"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."

The Tobacco Master Settlement Agreement ("MSA") is vitally important to Alaska and to the 45 other states who are parties to the settlement. It delivers millions of dollars in revenues to Alaska annually, and it will continue to do so for years to come. Yet the continued receipt of these funds is threatened by the huge judgments that have been awarded against the tobacco companies that are funding the settlement. Defendants facing such large judgments almost always have a right to appeal them, and in many cases their appeals are successful in obtaining a reduced judgment or in overturning the judgment entirely. But in order to stay the execution of a money judgment on appeal, a defendant must post a supersedeas (or appeal) bond which, in the diminishing number of states not having limits on appeal bonds, usually equals the amount of the judgment. In Alaska, the bond required is ordinarily the amount of the judgment remaining unsatisfied, plus appeal costs and interest. ¹ But Alaska courts are permitted to set the bond in a different amount for good cause shown -- meaning judges may set the bond at an amount exceeding the total judgment. ²

If a company cannot afford to post a bond in the amount set by the court, the company may be forced to file for bankruptcy -- which carries with it an automatic stay of the debtor's obligation to pay its creditors -- in order to stop the plaintiff from taking its assets during the appeal. Such a stay could disrupt payments by the company, including payments to Alaska and the other states under the MSA. This problem has been most vividly demonstrated by the ongoing Engle case in Florida, in which a class of smokers was awarded $145 billion in punitive damages. Had there not been an appeal bond cap in place at the time, the defendant tobacco companies would clearly have gone bankrupt, resulting in the termination of all MSA settlement payments nationwide, and precluding the ability to pursue a fair and orderly appeal. However, because Florida had previously enacted bond cap legislation, the settlement payments continued during the appeal, and the appellate court ultimately rejected and reversed the verdict in its entirety.

To date, 26 states have recognized the possibility of enormous appeal bonds causing signatory companies to be unable to meet their obligations to the states under the MSA, and 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. Some states have passed legislation applying broadly to all litigants, while other states have passed more limited legislation applying only to MSA signatories, successors, and affiliates. The bond limits range from $1 million to $150 million. Nearly all of the statutes include a provision allowing for a higher bond amount up to the full value of the judgment if the court determines the appellant dissipating assets to avoid paying a judgment.

HB 468 imposes a $25 million limit on the supersedeas bond MSA signatories, successors, and affiliates must post to stay the execution of a judgment in Alaska. This bond limit would not change any other aspect of the law -- meaning it does not change the rules by which the trial is conducted, or affect who ultimately wins or loses the lawsuit -- or affect the rights of plaintiffs to recover fully the damages to which they are entitled if the judgment is upheld on appeal. Plaintiffs are also protected by the provision in the proposed legislation allowing the court to require a bond amount up to the value of the judgment if the appellant is dissipating its assets to avoid paying a judgment. HB 468 thus would not injure plaintiffs in any way, and it would protect the state by ensuring it will continue to receive its MSA payments while the tobacco companies fully appeal an adverse judgment.

I urge your support for this legislation.

1. Alaska R. App. P. 204(d)
2. Id.

Version: 23-LS1719A

# # #