Legislature(2005 - 2006)BUTROVICH 205

02/22/2006 08:30 AM JUDICIARY

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* first hearing in first committee of referral
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Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SB 301-CHANGE OF VENUE IN CIVIL CASES                                                                          
9:20:06 AM                                                                                                                    
CHAIR RALPH SEEKINS announced SB 301 to be up for consideration.                                                                
He informed the committee that the Department of Law (DOL) would                                                                
testify on  the bill  at a  later date. He  opted to  hear public                                                               
testimony first.                                                                                                                
Senator Charlie Huggins joined the meeting.                                                                                     
9:21:44 AM                                                                                                                    
BOB HAJOUKOVICH, President of  Frontier Flying Service, testified                                                               
in support  of SB 301.  He said  liability insurance was  a major                                                               
cost component for  his company. It has been  his experience that                                                               
judgments  in  lawsuits are  heavily  weighted  on the  plaintiff                                                               
side. He  cited an incident  in Bethel  in 2000, where  the power                                                               
steering component  on an aircraft  failed, causing  the aircraft                                                               
to  run off  the runway.  Seventeen passengers  were onboard  and                                                               
there  were no  injuries.  An attorney  representing  six of  the                                                               
passengers wrote a  demand letter asking for  an early settlement                                                               
of $75,000 each.  The attorney indicated that  Bethel juries were                                                               
famous  for  awarding large  settlements  to  the plaintiffs  and                                                               
that,  if the  case goes  to trial  they could  easily award  the                                                               
plaintiffs six figures each. The  claim ultimately settled out of                                                               
court for $300,000.                                                                                                             
9:24:21 AM                                                                                                                    
MR.  HAJOUKOVICH said  last year  there were  zero fatalities  in                                                               
Part 135 and  Part 121 operations. The public would  be served by                                                               
the reduction of costly litigation.                                                                                             
9:25:08 AM                                                                                                                    
CHAIR  SEEKINS asked  Mr. Hajoukovich  to  repeat the  attorney's                                                               
description of the Bethel jury system.                                                                                          
MR. HAJOUKOVICH read from the attorney's demand letter:                                                                         
     As you  may be  aware, Bethel is  a town  whose jurists                                                                    
     are  used to  awarding  a  lot of  money  for pain  and                                                                    
     suffering. For example,  moved by subjective complaints                                                                    
     of pain that allegedly  disrupted their lives, a Bethel                                                                    
     jury   recently  awarded   five  ladies   $75,000  each                                                                    
     following  an accident  where a  cab driver  tapped the                                                                    
     ladies' vehicle at  under 5 miles an hour.  None of the                                                                    
     ladies  sought   or  received  any   medical  treatment                                                                    
     whatsoever, had  no lost income, and  were not claiming                                                                    
     emotional  distress. One  of our  attorneys is  a pilot                                                                    
     himself and  has been successfully  litigating airplane                                                                    
     crashes for 22  years. He estimates that  a Bethel jury                                                                    
     would award  six figures each  to those  passengers for                                                                    
     the emotional  distress damages alone. However,  in the                                                                    
     interest  of  compromise   and  early  settlement,  the                                                                    
     passengers listed above would be willing to settle all                                                                     
     claims for $75,000 each.                                                                                                   
9:27:41 AM                                                                                                                    
PETER KELLEY, insurance broker and  president of Kelley Insurance                                                               
Associates, testified in support of  SB 301. He believes there is                                                               
a precedent that places the  plaintiff at an unfair advantage. He                                                               
has seen where plaintiff's attorneys  have sent insurance company                                                               
adjusters demand  letters with copies  of very large  jury awards                                                               
for  simple soft  tissue cases  in an  attempt to  strong-arm the                                                               
company into settlements, which he feels is legal extortion.                                                                    
He cited a case where,  on final approach, passengers experienced                                                               
turbulence  but  the  aircraft   landed  without  incident.  Some                                                               
passengers filed a suit alleging  that they feared for their life                                                               
and suffered  emotional distress.  The insurance  company settled                                                               
for  $7,500   for  each  passenger.  He   said  underwriters  are                                                               
currently afraid to  do business in Alaska and some  refuse to do                                                               
business in rural Alaska due to the potential high jury awards.                                                                 
9:30:29 AM                                                                                                                    
MR. KELLEY said SB 301 would  level the playing field and attract                                                               
new underwriters to the state.                                                                                                  
CHAIR SEEKINS  said a rural  newspaper reported that  the problem                                                               
was  due to  insurance  companies sending  poorly prepared  young                                                               
attorneys to  handle the lawsuits.  A Bethel attorney  was quoted                                                               
as saying the disparity in  awards was due to ineptness, arrogant                                                               
attitudes, or  unprepared attorneys.  He asked for  the gentlemen                                                               
to comment.                                                                                                                     
MR. KELLEY said he has not witnessed that.                                                                                      
MR.  HAJOUKOVICH  said  he  has   seen  the  opposite.  Insurance                                                               
companies tend to send the best attorneys to handle the suits.                                                                  
9:33:37 AM                                                                                                                    
BRUCE  MCGLASSEN,  President  of  Grant  Aviation,  testified  in                                                               
support  of SB  301.  He has  received  threatening letters  from                                                               
attorneys  in   Bethel  in  particular;  letters   that  threaten                                                               
outrageous  jury awards.  Insurance companies  have expressed  an                                                               
unwillingness to go to trial in  Bethel despite the lack of merit                                                               
for the plaintiff's cases and the history of awards made there.                                                                 
9:35:54 AM                                                                                                                    
MR.  MCGLASSEN   said  a  change   of  venue  to   the  corporate                                                               
headquarters  in Anchorage  would more  likely result  in a  fair                                                               
9:36:31 AM                                                                                                                    
RICHARD HARDING,  Senior Vice President, Peninsula  Airways, Inc.                                                               
(PenAir),  testified  in  support  of  SB  301.  He  advised  the                                                               
committee  that  the   cost  of  a  large   settlement  would  be                                                               
devastating to  PenAir and  would have  reverberations throughout                                                               
the  state.  PenAir  employs  over 500  Alaskans  and  serves  36                                                               
locations with passenger and freight  services. Several years ago                                                               
PenAir  withdrew  service  from   Bethel  primarily  due  to  the                                                               
inequity  in  the  judicial   system.  PenAir  transports  almost                                                               
200,000 passengers  each year  and could now  get sued  for minor                                                               
incidents due to the precedents set by the rural jury system.                                                                   
MR.  HARDING  continued the  cost  of  settling claims  in  rural                                                               
communities is  significant and  unnecessary. A  corporation with                                                               
headquarters  in  Point  Barrow  should not  have  to  travel  to                                                               
Anchorage anymore than a corporation  in Anchorage should have to                                                               
travel to  Point Barrow  to defend itself.  Federal law  allows a                                                               
corporate  defendant  to  change  the venue  to  their  place  of                                                               
business and Alaska should do the same, he stated.                                                                              
9:39:34 AM                                                                                                                    
KAREN   CASANOVAS,  Executive   Director,  Alaska   Air  Carriers                                                               
Association,  testified  in  support  of SB  301.  She  said  the                                                               
Association  represents over  160 businesses  including insurance                                                               
companies,  avionic  suppliers,   maintenance  workers,  aircraft                                                               
manufacturers,  consultants,  attorneys,  and  airlines.  SB  301                                                               
seeks to  rectify the  problems of the  current system  and would                                                               
create an even playing field  by allowing defendants the right to                                                               
move the  case to  a different venue.  Many companies  around the                                                               
state  refuse  to do  business  in  remote jurisdictions  due  to                                                               
potential expensive litigation.                                                                                                 
When an airline  gets sued due to  equipment malfunction, avionic                                                               
suppliers get dragged into the  litigation and that cost of doing                                                               
business gets passed down to  the flying public or shippers. Many                                                               
insurance underwriters  refuse to  do business  in Alaska  due to                                                               
the added expenses.                                                                                                             
9:41:44 AM                                                                                                                    
MS. CASANOVAS  said the  current system  allows the  plaintiff to                                                               
choose  the venue.  SB 301  is neutral  and would  work to  lower                                                               
litigation  costs  and  allow for  cheaper,  easier  settling  of                                                               
9:43:29 AM                                                                                                                    
MIKE  HAGLAND,  Secretary  and   Treasurer  of  Hagland  Aviation                                                               
Services, testified  in support of  SB 301. Hagland  Aviation has                                                               
been  doing business  in  Western  Alaska for  25  years and  the                                                               
company feels Alaska citizens are  becoming more litigious due to                                                               
the  large awards  handed down  by rural  juries. He  agreed that                                                               
people should  be taken care of  in the event of  an accident but                                                               
not  for  minor  things  such   as  fear  during  turbulence.  He                                                               
expressed support for being able to  move the venue in pursuit of                                                               
getting a fair trial.                                                                                                           
9:45:12 AM                                                                                                                    
KNEELAND TAYLOR, introduced himself as  an attorney with a broad-                                                               
based civil  practice. He spoke about  unintended consequences of                                                               
the bill.  He gave  an example  of a  couple that  lived together                                                               
unmarried  but  financially  linked.  The  couple's  relationship                                                               
ended  and the  woman had  to file  claims for  stolen furniture,                                                               
family heirlooms,  handicrafts and for injuries  sustained by the                                                               
man. The bill exempts divorce,  dissolution and custody cases but                                                               
does not  cover unmarried, financially  linked couples.  The bill                                                               
would give the  man absolute right to venue and  require that the                                                               
woman bring her claims to the city where the man now lives.                                                                     
9:48:17 AM                                                                                                                    
MR. TAYLOR  cited an  example involving a  real estate  deal gone                                                               
sour  in  the  MatSu  Valley.  One party  sued  another  and  the                                                               
defendant  subsequently filed  a  fraudulent claim  in Nome.  The                                                               
third  party defendant,  under SB  301, could  move the  venue to                                                               
Nome, and force  the remaining parties to travel to  Nome for the                                                               
case trial.  He said there  are huge, unintended  consequences of                                                               
the bill and requested the that committee oppose it.                                                                            
9:50:07 AM                                                                                                                    
SENATOR THERRIAULT  asked Mr. Taylor  whether he  has experienced                                                               
any problems in the Bethel court system.                                                                                        
MR. TAYLOR  responded he handled  a case  in Bethel and  the bill                                                               
brings up a  good point yet it would bring  disaster to the civil                                                               
system in many areas. He suggested  the only people who are aware                                                               
of the  bill were  people involved in  the aviation  industry. He                                                               
agreed that insurance companies sometimes send arrogant "big-                                                                   
city lawyers" to  small communities and juries tend  to side with                                                               
the hometown lawyer.                                                                                                            
9:51:55 AM                                                                                                                    
MR. TAYLOR added he is  not disputing the appearance of disparity                                                               
between Bethel juries and Anchorage jury verdicts.                                                                              
CHRIS  SCHLUSS,   attorney,  testified  against  the   bill.  She                                                               
informed  the committee  that  the Alaska  Action  Trust wrote  a                                                               
position paper on the bill dealing  largely with what they see as                                                               
constitutional  infirmities. She  pointed out  the committee  was                                                               
considering an enormous fix for  a very limited problem. She said                                                               
the  federal system,  as  well  as every  state  in the  country,                                                               
operates  the same  way as  Alaska  operates today  and does  not                                                               
allow a  defendant an  absolute right to  change venue.  She gave                                                               
many  examples  of unintended  consequences  of  the bill,  which                                                               
would give any defendant the  power to force plaintiffs to travel                                                               
far out of the area where  the situation occurred. She said under                                                               
SB 301 a drunk driver who was  in town for a meeting could injure                                                               
a  person in  Fairbanks and  that  injured person  could have  to                                                               
travel to Naknek to have their case heard.                                                                                      
9:55:17 AM                                                                                                                    
MS.  SCHLUSS  said she  represents  women  and children  who  are                                                               
victims of  rape and molestation.  Under the current  system, she                                                               
is often  successful in suing the  offender and is able  to do so                                                               
because of the law that states  criminals are not allowed to keep                                                               
their  personal  property exempt.  She  said  she is  allowed  to                                                               
pursue this because  she can keep the costs  of litigation fairly                                                               
well  affordable. SB  301  would  force she  and  her clients  to                                                               
travel extensively to  a location chosen by the  offender to have                                                               
their day  in court. She asked  the committee to think  about the                                                               
issues in a broader manner.                                                                                                     
9:57:51 AM                                                                                                                    
MEG SIMONIAN, introduced  herself as an attorney for  a firm that                                                               
does  contract  work,  personal injury  work,  and  business  law                                                               
contract  work. She  said SB  301 would  change the  current law,                                                               
which says  the claim should  be brought  at the place  it arose.                                                               
Judges  have the  ability to  change a  venue if  impartiality is                                                               
proved or when the interest of  justice requires it. SB 301 would                                                               
remove the  ability of  the judge  to do that  and put  the power                                                               
entirely  with the  defendant. She  estimated that  lawyers would                                                               
find ways  to make things  extremely inconvenient  for plaintiffs                                                               
to  get  to court.  She  maintained  that  the bill  could  cause                                                               
enormous impacts  across spectrums of litigation,  would increase                                                               
litigation, and bog the courts.                                                                                                 
10:00:36 AM                                                                                                                   
MS.  SIMONIAN  asserted  not  all  claims  in  Bethel  result  in                                                               
plaintiff's verdicts.  She agreed  that an out-of-town  lawyer is                                                               
always  at a  disadvantage but  SB 301  wouldn't necessarily  fix                                                               
that because it would just  shift the disadvantage. She asked the                                                               
committee members to think about  the broad-based impact the bill                                                               
would have.                                                                                                                     
10:02:21 AM                                                                                                                   
CHAIR SEEKINS  asked Ms.  Simonian whether  a provider  or seller                                                               
could limit  venue for any  civil action that is  brought against                                                               
them as part of the contract.                                                                                                   
MS. SIMONIAN said yes.                                                                                                          
CHAIR SEEKINS asked her whether  a small airline, as condition of                                                               
purchase of the ticket, is able to do so under contract law.                                                                    
MS. SIMONIAN  said it is  possible but there would  be obstacles.                                                               
There would  be questions  of adhesion  where the  person signing                                                               
the contract would  be aware that they were  signing away certain                                                               
CHAIR SEEKINS commented  he has seen sales  contracts where venue                                                               
is prescribed  as a condition  of the  contract. He asked  her to                                                               
MS. SIMONIAN said  she was discussing that  topic with colleagues                                                               
earlier  and  is  not  sure  of  the  restrictions  on  passenger                                                               
adhesion contracts. She  said it seems to be within  the realm of                                                               
a potential  solution for what  appears to be a  special interest                                                               
problem in limited areas of the state.                                                                                          
10:04:16 AM                                                                                                                   
CHAIR  SEEKINS asked  Ms. Simonian  whether  the personal  injury                                                               
snow  machine case  in Bethel  last  week was  brought against  a                                                               
Bethel business.                                                                                                                
MS.  SIMONIAN said  she understood  it  to be  brought against  a                                                               
Bethel business.  She said currently  the court is  the impartial                                                               
arbitrator and maintained that SB  301 would bring about a battle                                                               
between parties over venue.                                                                                                     
10:06:14 AM                                                                                                                   
SKIP  DOOMERSHINE, electrician,  testified that  he was  recently                                                               
involved  in  a  lawsuit  that went  to  arbitration.  The  judge                                                               
reviewed the facts  of the case and stated the  case, if tried in                                                               
Anchorage, would  have a value  of zero dollars because  the case                                                               
lacked merit.  Later during arbitration  the judge  insisted they                                                               
settle  for a  six-figure  amount. He  feels  there is  something                                                               
wrong with  the rural judicial  system. Threatening  letters were                                                               
received listing  awards given  in other cases  and since  he was                                                               
personally   named  in   the  lawsuit,   it  was   a  frightening                                                               
experience. His  employer has  ceased bidding  for work  in rural                                                               
areas because of the risk of frivolous lawsuits.                                                                                
10:09:01 AM                                                                                                                   
MR. DOOMERSHINE said his specialty  is doing bush runway lighting                                                               
and so  the decision by  his employer personally affects  him but                                                               
it  also affects  residents and  businesses that  depend on  good                                                               
runway lighting.                                                                                                                
10:09:31 AM                                                                                                                   
SENATOR  GUESS  asked  Mr. Doomershine  the  reason  the  arbiter                                                               
recommended settlement.                                                                                                         
MR. DOOMERSHINE said the arbitrator  was a retired superior court                                                               
judge and she simply advised  his employer that a rural community                                                               
would probably award a tremendous amount of money.                                                                              
SENATOR GUESS  asked Mr. Doomershine  whether he or  his employer                                                               
tried to change the venue citing lack of impartial jury.                                                                        
MR.  DOOMERSHINE  said his  employer  went  to great  lengths  to                                                               
attempt to change the venue to Fairbanks but it was denied.                                                                     
10:11:36 AM                                                                                                                   
Senator French joined the meeting.                                                                                              
PAUL  LANTZ, General  Manager of  Dimond  Electric, testified  in                                                               
support  of  SB  301.  He  said his  company  has  been  building                                                               
infrastructure  in  Western  Alaska  for over  20  years  through                                                               
weather, logistics, and cultural  challenges. They have chosen to                                                               
draw  the line  at legal  challenges.  The company  was taken  to                                                               
court in Bethel  for a case that would never  have seen the light                                                               
of day anywhere else in Alaska,  he stated. This issue presents a                                                               
direct effect  on economic development in  the region surrounding                                                               
Bethel.  Infrastructure  projects, improved  communications,  and                                                               
improved transportation  would provide many opportunities  to the                                                               
people  in  the  region  but contractors  are  shying  away  from                                                               
accepting contracts  in rural Alaska  and Dimond Electric  is one                                                               
of them.                                                                                                                        
10:14:34 AM                                                                                                                   
RUSS WINNER,  Attorney, testified against  the bill on  behalf of                                                               
Alaska   Action  Trust.   SB  301   would  allow   defendants  to                                                               
automatically  transfer  venue  to their  home  court.  Virtually                                                               
every  state in  the nation  tries the  case in  the vicinity  of                                                               
where the  harm has  been done.  It is  an over-broad  measure to                                                               
address the  legitimate concerns  of the  air carriers  yet would                                                               
have unintended consequences. He gave an example:                                                                               
     If a Fairbanks  resident is in an auto  accident and is                                                                    
     hit by a person from out  of town, perhaps a village in                                                                    
     Western  Alaska, under  this  bill,  if that  Fairbanks                                                                    
     resident filed  suit in a Fairbanks  court against that                                                                    
     out  of town  defendant, the  defendant would  have the                                                                    
     automatic right  to transfer the case  out of Fairbanks                                                                    
     into a rural court.                                                                                                        
10:19:50 AM                                                                                                                   
MR. WINNER continued that he has  tried cases in Bethel and knows                                                               
most of  the attorneys  who practice there.  He claimed  that the                                                               
defendants who find  themselves in Bethel court  hire lawyers who                                                               
are  out of  tune to  the differences  between Bethel  juries and                                                               
other  juries.  In  reference  to  previous  testimony  regarding                                                               
threatening letters  sent to defendants,  he said,  lawyers write                                                               
those letters all the time.                                                                                                     
10:22:31 AM                                                                                                                   
MR. WINNER alerted committee members  to a position paper that he                                                               
faxed to Senator Seekins' office  and wrapped up his testimony by                                                               
stating SB  301 was unconstitutional  and that  defendants should                                                               
be hiring local Bethel lawyers.                                                                                                 
10:25:26 AM                                                                                                                   
JERRY ROCK,  President, Evergreen Aviation, testified  in support                                                               
of the  bill. He  cited a medical  evacuation (med-evac)  case in                                                               
Kotzebue where a  contractor was working on a road  and a village                                                               
elder was  run over  by a  front-end loader as  he was  driving a                                                               
four-wheeler  through  the  construction  site.  The  elder  died                                                               
during the  med-evac flight. The  family sued  Evergreen Aviation                                                               
for  the death  and the  lawyer for  the family  told him  that a                                                               
Kotzebue jury would rule against  the airline. The lawyer advised                                                               
him to settle with the family.                                                                                                  
MR. ROCK said  the bill would bring jury awards  down and in turn                                                               
help bring insurance costs down  for contractors and air carriers                                                               
as well.                                                                                                                        
10:28:46 AM                                                                                                                   
SENATOR GUESS asked Mr. Rock  whether he or his insurance company                                                               
tried to change the venue citing lack of impartial jury.                                                                        
MR. ROCK  said they  settled out  of court on  both of  the rural                                                               
cases that they had.                                                                                                            
10:29:22 AM                                                                                                                   
CHAIR SEEKINS held SB 301 in committee.                                                                                         

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