Legislature(2003 - 2004)
01/21/2004 03:16 PM House L&C
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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 0066 CHAIR ANDERSON announced that the first 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." Number 0066 REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, presented HB 227 on behalf of the House Judiciary Standing Committee, sponsor. He testified: It contains four parts. The first part simply increases the district court's jurisdiction from $50,000 to $75,000. We're only talking about civil jurisdiction here. Section 2 increases small claims jurisdiction from $7,500 to $10,000. Section 3 tracks Section 2 with respect to magistrates' jurisdiction because they hear small claims, increasing it from $7,500 to $10,000. Section 4 amends a district court civil rule that presently states you cannot sue an out-of-state defendant in small claims court. This will allow you to do so when the cause of action is based on a debt or a contract of personal injury or property damage that was incurred while the defendant was physically present in Alaska. Let me explain very briefly the reason for all four of these. As the state has matured and become more sophisticated, the quality of the district court has increased and we have people now sitting on that court who are very good and are highly qualified to hear larger cases. In addition is the effect of inflation, which has made money worth less than it was, and we have, over the years, consistently increased the civil jurisdiction of the district court. I think it may have been $25,000 initially. It was quite small, and now it's certainly up to $50,000, and we would like to see it go up to $75,000, at least, at a minimum. Number 0142 REPRESENTATIVE GRUENBERG noted that this bill applies to civil cases. In Section 1, everywhere in AS 22.15.030(a) that the figure of $50,000 is mentioned, the figure will be increased to $75,000. He said he believes procedure, timing, and ability to get a case to court are faster in district court than in civil court, where they have complex, larger cases, felonies, family law cases, and other types of cases. He described small claims court as streamlined, and the court of the people. He said many people go to small claims court without attorneys and they don't have to follow the strict rules of evidence. He reiterated that HB 227 keeps pace with inflation and increases the civil jurisdiction to $10,000 from $7,500. Section 3 allows magistrates to hear cases up to $10,000. He noted that in a complex case the magistrate can defer to a district court judge. He stressed that HB 227 gives magistrates in Alaska the authority to hear these cases. REPRESENTATIVE GRUENBERG pointed out with respect to Section 4, the amendment to the civil rule in small claims [court], that often defendants in a contract or small case of personal injury leave Alaska. These defendants may be transferred or are an out-of-state corporation, but the actions that led to the case occurred here in Alaska. He described a corporation with an office here in Alaska, a "nexus here in the state," that was present in Alaska when it entered into a contract and subsequently became a defendant. Usually, people going to court on a small case would have to hire a lawyer to go to court with them because the defendant was a large corporation and located out-of-state. He said he feels this is difficult for people. He observed that the fifth section of HB 227 clarifies that this bill amends a rule and consequently requires a two-thirds vote for Section 4 to become effective. Number 0459 REPRESENTATIVE LYNN asked how Alaska compares to other states in terms of the dollar limits; would HB 227 bring Alaska into line with other states? REPRESENTATIVE GRUENBERG replied that he couldn't answer this question because he had not done a survey. He thinks it would. He clarified that the last time the limits of jurisdiction were raised for district court was in 1990, from $35,000 to $50,000, and the limit was raised as recently as 1997 for small claims court, from $5,000 to $7,500. Number 0586 REPRESENTATIVE DAHLSTROM asked for clarification on the procedure followed when there is no response from a person out of state; who from the court or an Alaskan agency is responsible for following up? REPRESENTATIVE GRUENBERG informed Representative Dahlstrom The process of filing a lawsuit involves filing a complaint and paying the filing fee. Then you serve the defendant. There are various ways under Civil Rule 4 that governs this. There's no difference for small claims service of summons, except that for small claims you're not allowed to serve by what's called "publication." "Publication" is if you can't find somebody, then you can use public notice. [In the case of small claims] you either do it by personal service, you hire a process server or you hire a peace officer, and they serve it to you or at your current address or they give it to an adult or somebody of reasonable age or they can serve it to you on the street or anyplace. Second is by certified mail, return receipt requested, addressed to addressee only, so they have to sign and then you get a green card back. They have 20 days, generally, to respond, except the state has (indesc.). If they don't respond, you can get a default and you file an application for entry of default and an affidavit stating, "Such-and-such a date I served the person and they didn't respond." Here is the proof: the affidavit of service from the person who served it or the green card in the mail. The file will reflect there is no answer, and I request a default." Then the court enters a default. Then you can get a default judgment if it is for money, like it is in small claims. If it's not, you can get a default hearing, like in a divorce. If it's for a money judgment, you can also apply for a default judgment at the same time and the clerk can see [for example] I lent him $10,000, he has not paid me back, here is the promissory note and my affidavit that he has not paid me back. And that's also the complaint and they will enter a default judgment. REPRESENTATIVE DAHLSTROM thanked him for his help "for those of us who are non-attorneys." Number 0856 DOUG WOOLIVER, Administrative Attorney, Alaska Court System, stated that the latest information that he has, in answer to a previous question from Representative Lynn regarding a comparison of Alaska to other states, is from 2001, when there were five states with jurisdictional limits above Alaska's current rate of $7,500. He noted that in two states there is a match of Alaska's limits and there are 42 states that are below Alaska's rate, most considerably below. He pointed out that the "overwhelming" number of states have small claims jurisdiction limits of two to five thousand dollars. He reported that the caseload average in small claims court is between 10,000 and 12,000 cases a year, whereas superior court cases average 3,000 to 3,500. He noted that small claims [courts] tend to have a high volume of cases. He testified: As is typically the case, the court system doesn't take a position on this bill in terms of pro or con. That's our standard policy. We try to leave most of the policy debates up to you and don't weigh in one way or the other. We try to point out general problems that we have with a bill, but we generally don't weigh in as to whether it's a good idea or a bad idea. This bill falls into a gray area between supporting, opposing, or remaining neutral, and that's because most judges see a variety of potential problems with the bill. But the bill is also consistent with the court's general philosophy, which is to make the court more accessible, particularly to the growing number of people who are going to court without an attorney. Small claims court is the most per se friendly court and is intended to be, as Representative Gruenberg said, "the people's court." This bill is consistent with the philosophy of making that court more accessible. So our testimony is going to raise potential problems the judges have pointed out to me with the bill, and at the end I will try to explain why we still, despite these problems, are (indisc.) take that position. Section 1 of the bill raises the jurisdiction of the district court of $50,000 to $75,000. The court doesn't have any objection with this provision. MR. WOOLIVER went on to say that since this hasn't been raised in several years it is fair. He reported that several judges have expressed concern with raising small claims limits because this might frustrate the general purpose of that court, which is to move a high volume of low-dollar-value cases through the system. He noted that it's the general citizen's opportunity to have his or her case heard before a judge without a lawyer, a long delay, pretrial motion practice, or depositions. He stated that the judges are concerned about a $10,000 limit because the judges think this provision will not actually change the fact that very few people consider a claim in excess of $7,500 to be small. He agreed with Representative Gruenberg that one of the benefits of small claims court is that for people who are not attorneys there are no complicated pretrial steps. He stated this also means that the person goes into court with no idea as to what the opponent "has in their corner." He testified that the judges believe that most people would not go to small claims court because of this if the amount of money involved is over $7,500. MR. WOOLIVER listed the second concern as the probability that people in cases involving $10,000 are likely to come to small claims court with counsel and that the process that lawyers follow in court will lengthen the time spent in small claims court, thus causing full-blown and lengthy trials. He offered that this causes a backup in small claims court. MR. WOOLIVER noted that most of the time out-of-state hearings come with a telephonic proceeding. The Alaska Court System relies heavily on daily telephonic proceedings, which come with certain problems. He stated that these problems are particularly difficult in small claims court, where the whole purpose is to move cases quickly through the system. He listed the issues: the first problem is getting a person on the phone; the person may be using a cell phone number that cuts in and out of reception; then the person isn't necessarily well prepared. He notes that judges are better able to assess credibility of a person who is directly in front of them, rather than out of state. MR. WOOLIVER said that none of these problems are unique to this issue and that in this state telephonic proceedings are common. This bill does not create telephonic problems, but these problems are exacerbated. Number 1247 MR. WOOLIVER asserted that this bill will require magistrates to have additional training, since none of them have had to deal with out-of-state defendants, except in limited circumstances. He admitted it will not necessarily be a huge problem because if a magistrate feels overwhelmed by a case, he/she can refer it to district court. MR. WOOLIVER restated that the court does not object to HB 227, since this bill is consistent with the court's general philosophy of making the courts more accessible to people so they can come to court without the assistance of counsel. He listed several means that the court is using to help citizens negotiate "this arcane system." He reiterated that the court is neutral on HB 227 and leaves the legislature to weigh the pros and cons. He cautioned that this bill helps people but may also create a process that undermines the whole purpose of small claims court by making it more costly and time-consuming than it is intended to be. REPRESENTATIVE CRAWFORD asked if it would be an incentive to take more cases to small claims court if the limits were raised on small claims. MR. WOOLIVER stated that it could, since there is a category of cases that people are discouraged to bring and indeed don't bring because they have to go to regular district court. He voiced that the courts may see more cases, particularly with out of state defendants, than are being seen at present. However, he admitted that in the past when the jurisdiction of small claims court was increased there was no corresponding increase in cases. Number 1481 REPRESENTATIVE ROKEBERG asked what the requirements for counsel are in small claims court. MR. WOOLIVER responded that attorneys may come to small claims court, but that it is exceptional. REPRESENTATIVE ROKEBERG noted that this bill shifts costs within the system, and that this may be positive overall. MR. WOOLIVER responded that it would be positive in those cases where the superior court is busier than the district court, and a piece of the superior court's work is moved to the district court. REPRESENTATIVE ROKEBERG asked what the educational requirements are for magistrates, what the current situation is in the Anchorage area, and what the impact of this bill might be. MR. WOOLIVER replied that many magistrates in outlying areas are not attorneys and sometimes work part-time. In hub areas the magistrates are attorneys. MR. WOOLIVER testified that in Anchorage the magistrates operate differently in that they handle many domestic violence and traffic cases, with the district court judges handling small claims cases. He noted that the concerns about training magistrates will only apply to some parts of Alaska, but not Anchorage. REPRESENTATIVE ROKEBERG continued with his concern about expanding the jurisdiction of magistrates who have an inadequate training background to carry out this bill if it becomes law. Number 1800 MR. WOOLIVER responded that an area of concern with the judges occurs when tourists or people who fish visit remote communities, have problems, leave the state and are then named in a case. He stated that the case would go to the magistrate but the magistrate can always refer the case to a district court judge. REPRESENTATIVE ROKEBERG asked that attention be turned to page 4, line 11, of the bill, commenting that proposed rule 11(a) (4)(C) would only be applicable if the defendant was present in Alaska. He expressed curiosity about what would happen if the defendant was a corporate entity and, if the defendant was physically present because of conducting business, what the legal interpretation would be. MR. WOOLIVER responded that if one does business in Alaska and has an office here, then that person or entity can be sued in Alaska. REPRESENTATIVE DAHLSTROM stated that her question pertains to Section 4, line 11, also, because she represents many constituents, particularly the military, who are physically out of the state. She asked if this bill would affect them. She noted that there was an Act, the [federal] Soldiers and Sailors Civil Relief Act, that protects them while they are defending the United States. She asked if this had been considered. Number 2003 MR. WOOLIVER admitted that he does not know the full scope of that law, but thinks that this bill affects that law. REPRESENTATIVE GRUENBERG stated that he had a number of points to add to Mr. Wooliver's answers. He stated that this bill would not affect the Soldiers and Sailors Civil Relief Act, since this Act mandates that an attorney be appointed to advise the service person of his/her rights. This bill is intended to make it easier for people to use the court system without getting into the formal rules of district court. He conveyed that nothing in the bill makes it easier for somebody to get into court in Alaska; it just determines which court, and the purpose is to expand the lower, simpler, easier, quicker courts. REPRESENTATIVE DAHLSTROM voiced an example of a constituent who is serving in Iraq for an extended time; is that person immune until he/she returns? REPRESENTATIVE GRUENBERG clarified: [The Soldiers and Sailors Civil Relief Act] just makes sure that the absent service person has the right to a court-appointed attorney to advise them of their right to defend themselves. It doesn't stay the action, to my knowledge; it doesn't give them an in-court counsel. It is a very minor appointment, simply that if you are being sued, you have a right to defend yourself. I'm not aware of anything in Alaska law or of any federal law that stays a case because of the [Soldiers and Sailors Civil Relief Act] Act. REPRESENTATIVE GUTTENBERG returned to line 11, page 4 of HB 227 and asked what happens if the defendant causes something to happen when he/she is not physically in Alaska. He gave the example of being a renter, leaving without telling the landlord, then not paying the utility bill, and thereby causing the house to freeze. REPRESENTATIVE GRUENBERG spoke in reply as though he were advising the landlord: They could sue on several theories. They could sue you because you failed to maintain the unit, assuming you did, under your lease, under the landlord-tenant Act. And that's already law, and they could already sue you under that theory. If they just sued you for negligence, not under the landlord-tenant Act, and if you failed to pay the bill and the damage occurred while you, David Guttenberg, were still in Fairbanks, yes, for that portion of the damage they could sue you in small claims. Once you skip the state, if additional damages occurred while you were back in New York, they couldn't because the damages that occurred then would not be under this. That would be my interpretation. REPRESENTATIVE GATTO commented that he is in favor of the bill, TAPE 04-1, SIDE B REPRESENTATIVE GATTO noted that it would open up the court to people who can't afford to be represented by an attorney. He said $10,000 in this state is not even the price of a used car. He states he is in favor of the bill. Number 2345 CHAIR ANDERSON asked if there were any other specific questions and whether anyone was opposed to moving this bill out today. Number 2310 REPRESENTATIVE GATTO moved to report HB 227 out of committee with individual recommendations [and the accompanying fiscal notes]. REPRESENTATIVE ROKEBERG objected for purposes of discussion, and declared that he wanted to move this bill out of committee with an "amend" [recommendation], specifically recommending that the House Judiciary Standing Committee review Section 4 closely. He expressed concern that Rule 11 would allow magistrates to have substantially expanded jurisdiction over non-automotive and landlord-tenant cases. He is concerned about the magistrates' levels of competency and abilities to handle the complexity. The tendency here is to favor those who wish to more cheaply pursue claims, which typically are business people, against the typical, average-person defendant. He said this interpretation of the bill makes it more pro-business than pro-people. REPRESENTATIVE GRUENBERG responded that the point is well taken and continued with clarification that Rule 11 deals with small claims court and that most of these claims are heard by judges rather than magistrates. He stated that perhaps inserting language into the bill that says "except magistrates" would be a good idea. Number 2183 REPRESENTATIVE ROKEBERG stated that this insertion would allay his concerns. He noted, "You still have the small claims litigant going into district court and being able to use this out-of-state reach under this addition with a district court judge supervising the claim." REPRESENTATIVE ROKEBERG removed his objections. CHAIR ANDERSON announced that HB 227 was reported from the House Labor and Commerce Standing Committee.
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