R.J. Reynolds Tobacco Co. v. Hall

67 So. 3d 1084, 2011 Fla. App. LEXIS 10909, 2011 WL 2685609
District Court of Appeal of Florida·Decided July 12, 2011·No. 1D10-2820·Published·Cited by 7 cases

Opinion

ON MOTION FOR REVIEW OF STAY ORDER

WETHERELL, J.

Appellee seeks review of the trial court’s order denying her motion challenging the sufficiency of the bond posted by Appellant, R.J. Reynolds Tobacco Company (RJR), pursuant to section 569.23(3), Florida Statutes (2010), to obtain a stay of the judgment in this Engle 1 progeny case. Appellee contends that the bond is insufficient because the statute upon which it is based is unconstitutional. We reject Appellee’s constitutional challenges to section 569.23(3) and affirm the trial court’s order.

Appellee obtained a $15.75 million judgment against RJR in this case. RJR appealed the judgment to this court and obtained an automatic stay of the judgment by posting a $5 million bond in accordance with section 569.23(3), rather than the approximately $17.6 million bond that would have been required for a stay under Florida Rule of Appellate Procedure 9.310(b)(1). Appellee filed a motion with the trial court to determine the sufficiency of the bond and, in that motion, Appellee argued that section 569.23(3) was unconstitutional. The Attorney General was permitted to intervene to defend the constitutionality of the statute. After a hearing, the trial court denied the motion, citing an unpublished order of this court in another Engle progeny case 2 and the Third District Court of Appeal’s decision in BDO Seidman, LLP v. Banco Espirito Santo International, Ltd. 3 Appellee seeks review of the trial court’s order pursuant to rule 9.310(f). 4

As she did below, Appellee contends in her motion for review that section 569.23(3) is unconstitutional because 1) it is a special law granting a privilege to a corporation in violation of article III, section ll(a)(12) of the Florida Constitution, and 2) it impermissibly intrudes on the Florida Supreme Court’s authority to regulate practice and procedure in the courts under article V, section 2(a), thereby violating the separation of powers mandate in article II, section 3. Each claim will be addressed in turn after a brief discussion of the background, history and operation of section 569.23(3).

Background

In 1995, the State of Florida sued RJR and other cigarette manufacturers, asserting various claims for monetary and in-junctive relief. See State of Fla., et al. v. Am. Tobacco Co., et al., Case No. 95-1466 AH, 1996 WL 788371 (Fla. 15th Cir.Ct.). *1087 The suit was resolved in 1997 through a settlement agreement (commonly referred to as “the FSA”) that, among other things, required RJR and the other settling companies to pay the State approximately $13 billion over 25 years along with additional payments that will continue in perpetuity. The payments have been as high as $765 million and are projected to be approximately $350 million per year in the upcoming fiscal years. The payments are used to fund various state agencies and programs, including the comprehensive statewide tobacco education and prevention program mandated by article X, section 27 of the Florida Constitution. See Art. X, § 27(b), Fla. Const. (requiring 15% of the total gross funds that tobacco companies pay the State under the FSA to be used to fund the constitutionally-mandated tobacco education and prevention program).

Starting in 2000, the Florida Legislature passed several statutes in response to concerns about the potential adverse impact of large verdicts in suits filed by individual smokers on the ability of the tobacco companies to continue to make the payments required by the FSA. The clear purpose and intent of these statutes was to protect the State’s pecuniary interest in the revenue stream under the FSA.

In 2000, the Legislature enacted section 768.733, Florida Statutes. This statute established a $100 million cap on the bond or other security required to stay execution of a punitive damage award in a certified class action. See § 768.733(2), Fla. Stat. (2000) (limiting the bond to the lesser of the amount of the punitive damages plus interest or 10% of the defendant’s net worth, but in no event more than $100 million). At the time, Engle was proceeding as a class action and the jury had awarded $146 billion in punitive damages against RJR and the other defendants in that case. The Legislature was concerned that “the State of Florida itself would be at risk in its continued receipt of settlement payments if the ability of participating manufacturers to make the payments were threatened by a requirement that the manufacturers immediately pay massive awards of punitive damages.” See Fla. CS for SB 1720 (2000) (First Engrossed) (providing legislative intent for section 768.733 as recognized in Fla. S. Jour. 1442 (Reg. Sess. 2000)); see also Fla. H.R. Comm. on Fin. Servs. CS/HB 1721 5 Staff Analysis 1, 4 (final July 13, 2000) (on file with comm.) (explaining that section 768.733 was part of a comprehensive bill designed to protect the state’s proceeds under the FSA, and noting that “[wjhile the tobacco settlement payments are to be made in perpetuity, there is concern by some that the companies may declare bankruptcy and default on their obligations” because of lawsuits such as Engle).

In 2003, the Legislature enacted section 569.23. This statute established a $100 million cap on the bond or other security that a signatory to the FSA had to post in order to obtain a stay of any judgment pending appeal. See § 569.23(1), Fla. Stat. (2003) (cross-referencing section 215.56005(1)(f), which defined “tobacco settlement agreement” to mean “the settlement agreement, as amended, entered into by the state and participating cigarette manufacturers in settlement of State of Florida v. American Tobacco Co., No. 95-1466 AH, 1996 WL 788371 (Fla. 15th Cir. Ct.1996)”). As was the case with section 768.733, the enactment of section 569.23(3) was based on concerns that the FSA signatories might default on their obligations to *1088 the State if they could not afford the bond required to stay an extremely large money judgment pending appeal. See Fla. S. Comm, on Judiciary SB 2826 6 Staff Analysis 3 (Apr. 18, 2003) (on file with comm.).

Section 569.23 was amended in 2009 in response to the Florida Supreme Court’s decision in Engle, which had the practical effect of decertifying the class in that case. The legislative staff analysis for the 2009 amendments explained:

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R.J. Reynolds Tobacco Co. v. Hall, 67 So. 3d 1084, 2011 Fla. App. LEXIS 10909, 2011 WL 2685609 (Fla. Ct. App. 2011).

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