Legislature(1995 - 1996)
02/19/1996 01:05 PM House JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 316 - CIVIL LIABILITY FOR IMPROPER LAWSUIT CHAIRMAN PORTER recognized Representative Mulder as sponsor to HB 316, this was the first bill up for consideration. REPRESENTATIVE MULDER read the sponsor statement to HB 316 into the record. "House Bill 316 requires parties to law suits to be truthful and responsible in their pleadings. This bill discourages false statements in litigation and encourages responsibility by all parties and their attorneys. It requires more careful and focused preparation and presentation of pleadings. This bill creates an obligation for litigants and attorneys to make reasonable efforts to insure that claims have a probability of succeeding. If the claim is knowingly or recklessly false, both the attorney and the party can be assessed damages. HB 316 requires attorneys and their clients to research their claims to assure they are factually supported before filing a suit. This bill will help eliminate 'boiler plate' pleadings in law suits and encourage responsible and focused pleadings. 'Boiler plate' pleadings include everything anyone could ever imagine could ever have happened rather than focusing on those specific issues that actually happened. These extraneous pleadings are expensive to work through and are most often thrown out. They simply cause one party to expend significant dollars to pare the filing down to the real issues. Many suits are often times cheaper to settle than litigate, regardless of their merit. [And that I believe Mr. Chairman is a real problem, a real problem we're trying to address within this bill.] This bill does not affect suits filed in good faith. It will, however, have a significant deterrent effect on those without merit. A system that allows deceit to be rewarded must be changed. This bill assigns financial responsibility to those who file suits without probable cause, those who provide false information, those who want to sue claims and cross claims to cloud the issues and those who want to go on unsuccessful fishing trips. This is not why we have, nor support a judicial system. A jury will make the determination whether the information presented was intentional and material. If honest errors are made, there will be no problem. I believe that the jury can make these decisions and that the deterrent effect of this bill will apply to those cases that are inappropriate without inhibiting the filings of cases believed to have merit." REPRESENTATIVE MULDER went on to add that the focus of this bill is to make people responsible for their litigation and to deter those who file frivolous claims or factually inaccurate claims by making them financially responsible for knowingly filing a false claims. This would include somone who knowingly tried to extend a case by simply adding further cost to the case. This legislation attempts to make a system which is more equitable, more fair and to make people more responsible for their actions within the court system. He felt that this legislation would give people a greater confidence level within the court system and would help to expedite the hearing process. Number 326 REPRESENTATIVE TOOHEY made a motion to move version 9-LS1013\K of CSHB 316(JUD) as the working draft of this legislation before the committee. Hearing no objection it was so moved. Number 384 ROBERT MINTZ, Esq., testified from Anchorage by teleconference regarding HB 316. He stated that the basic issue addressed by this bill was to give injured parties effective remedies for bad faith, civil litigation. The essence of the bill allows for people who actually suffer harm due to abuse of the civil justice system to be compensated for their injuries. In addition, people who cause this harm by abusing the civil justice system, they will be forced to pay compensation. MR. MINTZ outlined that abuses of the justice system under this legislation would be the following: Intentionally or maliciously asserting false claims and allegations, or asserting claims and allegations without first making an effort to determine whether or not a party has a reasonable basis to do so. The standards of conduct embodied in this bill are similar to other standards of conduct such as under Civil Rule 11 and the common law tort of malicious prosecution, but a significant aspect of this legislation is that the victims of the bad faith litigation become the rule enforcers, not the legal community. HB 316 is a departure from the existing system of self-regulation of the legal profession. It gives victims of unscrupulous attorneys and their clients the ability to be compensated in cases of what ordinary people would consider to be outrageous conduct. MR. MINTZ noted that section (a) (1) of the bill provides for a person (party or an attorney) shall not knowingly or recklessly file a pleading that contains false or misleading statements of facts or allegations. The standard employed is one that's higher than simple negligence. Someone can't get in trouble by making a simple mistake. They have to intentionally make a mis-statement or they would have reason to believe these statements are untrue. Also a reasonable person would make additional investigations into a situation before they cast a stone, so to speak. MR. MINTZ further outlined that sections (a) (2) and (a) (3) of the bill are very similar to the existing Civil Rule 11 in terms of the standard of conduct that's utilized. It requires that each claim and defense should be well grounded in fact and supported by law. Sections (d), (e) and (f) of the bill are a variation of the existing malicious prosecution common law action. Currently under common law, a person who is a victim of a malicious law suit has to prove both, that the law suit was brought maliciously and that the conduct of the party bringing the law suit was unreasonable. HB 316 would uncouple these requirements and would enable a person to bring an action of malicious prosecution if either these conditions were present. MR. MINTZ stressed that the key difference between this bill and existing law is that the client and attorney will be held personally liable for damages caused by their conduct and the person who enforces the system of conduct is the person who's hurt, not the court system. He noted that if this bill is enacted most attorneys will experience a minor inconvenience because of the potential personal liability for themselves and their clients, these attorneys will be forced to do better investigations up front as well as, document the basis for claims and allegations prior to asserting them. MR. MINTZ used specific examples of how this legislation would affect particular law suits as follows: If someone knowingly lies to drag a person into court then this prior person will end up paying for this. If someone beefs up a complaint with frivolous claims to increase the settlement value, then they will end up paying for this. If someone asserts claims without checking first to see if they have a reasonable basis, then they'll pay for that. If someone files a case maliciously in an attempt to extort money because it would be cheaper for a defendant to settle than to fight, then they'll end up paying for this too. Mr. Mintz noted that currently there are insufficient adverse economic consequences associated with abuses of the legal system. HB 316 is designed to fix this. Number 726 REPRESENTATIVE BUNDE stated he heard that for major corporations and insurance companies the threshold for fighting a suit is about $50,000, that it's cheaper to settle a frivolous lawsuit up to $50,000 than it is to go to court. Representative Bunde asked Mr. Mintz if he could confirm this. MR. MINTZ answered that this really depends. The company which he works for usually stands on principle, so he said their threshold is lower than $50,000. The claim would have to be less than $10,000 to pay extortion money. On the other hand, he knew of situations where people were personally exposed to significant, potential liability which was unfounded and the payout was a lot more than $50,000 rather than fight it. He could cite cases over a $1 million was spent in defense costs, prior to completion of discovery and the case was ultimately settled under $20,000. Mr. Mintz also noted cases where dozens of counts were brought and one or two of them had any substance, but it cost literally hundreds of thousands of dollars to dispose of the frivolous claims. Number 887 REPRESENTATIVE BUNDE asked Mr. Mintz about the previous year and asked him to cite cases that he felt would have fallen under the provision of this bill as a frivolous law suit. MR. MINTZ said he was personally aware of at least a couple of cases. He wished to punctuate this by saying that he was an attorney and that he did practice law as a partner in a local law firm before he went to work for a real estate company. In his practice he said he hardly ran into what he would characterize as a "scum-bag" attorney who was bulking up and filing frivolous complaints, but he did point out that this happens. He said he's run into situations like this in the business world rather than the law field. Mr. Mintz noted that it finally dawned on him that nothing bad happens to people who engage in this kind of deceptive conduct. Number 982 REPRESENTATIVE FINKELSTEIN asked about a situation where someone has suffered an injury, the injury is no doubt real, but the question becomes who is at fault. Without the discovery proceedings how would somebody go about figuring out who to sue, if for instance, some of the parties involved might be unwilling to divulge any information without the discovery process. MR. MINTZ stated that the effect of this bill on the legitimate practitioner would be negligible. It only requires that an attorney first must make an effort to determine if there is a basis for the claims and the allegations. Based on this the attorney must then assert claims and allegations as long as this attorney does not have information which make these assertions false. Also, if this attorney knows they don't have the predicate or the requisite elements to prove a claim, then this claim should not be made. Number 1099 REPRESENTATIVE MULDER stated that there was not a fiscal note attached to this legislation, but that there was a like bill in the senate and the fiscal note corresponding to this senate version would be made available to the committee. Number 1120 MICHAEL LESSMEIER, Esq., representing State Farm testified on HB 316. Mr. Lessmeier stated that this bill was a truth bill and a responsibility bill. This legislation ensures a level of responsibility in civil litigation which doesn't currently exist. The second aspect of this bill is the truth aspect and this is under subsection (b) which addresses a person who essentially appears in court and lies. What happens presently is that there isn't a disincentive for doing this, except that this person's credibility may suffer in front of a jury. This provision here would force every lawyer to inform their clients that if they lie in court, the court will throw them out on whatever claim in conjunction they assert. It creates a more open and shut case situation, rather than the jury weighing this person's credibility against the evidence. MR. LESSMEIER noted that this section wouldn't probably be used very often, but it would be an incredible deterrent to what he thought happens quite frequently in the courts right now. Personally, Mr. Lessmeier said he represents doctors, a hospital, etc. and he is frequently exposed to cases where someone will tell him that they can make this as expensive for Mr. Lessmeier and his client as they can, and that it would be in their best interest to settle this case. He noted that just in the last month this had occurred. He also added that the cases which they see this type of behavior are not always frivolous, but cases where a person may have a legitimate basis, for example, someone has been injured in an automobile accident and under oath they say they have not been involved in a prior accident, but later on it's found out that they have. This occurs with an incredible amount of frequency. A provision related to these types of situations was inserted in this legislation, which would be self-effectuating, since most of the Judges will not get involved with sanctioning someone for conduct like this. Hence, this is why they inserted the truth provision under subsection (b). If a jury finds someone has lied it must be intentional, material and it has to be false, then they can just send them home on this claim. Number 1296 REPRESENTATIVE BUNDE asked about the penalties which might be asserted under these situations. MR. LESSMEIER stated that penalties had to do with the responsibility provision of this legislation. The way this bill is drafted, if it's discovered that the party has lied, rather than the attorney, then in the very same action this can be asserted. If it is established that damages were incurred as a result, these damages could be recovered. If the attorney was involved in this dishonesty, a separate cause of action would have to be brought. Number 1355 REPRESENTATIVE FINKELSTEIN asked if this self-effectuating nature of the legislation would add to the already bogged-down cases in the legal system. MR. LESSMEIER said he didn't see this happening. Once a false or inconsistent statement has been made, under subsection (b) this argument would be made to the jury and the jury would be instructed on this particular issue. It shouldn't bog the system down at all. It should be easy to quantify the damages that someone has suffered, once the lie or false statement has been discovered. REPRESENTATIVE FINKELSTEIN used the O.J. Simpson trial as an example of constant discussions regarding whether or not something was improper. MR. LESSMEIER pointed out that this subsection, because it was self-effectuating, it would be much quicker than a judicial decision and has all of the safeguards that are inherent in a decision by a group of peers. REPRESENTATIVE FINKELSTEIN asked how this could be done without biasing the rest of the case. MR. LESSMEIER responded that this legislation deals with civil actions and it would deal only with the issue of negligence. Credibility affects some issues, but not others, for example, credibility wouldn't affect how an accident occurred. How the accident occurred may not be in dispute. The effect of this bill in a large part would be a deterrent. Number 1612 REPRESENTATIVE FINKELSTEIN asked if anyone would be testifying from the Department of Law. He also asked if there was an administration position on this legislation. REPRESENTATIVE MULDER responded that he was not aware of the administration having a position on this legislation. Number 1630 REPRESENTATIVE VEZEY stated that he was curious what constitutional questions this legislation might raise. MR. MINTZ said he didn't see a constitutional issue in terms of rights or civil liberties. There is an issue under the Alaska constitution as to whether or not this legislation could be construed as a rule change, which would require a large majority of the legislature to enact, but he stated they tried to craft this legislation carefully in such a way as to create causes of action, rather than changes to court rules. Number 1672 REPRESENTATIVE FINKELSTEIN pointed out in the bill drafting analysis that they interpreted this legislation as changing court rules. MR. MINTZ said that in the one section pertaining to loosing a claim for lying, the legislative drafters took this position. He referred to section 3, 190 (b) more specifically has the effect of amending Alaska Rule 37 and 190 (b), "the court determines that a party to a civil action has intentionally made a false statement of material fact, the court shall enter judgment against the party making the false statement on the issue to which the false statement relates." Number 1733 REPRESENTATIVE BUNDE made a motion to move CSHB 316 (JUD) from the House Judiciary Committee with individual recommendations and an enclosed fiscal note. Hearing no objection it was so moved.
| Document Name | Date/Time | Subjects |
|---|