Legislature(2003 - 2004)
03/19/2004 01:15 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 428 - CIVIL PENALTY: UNDERAGE ALCOHOL PURCHASES Number 0102 CHAIR McGUIRE announced that the first order of business would be HOUSE BILL NO. 428, "An Act relating to civil liability for acts related to obtaining alcohol for persons under 21 years of age or for persons under 21 years of age being on licensed premises." Number 0136 REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor, reminded the committee that at the last hearing on HB 428, Conceptual Amendment 3 was left pending due to the need for legal assistance. Number 0245 JERRY LUCKHAUPT, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, turned to the question of why he drafted HB 428 as he did, without having minors being sued directly [and] disallowing recovery against anyone violating Title 4 statutes. He explained that he drafted HB 428 after receiving a request to follow AS 09.68.110, which is a "civil liability for shoplifting" statute that already imposes a similar procedure for allowing storeowners to recover civil penalties against minors and others who shoplift. The aforementioned procedure is identical to the one used in HB 428. He explained that he took that approach due to the inherent problems in suing minors. Although a minor can be sued or can sue someone else, there are limitations. One of the limitations found under [Rule 4 of the Alaska Rules of Civil Procedure] specifies that both the minor and the parent or legal guardian has to be served as a condition precedent to maintaining the suit. Furthermore, if one attempts to sue a minor, the court has to ensure that the minor's legal guardian defends the suit on the minor's behalf because the interests of the minor and the parent [or legal guardian] may differ in some situations. MR. LUCKHAUPT pointed out that just last year, the Alaska Supreme Court provided a decision specifying that a minor, through a next friend or legal guardian, can sue another individual. However, the minor can't defend through a next friend, and therefore a legal guardian has to maintain the defense on behalf of the minor. Mr. Luckhaupt further pointed out that the court's decision last year specified that the parent can't defend the minor pro se without an attorney. Therefore, at a minimum, an attorney would have to be hired in these cases. Moreover, a default judgment against a minor can't be obtained in a situation in which the minor doesn't answer the suit, because one can't assume that a minor is waiving his or her rights to defend. Mr. Luckhaupt said he basically tried to avoid the aforementioned problems. REPRESENTATIVE SAMUELS surmised that the best approach for the minor is to not be present. Number 0552 MR. LUCKHAUPT said that although a default judgment can be obtained, it means nothing. He informed the committee that in Alaska one can enter into a contract with a minor, but when that minor reaches the age of majority, he/she can void the contract if he/she so chooses. The aforementioned is why banks won't setup loans with minors unless the parent co-signs. Mr. Luckhaupt observed that it seems easier to avoid the questions surrounding minors, and just impose the penalties on 18-year- olds or emancipated minors or the [minor's] parents. The aforementioned is what the legislature choose to do with the shoplifting civil penalty statute. REPRESENTATIVE GRUENBERG commented that this isn't a constitutional issue. Representative Gruenberg read from the Shields v. Cape Fox Corporation case as follows: Alaska Civil Rule 17(c) governs this issue.2 The second sentence of this rule makes clear that while a next friend may sue on behalf of a minor, she may not defend a suit against a minor. Further, a next friend cannot generally represent a minor, even as a plaintiff, without counsel.3 As noted, [the mother], acting pro se, filed an answer for [the child] as [the child's] next friend. Thus [the child] was not properly represented and the trial court should have appointed a guardian ad litem or entered some other appropriate protective order on [the child's] behalf pursuant to Civil Rule 17(c). However, this error does not require reversal in this case because [the child] turned eighteen almost a year before trial. She became an adult after the case was filed but before any events had occurred in pretrial practice that might prejudice her interests. Once she became an adult she was, in the eyes of the law, competent to represent herself and was no longer entitled to protection under the rule.4 Absent a showing of prejudice resulting from her lack of representation or protection before she turned eighteen, the error was harmless.5 Number 0871 REPRESENTATIVE GRUENBERG read Rule 17(c) of the Alaska Rules of Civil Procedure: (c) Infants or Incompetent Persons. Whenever an infant or incompetent person has a representative, such as a general guardian, committee, conservator, or other like fiduciary, the representative may sue or defend on behalf of the infant or incompetent person. An infant or incompetent person who does not have a duly appointed representative may sue by a next friend or by a guardian ad litem. The court shall appoint a guardian ad litem for an infant or incompetent person not otherwise represented in an action or shall make such other order as it deems proper for the protection of the infant or incompetent person. REPRESENTATIVE GRUENBERG highlighted that the last sentence of Rule 17(c) was interpreted by the court to preclude the next friend from defending a suit against a minor, although the language of Rule 17(c) doesn't specify that explicitly. Representative Gruenberg offered his understanding of yesterday's testimony from Mr. Madden and others that these cases generally don't go to trial, and that the procedure followed by licensees such as Brown Jug, Inc. ("Brown Jug"), is well established and there hasn't really been a problem with it. Therefore, Representative Gruenberg surmised that the cure would be to simply say that if [a licensee] is proceeding against a minor, the [licensee], in its written notice to the minor, advise the minor of his or her rights under the Shields case [and] Rule 17(c). The aforementioned should be a fairly simple form to prepare and could be included in the notice [sent by the licensee] that is sent to the minor as well as the minor's parent or legal guardian, he opined. MR. LUCKHAUPT expressed concern that what Representative Gruenberg is proposing requests that the waiver execute some sort of settlement agreement. However, the minor doesn't have the capacity to execute the settlement agreement and, thus, merely including the notice doesn't necessarily satisfy anything because the minor still doesn't have a right to execute the settlement or waive any rights the minor might have. Furthermore, the minor doesn't necessarily know what those rights are. REPRESENTATIVE GRUENBERG surmised, then, that the procedure being practiced in Anchorage for some time is technically illegal. MR. LUCKHAUPT said it could be problematic. REPRESENTATIVE GRUENBERG pointed out that it seems that no one has raised that as an issue. With regard to waiving any rights, the party who is really waiving his or her right to proceed is the [licensee]. The problem would only arise if the [licensee] brought a suit despite the minor going through the process. Representative Gruenberg said that [his proposal] would ratify something that has been in place for some time. Number 1201 REPRESENTATIVE SAMUELS pointed out that there is a difference between a minor under the age of 18 and an individual who is considered a minor for the drinking age. Representative Samuels said he assumed that the "Hey Mister" group outside the liquor store are 18- to 20-year-olds rather than 14-year-olds. "Are we including most of them?" he asked. He also asked whether the Anchorage ordinance provides a remedy for those minors under age 18 as opposed to the "under 21 years of age" minors. REPRESENTATIVE MEYER relayed his understanding that Mr. Luckhaupt basically mirrored what was in the Anchorage ordinance in HB 428. Representative Meyer said he didn't believe the Anchorage ordinance addresses what Representative Samuels is discussing. Representative Meyer commented that if he were Brown Jug and a state law became too complicated, he would just use the Anchorage ordinance. Representative Meyer posited that most of those being [arrested] by Brown Jug are over age 18. REPRESENTATIVE GRUENBERG asked whether Brown Jug exclusively targets those who are over age 18. Number 1265 O.C. MADDEN III, Manager, Personnel and Loss Prevention, Brown Jug, Inc. ("Brown Jug"), responded that the youngest person Brown Jug has dealt with was 15 years of age. He relayed that for all the reasons stated by [Mr. Luckhaupt], Brown Jug doesn't enter into any written agreements with a minor under the age of 18; rather, Brown Jug deals strictly with the parents. He explained that a letter is sent to the minor, who must have his/her parent's involvement. REPRESENTATIVE GARA recalled reading an article that specified that Brown Jug has tried to use Anchorage's ordinance about 900 times since 1998, and inquired as to why the statute is necessary. MR. MADDEN answered that after the article ran, he received calls from licensees in other areas of the state who would like to do the same thing, but they can't because there is no civil- penalty provision in place that would allow them to utilize the same program. Mr. Madden emphasized that this is an effective tool that [Brown Jug] would like to see replicated throughout the state. Number 1383 REPRESENTATIVE GRUENBERG [withdrew Conceptual Amendment 3]. He then turned attention to page 1, line 14, and asked if this is already existing language or was developed by Mr. Luckhaupt. MR. LUCKHAUPT specified that he used the language from AS 09.68.110 and then added the provisions from the Anchorage ordinance. Number 1477 REPRESENTATIVE GRUENBERG pointed out that on page 2, line 1, the language "by first class mail" seems to be misplaced. Therefore, he moved that the committee adopt Amendment 4, as follows: Page 2, line 1: Delete "by first class mail" Page 1, line 14, after "send": Insert ", by first class mail," CHAIR McGUIRE asked whether there were any objections to Amendment 4. There being none, Amendment 4 was adopted. REPRESENTATIVE GRUENBERG asked if the Department of Law is the most appropriate department to promulgate the regulations for this. MR. LUCKHAUPT answered that this is similar to the procedure in AS 09.68.110 and the Department of Law is the department identified in that statute. REPRESENTATIVE GRUENBERG offered his belief that the Department of Law doesn't generally promulgate regulations for the liquor. REPRESENTATIVE MEYER remarked that since this legislation deals with civil law it would seem appropriate that the Department of Law promulgate the regulations. MR. LUCKHAUPT explained that he specified the Department of Law because the procedure is basically the same [as the procedure used with shoplifting] and doesn't have anything to do with the intricacies of liquor licenses or alcohol and beverage management in Alaska. He said the regulations [for shoplifting] and [under age solicitation of an alcoholic beverage] should basically be identical. REPRESENTATIVE GRUENBERG expressed the need to check with [the Department of Law] on that. He then turned attention to page 2, line 5, and suggested that "that" should be "a". MR. LUCKHAUPT answered that "a" would be acceptable. Number 1625 REPRESENTATIVE GRUENBERG moved that the committee adopt Amendment 5, as follows: Page 2, line 5: Delete "that" Insert "a" CHAIR McGUIRE asked whether there were any objections to Amendment 5. There being none, Amendment 5 was adopted. REPRESENTATIVE GARA asked whether the existing statute regarding imposing a fine against shoplifters and sending that fine to the business that was shoplifted relates to all businesses. MR. LUCKHAUPT answered that it applies to all businesses. He specified that it isn't a fine but rather a civil penalty. REPRESENTATIVE GARA asked if he is correct that since the existence of the Anchorage ordinance, Brown Jug has attempted to impose these fines in about 900 cases. MR. MADDEN replied, "Nine hundred of the fake ID cases, yes." In further response to Representative Gara, Mr. Madden specified that since Anchorage's ordinance has been in effect, Brown Jug has been able to [impose fines] in 20 cases. With regard to those cases, Mr. Madden said he didn't believe [that the fine] has been more than $300. Most everyone has signed up for the diversion program. Mr. Madden said he couldn't provide the committee with an estimate on the amount of fines collected from fake IDs because those are difficult to collect on due to the fact that fraudulent information is used. He said he didn't believe that the number of fake ID cases Brown Jug has collected on isn't a high number and, furthermore, many of the collections are negotiated down. In further response to Representative Gara, Mr. Madden reiterated that with such cases, virtually all attended the diversion program, but couldn't estimate how many of the fake ID cases resulted in the young person attending the diversion program. Number 1707 REPRESENTATIVE GARA asked whether [Brown Jug] has collected more revenue, in the form of fines, than the expenses for enforcement and the diversion program. MR. MADDEN relayed that on a $300 diversion program, the employee receives a $250 bonus, there are a couple of hours of administrative time, and there are postage and filing costs. And before one reaches that point, two to three hours, at minimum, are spent by security personnel involved in the situation. He remarked that this can be a fairly expensive proposition to do. Part of the reason the civil penalty was used was to help some of the smaller operators be able to afford security services that they wouldn't otherwise be able to utilize. REPRESENTATIVE GARA said that he has no problem imposing a fine if the money is going to education, diversion, or treatment. However, he opined, it is problematic if the companies levying the fines were going to merely keep the money. Therefore, he had suggested obtaining a commitment from the members of the Cabaret Hotel Restaurant & Retailers Association (CHARR) that they would endeavor to use the money for the aforementioned purposes. However, he noted, the CHARR representative said that there are too many members to do so and it would be too difficult to obtain a commitment. Representative Gara recalled that since a voluntary commitment couldn't be accomplished, his suggestion is to place it in statute. Number 1927 DALE FOX, Cabaret Hotel Restaurant & Retailers Association (CHARR), pointed out that even if the CHARR Board took such a position, CHARR can't bind all of its members. Furthermore, CHARR can't bind its nonmembers who make up a significant number of licensees. Mr. Fox said that if the intent [of the committee] is for the money to be used for education, diversion, or treatment, then placing language to that effect in statute is probably appropriate. CHAIR McGUIRE asked if it would be possible for Mr. Fox to generate a letter stating CHARR's position that it would encourage it members to put as much of the money toward alcohol treatment, education, and diversionary efforts as possible. MR. FOX agreed that such could be provided. If this legislation passes, he opined, there will probably be more information provided with regard to how well the program has worked in Anchorage. Mr. Fox said that CHARR will definitely have an outreach program to encourage this program because there is the desire to have the same good results that Brown Jug and Chilkoot Charlie's are seeing. Number 2018 CHAIR McGUIRE announced that she is considering offering an amendment that would include the following language: "The $1,000 civil penalty may be reduced by a licensee if the defendant attends an alcohol treatment program approved by the licensee." Although it's not as strong as what she and Representative Gara have discussed, it would at least provide statutory intent. MR. MADDEN advised against such an amendment because the $1,000 hammer seems to get offenders in the program. Mr. Madden stated his preference for the [punishment] to be either appearing in court and paying $1,000 or signing up for treatment. If these [offenders] believe the process can be drawn out and made difficult [for the business], that's what will occur. He reiterated that the reason he approached Representative Meyer regarding HB 428 is that other licensees have a strong desire to replicate what Brown Jug is doing, and remarked that Akeela, Inc. ("Akeela"), is interested in partnering with Brown Jug on this. CHAIR McGUIRE remarked that that seems fair, and commented that if a future legislature saw abuses in that perhaps treatment wasn't being sought, it could simply change the statute. Therefore, Chair McGuire announced that she [wouldn't pursue] that idea. Number 2143 REPRESENTATIVE GARA announced that an amendment of his would essentially require that if liquor licensees are going to take advantage of the fine money, that they do essentially what Brown Jug is doing, and that taking advantage of the fine program merely to make money wouldn't be allowed. Representative Gara related his understanding from Mr. Madden that Brown Jug doesn't make money off the program. Therefore, he proposed [adding] language specifying that if [a licensee] recovers the fine, a form has to be submitted to the Alcoholic Beverage Control (ABC) Board confirming that at least 75 percent of the net proceeds, after deductions for enforcement expenses, go towards alcohol education, treatment, or diversion. He asked if the aforementioned would be problematic. MR. FOX said he didn't know how Representative Gara's proposal would work. Although the proposal might work in aggregate, on an individual basis it would be a nightmare. He posed a situation in which the offender decides to take the [licensee] to court and ultimately [the licensee] loses $5,000 in the process; the [licensee] would already be in the hole. Although Mr. Fox said he agrees with the intent of Representative Gara's proposal, he offered that it seems problematic. MR. MADDEN said he would be opposed to Representative Gara's proposal because he believes that it would cause licensees, who might otherwise participate, not to participate. He explained that the situation now is one in which people are parking in parking lots near a liquor store and sending an adult in to purchase alcohol for them. Under the current [law], there is really no incentive for a licensee to police those areas because it's not illegal to sell alcohol to a sober adult. This legislation would encourage people to pay more attention around their establishment. Additionally, this is an expensive process because it involves trained security personnel. Furthermore, many of the arrests made by [Brown Jug] are felony arrests involving possession of narcotics, violation of parole or release, and in some cases [these individuals] are carrying guns. Mr. Madden stated that there is a certain amount of risk in doing this, specifically with regard to workers' compensation exposure. Mr. Madden remarked that Representative Gara's proposal would "kill the process," and reiterated his opposition. REPRESENTATIVE GARA commented that there is no doubt that Mr. Madden is doing good things with the money being raised with the fine structure. However, he opined, there is also no doubt that this would be an easy way for some liquor establishments to merely make money from it, adding that he didn't want to help facilitate such. The problem with drafting statutes is if they aren't drafted narrowly, as is the case in this legislation, the behavior not wanted is encouraged in addition to the desired behavior. MR. MADDEN highlighted that if a store is collecting this civil penalty every chance possible, then the store will gain a reputation such that people will know not to go there and attempt to purchase alcohol for minors. The aforementioned would be the case even if the store keeps the money from the fines collected. TAPE 04-41, SIDE B Number 2364 REPRESENTATIVE ANDERSON offered his belief that the bottom line is that this is about deterrence rather than making money. REPRESENTATIVE GARA announced that he isn't going to introduce his proposal as an amendment. However, he pointed out, the entire deterrence [argument] doesn't work because [Brown Jug] has levied this fine 900 times and still people come to his business [and attempt to purchase alcohol for minors]. Number 2322 REPRESENTATIVE SAMUELS moved to report HB 428, as amended, out of committee with individual recommendations and the accompanying fiscal notes. Number 2312 REPRESENTATIVE GARA objected and explained that he was doing so in order to encourage the sponsor to develop language that perfectly settles the problem. Number 2304 A roll call vote was taken. Representatives Gruenberg, Samuels, Anderson, and McGuire voted in favor of reporting HB 428, as amended. Representative Gara voted against it. Therefore, CSHB 428(JUD) was reported out of the House Judiciary Standing Committee by a vote of 4-1.
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