Legislature(1995 - 1996)

04/17/1996 01:12 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 414 - MANDATORY MEDIATION/DESIGN PROF LAWSUITS                           
 Number 100                                                                    
 JEFF LOGAN, Legislative Assistant for Representative Green came               
 forward to testify on HB 414.  Mr. Logan thanked Chairman Porter              
 for his indulgence with this bill.  The original version of this              
 bill, through all it's incantations and presently, has had as it's            
 goal to relieve the burden of design professionals from civil                 
 actions.  In the Labor and Commerce Committee there were a number             
 of issues raised and Chairman Porter had asked that these issues be           
 addressed before it's referral to the Judiciary Committee.  In the            
 meantime, there have been a number of time constraints, both on the           
 sponsor's part and on the parties affected, the trial attorneys and           
 professional designers.  Finally, he felt as though they had a                
 committee substitute which could be submitted to the committee,               
 which is version R, dated April 2, 1996.  In addition, the trial              
 attorneys and the professional designers have continued to work to            
 come to a compromise.  Yesterday at 9:31 a.m. he received a                   
 facsimile with four additional points.  He took these to the legal            
 division.  Mike Ford worked very quickly to put these concerns into           
 amendment form.  Mr. Logan disseminated these to committee members            
 and the Anchorage LIO so that witnesses could have them.  He wasn't           
 sure the sponsor will move these amendments or not.   He felt as              
 though there would be somebody on line to speak to these                      
 MR. LOGAN noted that what the present committee substitute does is            
 use the civil rules of procedure which are already in place and               
 simply stated, makes mediation mandatory for a civil action against           
 a design professional.  If a suit is filed against an architect or            
 engineer the parties have to go to mediation.  Discovery is allowed           
 under the auspices of a civil rule already in place.  This is                 
 mandatory and there is a time line to do it.  He then outlined                
 amendments R.1,2, & 3.  The first one stated that not only are                
 architects, engineers and land surveyors covered under this                   
 legislation, but also all design professionals.  R.2 allows a                 
 waiver option.  If both parties agree that mediation will not                 
 result in any benefit, they can waive this procedure and go                   
 straight to court.  R.3 allows that if the costs of mediation are             
 to be born by the defendant because the judge has decided that the            
 plaintiff is indigent, the defendant can waive this process to                
 avoid having to pay for the entire mediation.                                 
 Number 556                                                                    
 REPRESENTATIVE JOSEPH GREEN added to what Mr. Logan had stated.               
 The first version of this legislation was a little over eight pages           
 long, modeled after Hawaii's version and the present committee                
 is presently only about a page and a half long.  He lauded the                
 parties who came together and worked on it.                                   
 Number 626                                                                    
 STEVE CONN, Executive Director, Alaska Public Interest Research               
 Group, testified on HB 414.  He felt as though the consumer should            
 fill a seat, as well as the design professionals and the attorneys            
 in arrangements of re-working legal procedure such as this.  He was           
 concerned about this and wanted to talk briefly from the consumer's           
 perspective.  He is a proponent of mediation, but he is concerned             
 when certain professionals are given these types of procedural                
 advantages.  It's critical to be aware of the relevant power                  
 equation such this when it appears to be ideally a situation where            
 people can resolve their differences.  Usually these types of                 
 situations turn out best when the alternatives to this are                    
 relatively equal for both.                                                    
 MR. CONN stated that he was concerned about home owners and                   
 consumers who may have a legal claim and have a limited amount of             
 resources, not particularly indigent, but simply middle class                 
 people pursuing a legal claim.  Certainly they should be encouraged           
 to sit down and settle their differences, but under this                      
 legislation they'd would be impelled to move into this situation,             
 akin to the type of thing that some people find fault with in the             
 bureaucratic realm when exhausting one's administrative remedies.             
 Perhaps the only way this thing could be resolved is through                  
 litigation, but here a further pressure is placed upon the would be           
 plaintiff.  Not in all cases.                                                 
 MR. CONN noted that he was concerned about how the rules of                   
 evidence would apply to information of necessity which emerges as             
 this mediation occurs.  Is that realm of compromise seeking and the           
 information drawn therefrom going to be in litigation, will a                 
 record be kept, many complications arise in this area.  He noted              
 that the capacity for waiver is guided and controlled by the                  
 defendant who might be in a situation where they're dealing with              
 ordinary, middle-class people and have the "deeper pockets."  He              
 wondered if they should consider arbitration instead.  Mr. Conn               
 offered that this has been a well discussed, well worked out bill,            
 but the consumers seat at the table has been left empty.                      
 Number 900                                                                    
 COLIN MAYNARD, Alaska Professional Design Council testified by                
 teleconference from Anchorage on HB 414.  He stated that for over             
 the last three or four months they have attempted to reduce the               
 number of frivolous suits which their profession sees.  At most of            
 the hearings the trial attorneys have said they agree with the                
 goal.  They finally came to agree with the concept of mandatory               
 mediation.  He went into further detail of these negotiations.                
 MR. MAYNARD responded to Mr. Conn's comment.  This bill relates to            
 all civil actions, not just design professionals.  The trial                  
 attorneys did not want to have special interest legislation.                  
 Basically this legislation allows for a discovery process to last             
 no more than 60 days, then mediation takes place.  Cases could                
 potentially be settled within 60 to 90 days, rather than six months           
 to two years dragging the whole process out.  This procedure will             
 cut down on costs and (indisc. - paper shuffling.)                            
 Number 1038                                                                   
 RUSS WINNER, Trial Lawyers Representative testified by                        
 teleconference from Anchorage on HB 414.  He said he had just a few           
 minutes ago been handed the amendments to version R of this                   
 legislation.  The Trial Lawyer's view is that mandatory mediation             
 shortly after what's required of the new Civil Rule 26 which is an            
 automatic and mandatory exchange of discovery and calling for                 
 mediation of the parties after this time would be a good idea.                
 They support this idea and feel that it may help to resolve                   
 litigation sooner.  If it doesn't resolve the litigation, it may              
 help the parties to focus their thinking and allow for at least a             
 partial settlement of the defendants who might not be significant             
 to the case.                                                                  
 MR. WINNER added that the Trial Lawyers feel this is an idea which            
 ought to apply across the board and not just to one type of                   
 defendant.  They support the idea of mediation occurring after the            
 exchange of discovery rather than before the initiation of a                  
 lawsuit because after exchange of discovery the parties will know             
 much of what they need to know in regards to settling the case.               
 What is contemplated here is that mediation will occur before                 
 depositions, but after the exchange of written discovery which is             
 required by the rule.  This is not an inappropriate time for                  
 parties to think about what the case really holds in store.  The              
 deposition phase is the next major phase of a lawsuit.  If the case           
 can be settled, or partially settled, simplified before depositions           
 start is a good idea.  He felt as though all the parties could                
 agree to this.                                                                
 MR. WINNER noted that there were some "what if" questions which he            
 felt needed to be thought through.  What if for example, one of the           
 litigants is indigent and can't afford a mediator?  This is                   
 something which needs to be considered.  The procedure for                    
 selecting a mediator needs to be considered.  He felt as though the           
 bill should be written so that the parties can engage in mediation            
 at any time, as long as they've done so within a specified time               
 period, this would satisfy the requirements.                                  
 MR. WINNER added that he saw in the amendments that it's allowed              
 for all the parties to waive mediation.  His experience with                  
 mediation in lawsuits, is that the Rules of Evidence do not play a            
 role.  The parties come before a retired judge or sometimes an                
 attorney and information is exchanged to the extent that it already           
 hasn't been done.  This "judge" shuttles back and forth between the           
 parties often ensconced in two different rooms.  They try to talk             
 the parties towards middle ground.  What's said on the record in              
 mediation is not admissible as evidence in a subsequent trial.                
 Number 1339                                                                   
 REPRESENTATIVE CYNTHIA TOOHEY made a motion to adopt the CS for HB            
 414, version R as the committee's working document.  There being no           
 objection it was so moved.                                                    
 Number 1374                                                                   
 REPRESENTATIVE CON BUNDE made a motion to move amendment number one           
 labeled R.1 for consideration by the committee.  Chairman Porter              
 objected for the purposes of discussion.                                      
 REPRESENTATIVE GREEN as sponsor explained.  This amendment number             
 one would have a tendency to broaden the title significantly from             
 the original title which dealt primarily with architects, engineers           
 and land surveyors.  This amendment would expand to include certain           
 civil actions.  The amendment in it's entirety is as follows:                 
 Page 1, line 1 - 2:                                                           
 Delete "a civil action against an architect, engineer, or land                
 Insert "civil actions"                                                        
 Page 1, line 2, after "Procedure;":                                           
 Insert "repealing Rule 72.1, Alaska Rules of Civil Procedure;"                
 Page 1, line 6:                                                               
 Delete "AGAINST DESIGN PROFESSIONAL"                                          
 Page 1, lines 7 - 8:                                                          
 Delete "(a) A civil action against a design professional seeking              
 damages resulting from professional"                                          
 Insert "A civil action seeking damages resulting from"                        
 Page 1, line 11, through page 2, line 4:                                      
 Delete all material.                                                          
 Page 2, after line 4:                                                         
 Insert new bill sections to read:                                             
 "*Sec. 2.  AS 08.64.326(a)(12); AS 08.68.270(10); AS 09.55.535,               
 09.55.536, 09.55.560(2), and 09.55.560(3) are repealed.                       
 *Sec. 3.  Rule 72.1, Alaska Rules of Civil Procedure, is repealed."           
 Renumber the following bill sections accordingly.                             
 Page 2, line 7:                                                               
 Delate "against a design professional"                                        
 Insert "seeking damages resulting from negligence"                            
 Number 1431                                                                   
 MIKE FORD, Attorney, Legislative Legal Counsel, Legislative Affairs           
 Agency, testified by speaker phone on HB 414 and offered to run               
 through some of the key points related to this amendment.  The                
 change to the title is necessary to reflect the contents of the               
 bill as amended.  Lines 4 and 5 reflect the change to the title               
 which indicates the repeal of a court rule, a rule which is one               
 regarding medical malpractice panels.  If they were going to                  
 require mandatory mediation, this amendment would repeal provisions           
 of law which impose arbitration in medical malpractice actions.               
 Arbitration is not needed in medical malpractice if mandatory                 
 mediation is allowed for in all of these civil actions resulting              
 from negligence.                                                              
 MR. FORD continued that these changes are reflected on line 16 and            
 17 as a series of repealers and these repealers are all related to            
 medical malpractice arbitration.  They've made necessary changes              
 whereas necessary to eliminate language that limits the bill to               
 design professionals and to broaden the language to allow it to               
 apply to any civil action where someone is seeking damages                    
 resulting from negligence.  As a result of this a definition of               
 design professionals is not needed, as in subsection (b) of the CS            
 adopted.  He stated that this was it in a nutshell.                           
 Number 1555                                                                   
 CHRIS CHRISTENSEN, General Counsel, Alaska Court System testified             
 on HB 414.  He noted that he'd only had a brief chance to review              
 these amendments and he was still trying to ascertain what their              
 effect might be.  As a general rule, the Alaska Supreme Court does            
 support the concept of alternative dispute resolution.  They think            
 that it's generally a good idea to get people together in order to            
 solve their problems in a non-adversarial way.  This being said,              
 there are some parts of their civil law in which alternative                  
 dispute resolution can be very successful, for example, with                  
 contract claims.  Many contract claims are resolved by arbitration            
 or mediation and never come to the court system because people seem           
 to only have money at stake rather than tort type problems, such as           
 MR. CHRISTENSEN stated that another area is family law.  Probably             
 the worst use of the adversarial system is to try to divide up                
 children and assets in a divorce.  Most people would be better                
 served if they had this handled by a psychologist rather than a               
 judge.  One area of the law in which the court does not believe               
 alternative dispute resolution is as effective is in the tort area.           
 Right now better than 95 percent of all tort cases settle without             
 ever going to trial.  This is a tremendously high percentage.  The            
 court doesn't believe that mandatory arbitration or in this case              
 mediation for tort claims will save the state any money.  In the              
 sense that these cases which go to trial are going to go to trial             
 anyway, this smaller percentage is made up of three or four                   
 percent.  These are the cases where the attorneys just do not flat            
 agree on the issues to be settled.   Some other cases might settle            
 earlier, this primarily is an advantage to the litigants, not to              
 the state.  Mediation make help litigants, but it won't really save           
 the state money.                                                              
 MR. CHRISTENSEN pointed out that the CS before the committee                  
 affects about dozen cases a year.  This CS would dramatically                 
 expand the case load which the department did not put a cost on               
 when originally proposed.  Administrative costs may have to be                
 included.  He noted that there was no clear exemption for small               
 claims in this amendment.  He pointed out that there are thousands            
 of small claims cases which are tort related.  Small claims is an             
 expensive court for the state, it costs the state more to handle a            
 $2000 case in small claims court than it does in District court,              
 because of the extra assistance the state gives to litigants and              
 help with all the forms, etc.  The state provides small claim court           
 because a lot of people can't afford general adjudication.  The               
 process of mediation will price people out of small claims court.             
 The committee might want to consider this limitation.                         
 MR. CHRISTENSEN further stated that a tort reform bill sponsored by           
 Chairman Porter was in the senate which provides for mandatory                
 arbitration.  This has produced a fabulously expensive fiscal note            
 because of the state mandating arbitration or mediation.  If a                
 person has to do this as a condition of exercising their rights               
 before a judge or jury, the state will have to pay for the cost of            
 the mediator or the arbitrator if one of the parties cannot pay for           
 it.  Mediation as it's done is substantially less expensive than              
 the arbitration in the tort reform bill.  This does not mandate the           
 use of a retired judge or a lawyer.  These individuals normally               
 charge twice as much as a non-attorney mediator in Anchorage.                 
 MR. CHRISTENSEN also noted that if it's the legislatures intention            
 that judges be allowed to order a non-indigent party to pay for               
 both the parties involved expenses, it would be well advised for              
 the legislature to specifically say this instead of relying on                
 existing court rules.                                                         
 Number 1767                                                                   
 CHAIRMAN PORTER spoke against the amendment for a number of                   
 reasons.  The first, as it's been mentioned, this brings into                 
 consideration for this process a multitude of additional cases                
 which were not anticipated during the lengthy discussions and                 
 crafting of the present Committee Substitute.  He felt as though it           
 would be grossly unfair for them to whisk this Committee Substitute           
 out of committee without the input from the professions affected by           
 this amendment, especially the medical profession when they're                
 deleting a practice which they support.  Additionally, from a self-           
 serving, political point of view, he would never let this title out           
 of the Judiciary Committee.  With this in mind he asked if there              
 was further discussion of this amendment.  He noted that the                  
 objection was maintained and asked for a roll call vote.                      
 Representatives Toohey, Bunde, Green, Vezey and Porter voted no.              
 Representative Finkelstein voted yes.  Amendment number one failed.           
 Number 1865                                                                   
 REPRESENTATIVE BUNDE made a motion to move amendment number two               
 outlined as follows:                                                          
 Page 1, line 9, following "mediation":                                        
 Insert ", unless all the parties to the civil action agree to waive           
 CHAIRMAN PORTER explained that this amendment would allow if both             
 parties agree, a waiver of the automatic mediation process.  There            
 being no objection it was so moved.                                           
 Number 1887                                                                   
 REPRESENTATIVE BUNDE made a motion to move amendment number three             
 outlined as follows:                                                          
 Page, line 10, following "Procedure":                                         
 Insert ", except that if the court requires the costs of mediation            
 be paid by the party defending against the civil action, the                  
 provisions of this section may be waived at the election of the               
 party defending against the civil action.  If more than one party             
 is defending against the civil action, waiver of mediation is not             
 allowed unless all defending parties agree to the waiver.  For                
 purposes a waiver allowed under this subsection, "civil action"               
 does not include a counterclaim, third-party claim, or cross claim"           
 CHAIRMAN PORTER asked Mr. Christensen if he had any comments                  
 concerning this amendment.                                                    
 MR. CHRISTENSEN stated that if this amendment was adopted he would            
 like to see conceptually language added which would generally say             
 if one of the parties to the litigation is indigent the court may             
 order the other party to bear the costs.  Arguably the judge can              
 already do this under court rules, but he didn't think most judges            
 would do so quite frankly.  Even if the legislature said that this            
 was their intention this doesn't mean the judge will always follow            
 CHAIRMAN PORTER reiterated this concept with the following                    
 language, "If one of the parties were indigent the court may order            
 the non-indigent party to bear the entire cost of the mediation."             
 This was offered as a friendly amendment.  There being no                     
 objection, this conceptual amendment to amendment number three                
 passed.  The other participants did not have any objections to this           
 change.  Amendment number three also passed.                                  
 Number 2030                                                                   
 REPRESENTATIVE DAVID FINKELSTEIN asked for a brief observation from           
 both Mr. Maynard and Mr. Winter on the bill as amended.                       
 Number 2045                                                                   
 MR. MAYNARD felt as though the changes as amended would be fine and           
 would be a good procedure to reduce the length of cases, hence                
 saving money for the courts.                                                  
 Number 2060                                                                   
 MR. WINNER stated that the trial lawyers do object to a bill which            
 is tailored to just architects, engineers and land surveyors.  They           
 believe that the court system should be even handed in it's                   
 treatment of cases irrespective of the character or type of claim             
 or defendant.  He said it would be appropriate to hear testimony              
 from other professions, such as doctors, etc.  He urged the                   
 committee to consider this alternative to the rejection of                    
 expansion of the bill.                                                        
 CHAIRMAN PORTER asked if it would be within the realm of                      
 consideration to think of this legislation as perhaps a test                  
 program to see if after a couple of years it could then be applied            
 to other professions.                                                         
 Number 2118                                                                   
 MR. WINNER felt as though this might be a worthwhile idea to think            
 about.  He submitted that the way to do this would have it apply              
 across the board with a sunset clause.                                        
 Number 2130                                                                   
 REPRESENTATIVE GREEN stated that he was going to suggest the same             
 thing.  The concern he had though was in the interest of time in              
 this legislature.  He didn't think they would be able to adequately           
 address this issue, but were they able to give it at least the                
 interim and as Chairman Porter suggested a year or two and then               
 come back during the interim and talk to the other professions to             
 see if in fact this is what they do want.                                     
 REPRESENTATIVE BUNDE made a motion to move CSHB 414, version R as             
 amended with individual recommendations and attached fiscal notes.            
 There being no objection it was so moved.                                     

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