Legislature(1995 - 1996)
04/17/1996 01:12 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 amendments. 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 substitute 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 surveyor" 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 injuries. 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 mediation" 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 through. 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.