Legislature(1999 - 2000)
03/01/2000 01:40 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 42 - CIVIL LIABILITY FOR IMPROPER LITIGATION Number 0257 CHAIRMAN KOTT announced that the next order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 42, "An Act relating to civil liability for certain false or improper allegations in a civil pleading or for certain improper acts relating to a civil action; amending Rule 82(b), Alaska Rules of Civil Procedure; and providing for an effective date." CHAIRMAN KOTT informed members that the public testimony begun at the previous hearing would continue. He asked whether anyone on teleconference wished to testify, but there was no response. He called an at-ease at 2:17 p.m. and called the meeting back to order at 2:19 p.m., noting that Representative Mulder, the sponsor of SSHB 42, was present. He called on Susan Cox to testify. Number 0517 SUSAN COX, Assistant Attorney General, Special Litigation Section, Civil Division (Juneau), Department of Law (DOL), came forward to testify. She informed members that the Special Litigation Section does personal injury defense for the State of Alaska if state employees are sued regarding events in the course and scope of their employment. The state deals with a high volume of pro se litigation, which is litigation brought by people who are unrepresented by counsel. In many cases, the lack of counsel may indicate a lack of merit to the claims. Therefore, the DOL frequently faces marginal cases where a person is unable to retain counsel and where the cases should not have been brought because those being sued have immunity or the substance of the claim has no merit; the DOL finds itself defending against those. Furthermore, pro se cases are often costly to defend because the opponents don't know what they are doing in a court of law. MS. COX told members that while appreciating the goals of this legislation, unfortunately the department believes this bill would likely encourage people to file additional claims where those people think they can recover something that they were unable to get in their original lawsuits with the state, but perhaps with different targets in the follow-up litigation. Ms. Cox mentioned examples where attorneys in her office are defending cases in which they have won summary judgment and yet, if given the chance, the judgment-proof opponent who has nothing to lose would be more than happy to file a claim against the attorney who had prevailed on the merits in the case. Therefore, the DOL has submitted a fiscal note; they expect that this will be an attraction, and certainly, by its own terms, the bill does create causes of action that don't currently exist. Number 0728 MS. COX addressed substantive issues in the bill. She noted that subsection (f) states that a person may not bring a civil action to recover damages under subsections (c) or (d) unless a final judgment has been entered. Pointing out that this bill has been through two version this legislative session and was introduced in a different form in past years, Ms. Cox suggested some of the internal references are confusing and perhaps are holdovers from previous versions. MS. COX specified that in subsection (f), the reference to bringing an action to recover damages under subsection (c) is misleading or perhaps not intended; subsection (c) does not create a cause of action but merely prohibits certain conduct, whereas subsection (d) actually makes a cause of action for the various violations of those prohibitions in subsections (a) and (c). Ms. Cox said she is thinking that the reference to subsection (c) in line 30 [page 2] is not necessarily intended. Furthermore, page 3, line 1, again refers to a civil action to recover damages under subsection (c); Ms. Cox said she is assuming that reference is meant to be subsection (d), or at least it is ambiguous. MS. COX brought attention to the prohibitions in subsection (c) [page 2], which read: (c) A person may not, on the person's own behalf or as a representative of a party, take part in the initiation, defense, continuation or procurement of a civil action against another person if the person acts (1) without probable cause on a claim or defense; or (2) primarily for a purpose other than that of securing the proper adjudication of a claim or defense involved in the civil action. MS. COX suggested the person referenced here could possibly be a target in a second lawsuit if that person lacked probable cause for a claim or defense or had an improper purpose for involvement in that. She said the phrase beginning with "take part in the initiation" is somewhat ambiguous, and it may be difficult to determine the parameters. For example, in her own office people are directly involved in litigation of a case, and there may be superiors who are aware of and who may actually approve certain decisions made in a case; there would be a variety of levels of people called to account for how a case was defended and/or brought, and the reasons for that. Number 0898 MS. COX said she may have misunderstood Mr. Mintz the other day when he testified that subsection (c) is a codification of the standard for a malicious prosecution action under current common law. If that is what he said, Ms. Cox told the committee, she would have to disagree. The standard for a malicious prosecution action in this state would require that the party bringing it, first and foremost, has prevailed on the merits in the underlying case; then that party would have to establish the elements that are there in subsection (c) - both of them, not one or the other. Number 0940 REPRESENTATIVE GREEN referred to Ms. Cox's testimony regarding a judgment-proof litigant who could come back with a second frivolous lawsuit. He asked whether she believes this [bill] is meritorious in concept but could actually result in that happening. MS. COX answered that she is concerned about that when it comes to people who are unrepresented by counsel. This provision says actual reasonable fees can be awarded against a person who fails in a subsequent action brought under this bill; however, a judgment-proof person who lacks assets won't necessarily be deterred. From her perspective, the DOL has more trouble dealing with frivolous cases brought by people who aren't represented by lawyers than those brought by people who are represented. MS. COX noted that she had reviewed the canons of professional responsibility before the hearing that day; she pointed out that some of what is in this bill is already, of course, required of people who practice law in Alaska. She said she sees this as opening a possibility for what may seem to the department like never-ending frivolous litigation. MS. COX informed the committee about a current situation in which [the state] has a $34,000 judgment for attorney fees in a case it won, but the person involved is writing letters complaining about the conduct of the DOL attorney; if that person had the opportunity, Ms. Cox has no doubt he would file suit under this, and then another attorney in her office would be representing that first attorney. She concluded that they would be relitigating that case except where collateral estoppel might bar relitigation of the claims already determined. Number 1067 REPRESENTATIVE JAMES voiced her understanding that the legislation eliminates false claims from being part of the issue. She asked whether Ms. Cox was saying that a person who had lost [a case] would come back and claim that it wasn't fair, and would do so without an attorney. MS. COX explained that it is conceivable that someone who lost in the original case could come back and sue, claiming that one reason for losing was that the other side had made a false statement or was somehow engaged in an improperly motivated litigation. Ms. Cox said she isn't conceding in any way that the follow-up litigation would be meritorious, but she foresees cases in which people that [the department] has litigated against and won against could try again. She believes that this is more likely to happen with people who are unrepresented throughout. REPRESENTATIVE JAMES said she certainly understands the problems relating to lack of legal representation, and the law protects people for being able to do that. Her concern, however, is that if someone who loses a case has evidence that there was some untruth presented, that door isn't necessarily open, which this bill would do. She suggested that [with the bill] more care may be taken by people to ensure that those statements are true. She added: I don't necessarily mean that they did it on purpose. But if there is some untruth or some piece of the evidence that has been depended upon for the outcoming of the case that wasn't true, and that the person who was the subject of the challenge wasn't able to present their case because of that untrue statement in any way, I don't think you would want to deny them this opportunity, would you, of presenting it again? Number 1227 MS. COX replied: There are several answers to your question. One is, of course, you're assuming that the person who lost actually has a meritorious claim that someone actually lied or presented a falsehood in the original action. In that circumstance, they do have a couple of things available to them. One would be to file a bar complaint, ... if it involved the unethical conduct of an attorney. The other would be if it ... materially affected the outcome of their case, of course, they can ... file a motion to ... have the judgment vacated and submit their new evidence revealing that, in fact, something material had been misstated in the earlier case. They wouldn't, ... as you recognize, have at this point a separate cause of action for civil liability against their opposing lawyer and the opposing party necessarily. What I'm speaking to, however, and in terms of the fiscal impact, is the situation in which we expect unmeritorious claims to be brought under this litigation to further litigate what were unmeritorious claims to begin with. And we will have a cost in dealing with those. Number 1306 REPRESENTATIVE CROFT referred to malicious lawsuits and the way subsection (c) of the bill works versus the current law. He agreed with Ms. Cox that this [subsection (c)] is an "either/or": one can sue saying that somebody either didn't have probable cause or did it for another purpose. Under the current malicious lawsuit law, however, one would have to show both of those. MS. COX clarified that the person who would be bringing a malicious prosecution claim would have had to have won in the original lawsuit. REPRESENTATIVE CROFT suggested under the old law, then, a person couldn't sue another for malicious prosecution if that other person had won the case; that isn't a requirement in this bill, however. MS. COX affirmed that. REPRESENTATIVE CROFT said it opens it up for people who have lost a lawsuit to claim some motivation in the lawsuit and to sue on that basis. He asked whether, if he could prove that another's motivation were primarily for a purpose other than that of securing the proper adjudication, he could get full attorney fees and costs or compensatory damages. He clarified that he was referring to paragraph (c)(2). MS. COX specified that paragraph (d)(3) speaks to that and says compensatory and punitive damages. REPRESENTATIVE CROFT indicated the law had developed to be "and" in order to make these tough to do. He suggested it was really a "three-step deal": lack of probable cause, some ulterior motive, and the requirement of having prevailed in the litigation. If those three were met, the law said it was worth it to have an entirely new lawsuit. But under this bill, one gets a new lawsuit every time, just based on people guessing what the real purpose of the original lawsuit was, even if the case was lost on the merits. REPRESENTATIVE CROFT said the above is subsection (c), the main part that troubles him. However, it also had troubled him when the representation was made that this is about the same as the current malicious lawsuit [common law]. "It just isn't, and there are important distinctions why widening that up hurts," he added. Number 1558 REPRESENTATIVE CROFT noted that he was having an amendment drawn up [1-LS0264\D.2, Ford, 3/1/00, which had not yet arrived via fax]. He pointed out that there are two ways to lie: to assert something that isn't true or to say something is not true when it is; these are opposite sides of the same coin. He said plaintiffs make factual allegations because they have the burden of proof, whereas defendants make denials. He asked Ms. Cox her opinion as to whether this bill adequately addresses both sides of the equation [allegations and denials] in paragraphs [(a)](1) and (2) and subsection (b). MS. COX responded that she hadn't really thought of that. Her feeling is that there is a distinction here, of course, between the first section in subsection (a), especially paragraph (a)(1), because it says a person may not sign a complaint, answer or other civil pleading; she said the definition of "pleading" includes affidavits, so that coverage is not limited to lawyers, and of course it includes pro se litigants who sign their own complaints and answers, as well as witnesses who may sign affidavits. She added, "And so in that section we're talking about false allegations material to claims that may arise -- could be answers to interrogatories." REPRESENTATIVE CROFT specified that he wanted to add the word "denial" there, so it would say "claim, defense, denial or allegation." He then said he didn't know whether it would be "and" or "or." He explained that he wanted to make it more clear that it is both a factual positive allegation and a denial. MS. COX answered that certainly an argument could be made that, as drafted, that covers a denial. For example, when she files an answer to a complaint, which is contemplated in that first section, she is making a positive statement that what is being said is not true, and she assumes that if that is a false statement, she could be held responsible under this. She agreed that adding "denial" would make that clear. She emphasized that there is a difference between paragraph (a)(1) and subsection (b); paragraph (a)(1) on page 1, line 10, says "with the intention of asserting allegations that are false," whereas subsection (b) at the top of page 2 refers to "knowingly [made] a false statement." She said she doesn't know whether that is intentional or is the result of this bill being changed, with parts of it coming from different sources. REPRESENTATIVE CROFT responded that he thought that was intentional. He said paragraph (a)(1) is the one that he has the least problem with, if "denial" is added; that is a pretty high, almost criminal standard, the intention of asserting facts that are false. In contrast, subsection (b) is just "knowingly." Furthermore, the punishments are different: for (a)(1), compensatory and punitive [damages], whereas for subsection (b), "you just sort of freeze the lawsuit and have a mini-trial on the issue of who lied." MS. COX replied, "Or ... , as I believe Mr. Lessmeier testified the other day, give the jury a jury instruction about it, ... and it would probably be the first instruction they'd have to consider: 'If you find that either one of these parties made a knowing false statement, you stop there, you enter judgment for the other side.'" Number 1801 REPRESENTATIVE CROFT commented that sometimes in trials, particularly where there have been discovery violations, the judge rules on certain issues. He indicated this [provision] goes three or four steps further than that, however, because that judgment will be entered regardless of what else remains in the case. He asked Ms. Cox whether that is the way she reads it. MS. COX replied that it is hard to know exactly how this would be applied. It does say the court will enter judgment against the party who makes the false statement on the issue to which the false statement relates; the breadth or scope of that judgment would certainly be a disputed issue, especially if both parties disagreed about a seminal issue in the case such as whether one or the other had run a red light. Both parties could be firm in their convictions that they are right, and yet, in the end, the jury has to decide that they believe one more than the other. However, here the jury may be asked first to decide which side is telling the truth and to evaluate credibility before even looking at the elements of the cause of action. REPRESENTATIVE CROFT said that is a good point about [the judgment] applying only to the claims. However, the bill says "enter judgment" instead of "establish the issue," for example. As he reads it, it is a full judgment regardless of defenses or causation or other issues. Number 1911 REPRESENTATIVE GREEN posed a situation involving a misdemeanor and lying in court. MS. COX clarified that this only applies to civil liability. REPRESENTATIVE GREEN asked whether lying in court isn't a felony, however. MS. COX agreed that perjury is definitely a crime. REPRESENTATIVE GREEN expressed concern that if both parties accuse each other of lying, one is probably correct. REPRESENTATIVE CROFT pointed out that trials are made of factual disagreements. It could be that one side is lying and one side is telling the truth. However, it could be that both sides just disagree and one is mistaken. What one really wants is for the jury to decide who was at fault. He suggested that the bill, however, would result in overlaid allegations and "must finds." He expressed concern about changing the focus into a search for perjury. Number 2096 REPRESENTATIVE GREEN asked, in essence, what happens if someone has made a statement but then becomes uncertain as to its veracity. MS. COX deferred to Representative Croft. REPRESENTATIVE CROFT said paragraph (a)(2) essentially [replaces] Rule 11, which is used to sanction an attorney. Noting that Mr. Lessmeier had said [at the previous hearing] that he didn't recall having seen Rule 11 used in 20 years, Representative Croft pointed out that he himself, in two years in practice, had seen two potential issues regarding it; therefore, in his limited experience, there are some teeth to it. REPRESENTATIVE CROFT posed a situation where an attorney drafts a complaint without checking out all the facts, and it turns out that the allegations made without reasonable inquiry were correct. As it is now, the attorney could be sanctioned. Under this bill, however, there could be a whole new lawsuit, even though the allegations turned out to be correct. Representative Croft suggested this would at least double the amount of litigation and perhaps the person who was factually in the wrong would get the benefit. Number 2240 ROBERT A. MINTZ, Attorney at Law, testified via teleconference from Anchorage. He responded to Representative Croft's last scenario by saying the action could not be brought under subsection (a) for failure to make a reasonable inquiry unless, after the carelessly drafted complaint were filed, the offended party wrote a letter saying that the allegations weren't correct. If those allegations were not well founded, there would be an opportunity to change them; if they were checked and found to be true, the attorney would be insulated from liability. REPRESENTATIVE CROFT asked, "Where?" He pointed out that on page 1, line 11, it says "sign a civil pleading before making reasonable inquiry"; he would have violated (a)(2), even though the allegations turned out to be true. This doesn't say anything about the ultimate disposition of the case that he could find. MR. MINTZ referred to paragraph (f)(2) and said one cannot bring an action under subsection (a) unless a notice of the specific conduct alleged to violate (a) is served under the rules of civil procedure. Using Representative Croft's example, if he didn't receive a notice under (f), he would be okay; however, if he got a letter in the mail under (f) that says the allegations are untrue and there wasn't reasonable inquiry, then he would be at risk. REPRESENTATIVE CROFT said that in the first instance, the challenged conduct wouldn't be corrected because there is no correction to be made. MR. MINTZ said the point is well taken. The intent of (a)(2) is to require attorneys to actually do up-front research and to determine whether there is a basis for bringing people to court. REPRESENTATIVE CROFT suggested under his scenario, however, a new lawsuit could develop, even if he proceeded and won. MR. MINTZ agreed, but said that would only be if the failure to do so were brought to his attention and ignored. He restated his belief that if the allegations were checked out and the attorney decided to go forward, under (f) the attorney would be insulated. REPRESENTATIVE CROFT disagreed that it accurately says that, however, and mentioned sanctions. TAPE 00-24, SIDE B Number 0001 REPRESENTATIVE CROFT suggested that remedies under Rule 11 and the bill are similar except that they are in two different legal contexts. MR. MINTZ agreed, saying that in one legal context, the judge had discretion, whereas in the other, the person is entitled to be made whole through compensatory and appropriate punitive damages. He emphasized that this only applies in civil suits. He also pointed out that in order for this to be triggered, it requires more than a simple disagreement or a mistake. Rather, it requires an intentional act, an intentional lie, or a knowing misstatement of fac;, or it requires somebody to not correct a mistake after it has been brought to that person's attention. It is not something that happens easily or by mistake. Number 0096 REPRESENTATIVE MURKOWSKI referred to the 21 days after a person has been served notice. She recalled that if she had been served a notice by another attorney or a pro se litigant saying that she hadn't "done her homework," she would be obligated to notify her own malpractice carrier; it isn't just whether there is a claim out there, but it is the probability of the claim that the carrier must be notified about. She asked how this would affect an attorney's malpractice coverage and whether there have been any discussions with ELPS [Educational Leadership and Policy Studies] about what this legislation would do regarding malpractice carriers in the state. MR. MINTZ answered that there has been no discussion with the malpractice insurers that he is aware of. REPRESENTATIVE MURKOWSKI asked Mr. Mintz whether he agrees that it might be problematic. MR. MINTZ said he didn't know how they would respond to it. Number 0172 REPRESENTATIVE GREEN referred to his own concept of filing a felony [for perjury] in a civil action and to the indication by Mr. Mintz that that wouldn't be appropriate. He asked whether there is immunity in a civil action against criminal prosecution if some fact comes out during the former. MR. MINTZ clarified that all he was saying is that SSHB 42 doesn't impose any consequences or provide the basis for any claims in the context of a criminal case. Whatever the law is, with regard to the criminal law implications of something said in the context of a civil trial, isn't changed by this bill. REPRESENTATIVE GREEN restated concern that something could come out of the "he said/she said" among attorneys which wouldn't otherwise come out in the normal course of things; the way things are now, that dialogue back and forth probably wouldn't occur. He said this [bill] doesn't address that, but it doesn't prevent it. MR. MINTZ said he doesn't think it affects it. Number 0282 REPRESENTATIVE ROKEBERG asked Mr. Mintz whether he had seen the fiscal note from the Department [of Law]. MR. MINTZ said he hadn't had a chance to look at it. His feeling is that there are a couple of ways to look at it. Philosophically, the standard of truth ought to apply to everybody. Practically, however, the largest evil that he had contemplated when he first became involved in being an advocate of this type of legislation is from cases where civil litigants bulk up complaints with specious charges in order to give them more settlement value. Where to draw the line, in terms of having it apply to cases, is really a judgment call, he added. REPRESENTATIVE ROKEBERG requested that Mr. Mintz be provided a copy of the fiscal note so that he could make recommendations. Number 0354 REPRESENTATIVE CROFT asked Mr. Mintz why subsection (g) exempts divorce and issues involving children - child custody, support and visitation. MR. MINTZ replied that it was a compromise reached with the Department of Law in the version of this bill that was introduced about three years ago. Number 0380 CHAIRMAN KOTT asked whether there were additional testifiers. He closed the public testimony, then announced that SSHB 42 would be held over.
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