Legislature(2003 - 2004)
02/09/2004 01:04 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 227 - DISTRICT COURTS & SMALL CLAIMS Number 2330 CHAIR McGUIRE announced that the final order of business would be HOUSE BILL NO. 227, "An Act increasing the jurisdictional limit for small claims and for magistrates from $7,500 to $10,000; increasing the jurisdictional limit of district courts in certain civil cases from $50,000 to $75,000; and amending Rule 11(a)(4), Alaska District Court Rules of Civil Procedure, relating to service of process for small claims." [HB 227 was sponsored by House Judiciary Standing Committee.] REPRESENTATIVE GRUENBERG noted that the committee should have a title amendment to accompany this legislation. Number 2290 REPRESENTATIVE SAMUELS moved to adopt the proposed committee substitute (CS) for HB 227, Version 23-LS0896\I, Luckhaupt, 2/4/04, as the work draft. There being no objection, Version I was before the committee. REPRESENTATIVE GRUENBERG reminded the committee that upon his request, the committee introduced this legislation late last session. He pointed out that originally, Section 1 of the legislation increased the district court jurisdiction from $50,000 to $75,000. However, a number of superior court judges and [other people] suggested increasing the district court's jurisdiction to $100,000, which is one of the changes encompassed in Version I. Section 2 remains the same as in the original version. Section 3 is a new section [that deletes the following language] "action for false imprisonment, libel, slander, malicious prosecution" because Representative Gruenberg said he believes that district court judges and juries are capable of hearing cases for false imprisonment, libel, slander, and malicious prosecution. Section 4 remains the same as in the original version. REPRESENTATIVE GRUENBERG pointed out that Sections 5 and 6 go together. He explained that under small claims law, an individual that is out of state can't be sued unless it's an action falling under the Landlord-Tenant Act or service on a nonresident owner of a motor vehicle. He said that he wanted to increase the ability to sue someone who is out of state. Therefore, language saying "if the defendant was physically present in the state when the accident, contract, or whatever it was occurred" was added. The aforementioned is difficult to determine in some cases, however, especially with regard to when a corporation is physically present in the state. He pointed out that most small claims cases are heard by district court judges who are fully capable of hearing these cases. The only situation in which there would be a problem is if there is a magistrate, some of which have law degrees and some do not. If the magistrate is qualified, the presiding judge can appoint the magistrate as a district court judge pro tem in order to hear the small claims case. Therefore, paragraphs (5) and (6) of Section 4 specify that any case can go to small claims, for up to $10,000, as long as it is a district court judge who is hearing the case. He noted that if the judge feels that a small claims case will take more time, for example, if there is telephonic testimony involved, the judge can calendar the case when there is more time to hear it. Number 2051 REPRESENTATIVE GARA informed the committee that those who practice in the personal injury and tort bar on the plaintiff and defense side use an expedited process that makes it a lot easier and cheaper to bring superior-court type cases with damages of less than $100,000 to district court. He said he wanted to be sure that this legislation does not unintentionally interfere with this expedited process. REPRESENTATIVE GRUENBERG recalled that process to be governed by Civil Rule 26. He said that there were discussions with a superior court judge on that matter. Therefore, the district court jurisdiction was increased to $100,000 so that [small claims cases] would be under the same expedited procedures now used in superior court. REPRESENTATIVE GARA asked if Representative Gruenberg had run this by any of the practitioners who use [Civil Rule 26], in order to determine whether it interferes with that option. REPRESENTATIVE GRUENBERG replied no. He said he didn't see any problem because the bill simply allows practitioners to proceed in district court, where those expedited proceedings could be used. Number 1988 REPRESENTATIVE OGG turned to the $10,000 limit for small claims court and said that it seems a little low for this day and age. For example, if a person has $1,000 a month rent, and the [landlord] gives notice of eviction but isn't able to get the renter out of the apartment for a year. Furthermore, the landlord would have to hire an attorney and go to regular court because he/she wouldn't be able to go through the small claims procedure. Therefore, he inquired as to why the [threshold] is being set at $10,000. REPRESENTATIVE GRUENBERG said that with this legislation, Alaska is going to have just about the highest small claim [threshold] in the country, and noted that some of the judges were concerned with going up to even $10,000. He indicated that he didn't have a problem with raising it, but would prefer to do it incrementally. REPRESENTATIVE OGG posed another situation in which the owner of an expensive automobile had an accident with an uninsured motorist. In such a situation, in order to recover anything, the [automobile owner] has to hire an attorney and go into regular court wherein the legal fee, at minimum, will be $5,000. REPRESENTATIVE GRUENBERG said he sympathized, but he didn't want to jeopardize the legislation [by raising the threshold too much]. REPRESENTATIVE OGG expressed the need to keep in mind possible real situations. CHAIR McGUIRE inquired as to when the statute for the jurisdictional limit on small claims was raised to $7,500. REPRESENTATIVE GRUENBERG recalled that the last increase to the jurisdictional limit on small claims to $7,500 was two to three years ago. Number 1852 VANESSA TONDINI, Staff to Representative Lesil McGuire, House Judiciary Standing Committee, Alaska State Legislature, on behalf of the House Judiciary Standing Committee, sponsor, offered her recollection that the jurisdictional limit on small claims was last raised in 1997 from $5,000 to $7,500. In response to Representative Ogg, Ms. Tondini noted that as of 2001, the jurisdictional limit of five other states is above $7,500; that two states have a limit of $7,500; and that 42 states have a limit of between $2,000 to $5,000. MS. TONDINI told the committee that although the House Labor and Commerce Standing Committee didn't amend the legislation, Section 5 of Version I was [added] in order to alleviate concerns by Representative Rokeberg and other members of the House Labor and Commerce Standing Committee. Number 1785 DOUG WOOLIVER, Administrative Attorney, Administrative Staff, Office of the Administrative Director, Alaska Court System (ACS), said that although the ACS doesn't have a position on this legislation, some of the judges do have some concerns with this legislation. The court has no objection to raising the district court jurisdictional limit to $100,000, which most judges view as a fairly common sense amendment. Furthermore, it's consistent with Civil Rule 26(g), which is the limited discovery rules for superior court cases. However, some judges have concerns with raising the jurisdictional limit to $10,000. Some judges don't believe many people will come in with claims in excess of $7,500 simply because that's not considered a small claim for most people. When the jurisdictional limit was raised from $5,000 to $7,500, there wasn't an increase in small claims cases. Therefore, there is some evidence to support the notion that those aren't the bulk of the cases coming in. However, other judges were concerned that cases of [$10,000 in] value don't belong in small claims, which is designed to move quickly through a large number of cases that are of a small dollar amount. These judges are concerned that in these cases, more and more people will bring in attorneys, and therefore the process will turn into a mini district court and it will take longer to process cases. Furthermore, the process will cause more arguments because more and more money is at stake. MR. WOOLIVER turned to the matter of out-of-state defendants, who will invariably be teleconferenced. In a teleconference situation, particularly when it's a pro se situation, the party on teleconference won't have all the information. The other issue is that often the individual can't be reached on the phone right away or he/she will call on a cell phone and the connection might be lost. Furthermore, it's difficult for judges to assess the credibility of witnesses over the phone as opposed to one in front of them. He specified that this is another frustration regarding what is supposed to be a quick- moving process. Therefore, some judges believe that there could be cases brought forth that aren't really small claims cases anymore. MR. WOOLIVER explained that the court doesn't oppose this legislation because there are people who wouldn't go to court if there wasn't a small claims court, which is "pro se" friendly. In Alaska as well as nationwide, there are more and more pro se litigants. This legislation is consistent with the philosophy of better adapting to the needs of pro se litigants. Number 1569 REPRESENTATIVE GARA asked if there is a way to address Representative Ogg's concern. He asked if other states have a small claims exception above $10,000 for car repair cases. MR. WOOLIVER said that he didn't know of any. In trying to compare Alaska to other states, he found a breakdown of all the jurisdictional limits of all courts from the National Center for State Courts. However, that information doesn't go into the detail [of exceptions]. REPRESENTATIVE GARA posed a situation in which there was an $80,000 claim arising from an accident with an expensive car. In such a situation, if both sides agreed, a $100,000 case or less should be allowed to go to small claims court. He asked if that could be done now. MR. WOOLIVER answered, "Only up to the jurisdictional limit of the court itself." However, he highlighted that Representative Gara is correct in that both parties always have to consent to be in small claims court. In further response to Representative Gara, Mr. Wooliver said that a case couldn't go to small claims court even if both parties in a $100,000 or less case consent to be in small claims court. Currently, $7,500 is the most that one can collect or allege in order to be in small claims court. REPRESENTATIVE HOLM asked if an individual's insurance covers an uninsured motorist, wouldn't the insurance company take care of [recovering damages from the accident]. He assumed that he wouldn't have to go into small claims court and this would preclude having to worry about suing someone for damages. MR. WOOLIVER said that he wasn't sure how often insurance claims come through small claims court or how they are handled. REPRESENTATIVE GRUENBERG explained that usually, if one is hit and the insurance pays it off, the individual would be given the right of subrogation so that the individual could sue the defendant in small claims court and recover. He noted that such a case could go into district court. Number 1367 EILEEN McVEY testified in support of increasing [the jurisdictional limit for small claims] from $7,500 to $10,000 or greater. She related her personal experience when she had a metal roof installed. After discovering that a metal roof was inappropriate for her house, she retained an attorney who felt that she had a 95 percent chance of winning the case. However, if she lost, it would cost her $10,000. Ms. McVey reiterated support for passing [this legislation]. CHAIR McGUIRE, upon determining that no one else wished to testify, closed public testimony on HB 227. REPRESENTATIVE GRUENBERG informed the committee that the addition of Section 5 on page 4 requires a title amendment. Number 1048 CHAIR McGUIRE made a motion to adopt Amendment 1, labeled 23- LS0896\I.1, Luckhaupt, 2/9/04, which read: Page 1, line 3, following "courts;": Insert "limiting magistrates from hearing certain small claims cases;" There being no objection, Amendment 1 was adopted. Number 1029 REPRESENTATIVE GARA made a motion to adopt Conceptual Amendment 2 [to increase the small claims limit to $50,000]. He suggested that this increase would assist people in situations such as the one encountered by Ms. McVey. He also mentioned that if one has a case against an insurance company, the insurance company isn't going to let the individual go to small claims court. REPRESENTATIVE SAMUELS, in response, highlighted Mr. Wooliver's testimony that some of the judges didn't want to turn what should be high volume, low dollar cases into cases with full- blown trials. He further recalled that some of the judges even had difficulties with increasing the jurisdictional limit to $10,000. [To increase the jurisdictional limit to $50,000] would seem to get to the upper limit where people view it as a "real" case. MR. WOOLIVER agreed that this is the concern, adding that there is a fiscal concern as well. The fiscal concern would arise if the number of small claims cases increased as opposed to the number of cases going to district court. Mr. Wooliver pointed out that in small claims court there is no motion practice and no pre-hearings. Furthermore, at the small claims level, court clerks rather than the parties perform all of the service of process and the court clerks are directed by rule to assist the pro se litigants through the process. The small claims court process is a fast and easy way for litigants to go through the system, although it isn't a cheap way for the courts to handle cases. The cheapest way for courts to handle cases is to accept the filing and settle in a few months. Mr. Wooliver was sure that for many judges a $50,000 claim would be disruptive of the process, particularly if there were a great number of them. REPRESENTATIVE GARA acknowledged that it might cost more if more people bring cases to court. However, he said he wasn't comfortable that savings would be realized by telling people that they shouldn't pursue their rights because their cases don't involve enough money to attract an attorney. Representative Gara surmised that in some cases there would be savings because small claims cases are quicker and less intensive than the full-blown discovery cases. MR. WOOLIVER agreed that there may be some savings in individual cases. Mr. Wooliver said that he didn't know where the point is at which it becomes worthwhile for attorneys to take cases. Although attorneys aren't necessary in district court cases either, most people do retain an attorney because it's a complicated process. However, throughout the court system, more and more people are taking their cases all the way to the supreme court without an attorney. Mr. Wooliver explained that the purpose of small claims court is that small claims can be handled quickly and the hearing doesn't have to be scheduled months in advance. He said that he hadn't polled the judges on their views on a $50,000 claim, but given the number of concerns the judges expressed regarding a $10,000 [limit], he was fairly confident that there would be very little support for a $50,000 limit. REPRESENTATIVE GRUENBERG requested that Representative Gara withdraw Conceptual Amendment 2, adding that he wouldn't support it because it would change the nature of small claims cases. [With a limit of $50,000], he predicted that small claims cases would subsume the district court jurisdiction. Number 0740 REPRESENTATIVE OGG inquired as to the possibility of having an exception for personal property claims or residential rents up to $20,000. REPRESENTATIVE GRUENBERG said that such an exception would create a serious burden on small claims court, and therefore he expressed the need to know the court system's position on such a change before doing it. He urged the committee not to adopt such a change. MR. WOOLIVER said he wasn't sure what percentage of small claims cases fall under the category specified by Representative Ogg. However, he said he might be able to determine whether such an exception covers the majority of cases or just a small amount. He offered his guess that there are a lot of auto claims in small claims court, and therefore raising the limit to $20,000 would create a significant impact on the court. REPRESENTATIVE GARA requested that Mr. Wooliver discuss the aforementioned issues with judges because the $20,000 limit makes more sense than his original proposal of $50,000. He surmised that attorneys tell individuals with a $20,000 construction or automobile claim that they would be happy to take the case. However, even if a low fee is charged, it will cost more than the damages being sought. Therefore, he felt that there should be a small claims remedy for such individuals. He asked about extending the jurisdictional limit to $20,000 for real and personal property claims as well as Landlord-Tenant Act claims. Representative Gara asked Mr. Wooliver if he would be able to bring back information before the legislation reaches the House floor. MR. WOOLIVER inquired as to what claims wouldn't, in small claims court, fall under the category of real and personal property and the Landlord-Tenant Act. REPRESENTATIVE GARA countered by questioning why wouldn't "we" want to offer a remedy for those individuals who can't find an attorney to take cases such as these. MR. WOOLIVER surmised, then, that Representative Gara's amendment would be to amend the [small claims] jurisdictional limit to $20,000. REPRESENTATIVE GARA said that he was trying to limit the categories because medical evidence would be too complex [to address in small claims court]. REPRESENTATIVE SAMUELS pointed out that all the cases in small claims court are real property cases. Number 0397 REPRESENTATIVE GRUENBERG commented that he understands what both Representative Gara and Representative Ogg are attempting and believes that their hearts are in the right place. However, he didn't want to jeopardize the legislation. He said he could see such changes creating a lot of controversy. REPRESENTATIVE GARA agreed that if such a change would kill the legislation, he didn't want to do it. However, he said he would like to hear a response from the chief justice or the presiding judge in the trail courts regarding the issue of raising the limit to $20,000. REPRESENTATIVE GRUENBERG requested that Mr. Wooliver obtain such a response [to raising the limit to] $15,000 or $20,000. He requested that response in writing. MR. WOOLIVER agreed to do so. Number 0240 REPRESENTATIVE SAMUELS moved to report the proposed CS for HB 227, Version 23-LS0896\I, Luckhaupt, 2/4/04, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 227(JUD) was reported from the House Judiciary Standing Committee.
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