Legislature(1999 - 2000)
03/17/1999 01:12 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 57 - STATE & MUNI IMMUNITY FOR Y2K CHAIRMAN KOTT announced the first order of business is HB 57, "An Act relating to immunity for certain claims against the state, a municipality, or agents, officers, or employees of either, arising out of or in connection with the year 2000 date change; and providing for an effective date." CHAIRMAN KOTT announced there are a series of amendments. Number 0273 REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 2. It reads as follows: Page 3: Delete lines 11-16 Insert: (1) "electronic computing device" includes any computer hardware or software, a computer chip, an embedded chip, process control equipment, or other information system that is used to capture, store, manipulate, or process data; Page 3: Delete lines 20-23 Insert: (3) "year 2000 date change" includes processing date or time data from, into and between calendar year 1999 and calendar year 2000, and leap year calculations; in this paragraph, "processing" includes calculating comparing, sequencing, displaying and storing. REPRESENTATIVE GREEN objected for discussion purposes. REPRESENTATIVE ROKEBERG made a motion to remove the first Page 3 paragraph relating to electronic computing devices. REPRESENTATIVE ROKEBERG stated the nature of the amendment is to clarify the definition of a "year 2000 date change". There is confusion among the public about what day it is - January 1, 2000 or January 1, 2001. REPRESENTATIVE GREEN asked Representative Rokeberg whether he really feels that there is a problem. REPRESENTATIVE ROKEBERG replied there is confusion. There is an 18-month period, according to conventional wisdom, starting July 1, 1999 through the entire next year when the millennium problems will arise. The amendment clarifies that the year 2000 date change is January 1, 2000, not January 1, 2001. Number 0548 REPRESENTATIVE GREEN removed his objection. There being no further objection, Amendment 2, as amended, was so adopted. CHAIRMAN KOTT asked Gail Voigtlander from the Department of Law whether she has any objection to Amendment 2, as amended. GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation Section, Civil Division, Department of Law, testified via teleconference from Anchorage. She doesn't have the amendment in front of her, but it sounds like it is just a clarification of a reference to the twenty- and twenty-first centuries. She doesn't have any comment on that raising a legal issue. Number 0757 REPRESENTATIVE CROFT made a motion to adopt Amendment 3 (1-GH1005\A.2, Ford, 2/8/99). It reads as follows: Page 3, line 9, following "others.": Insert "The immunity described in this subsection does not apply unless the state shows by a preponderance of the evidence that the state used good faith efforts to avoid the failure that caused the damages claimed in the civil action." Page 4, line 23, following "municipality": Insert "; the immunity described in this paragraph does not apply unless the municipality shows by a preponderance of the evidence that the municipality used good faith efforts to avoid the failure that caused the damages claimed in the civil action" REPRESENTATIVE GREEN objected. REPRESENTATIVE CROFT explained Amendment 3 simply sets a minimum standard of due diligence before qualifying for immunity. It asks for good faith efforts to avoid the failure that caused the damages claimed in the civil action. Representative Rokeberg's business immunity bill includes a section that says efforts have to be made. The bill now says, "whether you have done zero, a little, a lot you are treated exactly the same." It doesn't comport with individual or organizational responsibilities that ought to be responsible for their actions or inactions. In principle, he is worried about an unqualified immunity, and practically the state has been able to meet the problems so far by using the Risk Management Fund because of the potential harm of lawsuits. He said, "I would submit that if this blanket, unqualified immunity were enacted a year ago, we could not have used that fund because there would be no risk to manage. We would not, even with the best of intentions, you will not get the same level of effort with no carrot or stick that you would with some partial one. It--it--is what encourages people to function people responsibly is some risk that they would be called to task if they don't. And, to pass a bill that says the states, municipalities, all sorts of local and state government units have no more responsibility to act responsibly, I feel practically will lead to the wrong result, and is just a horrible public policy message." Number 0973 REPRESENTATIVE GREEN concurs with the logic of Representative Croft, but is concerned with the phrase, "preponderance of the evidence". He is concerned that the state would open itself up to litigation if a good faith effort can't be shown overwhelmingly to a judge or jury. He suggested removing the phrase, "...preponderance of the evidence that the municipality...", and including the phrase "that it". The new subparagraph would read, "...does not apply unless the municipality showed that it used good faith efforts to avoid...". REPRESENTATIVE JAMES asked Representative Green whether he also has a problem with that same language in the first subparagraph of Amendment 3. REPRESENTATIVE GREEN replied it should be changed in both places. REPRESENTATIVE CROFT stated he has no objection to the friendly amendment to Amendment 3. CHAIRMAN KOTT asked whether there is any objection. There being no objection, it was so amended. Number 1153 CHAIRMAN KOTT stated, it still seems that by creating a preponderance of evidence standard that must be met before an immunity defense is evoked, the burden of proof is being shifted to the governmental body. He wondered whether it would suggest a number of filings whereby the state and municipalities would tend to settle out of court which would be expense for them. Number 1195 REPRESENTATIVE MURKOWSKI referred to United States Senate Bill 96, the year 2000 (Y2K) fix at the federal level, and other legislation from various states, and noted that everything shows there is at a minimum some due diligence and good faith effort that is required in order for immunity to be invoked. The federal bill says, "...an exercise of due diligence and reasonable care to prevent it...". The standard is not going to be difficult to achieve. She is concerned because right now there is just blanket immunity without a requirement to show some good faith. She thinks there is an obligation to include some demonstration of good faith. Number 1315 REPRESENTATIVE KERTTULA concurs with the comments made by Representative Murkowski. She asked, by taking preponderance of evidence out, what will the level of standard be. Number 1353 MS. VOIGTLANDER stated the court will still know what the standard is by interpreting the statute. If the statute doesn't give a standard then the court will have to graft onto what the standard should be. Practically, if a state or municipality has to make a showing of a good faith effort, it would end up in trial because the courts can't grant summary judgment if there are any genuine issues of material fact. And, in a trial, there really isn't any immunity because it is intended to cut off a claim so that the governmental entity doesn't have to incur defense costs. In AS 09.50.250, there are a number of areas where the state is immune, and it can file a motion to have a claim dismissed at the start, and in the worst case scenario go to a summary judgment thereby avoiding the cost of a trial. In addition, the federal bill mentioned by Representative Murkowski is not intended to be directed towards governmental entities, but as a standard for the general business community. Number 1540 REPRESENTATIVE JAMES stated is seems that including the amendment doesn't avoid a lawsuit when that is the intent of the bill. Number 1555 REPRESENTATIVE CROFT stated he is concerned because there isn't a standard of care. He said, "It is nice to have an immunity. It means you don't have to do any efforts. It means you don't have to worry about ever getting called to task for what you did. It'd be nice if this committee could immunize me for everything I ever did because I wouldn't have to worry so much about being sued. The worry though is what makes our innate goodness, but also our worry that we would get called to task for what we do wrong is what makes us perform correctly. And--and, it's--it's very worrisome to give anyone a blank check to act as however they want, but I think it's even more worrisome to give the state and municipalities, the government, the right to do whatever it wants." In response to Chairman Kott's concern, he suggested the following language: The immunity described in this subsection applies only if the affected party shows that the [state/municipality] did not use good faith efforts to avoid the failure that caused the damages claimed in the civil action. Number 1638 REPRESENTATIVE KERTTULA noted that would shift the burden back to the affected party while still having the same standards. It is a more reasonable way to allow immunity while at the same time showing some due diligence. Number 1655 REPRESENTATIVE JAMES agrees with putting the responsibility of evidence onto the party suing. But, this bill refers to the Y2K problem, a universal problem, that no one asked for and no one prepared to get into. It is so expansive that no matter what good faith efforts are made someone may still be harmed. It makes sense to give immunity on this issue because it is so unpredictable. Number 1707 REPRESENTATIVE GREEN said: "Thank you Mr. Chairman. While--while I'm sympathetic to the fact that we need to make sure that municipalities in the state act--exercise some degree, the fact that the court sounds like it's gonna shift into a mode that we don't want, we're talking about having to defend yourself with the preponderance of evidence. I think perhaps, we've misnumbered these, and I would think that Representative Croft's number four would be a little bit better latitude where it says that regard, in order--we have an immunity unless there is gross negligence, if we can ever define that term, which says that you actually really screwed up and therefore, there should be some liability as opposed to, if I can't defend I'm working my fanny off trying to do something but I can't show 51 percent, I'm dead meat. To me, that's too severe because I think everybody is made aware that there is at least potentially a Y2K problem. And, we have just allocated a lot of funds to try and correct that. Would the courts say that whatever ended up being $14 million is an effort to--to avoid or is that a preponderance of evidence or is that just so be it we've got a $23 billion trust fund so this really isn't preponderance of evidence?" Number 1796 REPRESENTATIVE KERTTULA stated, in response to Representative James' comment, the intention of the amendment is for a finding and showing of fact under circumstances where a municipality hasn't done anything thereby allowing the court to go forward. Number 1836 MS. VOIGTLANDER stated, practically, unless the bill says otherwise, the court can't make findings of fact if they are disputed. The party would make a motion for a summary judgment, and if there are material issues of fact, the court couldn't rule resulting in a battle of the experts of due diligence standards. It isn't much different than arguing reasonable efforts in a negligence case. Practically, as long as there are genuine issues of material fact, there is the possibility of going to trial. The more sophisticated the issue, the more complex the litigation. Number 1918 MICHAEL GATTI, Attorney, Matanuska-Susitna Borough; Member, Alaska Municipal League (AML), testified via teleconference from Mat-Su. In general, the AML supports the bill, but the amendments are problematic. A good-faith effort requirement actually guts the immunity. There is already a preference on the part of the Alaska Supreme Court not to grant summary judgment. It has said that negligent cases are usually fact-intensive, therefore, a summary judgment will unlikely be granted. In addition, a trial is very expensive, impacts the public entity being litigated, and distracts the officials that should be serving the public. In addition, it is not unusual for the legislature to grant blanket immunity for certain governmental activities. There is a laundry list of immunities in statute. It is a good idea because public officials engaging in activities are presumed to be acting (indisc.) and there should be protection without fear of litigation. Typically, the burden to show that a public official did not act (indisc.) is on the person charging the wrongdoing, and the good faith and preponderance of evidence language shifts that burden to the municipalities. Furthermore, in reference to Representative Croft's statement, he has legislative immunity. He cited State v. Dankworth and Kerttula v. Abude (ph) as examples of legislative immunity cases. In addition, while the Matanuska-Susistna Borough has been diligently involved in Y2K issues, other communities that don't have the professional resources or money could be unduly penalized devastating their treasuries. In addition, Ms. Voigtlander is correct about the summary judgment issue, It could open the floodgates for litigation. The big law firms in the Lower 48 are gearing up for Y2K litigation. In addition, AS 09.65.070 talks about immunity for 911 emergency services. He wondered whether there would be a conflict between the immunity granted in the bill with a preponderance of evidence and good faith and the immunity to the 911 system. In summary, municipalities act in good faith. Their conduct is to do the best job for their public. They need the help of the legislature so that they don't suffer with lawsuits taking their time away from important public business. Number 2286 REPRESENTATIVE KERTTULA asked Mr. Gatti whether he heard the amendment by Representative Croft shifting the burden back to the affected party. MR. GATTI replied yes. He urged the committee members not to adopt any of the amendments. Number 2326 REPRESENTATIVE KERTTULA asked Mr. Gatti whether he agrees that simply showing good faith is not a very high standard to require municipalities to live up to. MR. GATTI replied municipalities already engage in good-faith conduct. Either way the burden is shifted, the question is passing muster on a summary judgment, and that likelihood is remote. Number 2373 REPRESENTATIVE CROFT made a motion to amend Amendment 3 to read as follows: Page 3, line 9, following "others.": The immunity described in this subsection applies only if the affected party shows that the [state] did not use good fail efforts to avoid the failure that caused the damages claimed in the civil action. Page 4, line 23, following "municipality": The immunity described in this subsection applies only if the affected party shows that the [municipality] did not use good fail efforts to avoid the failure that caused the damages claimed in the civil action. CHAIRMAN KOTT ruled the motion out of order. REPRESENTATIVE CROFT withdrew Amendment 3 and submitted the new text as Amendment 4. Number 2423 REPRESENTATIVE CROFT made a motion to adopt Amendment 4. It reads as follows: Page 3, line 9, following "others.": The immunity described in this subsection applies only if the affected party shows that the [state] did not use good fail efforts to avoid the failure that caused the damages claimed in the civil action. Page 4, line 23, following "municipality": The immunity described in this subsection applies only if the affected party shows that the [municipality] did not use good fail efforts to avoid the failure that caused the damages claimed in the civil action. REPRESENTATIVES JAMES AND GREEN objected. Number 2456 REPRESENTATIVE GREEN suggested including the phrase, "by clear and convincing evidence", after the word "shows" thereby increasing the hurdle for litigation. TAPE 99-13, SIDE B Number 0001 REPRESENTATIVE GREEN continued. There could be rash of small claims court types of litigation. But, having to show clear and convincing evidence might deter some litigation. Number 0024 CHAIRMAN KOTT appreciates raising the threshold because 80 out of the 200 critical functions of government are in compliance with Y2K. Number 0042 REPRESENTATIVE JAMES stated there is nothing wrong with giving immunity for the Y2K problem. Anything else done will not avoid lawsuits or costs. Number 0060 REPRESENTATIVE CROFT stated it changes the standard and puts a significant burden on the affected party. It isn't his first choice, but if it helps put a standard of care so that the state is not absolving in blanket those that have done nothing, he can accept it as a friendly amendment. CHAIRMAN KOTT asked whether there is objection to the friendly amendment. There being none, Amendment 4, as amended, was so adopted. REPRESENTATIVE MURKOWSKI suggested hearing from Ms. Voigtlander regarding Amendment 4, as amended. Number 0104 MS. VOIGTLANDER stated it is a higher standard of proof under civil standards of proof. "Preponderance of evidence" is characterized as 51 percent. "Clear and convincing" is a much higher standard, and is imposed for a finding of punitive damage against an individual. Number 0142 REPRESENTATIVE MURKOWSKI asked Ms. Voigtlander whether it makes the amendment any more acceptable to her. MS. VOIGTLANDER replied it is a policy issue rather than a legal issue. Clear and convincing evidence is easier to work with, but the court may say there are genuine issues of material fact precluding a summary judgment. And, under case law in Alaska on summary judgment, any issue of material fact has to go to trial. Number 0194 REPRESENTATIVE KERTTULA asked Ms. Voigtlander whether it is true that there is a better chance of passing a summary judgment motion if the standard is raised to clear and convincing. MS. VOIGTLANDER replied, as opposed to a lower threshold, yes. CHAIRMAN KOTT noted that the objection is still maintained. A roll call vote was taken. Representatives Green, Murkowski, Croft and Kerttula voted in favor of the motion. Representatives James and Kott voted against the motion. The motion passed by a vote of 4-2. Number 0283 REPRESENTATIVE CROFT made a motion to adopt Amendment 5 (1-GH1005\A.4, Ford, 2/8/99). It reads as follows: Page 2, line 29: Delete "consequences" Insert "damage to property as a result" Page 3, line 1, following "for": Insert "property damage" Page 3, line 3, following "action": Insert "for property damage" Page 3, line 5: Delete "damages" Insert "damage to property" Page 4, line 19, following "is": Insert "an action for property damage that is" Page 5, line 9, following "for": Delete "damages" Insert "damage to property" CHAIRMAN KOTT objected for discussion purposes. REPRESENTATIVE CROFT explained Amendment 5 limits immunity to property damages. In other words, if an inaction, negligence or action causes personal injury, there would still be the ordinary negligent standard, and this immunity would apply in property damages. CHAIRMAN KOTT stated he doesn't see the rationale for not affording blanket immunity and is not clear on what would be reasonable. He said, "How many times would a hospital have to go to a chip maker to determine whether or not it was 'reasonable' in its approach to resolving the Y2K?" CHAIRMAN KOTT asked Ms. Voigtlander to comment on Amendment 5. Number 0369 MS. VOIGTLANDER stated personal injuries can be bodily claims and emotional claims. Many of the states that have grappled with this Y2K issue have also grappled with the difference between bodily and personal injuries. CHAIRMAN KOTT maintained his objection. A roll call vote was taken. Representatives Green, James, Murkowski and Kott voted against the motion. Representatives Croft and Kerttula voted in favor of the motion. The motion failed by a vote of 4-2. Number 0453 REPRESENTATIVE GREEN made a conceptual amendment to include the phrase, "this stuff that we have done in no way diminishes a state or municipality's immunity under any other legal doctrine or provision of law". He doesn't want this kind of statement to be utilized and extracted for some other kind of litigation. Number 0481 REPRESENTATIVE CROFT said he doesn't have an objection, but he isn't sure that it is necessary. CHAIRMAN KOTT asked whether there is objection. There being no objection, it was so adopted. He noted a bill drafter will have to work on the language. Number 0511 REPRESENTATIVE JAMES made a motion to move HB 57, as amended, from the committee with individual recommendations and the attached fiscal note(s). There being no objection CSHB 57(JUD), was so moved from the House Judiciary Standing Committee. CHAIRMAN KOTT called for a brief at-ease at 2:13 p.m., and called the meeting back to order at 2:16 p.m.
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