Legislature(2005 - 2006)CAPITOL 120

02/24/2006 02:00 PM JUDICIARY

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
Moved Out of Committee
Moved CSHB 93(JUD) Out of Committee
Moved CSHB 446(JUD) Out of Committee
+= Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 329(JUD) Out of Committee
Heard & Held
HB 446 - PENALTY FOR UNLAWFUL TRADE PRACTICE                                                                                  
2:23:54 PM                                                                                                                    
CHAIR McGUIRE announced that the  next order of business would be                                                               
HOUSE BILL  NO. 446, "An  Act relating to  the amount of  a civil                                                               
penalty for an  unlawful act or practice in the  conduct of trade                                                               
or commerce."                                                                                                                   
CHAIR  McGUIRE,  speaking  as  the  sponsor,  noted  that  Alaska                                                               
continues  to top  the nation  in fraud  complaints, and  relayed                                                               
that HB 446  attempts to tighten up  Alaska's consumer protection                                                               
laws and send  a strong message that fraud will  not be tolerated                                                               
in Alaska.                                                                                                                      
2:24:57 PM                                                                                                                    
TED  POPELY,  Legislative  Council  Legal  Office,  Alaska  State                                                               
Legislature,  relayed  that HB  446  simply  increases the  civil                                                               
penalties that  the Department of  Law (DOL) may avail  itself of                                                               
under the [Alaska Unfair Trade  Practices and Consumer Protection                                                               
Act], civil penalties that are used  as a tool to enforce the Act                                                               
against companies that may defraud  Alaskan consumers.  Currently                                                               
the law permits  civil penalties to be sought by  the DOL and the                                                               
attorney general in cases of  consumer fraud, consumer deception,                                                               
and  other acts  forbidden  under  the Act.    The current  civil                                                               
penalties  have  been  in  place since  the  Act  was  originally                                                               
enacted in 1970,  and they are rather low in  comparison to other                                                               
states, particularly given the rate of inflation.                                                                               
MR.  POPELY  explained  that  HB   446  proposes  to  modify  two                                                               
provisions of current law:   AS 45.50.551(a) and AS 45.50.551(b).                                                               
Proposed  AS   45.50.551(a)  will  increase  the   civil  penalty                                                               
included  therein from  "$25,000 per  violation" to  "$50,000 for                                                               
each violation",  and will  apply in  situations where  a company                                                               
violates  an  injunction  [or restraining  order]  pertaining  to                                                               
deceptive practices.   Proposed  AS 45.50.551(b) will  change the                                                               
civil  penalty included  therein from  "$5,000 per  violation" to                                                               
"not  less  than  $1,000  and  not more  than  $25,000  for  each                                                               
violation", and  will apply  in situations  where one  violates a                                                               
provision  of the  [Alaska Unfair  Trade  Practices and  Consumer                                                               
Protection Act].                                                                                                                
2:27:58 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG  referred to  Section  1  of the  bill,                                                               
specifically the language in current  law that says in part, "the                                                               
cause  shall be  continued".   He  characterized  this phrase  as                                                               
"ancient language," and  asked whether it would  be sufficient to                                                               
simply say that the court retains jurisdiction.                                                                                 
CYNTHIA DRINKWATER,  Assistant Attorney  General, Commercial/Fair                                                               
Business Section,  Civil Division (Anchorage), Department  of Law                                                               
(DOL), agreed  that the phrase,  "the cause shall  be continued",                                                               
is probably unnecessary.                                                                                                        
REPRESENTATIVE GRUENBERG  suggested that  the same could  be said                                                               
of the  phrase, "the attorney general  acting in the name  of the                                                               
state may  petition for  recovery of the  penalties", in  that it                                                               
seems to be requiring the  attorney general to petition the court                                                               
in  a situation  where  only  a writ  of  execution  needs to  be                                                               
MS.  DRINKWATER  pointed  out,  however, that  the  way  the  DOL                                                               
requests civil  penalties is initially via  the complaint itself.                                                               
Then,  once a  case is  at the  point where  a final  judgment is                                                               
sought, the DOL  asks for civil penalties via a  motion for civil                                                               
penalties.    Therefore,  according  to  her  understanding,  she                                                               
remarked,  the  word  "petition"  is  a  bit  broader  than  what                                                               
Representative Gruenberg is suggesting.                                                                                         
REPRESENTATIVE  GRUENBERG surmised,  then, that  the language  is                                                               
referring to  the motion for  civil penalties rather than  a writ                                                               
of execution.                                                                                                                   
MS. DRINKWATER concurred.  In  response to questions, she relayed                                                               
that she doesn't see a problem  with the way the current language                                                               
in AS 45.50.551(a) is drafted.                                                                                                  
REPRESENTATIVE GRUENBERG  said he's wondering whether  Section 3,                                                               
the applicability  provision of the  bill, will cause an  ex post                                                               
facto problem from a constitutional  standpoint.  He noted that a                                                               
memorandum  he'd received  from  Legislative  Legal and  Research                                                               
Services,  written by  Dennis C.  Bailey, raises  this issue  and                                                               
states in part:                                                                                                                 
     In conclusion,  I do not  know how this issue  would be                                                                    
     resolved  by  a  court.    However,  the  applicability                                                                    
     section  you propose  changes  the  penalty for  events                                                                    
     that have  already occurred.  The  fines are designated                                                                    
     as a penalty.  It would  be difficult to argue that the                                                                    
     fines  are compensatory  rather  than  punitive.   This                                                                    
     seems to run afoul of the ex post facto prohibition.                                                                       
REPRESENTATIVE GRUENBERG said it seems  to him that the committee                                                               
has three choices:  leave the  language as is and allow the court                                                               
to decide; strike Section 3; or  insert other language.  He asked                                                               
Ms. Drinkwater whether [the DOL]  would be prepared to defend the                                                               
current language if the committee left it as is.                                                                                
MS.  DRINKWATER suggested  that perhaps  Mr. Popely  could better                                                               
address that issue, but pointed  out that Clyde (Ed) Sniffen, Jr.                                                               
- Assistant  Attorney General, Commercial/Fair  Business Section,                                                               
Civil  Division  (Anchorage),  Department  of  Law  (DOL)  -  had                                                               
conducted an analysis  of that issue and had come  to a different                                                               
2:34:10 PM                                                                                                                    
MR. POPELY concurred with Ms.  Drinkwater regarding Mr. Sniffen's                                                               
opinion.  Anytime there is  an applicability section containing a                                                               
date other  than the effective date  of the Act, it  will raise a                                                               
potential ex  post facto  issue, Mr.  Popely remarked,  but added                                                               
that according  to conversations he'd  had with Mr.  Sniffen, Mr.                                                               
Sniffen  doesn't think  Section 3  will  cause an  ex post  facto                                                               
problem for several reasons:   generally ex post facto challenges                                                               
are directed at purely punitive  actions, and the civil penalties                                                               
in the bill are a hybrid  of punitive and compensatory action; ex                                                               
post  facto challenges  are generally  most successful  when they                                                               
pertain to purely criminal acts  and criminal violations, and the                                                               
[Alaska Unfair  Trade Practices and  Consumer Protection  Act] is                                                               
not a criminal statute; the conduct  referred to in the bill will                                                               
have been illegal at the time  the penalties are assessed and the                                                               
bill  doesn't  create  any  new civil  or  criminal  liability  -                                                               
instead  the  amount  of  liability is  simply  altered;  and  no                                                               
substantive rights are being denied via the proposed increases.                                                                 
MR. POPELY  said that these are  all points that the  court looks                                                               
at in making  an ex post facto analysis.   Mr. Popely offered his                                                               
understanding  that there  are only  a handful  of pending  cases                                                               
that would  be impacted by  the proposed  applicability provision                                                               
as it  is currently  written, and  that any  new cases  that [are                                                               
filed] after the effective date of  the bill won't be affected by                                                               
the applicability provision.                                                                                                    
REPRESENTATIVE GRUENBERG  posited that that won't  necessarily be                                                               
the case,  and offered  an example wherein  an action  is brought                                                               
within  the  statute  of  limitations   against  a  company  that                                                               
committed fraud in the past but no one knew about it.                                                                           
MR. POPELY concurred with that point.                                                                                           
CHAIR  McGUIRE suggested  that they  ought to  provide the  state                                                               
with the option of seeking  the aforementioned civil penalties if                                                               
it is willing to pursue them.                                                                                                   
REPRESENTATIVE GRUENBERG concurred.                                                                                             
MR. POPELY also concurred.                                                                                                      
2:38:48 PM                                                                                                                    
STEVE   CLEARY,  Executive   Director,  Alaska   Public  Interest                                                               
Research  Group  (AkPIRG), indicated  that  he  concurs with  the                                                               
comments in favor  of HB 446, characterizing the bill  as a great                                                               
way to  modernize consumer  protection in Alaska.   It's  good to                                                               
know that the  consumer protection laws are about  to be updated,                                                               
he  remarked,  adding  that  those   updates,  along  with  other                                                               
legislation currently moving through  the process are things that                                                               
the DOL will be able to make  use of.  He concluded by indicating                                                               
that [AkPIRG] is in full support [of the bill].                                                                                 
CHAIR  McGUIRE, after  ascertaining that  no one  else wished  to                                                               
testify, closed public testimony on HB 446.                                                                                     
REPRESENTATIVE GRUENBERG made  a motion to adopt  Amendment 1, to                                                               
delete  the phrase,  "and  the cause  shall  be continued,"  from                                                               
page 1, lines 8-9.                                                                                                              
REPRESENTATIVE ANDERSON objected for the purpose of discussion.                                                                 
CHAIR McGUIRE  said she is assuming  that if Mr. Sniffen  had had                                                               
concerns about  the phrase that  Amendment 1 proposes  to delete,                                                               
he  would   have  brought  those  concerns   to  the  committee's                                                               
REPRESENTATIVE  GRUENBERG, in  response  to  a question,  offered                                                               
that the  aforementioned phrase  is not  modern terminology.   He                                                               
indicated that he  is amenable to having  the language reinserted                                                               
later if Mr. Sniffen objects to its removal.                                                                                    
REPRESENTATIVE   COGHILL  offered   his  understanding   that  by                                                               
retaining jurisdiction, a  district would be able  to continue an                                                               
REPRESENTATIVE GRUENBERG concurred.                                                                                             
REPRESENTATIVE ANDERSON removed his objection.                                                                                  
CHAIR McGUIRE asked whether there  were any further objections to                                                               
Amendment 1.  There being none, Amendment 1 was adopted.                                                                        
2:42:37 PM                                                                                                                    
REPRESENTATIVE COGHILL  moved to report  HB 446, as  amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying  zero  fiscal  notes.   There  being  no  objection,                                                               
CSHB 446(JUD)  was reported  from  the  House Judiciary  Standing                                                               

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