execution of a judgment in civil litigation involving a signatory, a successor of a signatory, or an affiliate of a signatory to the tobacco product Master Settlement Agreement during an appeal; amending Rules 204 and 205, Alaska Rules of Appellate Procedure; and providing for an effective date." Number 0331 CHAIR McGUIRE moved to adopt Amendment 1, which read [original punctuation provided]: Page 2, Line 2: Delete "25,000,000" Insert "100,000,000" REPRESENTATIVE HOLM objected. CHAIR McGUIRE explained that Amendment 1 would increase the bond amount, which is reflective of what was done in the Senate. She opined that such an increase in the bond amount is commiserate with what other states have done and more representative of the type of capital that could be put forward. REPRESENTATIVE GARA agreed that $100 million is appropriate. He recalled that there was concern with regard to punitive damages. However, he expressed the need to be sure that there is enough of a bond to cover compensatory [damages]. He suggested that the best avenue would be to have a $100 million bond, but specify that such a limitation should only apply to punitive damages. Therefore, for compensatory damages, the bond would have to be provided under the current rules. Representative Gara noted that the committee should have an amendment from him that also increases the bond amount to $100 million, but only limits the punitive damages verdict to $100 million. CHAIR McGUIRE suggested that the committee should dispense with Amendment 1 first and then, when Representative Gara offers his amendment, the portion addressing the amount [as specified in Amendment 1] could be deleted. REPRESENTATIVE HOLM removed his objection. Number 0558 CHAIR McGUIRE, noting that there were no further objections to Amendment 1, announced that Amendment 1 was adopted. Number 0593 REPRESENTATIVE GARA moved to adopt Amendment 2, labeled 23- LS1719\A.1, bullock, 3/2/04, which read: Page 2, line 1: Delete "total" Insert "portion of the" Page 2, line 2, following "collectively": Insert "that is attributable to the amount of the judgment for punitive damages" Page 2, lines 2 - 3: Delete "$25,000,000, regardless of the value of the judgment" Insert "$100,000,000" CHAIR McGUIRE objected. REPRESENTATIVE GARA recalled that at the last hearing on this bill, the testimony from the tobacco industry's attorney relayed concern with regard to large punitive damages amounts. This [legislation] creates a special exception to the bond rules, with which he is uncomfortable. He said that he could perhaps [understand such an exception] if the bonds are being limited only in the area of punitive damages. However, he reiterated that he didn't want to limit the bond amount for compensatory damages. REPRESENTATIVE ANDERSON opined that [Amendment 2] doesn't follow the intent of the legislation, and could cause the reverse effect. Representative Anderson announced that he opposed Amendment 2, save the last portion that is encompassed in Amendment 1. CHAIR McGUIRE pointed out that most of the states that apply similar legislation to punitive [damages] use [a bond amount of] $25 million. REPRESENTATIVE GARA remarked that a minority of states, one of which is Kentucky, do [what is proposed in Amendment 2]. Number 0777 REPRESENTATIVE ANDERSON opined that this is a financial issue not a public health issue. Furthermore, when the [limit] is changed with regard to punitive damages, it changes the intent of the law. Therefore, the change made by Amendment 1 is sufficient. REPRESENTATIVE GARA remarked that a class action lawsuit is the only circumstance for which he could envision a verdict this large. He surmised that if it is a class action lawsuit, then the bond amount would apply to the entire suit. If there ever is such a case, the cigarette company should have to post a bond to cover those it has harmed under the current laws and rules. Representative Gara said he is willing to [give the cigarette company] something on the punitive damages portion, but not on the compensatory damages portion. Number 0887 CHAIR McGUIRE moved an amendment to Amendment 2, which would delete the last portion of Amendment 2, which read: Page 2, lines 2 - 3: Delete "$25,000,000, regardless of the value of the judgment" Insert "$100,000,000" CHAIR McGUIRE asked whether there were any objections to the amendment to Amendment 2. There being none, the amendment to Amendment 2 was adopted. CHAIR McGUIRE clarified that before the committee is Amendment 2 as amended, which now read: Page 2, line 1: Delete "total" Insert "portion of the" Page 2, line 2, following "collectively": Insert "that is attributable to the amount of the judgment for punitive damages" REPRESENTATIVE OGG offered his understanding that [subsection] (a) of the bill only applies to the tobacco settlement. Number 0919 A roll call vote was taken. Representatives Samuels, Gara, and Gruenberg voted in favor of Amendment 2, as amended. Representatives Holm, Anderson, Ogg, and McGuire voted against it. Therefore, Amendment 2, as amended, failed by a vote of 3- 4. REPRESENTATIVE GARA, speaking with regard to Amendment 3, explained that he wanted this limited bond to only apply in tobacco cases. Many of the signatories of the Master Settlement Agreement ("MSA") are conglomerates that might harm people in areas outside of the tobacco area. Therefore, he said he didn't want these conglomerates to benefit from this reduced bond in cases that aren't tobacco related litigation. Number 1000 REPRESENTATIVE GARA moved that the committee adopt Amendment 3, which read [original punctuation provided]: Page 1, line 10, after "civil" Insert: "tobacco-related" REPRESENTATIVE ANDERSON objected. CHAIR McGUIRE recalled that Keith A. Teel, Attorney, Co-Chair, Legislative Practice Group, and Chair, Tobacco Practice Group, Covington & Burling, indicated that there might be a practical problem with this. She recalled that the problem was in regard to how the assets would be separated when [a signatory of the MSA] was involved in other industries besides tobacco. REPRESENTATIVE GARA answered that the assets wouldn't be separated out. If a tobacco-related case is against a [signatory] of the MSA, then the bond limit applies. However, if the case isn't tobacco related, then the bond limit doesn't apply. REPRESENTATIVE SAMUELS remarked that it seems like that's already accomplished through the language on page 1, lines 9-10. REPRESENTATIVE GRUENBERG directed attention to AS 45.53.010, which reads: Sec. 45.53.010. Tobacco product Master Settlement Agreement recognized. The Master Settlement Agreement entered into by certain United States tobacco product manufacturers and the state, and related documents, for settlement of claims raised in State of Alaska v. Philip Morris, Incorporated, and approved by the Alaska Superior Court on February 9, 1999, are recognized. REPRESENTATIVE GRUENBERG pointed out that the entire chapter only relates to the State of Alaska v. Philip Morris, Incorporated litigation, which is tobacco related. He said he didn't believe Amendment 3 did any harm, but indicated that it's already clear. Number 1125 REPRESENTATIVE GARA said he disagrees. He explained that the MSA is a tobacco-related case between the state and tobacco companies. However, Section 1 of HB 468 refers to other cases that have nothing to do with the MSA; HB 468 refers to private litigation involving people who sign onto the MSA. Therefore, since "Phillip Morris" [Phillip Morris USA, Inc.] signed onto the MSA five years ago, this [proposed] bond rule will apply to any future case brought against Phillip Morris, even those unrelated to the MSA. The future litigation to which this bond rule would apply doesn't have to be tobacco-related litigation but could be related to anything [a signatory of the MSA] does to a member of the Alaska public. Although he acknowledged that the circumstances happening at this damage amount are remote, he said that he saw no reason to go out of his way to adopt a special rule for these companies. Representative Gara said, "To the extent these companies might injure people outside of the tobacco context, because they're conglomerates, the bond rule will apply in those cases." REPRESENTATIVE GRUENBERG remarked that he would be surprised if having the proposed bond rule apply to non-tobacco related cases is the intent of the legislation, but added that if that is the intent, then Amendment 3 is necessary. REPRESENTATIVE GARA stated that he didn't like adopting special legislation for special industries. REPRESENTATIVE ANDERSON maintained his objection. Number 1299 A roll call vote was taken. Representatives Gara, Gruenberg, and Ogg voted in favor of Amendment 3. Representatives Samuels, Anderson, Holm, and McGuire voted against it. Therefore, Amendment 3 failed by a vote of 3-4. Number 1321 REPRESENTATIVE GRUENBERG moved that the committee adopt Amendment 4, as follows: Page 2, line 5, Delete "outside the ordinary course of business" CHAIR McGUIRE objected, and subsequently removed her objection. There being no further objection, Amendment 4 was adopted. Number 1409 ROBERT EVANS, Lobbyist, Phillip Morris USA, Inc., in response to questions from Representative Gara, confirmed that Phillip Morris and virtually all of the 40 signatories to the MSA are supporting this [legislation]. He mentioned that the National Association of Attorneys General is comfortable with this as well. REPRESENTATIVE GARA highlighted the discussion regarding whether the bond rule proposed in the legislation only applies to tobacco-related litigation. He asked if Mr. Evans's intent is for [this proposed bond rule] to only apply to tobacco-related litigation. MR. EVANS replied yes, noting that Mr. Teel testified to that effect in the Senate Judiciary Standing Committee meeting. REPRESENTATIVE GARA remarked that he was comforted that it's the intent of the legislation to only apply to tobacco-related litigation. Number 1475 EMILY NENON, Alaska Advocacy Director, American Cancer Society (ACS), recalled a question from the last hearing, and explained that although the American Cancer Society doesn't have a position on appeal bond caps, the American Cancer Society is staunchly opposed to HB 468, which is special consideration being given to the world's largest tobacco companies. Ms. Nenon said that she understands that the idea is to ensure that the state receives its MSA payments. Ms. Nenon disputed the statement at a previous hearing that the state receives, into the general fund, $22-$27 million from the MSA. She informed the committee that the state receives $4-$5 million from the MSA while the other 80 percent of the income stream has already been pulled out as bonds. Therefore, the state wouldn't lose anything from that [80 percent that is set aside] if the tobacco industry went bankrupt. If the major tobacco companies went bankrupt, the state would lose $4-$5 million in MSA payments, and she said she presumes there would be an impact on the over $200 million the state spends for direct health care costs and lost productivity from tobacco-related illness. MS. NENON recalled that at the bill's last hearing, Mr. Teel stated that the only reason similar legislation didn't pass in New Mexico was because the session ended before its passage. However, her American Cancer Society counterpart in New Mexico related to her the following: We fought this tooth and nail and we got two consecutive votes in our favor and the first vote was a tabling motion and the second vote a couple of days later on the last evening of the session was to keep the bill tabled in our House Judiciary Committee after Phillip Morris had to reside the bill there during the last week of our session. On the last day of our session, the Speaker of the House pulled the bill out of that committee ... and they couldn't get it through legitimately. But, [when] he was explicitly threatened with a filibuster on the floor in the final hours of the session, the Speaker backed off. MS. NENON reiterated that the American Cancer Society believes tobacco companies should be held to the same standard as other industries and shouldn't receive special protection from state legislatures. Number 1647 JENNIFER APP, Alaska Advocacy Director, American Heart Association, began by recalling Mr. Teel's statements with regard to the [potential] broad impact of this legislation. She recalled that a hypothetical situation in which a Nabisco truck hit a school bus was posed as an example. In response, Mr. Teel said that the aforementioned wouldn't be a problem because there aren't Nabisco employees in Alaska, and did not say that the legislation is so narrowly drafted that it would prohibit any non-tobacco litigation from falling under this cap. Ms. App said the legislation is clear as it specifies: "in civil litigation under any legal theory involving a signatory, a successor of a signatory, or an affiliate of a signatory to the Master Settlement Agreement". The language "or an affiliate of a signatory to the Master Settlement Agreement" would include any Altria company, which is an affiliate of a signatory of the MSA, in any civil litigation. Therefore, she opined that this [legislation] goes beyond just tobacco. MS. APP noted that she reviewed the rules [Alaska Rules of Appellate Procedure] that this legislation would amend. She pointed out that Rule 204(d) specifies: When the judgment is for the recovery of money not otherwise secured, the amount of the bond shall be fixed at such sum as will cover the whole amount of the judgment remaining unsatisfied, costs on the appeal, and interest, unless the superior court, after notice and hearing and for good cause shown, fixes a different amount or orders security other than the bond. MS. APP opined that currently, Rule 204 already provides protections against bankruptcy. Furthermore, she relayed that she hasn't been able to find any record of any company going bankrupt in Alaska because of needing to pay an appeal bond. She attributed the aforementioned to the safeguard in Rule 204(d). In conclusion, Ms. App announced that the American Heart Association continues to be concerned about HB 468, especially since it believes current rules protect all companies. She commented that tobacco-related companies certainly aren't deserving of additional protection. Number 1786 REPRESENTATIVE GRUENBERG, noting that the intention for this legislation is to apply only to tobacco-related litigation and that there is the potential for it to be read otherwise, moved that the committee [rescind] its [action] in failing to adopt Amendment 3. REPRESENTATIVE ANDERSON objected, saying that the title specifies the [intent] of HB 468. REPRESENTATIVE GRUENBERG pointed out that there is an existing statute that specifies that the title [of legislation] isn't legally part of the act. Therefore, if the intent is to conform to the title, then [the adoption of Amendment 3] is necessary, he opined. REPRESENTATIVE ANDERSON withdrew his objection. CHAIR McGUIRE clarified that Amendment 3 [text previously provided] is now before the committee. Upon determining there were now no objections to the adoption of Amendment 3, she announced that Amendment 3 was adopted. Number 1891 REPRESENTATIVE ANDERSON moved to report HB 468, as amended, out of committee with individual recommendations and the accompanying zero fiscal notes. REPRESENTATIVE GARA objected and indicated that the legislation is unnecessary. This seems like special legislation, he said. Furthermore, this state already has punitive damage caps and economic damage caps that will probably prevent the types of verdicts [that these companies] fear, except in a class action lawsuit. In a class action lawsuit, [these companies] should be subject to the same rules as would anyone else. Therefore, Representative Gara stated that he opposes HB 468. REPRESENTATIVE ANDERSON highlighted that half the states in the nation disagree with Representative Gara and have passed this type of legislation. REPRESENTATIVE GARA maintained his objection. Number 1846 A roll call vote was taken. Representatives Anderson, Ogg, Holm, Samuels, and McGuire voted in favor of reporting HB 468, as amended, from committee. Representatives Gruenberg and Gara voted against it. Therefore, CSHB 468(JUD) was reported out of the House Judiciary Standing Committee by a vote of 5-2.