Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/31/2015 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| Confirmation Hearing | |
| SB76 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 76 | TELECONFERENCED | |
| *+ | SB 77 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SB 76-REAL ESTATE BROKERS; LIABILITY
2:32:19 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 76. "An Act relating to private actions and
remedies against real estate licensees for licensee
relationships, disclosures, and activity before January 1, 2005;
and providing for an effective date."
2:32:45 PM
GENEVIEVE WOJTUSIK, Staff, Senator Lesil McGuire, introduced SB
76 speaking to the following sponsor statement: [Original
punctuation provided.]
Under AS 08.88.396, a real estate licensee acting
before January 1, 2005 was authorized to act as both a
buyer's and a seller's representative, but only after
the licensee informed both the buyer and the seller of
his or her dual agency and obtained written consent
from both. The statute, as originally enacted, did not
specify remedies if a real estate licensee (or agent)
violated its provisions.
In 2003, the Alaska Legislature acted to correct the
remedies-omission. The Legislature was concerned that
without specifying its intent with respect to
appropriate remedies in the case of a violation, a
court might feel compelled to impose the potentially
business-ending remedy of forfeiture of real-estate
sales commissions. The Legislature was particularly
concerned that this could occur in cases even where
the plaintiffs had suffered no actual damages.
In order to address this concern, the Legislature
enacted House Bill 257, legislation that fixed this
ambiguity by retroactively limiting the remedy for
violations of AS 08.88.396 to actual damages. [House
Bill] 257 passed the Legislature, was signed into law
and has been found constitutional by the Alaska
Supreme Court.
Despite the enactment of House Bill 257, and despite
the Alaska Supreme Court's determination that the law
is constitutional, questions have arisen regarding the
Legislature's intent in amending AS 08.88.396. Senate
Bill 76 is intended to make clear the Legislature's
intent when it amended AS 08.88.396 in 2003 by
specifying and clarifying that the "actual damages"
limitation of the 2003 amendment applies to all claims
that are based upon or arise out of allegations of
violations of AS 08.88.396.
The clarification is necessarily retroactive because
the Legislature enacted House Bill 29 in 2004 which,
among other things, specified that AS 08.88.396 ceased
to apply to real estate transactions as of January 1,
2005; and the Legislature desires to ensure that any
claims pre-dating the 2005 effective date of House
Bill 29 are appropriately subject to the intent of its
2003 enactment of House Bill 257.
The retroactivity of the bill is constitutional, as
provided in both U.S. Supreme Court and Alaska Supreme
Court decisions.1 This bill preserves the right of
purchasers of real estate to seek redress for actual
damages under AS 08.88.396 while ensuring that the
Legislature's intent that only actual damages be
awarded is recognized by courts hearing cases arising
within the relevant time periods.
2:35:45 PM
JEFFREY PICKETT, Staff Counsel to the Senate Judiciary
Committee, Anchorage, Alaska, proved the following sectional
analysis:
Section 1 amends the wording of AS 08.88.396(e) which,
for real estate transactions that occurred before
January 1, 2005, limits civil litigation and other
remedies for the failure of a real estate licensee to
comply with certain requirements concerning
relationships with and disclosures to buyers and
sellers.
Section 2 provides that the bill applies to a real
estate transaction that occurred on or before the
bill's effective date, and to a court action related
to such a transaction pending on the effective date of
bill.
Section 3 makes sec. 1 of the bill retroactive to
January 1, 1991.
Section 4 makes the bill effective immediately.
2:37:20 PM
SENATOR MEYER joined the committee.
SENATOR GIESSEL asked if it's possible to make a law retroactive
if there's an ongoing case.
MR. PICKETT explained that there is case law that says a law may
be retroactive in a pending case so long as there is not a final
judgment. The U.S. Supreme Court has found that this does not
violate the separation of powers, and that type of action has
been found constitutional.
SENATOR GIESSEL asked if there have been any cases that this
bill would impact.
MR. PICKETT answered yes; there's a case from 2002. In 2003 the
legislature amended the statute to limit any remedy to actual
damages. The litigants continued their motion practice and in
2005 Judge Hensley ruled that the amendment to AS 08.88.396 was
a constitutional amendment and it limited remedies only to
actual damages. In 2007 another judge affirmed Judge Hensley's
2005 finding. In 2010 another judge followed the theory that
says there is a common law duty among real estate licensees to
disclose if they're acting in a dual role. Because it is common
law duty and not statutory duty, the remedy of forfeiture is
available.
SB 76 clarifies that the remedy of forfeiture is not available
to any action arising out of a failure to disclose dual agency.
2:41:23 PM
CHAIR COSTELLO asked what is at stake and what the bill seeks to
resolve.
MR. PICKETT explained that the issue is what penalties might be
imposed on a real estate licensee who did not disclose that
he/she was acting in a dual capacity. His understanding is that
prior to 2002, real estate licensees didn't comply with the
requirement to disclose because there wasn't a penalty for not
doing so. He surmised that there were a lot of back-dated
disclosures following the lawsuit. The purpose was to provide
the required notice and, in situations where nobody was harmed
by the failure to disclose, to remove the threat of forfeiture
of commissions.
CHAIR COSTELLO asked if part of the vagary is that the law
neglected to say when the disclosure had to occur.
MR. PICKETT said he didn't know what the timing requirements
were in 2002.
2:44:08 PM
CHAIR COSTELLO asked what significance it has to change the
language on page 1, line 6, striking the term "for" and
replacing it with "arising out of."
MR. PICKETT replied the term "arising out of" has a much broader
meaning so any claim arising out of a failure to disclose dual
agency now would come within the remedy restriction of actual
damages.
CHAIR COSTELLO questioned how this legislation clarifies the
intent of the legislature when the courts have been unable to do
so.
MR. PICKETT opined that the "arising out of" language is broad
enough to encompass common law claims. He acknowledged that it
would ultimately be decided by a judge.
CHAIR COSTELLO commented on the court reviewing the public
record to determine the intent of the legislature.
SENATOR ELLIS suggested the committee hear from Mr. Howard
Trickey who could provide the history of the matter in layman's
terms.
CHAIR COSTELLO opened public testimony.
2:48:09 PM
HOWARD S. TRICKEY, Attorney, related that he testified in 2003
about why it was necessary for the real estate industry to limit
damages for the statutory violation to actual damages. At the
time the industry was potentially exposed to $70 million for
forfeiture and disgorgement of all commissions that may have
been earned over a three-year period by people in the industry
who were involved in dual-agency transactions. The law permitted
dual agency transactions once there was a disclosure and written
consent was obtained. The industry practice at the time was to
make the written and oral disclosures at the time the properties
were being showed to a potential buyer. There were written
disclosure forms that disclosed "I'm an agent for the seller" or
"I'm an agent for this buyer" and then written consents were
obtained both from the buyer and the seller. It was a buyer's
market so when someone showed up at a residence that was being
shown by a listing agent, offers were often made on the spot.
He said he's always characterized the violation that's asserted
in the lawsuit as a technical timing violation. The industry
made the disclosures and obtained the written consents, but
there was confusion because the statute did not specify the
timing for making those disclosures. That technical timing
violation was exploited in the lawsuit and the threat to the
industry was forfeiture of all commissions earned. It was a no
harm no foul situation but aggregating claims through a class
action creates a bet the farm type of case that puts the entire
business at risk. The claim that's being asserted is for $30
million, which is what led the legislature in 2003 to limit the
remedy to actual damages.
MR. TRICKEY said this matter is before this committee again
because a judge who didn't like the statute came up with a
creative decision that allows the use of the statutory
violations to support the remedy of a breach of a common law
duty. The proof is based on identifying the problems that the
legislature originally addressed in House Bill 257, which simply
had to do with the timing of the written disclosures and the
timing of obtaining the written consent. SB 76 seeks to bring
the needed clarification.
He explained that the reason for using the term "arising out of"
is that it's broader than the original statute but it's broad
only in limiting remedies for the violation of the statute to
actual damages. It doesn't take away any other existing claim.
This remedy for violating the statue is actual damages.
Addressing Senator Giessel's question, he explained that it's
constitutional because there is no contractual right to the
remedy of punitive damages or to the remedy of forfeiture. There
isn't any vested right because there is no final judgment in the
case. When the legislature first passed tort reform and capped
punitive damages, there were pending lawsuits that applied. The
Alaska Supreme Court ruled that it was not an improper and
unconstitutional retroactive application because no one had a
judgement entitling them to damages. It's a matter of public
policy for the legislature not the courts because it's a
penalty, not a remedy for actual damages that someone has
suffered.
The industry supports the legislation.
2:56:26 PM
CHAIR COSTELLO asked if he's testifying as a representative of
the defendants or as a member of the public.
MR. TRICKEY confirmed he is being paid to address the issues as
part of the representation he undertook years ago.
2:57:02 PM
ERROL CHAMPION, Chair, Legislative Issues Committee, Alaska
Association of Realtors (AAR), stated support for SB 76 and
noted that he submitted a letter stating the reasons.
CHAIR COSTELLO announced that she would hold SB 76 in committee
and public testimony would remain open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 76 - Version H.PDF |
SL&C 3/31/2015 1:30:00 PM |
SB 76 |
| SB 76 - Fiscal Note.pdf |
SL&C 3/31/2015 1:30:00 PM |
SB 76 |
| SB 76 - Sectional Analysis.PDF |
SL&C 3/31/2015 1:30:00 PM |
SB 76 |
| SB 76- Sponsor Statement.pdf |
SL&C 3/31/2015 1:30:00 PM |
SB 76 |
| SB 77 - Fiscal Note DCCED 2.pdf |
SL&C 3/31/2015 1:30:00 PM |
SB 77 |
| SB 77 - Fiscal Note DCCED.pdf |
SL&C 3/31/2015 1:30:00 PM |
SB 77 |
| SB 77 - Sectional Analysis.PDF |
SL&C 3/31/2015 1:30:00 PM |
SB 77 |
| SB 77 - Version E.PDF |
SL&C 3/31/2015 1:30:00 PM |
SB 77 |
| SB 77 Sponsor Statement.pdf |
SL&C 3/31/2015 1:30:00 PM |
SB 77 |