Removes cap of $150,000,000 on supersedeas bond for tobacco master settlement signatories to stay the execution of any judgments against the signatories during appeals.

A BILL FOR AN ACT

SECTION 1. This legislature finds that in enacting Act 157, Session Laws of Hawaii 2004, the legislature acted in good faith to assist tobacco master settlement signatories by setting a limit on the amount of any supersedeas bond a signatory may need to post to stay the execution of any judgment against a signatory during appeal. The reasoning behind implementing a supersedeas bond limit was that a tobacco master settlement signatory needs to protect its assets when a verdict for an extremely high amount is entered against the signatory and the amount of the supersedeas bond the signatory posts equals or exceeds the amount of the judgment. The idea that a signatory may not be able to post such a bond, and thus adversely affect its ability to continue to meet its obligations under the master tobacco settlement agreement by continuing to make payments to the State, was the driving factor behind enactment of the supersedeas bond cap. The legislature, in good faith took this action to assist the tobacco master settlement signatories.

However, the legislature finds that these signatories not only have not reciprocated the good faith efforts of the legislature but, in fact, have taken objectionable and disturbing actions in inappropriately targeting youth in their marketing campaigns by using images and symbols representing Hawaii in unsuitable and offensive ways to promote smoking among youth. Specifically, Reynolds American Inc., the makers of Camel cigarettes, has recently unleashed a marketing campaign for Camel cigarettes that showcases the image of a hula girl, uses the name of Kauai, and features pineapple- and coconut-flavored cigarettes. Not only is it tasteless and objectionable to commandeer wholesome images reflecting the State of Hawaii to market a product that is unhealthy, but the use of these images to induce youth to consume tobacco products is both irresponsible and reprehensible and runs counter to the good faith action taken by the legislature in enacting the supersedeas bond cap in Act 157, Session Laws of Hawaii, 2004.

The purpose of this Act is to repeal the limitation on the amount of the supersedeas bond for tobacco master settlement signatories previously enacted in Act 157, Session Laws of Hawaii, 2004.

SECTION 2. Act 157, Session Laws of Hawaii 2004, is amended by repealing section 7.

["PART II

SECTION 7. The legislature finds that the payments that the State receives from tobacco companies under the tobacco master settlement agreement fund vitally important public programs, and it is in the State's interest to protect the continued receipt of these funds.

The legislature further finds that the tobacco companies that make payments to the State pursuant to the tobacco master settlement agreement are involved in extensive litigation that on occasion produces verdicts in the hundreds of millions or billions of dollars. As in other states, were such a verdict entered against the tobacco companies in Hawaii, the only way they could protect their assets, and hence their ability to make their tobacco master settlement agreements payments to the State while they appeal, would be to post a supersedeas bond that could equal or exceed the amount of the judgment. The companies may not be able to post such a bond, and this could adversely impact their ability to continue to meet their obligations under the tobacco master settlement agreement.

The legislature further finds that twenty-four states have recognized this, and these states have passed legislation limiting the size of supersedeas bonds, sometimes in legislation that applies to all litigants and other times in legislation that applies only to tobacco master settlement agreement signatories, successors, and affiliates. By limiting the amount of the bond that defendants must post to stay the execution of the judgment during appeal, such legislation guarantees that tobacco master settlement agreement signatories, affiliates, and successors will be able to appeal a judgment while continuing to make their payments to Hawaii and other states. A supersedeas bond limit would not in any way affect the outcome of the appeal or the ultimate ability of the plaintiff to prevail in the appeal. It would only ensure that the tobacco companies are able fully to use their constitutional right to appeal, while protecting the interest of the State in the receipt of its tobacco master settlement agreement funds during the course of appeal.

Accordingly, the purpose of this part is to safeguard the flow of funds under the tobacco master settlement agreement to the State, by limiting the supersedeas bond that tobacco master settlement agreement signatories and their successors and affiliates must post to stay the execution of a judgment during appeal to $150,000,000 regardless of the amount of the judgment. This part also provides for a higher bond amount, up to the full amount of the judgment, if the court determines that the appellant is dissipating assets to avoid the payment of a judgment."]

SECTION 3. Section 328L-7, Hawaii Revised Statutes, is repealed.

["[§328L-7] Limitation on bond requirements in litigation involving master settlement agreement signatories, successors, and affiliates. (a) In civil litigation under any legal theory involving a signatory, a successor of a signatory, or an affiliate of a signatory to the tobacco master settlement agreement, the supersedeas bond to be furnished to stay the execution of the judgment during the entire course of appellate review shall be set in accordance with applicable laws or court rules, except that the total bond that is required of all appellants collectively shall not exceed $150,000,000, regardless of the amount of the judgment.

(b) Notwithstanding subsection (a), if an appellee proves by a preponderance of the evidence that an appellant is dissipating assets outside the ordinary course of business to avoid the payment of a judgment, a court may require the appellant to post a bond in an amount up to the full amount of the judgment. "]

SECTION 4. Statutory material to be repealed is bracketed and stricken.

SECTION 5. This Act shall take effect upon its approval.