Legislature(2003 - 2004)

03/16/2004 01:10 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
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                                                               
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-                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                                    
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.                                                                        

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