Legislature(1995 - 1996)

02/07/1996 03:13 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 414 - MANDATORY MEDIATION/DESIGN PROF LAWSUITS                           
 Number 1124                                                                   
 CHAIRMAN KOTT announced the next order of business would be HB 414,           
 "An Act requiring conciliation panel review in a civil action                 
 against an architect, engineer, or land surveyor; and providing for           
 an effective date."                                                           
 JEFF LOGAN, Legislative Staff to Representative Joe Green, Alaska             
 State Legislature, came forward to give the sponsor statement.  He            
 read his statement into the record:                                           
      "The bill before you establishes a dispute mediation process             
      for claims against design professionals.  The goal of the new            
      process is to determine if a claim has merit, and if so, to              
      facilitate a settlement, before going to court.  The goal of             
      the bill is to keep these cases out of the court system.                 
      "Under the terms of the bill, the Department of Commerce will            
      impanel a three-member volunteer, but compensated board to               
      review the claim.  Following an informal hearing the board               
      will issue a written finding of liability, or `certificate of            
      merit' that can be used in the settlement process.  The cost             
      of the proceedings is borne by the parties.  Either party can            
      settle at any stage of the process.                                      
      "Similar Legislation has been enacted in Arizona, California,            
      Colorado, Georgia, Hawaii, Kansas and New Jersey.  And it has            
      been successful.                                                         
      "A study to determine the effectiveness of a similar law in              
      California has found that fewer lawsuits are filed, and more             
      malpractice suits are settled before they reach the jury.  So,           
      again, the point of the bill is to keep these cases out of               
     "The bill is an attempt to keep frivolous lawsuits out of the             
     court system.  In several other states, the mediation process             
     has provided a low-cost alternative to litigation and we                  
     believe it can work here in Alaska as well."                              
 MR. LOGAN said he would like to review the bill.                              
 CHAIRMAN KOTT noted there is a proposed committee substitute (CS),            
 Version K.                                                                    
 Number 1249                                                                   
 REPRESENTATIVE GENE KUBINA moved to adopt the proposed CSHB                   
 414(L&C), Version K, 2/6/96.  Hearing no objection, it was so                 
 MR. LOGAN explained the reason Version K is before the committee              
 instead of the original bill is because he has been working with              
 the court system and the design professionals.  They have been                
 working with trial attorneys.  He said he thinks Version K is a               
 better "mouse trap."                                                          
 MR. LOGAN referred to Section 2 and said the bill really starts               
 there.  On line 9, a person who has a claim against the design                
 professional shall file claim.  On page 2, line 18, Section 710, it           
 says, "The claimant shall set out facts upon which the claim is               
 based,".  Mr. Logan said in order to file, you first go the                   
 department and put in writing what your claim is against the design           
 professional.  He said within 10 days after receiving the claim,              
 the department notices the design professional.  Then at least 10             
 but not more than 20 days from that date the design professional              
 responds.  Mr. Logan noted the committee members have a flow chart            
 in their files to show the flow, in the initial stages, to get up             
 to the panel of how the bill works.  In order to file a claim, you            
 must put down a $750 deposit.  When the design professional                   
 responds to the claim, he or she also submits $750.  The $1,500 is            
 the seed money to start the preceding.                                        
 MR. LOGAN referred to page 3, line 5, and said not more than 15               
 days after the date of receiving the response, the department forms           
 a panel.  The panel is made up of 20 attorneys in which you only              
 pick one, 20 design professionals which you pick one, and a                   
 professional mediator.  The department picks a chairman.  Panel               
 members are compensated at $300 per claim, plus per diem and                  
 travel.  He noted it is the same per diem and travel authorized for           
 other state employees.  The Department of Commerce, along with                
 keeping the lists, supplies the office and meeting space, the                 
 office equipment and office supplies for the panel.  The                      
 department's only involvement is to keep a list of people, which              
 they have a lot of those people anyway, and then to supply a place            
 to meet.  He noted there are conference rooms in Anchorage, Juneau            
 and the Frontier Building in Fairbanks.                                       
 Number 1414                                                                   
 MR. LOGAN referred to page 4, line 2, and said within five business           
 days after the panel if formed, the panel gives notice of the                 
 meeting by certified mail.  At this point Mr. Logan said, "So we've           
 got the claim, we've got the response by the design professional,             
 the department has put together three people to hear the claim and            
 those three people are now sending out notices telling everybody              
 there is going to be a hearing.  That hearing is going to be at               
 least 15, but not more than 30 days.  There is a couple of weeks to           
 put everything together."                                                     
 MR. LOGAN referred to line 12 of page 4, and said that is the first           
 outlet valve.  He read, "At any time, by mutual consent of the                
 parties involved, the department, before the appointment of the               
 chair, or the chair after the chair's appointment, may terminate              
 the proceedings and the claimant may proceed in the appropriate               
 court."  Mr. Logan said if they get this far and they decide this             
 thing just isn't working, everybody can throw their hands in the              
 air and the claimant proceeds to court.  He noted he doesn't claim            
 it is fool proof, but it is an improvement.                                   
 MR. LOGAN stated the hearings are not open to the public.  He                 
 referred to page 4, line 15, "A person, other than the panel,                 
 witnesses, consultants called by the panel, and the persons listed            
 in AS 09.55.740, may not be present at a panel hearing..."  Mr.               
 Logan referred to line 20 and said the panel shall be informal.  He           
 continued to read from the bill, "The panel may designate who,                
 among the parties, shall have the burden of going forward with the            
 evidence..."  Mr. Logan said the panel is also empowered to issue             
 subpoenas and a member of the panel or the commissioner may sign              
 the subpoenas.  Once they are before the panel, the parties may not           
 conduct discovery.                                                            
 MR. LOGAN explained there is a second release valve on page 5, line           
 24.  He said at any time, the panel may encourage the parties to              
 voluntarily settle or otherwise dispose of the case.                          
 MR. LOGAN referred to page 6, line 3, and said within 15 days after           
 the completion of a hearing, the panel issues a written advisory              
 decision and the decision must be one of four conclusions that are            
 on 12 of page 6.  He read from the bill, "(1) the evidence does not           
 indicate that the design professional failed to comply with the               
 applicable standard of care;".  Mr. Logan said, "Number 2, is if              
 the design professional failed to comply with the applicable                  
 standard of care."  Mr. Logan noted he is looking at line 17 of               
 page 6 and said, "Number 3 is the evidence indicate that maybe the            
 design professional did fail to comply but it wasn't the cause of             
 the problem.  And 4, is that there is a material issue of fact not            
 requiring an expert opinion, bearing on liability that should be              
 considered by a court."                                                       
 MR. LOGAN referred to line 25, and said this gets back to Section             
 1.  Mr. Logan said, "Before filing the opinion, the advisory                  
 decision rather, the panel shall determine if sufficient funds have           
 been deposited.  So, we have inserted a mechanism in the bill to              
 ensure that the costs of the proceedings are not borne by the                 
 state.  If the $1,500, deposited at the beginning of the                      
 proceeding, aren't enough to cover the costs of proceeding, the               
 panel says to one of the parties or potentially both of the                   
 parties, `annie up.'  Referring back to Section 1, we have a hammer           
 that says if the design professional doesn't pay the board, that's            
 the AELS Board, may suspend, refuse to renew or revoke the                    
 certificate.  So If you try to get around it, don't pay, they're              
 gonna play with your license.  And the panel decision may not be              
 released until the department has - they're sure that all the                 
 expenses are covered."                                                        
 MR. LOGAN referred to the top of page 7 and said it is set out how            
 the additional costs are allocated.  He continued, "If the panel              
 finds, under (b)(1) and that was that the design professional did             
 not do anything wrong, then the claimant pays the additional                  
 expenses, and that would be - I guess we could say a frivolous                
 case, and the penalty for bringing a frivolous to the panel is that           
 you pay.  If the design professional is found to have done                    
 something wrong, the design professional pays any costs above and             
 beyond the initial $1,500 deposit, which is made up of $750 from              
 each party.  And if the panel finds Number 3 or Number 4, that the            
 evidence indicates the design professional failed to comply but it            
 wasn't their problem, or that the thing is just too complex for us            
 to render a decision, they split the additional costs."                       
 Number 1699                                                                   
 MR. LOGAN referred to page 7, Section 09.55.760, SUBSEQUENT                   
 LITIGATIONS; EXCLUDED EVIDENCE, and said this is an important                 
 component of the bill, but one that will probably get more                    
 consideration in the Judiciary Committee.                                     
 MR. LOGAN read from page 7, line 17, "A statement made in the                 
 course of the hearing of the panel is admissible in a subsequent              
 civil action."  However, the decision, conclusion, finding, or                
 recommendation of the panel may not be admitted.  The point of this           
 is still to settle out of court.  Mr. Logan said you get the                  
 decision of the panel and if the design professional has been found           
 to not have a problem, the design professional says to the                    
 claimant, "Hey, look, they found I didn't really do anything wrong,           
 the court is probably going to find that, let's just settle it out            
 here."  He said a member of the panel is not liable for civil                 
 damages.  Mr. Logan explained the rest of the bill is definitions,            
 effective dates.  He referred to Section 3 and said there is a                
 court rule change.  Mr. Logan said this concludes his review of the           
 Number 1793                                                                   
 REPRESENTATIVE ROKEBERG questioned the wording of a mandatory                 
 situation.  He asked if there isn't a choice or an election at the            
 beginning.  MR. LOGAN explained it is before you go to court with             
 a claim against a design professional, you must go through this               
 process.  Representative Rokeberg said if there is an                         
 extraordinarily major cause of action, it would seem that this                
 particular process should be able to be avoided in its entirety.              
 Mr. Logan said if there is a big lawsuit, one side is going to want           
 to settle.  One side is going to have to potentially pay that, so             
 they're going to want to settle and they're going to be motivated             
 through this process and settle before they go to court.  For the             
 big cases, it's a quicker process to go through this because the              
 courts will not be entangled with all the little cases that will be           
 filtered out in this process.                                                 
 REPRESENTATIVE ROKEBERG said he is conceptually in favor any kind             
 of dispute resolution methodology that can alleviate the crowding             
 in the courts and also lead to a quicker resolution of difficulties           
 and conflict.  He asked Mr. Logan to describe why there was a                 
 decision made on the part of the sponsor of the bill or the people            
 involved in drafting regarding avoiding that election at the                  
 beginning.  MR. LOGAN said that was at the request of the design              
 professionals, after working with the trial attorneys, they                   
 requested that the provision be included in the legislation.                  
 Number 1945                                                                   
 REPRESENTATIVE JOE GREEN said there may be an issue that this just            
 acts as another impediment to somebody who wants to go to                     
 litigation.  The bill says you have to go through this extra                  
 Number 1969                                                                   
 REPRESENTATIVE ELTON said he thinks he understands that if somebody           
 doesn't like this process, they can throw up their hands and go               
 back to court.  He said the way he reads the statement in the                 
 sectional analysis is it allows the claimant to proceed to the                
 appropriate court at any time, but only by mutual consent with the            
 other parts.  Representative Elton said it seems to him that if he            
 is a claimant, he can't throw up his hands and say, "This process             
 isn't working for me," and go to court unless the defendant or the            
 design firm agrees to let him go to court.  He said there doesn't             
 seem to be much an out for the claimant.                                      
 MR. LOGAN said the point is to stay out of court.  Unless there are           
 some restrictions to stay within the confines of this process, it             
 breaks down.                                                                  
 REPRESENTATIVE ELTON said there doesn't seem to be an lot of                  
 latitude.  The plaintiff is required to go through this process.              
 The plaintiff is required to stay in the process unless the person            
 they have a problem with lets them out.  He said he thinks that is            
 substantially different than characterizing this as a mutual                  
 (indisc.) process.                                                            
 REPRESENTATIVE ELTON referred to the compensation rate being set at           
 $300 and attorneys are required to participate in this process.  He           
 questioned what kind of attorneys there would be if they're                   
 involved in a process that might take 30 days.  He said he isn't              
 sure he is comfortable with an attorney or an arbitrator serving              
 for $300 for 30 days.  Representative Elton asked how the $300                
 figure was arrived at.                                                        
 MR. LOGAN explained the $300 figure is a figure that came from the            
 "model legislation."  It is a number that has been used on other              
 states.  A number of professionals, including attorneys, do what is           
 known as "pro bono" work, often in these types of cases.                      
 REPRESENTATIVE ELTON said he is also interested in why the hearings           
 are to be closed to the public.  He said they don't close the                 
 courtroom doors to the public.                                                
 MR. LOGAN said it is to protect the design professional in the                
 event that he/she has found not to have done anything wrong.  If              
 they are found to have done something wrong, the public will know             
 about it in the court proceedings, which are open.  If they haven't           
 done anything wrong, it is to protect their name, license and                 
 reputation.  REPRESENTATIVE ELTON stated he objects to that when it           
 happens with judges and would object to that when it happens with             
 design professionals.  The public deserves to know.                           
 REPRESENTATIVE ELTON referred to the deciding of damages and said             
 this panel can't decide damages.  He said he is assuming that if in           
 fact the claimant, for example, is dissatisfied, they're going to             
 go on to court.  He said if the design professional is found at               
 fault, he is assuming they would have to go to court anyway to                
 establish a damages figure.                                                   
 MR. LOGAN said he hopes to the contrary.  They would both get a               
 copy of the panel's decision and one lawyer would call the other              
 lawyer and say, "Hey, they found this and this is about what we               
 think you owe us, lets sit down and talk about it."  He said he is            
 hoping this would keep the suit out of the court system and it                
 would help the settlement process before they got to court.                   
 REPRESENTATIVE ELTON said he is interested in discussion about why            
 this process proceeds without discovery or before discovery can               
 occur.  He said it seems to him that puts the claimant at some                
 MR. LOGAN said the committee will hear more about that from people            
 who have actually gone through this.  This has proved to be a                 
 useful model in other states.                                                 
 REPRESENTATIVE ELTON referred to an article he remembers reading in           
 the Wall Street Journal that talked about the enforced mediation              
 process that you go through if you're suing your stock broker.  He            
 said one thing that stuck in his mind was that it was skewed it               
 towards the stock broker, and in this case, somebody may say you've           
 skewed it to the design professionals by having a three member                
 panel, two of whom are or should be disinterested, the attorney and           
 the mediator, and another who may be having drinks after work with            
 the person that has been sued.  He questioned why the design                  
 professional is in on the panel.                                              
 MR. LOGAN explained it is so the panel has some expertise in these            
 matters.  They can also call in other design professionals who have           
 technical experience and expertise in the matters that they                   
 consider.  It is to balance it out so there is somebody speaking              
 from the group.                                                               
 REPRESENTATIVE ELTON said we don't expect a design professional to            
 serve on the jury or a judge to have design professional                      
 Number 2310                                                                   
 REPRESENTATIVE GREEN pointed out that this adds some degree of                
 knowledge to the process, more than tending to skew it.  There is             
 always the final appeal through a court.  He urged the committee to           
 remember that this is not to replace the court.  This is only to              
 try to get settlement before you get to court.  The issues of                 
 discovery and the hearing being open to the public is more of a               
 court nature.  Representative Green said, "It's trying to get you             
 and I to agree on, O.K., I either have done you wrong, or I haven't           
 done you wrong, and if I have lets see if we can't come to a                  
 compromise and we're out of here.  We didn't ever have to go to               
 court.  I can't satisfy you.  You're not satisfied.  Do you still             
 want to go to court?"  He said they still have that prerogative.              
 He explained that he is trying to minimize the amount of litigation           
 that is going to end up in court.  In other states that have                  
 adopted such a policy, it has worked very satisfactorily.                     
 REPRESENTATIVE ELTON said he agrees with Representative Green in              
 that if we can mediate before we have to litigate, we're much                 
 better off.  He stated he is somewhat concerned about the                     
 Number 2369                                                                   
 CHAIRMAN KOTT referred to the time parameters levied in various               
 areas within the bill and said he has concerned with issuing of the           
 advisory opinion by the panel, within 15 days.  He referred to what           
 the elements the advisory opinion must contain.  He asked how the             
 time line was arrived at and if it was enough time.                           
 MR. LOGAN said the time line was arrived at by talking with people            
 who have actually gone through the process.  That seemed to be a              
 number that was quick enough to not drag it out, but allowed them             
 enough time to do their work.                                                 
 REPRESENTATIVE GREEN indicated the numbers are arbitrary and they             
 seem to be reasonable enough to get the process moving, but not               
 unreasonable enough to allow adequate introduction of material.               
 Number 2459                                                                   
 RUSS WINNER, Attorney, testified via teleconference from Anchorage.           
 He explained his practice is a broad range practice and he                    
 represents plaintiffs and defendants in a wide variety of                     
 litigation.  Prior to opening his practice, he taught law school.             
 [End of Tape....]                                                             
 TAPE 96-6, SIDE B                                                             
 Number 001                                                                    
 MR. WINNER said he believes nobody, including the trial lawyers,              
 favors frivolous litigation.  He said he believes there is less               
 frivolous litigation filed (indisc.) some members of the panel.               
 Nonetheless, he said that is something to be avoided.  Mr. Winner             
 said the bill, as drafted, is not well crafted to serve that                  
 purpose given the specific and unique circumstances in Alaska.                
 MR. WINNER said to him, the bill appears to be special interest               
 legislation.  It is designed to establish a procedure for design              
 professionals and to try to minimize suits filed against them.  It            
 seems to maximize settlement of suits filed against them.  He                 
 questioned why the bill only includes design professionals.  Mr.              
 Winner asked why they should be given special privileged treatment            
 among all other professionals.  He questioned why it shouldn't                
 include teachers, realtors, business persons, air taxi operators or           
 attorneys.  He asked what is so special about design professionals.           
 MR. WINNER informed the committee he believes not enough money is             
 being provided, in terms of compensation, to the panel members.               
 The response he heard is that it would be in the nature of pro bono           
 work.  Perhaps some attorneys would be willing to volunteer their             
 time pro bono, but he doesn't believe that the class of attorneys             
 that is contemplated in the bill would be readily available to                
 serve in that function.  He referred to pro bono work that                    
 attorneys do and said it is usually attorneys that have recently              
 passed the Bar and don't have a whole lot of experience.  They want           
 to expose themselves to people in other areas.  He noted seasoned             
 trial lawyers tend to be busy and he doesn't believe there will be            
 a great number of them who are willing to volunteer the time.  The            
 same could be said of other panel members such as mediation                   
 specialists for design professionals.  If you want to get somebody            
 who is good, you've got to pay them.  If you're not going to pay              
 them and if you're asking for volunteer services, you're going to             
 an area of uneven quality or you're going to have difficulty                  
 finding people to agree to do the job and then do the job as a                
 (indisc.).  He said he thinks there are problems with sufficient              
 funding to get the job done.                                                  
 MR. WINNER said it seems to him that the procedure that is                    
 contemplated is too cumbersome.  It is really a mini trial as                 
 you're talking about testimony, depositions, exhibits, possibility            
 of discovery, etc., all before a lawsuit is filed.  Mr. Winner said           
 if there is going to be mediation, it can occur more expeditiously            
 than that.  He said he settles most of the cases he is involved               
 with and often, it's (indisc.) of mediation.  It doesn't require              
 this kind of cumbersome procedure.  It can often happen just by               
 (indisc.) letters and a mediator reads the letters and tries to               
 elicit the strengths (indisc.) from each side as he shuttles back             
 and forth between the sides.  He said he has found that to be                 
 effective in the cases he has worked on and he doesn't see why                
 there is a need to establish a mini trial procedure prior to filing           
 a suit.  Mr. Winner said he realizes that an advantage is that this           
 will be private and the reputation of the design professional won't           
 be (indisc.) by a lawsuit being filed.  He said he doesn't know               
 that you need to have a mini trial as part of the process.                    
 MR. WINNER said he believes that the composition of the panel is              
 biased in favor of the design professionals.  What is involved is             
 a mediator who apparently will be neutral and an attorney.  Mr.               
 Winner said attorneys, in general, are not pro plaintiff.                     
 Plaintiff's attorneys are pro plaintiff.  Defense lawyers tend to             
 be pro defense.  The fact that there is "an attorney on the panel"            
 does not indicate to him that the attorney is going to be (indisc.)           
 in favor of one side or the other.  He said he would look at the              
 attorney as essentially a neutral position as the mediator.  Mr.              
 Winner referred to the design professional and said that person               
 will probably will be (indisc.) towards the defendant.  He referred           
 to the consultant and said he would imagine in some cases a                   
 consultant would be brought in.  The consultant is only going to be           
 paid per diem if he is from out of town.  He said he has a question           
 about whether you're going to find a consultant willing to do the             
 job for free, and if he is, he would question whether he is                   
 unbiased.  The composition of the panel as contemplated is stacked            
 a little against the plaintiff and is in favor of the design                  
 MR. WINNER said he thinks that what is contemplated in the bill is            
 too early in the process.  The Alaska Court System, just revised              
 the rules of civil procedure.  Under civil rule 26, there is                  
 immediate mandatory exchange of information between the plaintiff             
 and the panel if a lawsuit is filed.  That is supposed to take                
 place within the first month or two of the lawsuit being filed.               
 The very first thing that happens, you've got to exchange relevant            
 documents.  Rather than force the plaintiff, who has perfect                  
 information about liability, to go through a mini trial before                
 filing a lawsuit.  It might be better to file the lawsuit.  Allow             
 the parties to exchange their documents and, at that point, have a            
 mediation - maybe a streamlined mediation and see if there is an              
 opportunity for the parties to settle the case at that point.                 
 MR. WINNER said he thinks that the procedure suggested in the bill            
 is cumbersome and not well tailored to the situation in Alaska.               
 Mr. Winner said he would submit that is one thing which unique                
 about Alaska is civil rule 82 is it allows for the prevailing party           
 to receive an award of partial attorney fees against the other                
 party.  He said he believes that is a deterrent to frivolous                  
 lawsuits being filed.  In fact, a lot of other states are looking             
 at Alaska and are considering adopting something like rule 82 as a            
 way of trying to prevent frivolous lawsuits from being filed.  The            
 other deterrent of frivolous lawsuits is Alaska's civil rule 11.              
 If a frivolous lawsuit is filed, then the court can award sanctions           
 against the plaintiff's attorney and the plaintiff for filing a               
 frivolous lawsuit.  So, in Alaska, there are deterrents to                    
 frivolous lawsuits being filed.  The thanked the committee for                
 listening to him.                                                             
 Number 402                                                                    
 REPRESENTATIVE ROKEBERG referred to lawsuits being settled by                 
 mediator and asked if this is where there is mutual voluntary                 
 arbitration or mediation.  MR. WINNER said usually what happens is            
 you file the suit, do discovery and if there is any basis for                 
 summary judgement to be entered then the parties file their                   
 pleadings and get ruling to record on summary judgement.  He                  
 referred to the court trial and said the party knows (indisc.) will           
 be.  They go in and often both sides agree (indisc.) mediator.  The           
 mediator can either be a superior court judge who is not the judge            
 assigned to the case, or increasingly, you can go to a mediator,              
 who is often a retired judge, who will for a fee, sit as a mediator           
 and shuttle back and forth between parties.  If it is a retired               
 judge who is serving as a mediator this is often a business he                
 does.  He noted Judge Ripley and Judge Hansen are serving as                  
 mediators.  The plaintiff and defendant share the costs of the                
 mediator.  The mediator process usually takes no more than a day.             
 The parties submit written material to the mediator before going              
 in.  It is not a trial, but the judge has a good understanding of             
 what would happen if there was a trial and he is not afraid to                
 offer his recommendations and opinions to each side.  The                     
 defendants usually want to have the plaintiffs sit in mediation to            
 hear from the mediator whether or not there is a good case.  Mr.              
 Winner said the plaintiff's council would like to have the                    
 defendant, or somebody who has got authority for the defendant to             
 participate in the mediation along with the defendants lawyer.  He            
 noted that in his experience, that is often something that is done            
 fairly close to the trial date.  Mr. Winner said with his practice,           
 he tries to arrive at settlement or mediation discussions earlier             
 in the litigation.  He said it may not be inappropriate to adjust             
 the mediation to occur after the exchange of documents but before             
 formal deposition, etc.  Mr. Winner noted the one disadvantage to             
 his suggestion is that the lawsuit is filed and becomes public                
 Number 563                                                                    
 REPRESENTATIVE KUBINA referred to the process Mr. Winner described            
 in settling some of his suits and asked if this is something that             
 is currently done with design professionals.  He also asked if it             
 takes a change in statute to do so or is it something that could              
 also be done by court rule.                                                   
 MR. WINNER explained it is something that could be done by court              
 rule.  The courts could adopt a court rule requiring mediation                
 after the exchange of discovery.  That is certainly something that            
 could happen regarding lawsuits against design professionals.                 
 REPRESENTATIVE KUBINA questioned why the bill is only specifically            
 for design professionals and not the greater field that was                   
 mentioned before.  He also asked if the greater field is using this           
 type of mediation more than the design profession is.                         
 Number 627                                                                    
 COLLIN MAYNARD, Chair, Legislative Liaison Committee, Alaska Public           
 Design Council (APDC), testified via teleconference from Anchorage.           
 He noted the APDC is a consortium of professional society                     
 representing architects, engineers, land surveyors and building               
 code officials.  He said the legislation is designed to limit                 
 frivolous lawsuits and has been adopted in seven other states for             
 design professionals.  Over 30 states, including Alaska at one                
 point, have review panels for medical professionals.  Mr. Maynard             
 referred to the Georgia case and said that was a law which was                
 geared for medical professionals, however, they didn't push medical           
 professionals in the statute.  They just said professionals.  The             
 Georgia supreme court said it was all professionals.  He said the             
 APDC doesn't see any reason why this couldn't apply to any other              
 licensed professional.  This is something that has been adopted in            
 other states for design professionals.  If other professionals                
 would like to do this as well, his organization sees no reason they           
 shouldn't.  Mr. Maynard said the APDC supports the bill because it            
 would reduce the number of frivolous suits.  The number of suits in           
 California went down by about 25 percent.  It will result in cases            
 being settled earlier by encouraging dropping of the suits deemed             
 frivolous and encouraging defendants to settle out on claims.  He             
 said the panel system was (indisc.) shotgun approach to lawsuits by           
 forcing claimants to go after the people really at fault.  Part of            
 the problem with construction and design officials is you have a              
 design team of four or five different firms and if the mechanical             
 system fails, they sue just the mechanical engineer, they sue just            
 the mechanical engineer, they sue the (indisc.) engineer, the                 
 constructional engineer, the (indisc.) engineer, the contractor,              
 everybody who ever set foot anywhere near the construction site               
 gets sued.  In that trap, you get a lot of people who had nothing             
 to do with the cause of the problem.  What the bill will do is get            
 rid of those people and make the case open on the people who are              
 really at fault.  It should result in fewer (indisc.) would provide           
 a lead to the over (indisc.) court system.                                    
 MR. MAYNARD referred to the election to bypass the (indisc.) panel,           
 and said in Hawaii they have a provision that says, "Under                    
 circumstances, and they list what they are, the size of the lawsuit           
 or claim, if one of those things applies and you didn't have to go            
 through the panel."   He said between 1985 and 1991, there were 132           
 claims (indisc.).  Basically, the panel doesn't do anything.  If              
 you sue for enough money, you don't have to go through the panel.             
 It makes the frivolous lawsuits go to the panel.  Mr. Maynard                 
 referred to the privacy issue and said he isn't so sure that is as            
 much of a concern.  The closed meeting is to make so you have just            
 the parties involved.  He said he would talk to writers of the                
 model law to find out why that provision is included and get back             
 to the committee regarding that matter.  Mr. Maynard said the APDC            
 would not have a problem with immediate mandatory discovery, but              
 they don't want drag out discovery and depositions going back and             
 forth.  It takes forever and costs thousands of dollars, then they            
 can determine you didn't have anything to do with this in the first           
 place and shouldn't have been there.                                          
 MR. MAYNARD said he doesn't think a design professional would be              
 biased on the panel.  He stated he knows a lot of design                      
 professionals.  He said he believes the people who would be                   
 volunteering for this would have enough ethics to make sure that if           
 they knew about something involved in the suit, they would excuse             
 Number 909                                                                    
 REPRESENTATIVE ROKEBERG referred to Mr. Maynard discussing the size           
 of a claim in Hawaii and asked if it would allow a bypass right to            
 court and avoid the mediation because they've set a limit on the              
 amount the prayer in complaint stipulated.                                    
 MR. MAYNARD explained in Hawaii they set seven or eight different             
 criteria which could get you out from the panel process.  One of              
 them is the size of the lawsuit and the size of the claim.  If you            
 sue for a lot of money, you don't have to go through the panel                
 Number 965                                                                    
 REPRESENTATIVE ELTON said if Mr. Maynard is suggesting a design               
 professional wouldn't be swayed one way or the other, why not have            
 a member of the public on the panel.   He asked why there is                  
 instance on having an assigned professional as a member of the                
 MR. MAYNARD said he thinks the make up of the panel is to have the            
 attorney there to be able to talk about legal questions and the               
 design professional has the experience on how the construction                
 works so that you don't have bring in a whole stream of expert                
 witnesses to talk about how construction works, what the process is           
 and the nitty gritty of it.  He said what you'd be doing is                   
 bringing in consultants for particular issues and the design                  
 professional on the panel is a special engineer.  The real issue of           
 fact in this suit is a mechanical engineering technical question.             
 So you bring in the mechanical engineer to answer that particular             
 technical question, then when the panel goes off for deliberations            
 and the question comes up about how something works, they have the            
 ability to explain to the other two people on the panel.  This                
 would be just like the lawyer being able to explain how the law               
 works to the other two people.                                                
 Number 1056                                                                   
 REPRESENTATIVE ROKEBERG referred to the provisions of establishing            
 the panel and said the bill indicates that there will be a list of            
 20 or more design professionals.  He pointed out that he has worked           
 in the real estate development business in Alaska for over the last           
 30 years and he knows the community of architects is relatively               
 small.  Those who are in the engineering professions are members of           
 other societies and other associations of their profession.  There            
 could be various conflicting personalities, biases and competitive            
 situations where if there was one peer judging another, and they're           
 within the same profession, there may be a potential of some bias.            
 He asked Mr. Maynard if he would consider a stipulation in the                
 selection of a panel member to select somebody from another                   
 discipline or someone who holds a different license than the person           
 who is before the panel.                                                      
 MR. MAYNARD said he isn't sure that would be necessary because if             
 a mechanical engineer is being sued, you'd probably want a                    
 mechanical engineer on the panel.  He suggested adding a provision            
 that would say that the party would have the right to object to any           
 of the members of the panel.  There would probably have to be a               
 limit on that.  Mr. Maynard said he wouldn't have a problem with              
 something along those lines.                                                  
 Number 1180                                                                   
 TERESA WILLIAMS, Assistant Attorney General, Fair Business                    
 Practices Section, Civil Division, Department of Law, said one of             
 the issues is whether or not design professionals should be                   
 segregated out for different treatment than other kinds of persons            
 who are defendants in lawsuits especially when land surveyors are             
 included as design professionals.  She said we've got a special               
 category for design professionals and then land surveyors are being           
 added to that groups.  Ms. Williams said there are questions about            
 why should that particular group of (indisc.) professions be                  
 treated differently.  She referred to page 2, line 12, Section                
 09.55.700, (b), and said the design professional can waive this               
 whole process.  That would be an equal protection due process issue           
 as to why the design professional didn't have to go through this              
 process, but the claimant did.                                                
 MS. WILLIAMS referred to page 3 and said there isn't a real clear             
 definition of who the chair person will be.  It says, "A person               
 experienced in court claims settlement process."  From a legal                
 point, that would need to be clarified.                                       
 MS. WILLIAMS referred to page 4, Section 09.55.730, (a) and (b),              
 and said the bill seems to go two different ways.  If it is                   
 mediation, then it is appropriate to have it closed and to have the           
 ability to exclude a party.  If it is not mediation and is a mini             
 adjudication, then the due process requirements are not met because           
 the person doesn't have the right to call witnesses.  The panel               
 may, in its discretion, permit you to call witnesses.  She said               
 there seems to be a mixing of apples and oranges.  If it is meant             
 to be a mediation process it needs to go one way and if it is meant           
 to be a mini adjudication, it needs to go the other way.  Ms.                 
 Williams explained under (a) it says that it is a closed hearing,             
 "The panel may, in its discretion, conduct and inquiry of a party,            
 witness, or consultant without the presence of a party."  She                 
 referred to wording on line 21, "the record may not be made                   
 available to the parties" and said that is an issue.  If a                    
 statement is an issue against a person, why is that no recording              
 can be obtained of that statement.  That doesn't make sense in why            
 the recording would not be available.  Ms. Williams referred to               
 page 4, lines 25 through 26, "The panel may, in its discretion,               
 permit a party or counsel for a party to question other parties,              
 witnesses, or consultants."  She said these sections go two                   
 different ways.  One would be more appropriate in mediation and the           
 other would be inappropriate in a committee on adjudication as this           
 is supposed to be.                                                            
 Number 1415                                                                   
 MS. WILLIAMS referred to page 5, line 7, "The panel shall attempt             
 to secure the voluntary appearance, testimony, and cooperation of             
 parties, witnesses, and consultants without coercion.  She said               
 that would raise an issue of whether or not the panel had to go               
 through a process of calling the witness and having the witness not           
 show up before it could issue a saphena, which would certainly slow           
 the process down if was required to go through a preliminary                  
 process before it could issue a saphena.                                      
 MS. WILLIAMS referred to wording on page 5, line 25, "the panel may           
 encourage the parties to voluntarily settle" and said if this is              
 supposed to be a settlement process, it seems to be inconsistent to           
 make that discretionary.  She referred to line 27 and said it                 
 provides for the exclusion of parties.                                        
 MS. WILLIAMS referred page 7, line 25, "PANEL MEMBER IMMUNITY." and           
 said she has a question of whether or not a person would have                 
 immunity from liability if there is intentional wrong doing by a              
 panel member, for example, accepting a bribe.                                 
 MS. WILLIAMS referred to the tolling of the statute of limitations,           
 which starts on page 7 and goes over to page 8, and said there                
 doesn't seem to come to a completion of this idea.  The statute of            
 limitations is tolled for six months and you cannot bring an action           
 within that six months.  She said there is no window of opportunity           
 after the six months is up before to follow your action before the            
 statute of limitations begins to run again.  So having the statute            
 of limitations start on that day, and that day being the first day            
 that you could file an action, doesn't seem to allow enough room in           
 the window of time to file the action.                                        
 MS. WILLIAMS said there are lots of policy issues that other                  
 parties can address, but the one she mentioned are legal issues she           
 Number 1563                                                                   
 CHAIRMAN KOTT asked Ms. Williams if she thinks an attorney would              
 risk settling until after discovery is complete.  MS. WILLIAMS                
 said, as an attorney, she could tell the committee that settlement            
 happens at all stages.                                                        
 Number 1601                                                                   
 MIKE TAURIAINEN was next to testify via teleconference from                   
 Soldotna.  He informed the committee he is a consulting civil                 
 engineer and is also on the AELS board, however, he is testifying             
 as an individual and not as a member of the board.  Mr. Tauriainen            
 said his intention was to testify in favor of HB 414, based on the            
 earlier draft which is similar to SB 119.  He said he is in favor             
 of the concept, however, he just received the new work draft which            
 seems to be more cumbersome than SB 119.  It is more wordy and that           
 may bias his initial evaluation of the bill.  Mr. Tauriainen said             
 there needs to be some sort of streamed of (indisc.) to eliminate             
 frivolous claims.  He said we need to keep in mind that frivolous             
 claims is what we're trying to eliminate.  The process needs to be            
 streamlined so that it encourages the elimination of those                    
 frivolous claims.  The advantage of this bill or similar bills is             
 that it should reduce the loads on the court system, reduce the               
 cost of professional liability insurance to professionals and                 
 reduce the amount of time professionals have to spend defending               
 themselves against frivolous claims.  He stated a concern of his is           
 that if a claim is frivolous and the panel so determines, it still            
 doesn't seem to discourage a plaintiff from continuing on to                  
 litigation.  If they're going to file a frivolous claim, he is not            
 sure how to best deal with that, except by enabling the assessment            
 of the costs to the party filing a frivolous suit or costs filed              
 against the professional.  Mr. Tauriainen said the deposit should             
 be increased to around $3,500 which is limit for small claims.                
 That way the frivolous filer would have to pay not only the panel             
 costs but also the legal costs of the design professional, and                
 likewise, if it is determined that the design professional is                 
 responsible they should pay for panel costs and the legal costs of            
 the plaintiff.  He said he would be reluctant to bring in                     
 consultants and expert witnesses into the process.  That seems to             
 complicate the process.  The design professional should be somewhat           
 in the same profession as the charged professional to facilitate              
 the panel's work.  Mr. Tauriainen said if they do elect to                    
 encourage that, there should be no payment of panel costs by the              
 parties.  He said he would send the committee written comments.               
 Number 1929                                                                   
 CHAIRMAN KOTT asked Mr. Tauriainen if he has any hard data on the             
 numbers of frivolous claims against design professionals in Alaska.           
 MR. TAURIAINEN indicated he didn't have that answer.  He said he              
 would like to point out a loophole regarding a definition on page             
 8, line 28, "`professional negligence' means a negligent act or               
 omission by a design professional in providing professional                   
 services;".  He then referred to line 30 and said, "limits                    
 professional services to those provided by the design professional            
 as licensed."  Some cases could legitimately arise and may be more            
 likely to rise for the design professional practicing outside his             
 legitimate scope of licensure.  Mr. Tauriainen said definition (7)            
 should be modified to not give the design professional that                   
 Number 2027                                                                   
 CATHERINE REARDON, Director, Central Office, Division of                      
 Occupational Licensing, came before the committee to address HB               
 414.  She said according to the bill, it would be the Division of             
 Occupational Licensing that selects the panel.  Teresa Williams,              
 Department of Law, spoke on behalf of the Administration regarding            
 legal issues and the policy.  She said she would review some of the           
 management details.  Ms. Reardon said a few of the questions she              
 has are, "Are you going to want a way for a claimant who is                   
 indigent to file a law suit?  Are you going to want us to have a              
 mechanism where if someone says `I don't have $750 but I want a               
 file a lawsuit' for us to excuse the person and if not, I'm                   
 wondering if we're gonna get any feedback from the court about                
 having served as a block to people's access."  Ms. Reardon said               
 most of the other issues have been discussed or asked about by                
 members of the committee.  She said she'll do her best to find                
 panel members who will be willing to take on the task for the $300.           
 Ms. Reardon noted she hasn't had experience with this and doesn't             
 know whether she will have difficulties in finding attorneys who              
 will take on this task.  The is a concern because if she fails in             
 that task within the 15 or 30 days, she is curious what the                   
 implications will be for the parties.  Ms. Reardon said what if the           
 panel doesn't successfully follow all the time lines and                      
 instructions in the statute, will that be anything that the                   
 legislature is looking at her division to assist the panel in                 
 reminding them that the time deadline is being missed.  She asked             
 if the parties will be looking in her direction of the panel messes           
 up.  Ms. Reardon said as she understands it, she is pretty much               
 leaving them to follow through on their own and just provide the              
 office space for them to function in.  She said she is not staff              
 Number 2281                                                                   
 REPRESENTATIVE GREEN asked what they currently do with indigent               
 people who want to file through a court.                                      
 MS. REARDON said, "I am not very knowledgeable about that, but I              
 believe there is.  I think court filing costs are $100, although              
 I'm certainly not an expert in this topic, and I believe they have            
 to provide some kind of alternative although it probably very                 
 rarely be legitimately exercised in this particular case.  I just             
 thought of the possibility that someone is gonna say, `No, I don't            
 want to pay $750, I don't have it, I just want to sue this                    
 Number 2342                                                                   
 REPRESENTATIVE ELTON referred to deadlines listed in the bill such            
 as the 15 day deadline and said he is assuming those are not                  
 working day deadlines otherwise they would say so.  If there is a             
 15 day deadline, that may mean there is 11 days to accomplish your            
 REPRESENTATIVE GREEN said it would be his understanding that it               
 would be working days.  Most of the time it is generally working              
 days unless it specified to be calendar days.                                 
 REPRESENTATIVE ROKEBERG asked Ms. Reardon if there is any other               
 mediation processes or something similar to that the division if              
 involved in.  MS. REARDON said they are not involved in anything              
 like this.  The court system handels the medical review panel that            
 is fairly similar to this.                                                    
 TAPE 96-7, SIDE A                                                             
 Number 000                                                                    
 CHAIRMAN KOTT asked what the per diem rate is.  He said it seems              
 like the parties will asked to "pony up" almost on every occasion.            
 MR. LOGAN said that is true.  He said they were trying to keep the            
 fees as low a possible.  There was full expectation that, in most             
 cases, there will be additional funds required.                               
 Number 097                                                                    
 REPRESENTATIVE ROKEBERG referred to the zero fiscal note from                 
 Division of Occupational Licensing and asked if all of the                    
 bookkeeping, etc., is going to come out of the gross proceeds.  MS.           
 REARDON explained the fiscal note was based on the original bill              
 which didn't involve her division.  She said she would expect a               
 modest fiscal note.                                                           
 REPRESENTATIVE SANDERS noted he isn't prepared to move the bill out           
 of committee.                                                                 
 CHAIRMAN KOTT indicated there will be a new fiscal note.  He                  
 referred to there being other issues and said he thinks the bill              
 should be held over.  He also said the indigent issue should be               
 reviewed along with some of the definitions.  Chairman Kott said it           
 is his intent to hold the bill to work with the sponsor on a new              
 committee substitute.                                                         
 Number 338                                                                    
 SHARON MACKLIN, Lobbyist, Alaska Professional Design Council,                 
 referred to the issue of having a design professional on the panel            
 and whether that was inappropriate or appropriate.  She said as an            
 example, she though she would mention the fee arbitration panel               
 system that the Alaska Bar Association has.  She noted she is a               
 member of the panel as a lay person.  On their panel people can               
 bring complaints to the fee arbitration panel about being charged             
 too much or not enough.  That panel is made up of two attorneys and           
 one lay person.  When she got on that panel she thought this is               
 going to be a fixed deal.  The panel will always decide in the                
 favor of the attorney - that he/she did not charge too much.  Ms.             
 Macklin said she has been on the fee arbitration panel for about              
 four years and do maybe two a year.  She stated she has been very             
 surprised that lawyers don't automatically protect lawyers just               
 because of their professional camaraderie.  They really do look at            
 the issues and put a lot of thought in it.  In her experience of              
 working with design professionals for almost ten years, they also             
 would put a lot of thought into it and not automatically protect or           
 support a fellow design professional.                                         
 MS. MACKLIN referred to the time frames and said on fee arbitration           
 panels, that usually takes them from three to five hours.  She                
 referred to the question of how many court cases there have been in           
 which design professionals were involved and said APDC set out a              
 questionnaire to all of the owner companies in the state.  Very               
 very few cases ever go to court.  She said 95 percent of civil                
 cases never go to court.  What the APDC is concerned about is these           
 cases that end up costing the design professionals $5,000, $10,000            
 up to $15,000 in legal fees that never go anywhere.  Ms. Macklin              
 explained most of the companies she works with have a deductible of           
 $20,000 to $25,000 on their liability insurance.  She said in the             
 future she could give the committee some examples of cases.                   
 Number 623                                                                    
 REPRESENTATIVE GREEN said a professional is rather reluctant to               
 decide in favor of another professional if there is any question of           
 doubt to its absolute legitimacy because it reflects back on his              
 professional standing.  Representative Green discussed a situation            
 regarding a car accident he was in several years ago where his bill           
 was exorbitant.  He applied to Orange County Medical Association              
 and they said it was exorbitant.  The physician ended up                      
 significantly reducing his bill.                                              
 REPRESENTATIVE GREEN referred to Chairman Kott's statement that               
 there will be a CS, and said that is very likely.  However, he                
 would like to review questions in the committee minutes.  He said             
 there may or may not be a CS.                                                 
 CHAIRMAN KOTT said there is one area that should probably be                  
 clarified regarding the 15 day working period.  It should probably            
 be clarified with the wording "working days," if that is what we're           
 shooting for.  Chairman Kott said his office will work with                   
 Representative Green regarding a CS.  He also noted there would be            
 a new fiscal note.                                                            

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