Legislature(2015 - 2016)BELTZ 105 (TSBldg)

03/31/2015 01:30 PM LABOR & COMMERCE

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Audio Topic
01:59:00 PM Start
02:00:02 PM Confirmation Hearings
02:17:00 PM Confirmation Hearing
02:32:19 PM SB76
02:58:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 2:00 pm --
-- Public Testimony --
*+ SB 76 REAL ESTATE BROKERS; LIABILITY TELECONFERENCED
Heard & Held
*+ SB 77 SHAREHOLDER ACCESS TO CORP RECORDS TELECONFERENCED
Scheduled but Not Heard
+ Confirmation Hearing: TELECONFERENCED
Commissioner Chris Hladick, Department of
Commerce, Community, & Economic Development
+ Board and Commission Appointees: TELECONFERENCED
Regulatory Commission of Alaska
Real Estate Commission
Alcoholic Beverage Control Board
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SB  76-REAL ESTATE BROKERS; LIABILITY                                                                          
                                                                                                                                
2:32:19 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration of  SB 76. "An Act relating to private  actions and                                                             
remedies   against    real   estate   licensees    for   licensee                                                               
relationships, disclosures, and activity  before January 1, 2005;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
2:32:45 PM                                                                                                                    
GENEVIEVE WOJTUSIK, Staff, Senator Lesil McGuire, introduced SB
76 speaking to the following sponsor statement: [Original                                                                       
punctuation provided.]                                                                                                          
                                                                                                                                
     Under  AS  08.88.396,  a real  estate  licensee  acting                                                                    
     before January 1, 2005 was  authorized to act as both a                                                                    
     buyer's and  a seller's representative, but  only after                                                                    
     the licensee informed both the  buyer and the seller of                                                                    
     his  or her  dual agency  and obtained  written consent                                                                    
     from both. The statute,  as originally enacted, did not                                                                    
     specify remedies  if a real estate  licensee (or agent)                                                                    
     violated its provisions.                                                                                                   
                                                                                                                                
     In 2003,  the Alaska  Legislature acted to  correct the                                                                    
     remedies-omission. The  Legislature was  concerned that                                                                    
     without   specifying  its   intent   with  respect   to                                                                    
     appropriate  remedies in  the  case of  a violation,  a                                                                    
     court might  feel compelled  to impose  the potentially                                                                    
     business-ending  remedy  of forfeiture  of  real-estate                                                                    
     sales  commissions.  The Legislature  was  particularly                                                                    
     concerned  that this  could occur  in cases  even where                                                                    
     the plaintiffs had suffered no actual damages.                                                                             
                                                                                                                                
     In  order  to  address this  concern,  the  Legislature                                                                    
     enacted  House Bill  257, legislation  that fixed  this                                                                    
     ambiguity  by  retroactively  limiting the  remedy  for                                                                    
     violations of  AS 08.88.396  to actual  damages. [House                                                                    
     Bill] 257  passed the Legislature, was  signed into law                                                                    
     and  has  been  found   constitutional  by  the  Alaska                                                                    
     Supreme Court.                                                                                                             
                                                                                                                                
     Despite the  enactment of House  Bill 257,  and despite                                                                    
     the Alaska  Supreme Court's determination that  the law                                                                    
     is constitutional, questions  have arisen regarding the                                                                    
     Legislature's intent  in amending AS  08.88.396. Senate                                                                    
     Bill  76 is  intended to  make clear  the Legislature's                                                                    
     intent  when  it  amended  AS   08.88.396  in  2003  by                                                                    
     specifying  and clarifying  that  the "actual  damages"                                                                    
     limitation of the 2003 amendment  applies to all claims                                                                    
     that  are based  upon or  arise out  of allegations  of                                                                    
     violations of AS 08.88.396.                                                                                                
                                                                                                                                
     The  clarification is  necessarily retroactive  because                                                                    
     the Legislature  enacted House Bill  29 in  2004 which,                                                                    
     among other things, specified  that AS 08.88.396 ceased                                                                    
     to apply to  real estate transactions as  of January 1,                                                                    
     2005; and  the Legislature  desires to ensure  that any                                                                    
     claims  pre-dating the  2005  effective  date of  House                                                                    
     Bill 29 are appropriately subject  to the intent of its                                                                    
     2003 enactment of House Bill 257.                                                                                          
                                                                                                                                
     The  retroactivity of  the bill  is constitutional,  as                                                                    
     provided in both U.S. Supreme  Court and Alaska Supreme                                                                    
     Court  decisions.1 This  bill  preserves  the right  of                                                                    
     purchasers of  real estate to  seek redress  for actual                                                                    
     damages  under AS  08.88.396  while  ensuring that  the                                                                    
     Legislature's  intent  that   only  actual  damages  be                                                                    
     awarded is  recognized by courts hearing  cases arising                                                                    
     within the relevant time periods.                                                                                          
                                                                                                                                
2:35:45 PM                                                                                                                    
JEFFREY PICKETT, Staff Counsel to the Senate Judiciary                                                                          
Committee, Anchorage, Alaska, proved the following sectional                                                                    
analysis:                                                                                                                       
                                                                                                                                
     Section 1 amends the wording  of AS 08.88.396(e) which,                                                                    
     for  real  estate  transactions  that  occurred  before                                                                    
     January  1, 2005,  limits  civil  litigation and  other                                                                    
     remedies for the  failure of a real  estate licensee to                                                                    
     comply    with    certain    requirements    concerning                                                                    
     relationships  with  and   disclosures  to  buyers  and                                                                    
     sellers.                                                                                                                   
                                                                                                                                
     Section  2 provides  that the  bill applies  to a  real                                                                    
     estate  transaction  that  occurred on  or  before  the                                                                    
     bill's effective  date, and to  a court  action related                                                                    
     to such a transaction pending  on the effective date of                                                                    
     bill.                                                                                                                      
                                                                                                                                
       Section 3 makes sec. 1 of the bill retroactive to                                                                        
     January 1, 1991.                                                                                                           
                                                                                                                                
     Section 4 makes the bill effective immediately.                                                                            
                                                                                                                                
2:37:20 PM                                                                                                                    
SENATOR MEYER joined the committee.                                                                                             
                                                                                                                                
SENATOR GIESSEL asked if it's  possible to make a law retroactive                                                               
if there's an ongoing case.                                                                                                     
                                                                                                                                
MR. PICKETT explained that there is  case law that says a law may                                                               
be retroactive in a pending case so  long as there is not a final                                                               
judgment. The  U.S. Supreme  Court has found  that this  does not                                                               
violate the  separation of  powers, and that  type of  action has                                                               
been found constitutional.                                                                                                      
                                                                                                                                
SENATOR  GIESSEL asked  if there  have been  any cases  that this                                                               
bill would impact.                                                                                                              
                                                                                                                                
MR. PICKETT answered  yes; there's a case from 2002.  In 2003 the                                                               
legislature amended  the statute  to limit  any remedy  to actual                                                               
damages.  The litigants  continued their  motion practice  and in                                                               
2005 Judge Hensley  ruled that the amendment to  AS 08.88.396 was                                                               
a  constitutional  amendment  and  it limited  remedies  only  to                                                               
actual damages.  In 2007 another  judge affirmed  Judge Hensley's                                                               
2005  finding. In  2010 another  judge followed  the theory  that                                                               
says there  is a common law  duty among real estate  licensees to                                                               
disclose if they're  acting in a dual role. Because  it is common                                                               
law  duty and  not statutory  duty, the  remedy of  forfeiture is                                                               
available.                                                                                                                      
                                                                                                                                
SB 76  clarifies that the  remedy of forfeiture is  not available                                                               
to any action arising out of a failure to disclose dual agency.                                                                 
                                                                                                                                
2:41:23 PM                                                                                                                    
CHAIR COSTELLO asked what is at  stake and what the bill seeks to                                                               
resolve.                                                                                                                        
                                                                                                                                
MR. PICKETT explained  that the issue is what  penalties might be                                                               
imposed  on a  real estate  licensee  who did  not disclose  that                                                               
he/she was acting  in a dual capacity. His  understanding is that                                                               
prior  to 2002,  real  estate licensees  didn't  comply with  the                                                               
requirement to  disclose because there  wasn't a penalty  for not                                                               
doing  so.  He surmised  that  there  were  a lot  of  back-dated                                                               
disclosures  following the  lawsuit. The  purpose was  to provide                                                               
the required  notice and, in  situations where nobody  was harmed                                                               
by the  failure to disclose,  to remove the threat  of forfeiture                                                               
of commissions.                                                                                                                 
                                                                                                                                
CHAIR  COSTELLO asked  if  part of  the vagary  is  that the  law                                                               
neglected to say when the disclosure had to occur.                                                                              
                                                                                                                                
MR.  PICKETT said  he didn't  know what  the timing  requirements                                                               
were in 2002.                                                                                                                   
                                                                                                                                
2:44:08 PM                                                                                                                    
CHAIR  COSTELLO asked  what  significance it  has  to change  the                                                               
language  on  page  1,  line  6,  striking  the  term  "for"  and                                                               
replacing it with "arising out of."                                                                                             
                                                                                                                                
MR. PICKETT replied the term "arising  out of" has a much broader                                                               
meaning so  any claim arising out  of a failure to  disclose dual                                                               
agency now  would come  within the  remedy restriction  of actual                                                               
damages.                                                                                                                        
                                                                                                                                
CHAIR  COSTELLO questioned  how  this  legislation clarifies  the                                                               
intent of the legislature when the  courts have been unable to do                                                               
so.                                                                                                                             
                                                                                                                                
MR. PICKETT  opined that the  "arising out of" language  is broad                                                               
enough to  encompass common law  claims. He acknowledged  that it                                                               
would ultimately be decided by a judge.                                                                                         
                                                                                                                                
CHAIR  COSTELLO  commented  on the  court  reviewing  the  public                                                               
record to determine the intent of the legislature.                                                                              
                                                                                                                                
SENATOR  ELLIS  suggested  the committee  hear  from  Mr.  Howard                                                               
Trickey who could  provide the history of the  matter in layman's                                                               
terms.                                                                                                                          
                                                                                                                                
CHAIR COSTELLO opened public testimony.                                                                                         
                                                                                                                                
2:48:09 PM                                                                                                                    
HOWARD S.  TRICKEY, Attorney, related  that he testified  in 2003                                                               
about why it was necessary for  the real estate industry to limit                                                               
damages for  the statutory  violation to  actual damages.  At the                                                               
time  the industry  was potentially  exposed to  $70 million  for                                                               
forfeiture  and disgorgement  of  all commissions  that may  have                                                               
been earned  over a three-year  period by people in  the industry                                                               
who were involved in dual-agency  transactions. The law permitted                                                               
dual agency transactions once there  was a disclosure and written                                                               
consent was  obtained. The industry  practice at the time  was to                                                               
make the written and oral  disclosures at the time the properties                                                               
were  being  showed to  a  potential  buyer. There  were  written                                                               
disclosure forms that disclosed "I'm  an agent for the seller" or                                                               
"I'm  an agent  for this  buyer" and  then written  consents were                                                               
obtained both  from the buyer  and the  seller. It was  a buyer's                                                               
market so  when someone showed up  at a residence that  was being                                                               
shown by a listing agent, offers were often made on the spot.                                                                   
                                                                                                                                
He said  he's always characterized the  violation that's asserted                                                               
in  the lawsuit  as a  technical timing  violation. The  industry                                                               
made  the  disclosures and  obtained  the  written consents,  but                                                               
there  was confusion  because  the statute  did  not specify  the                                                               
timing  for  making  those  disclosures.  That  technical  timing                                                               
violation  was exploited  in the  lawsuit and  the threat  to the                                                               
industry was  forfeiture of all  commissions earned. It was  a no                                                               
harm no  foul situation  but aggregating  claims through  a class                                                               
action creates a  bet the farm type of case  that puts the entire                                                               
business  at risk.  The claim  that's being  asserted is  for $30                                                               
million, which is  what led the legislature in 2003  to limit the                                                               
remedy to actual damages.                                                                                                       
                                                                                                                                
MR.  TRICKEY said  this  matter is  before  this committee  again                                                               
because  a judge  who  didn't like  the statute  came  up with  a                                                               
creative  decision   that  allows   the  use  of   the  statutory                                                               
violations to  support the  remedy of  a breach  of a  common law                                                               
duty. The  proof is  based on identifying  the problems  that the                                                               
legislature originally addressed in  House Bill 257, which simply                                                               
had to  do with  the timing  of the  written disclosures  and the                                                               
timing of  obtaining the  written consent. SB  76 seeks  to bring                                                               
the needed clarification.                                                                                                       
                                                                                                                                
He explained that the reason for  using the term "arising out of"                                                               
is that  it's broader  than the original  statute but  it's broad                                                               
only in  limiting remedies  for the violation  of the  statute to                                                               
actual damages.  It doesn't take  away any other  existing claim.                                                               
This remedy for violating the statue is actual damages.                                                                         
                                                                                                                                
Addressing  Senator Giessel's  question, he  explained that  it's                                                               
constitutional  because  there is  no  contractual  right to  the                                                               
remedy of punitive damages or  to the remedy of forfeiture. There                                                               
isn't any vested right because there  is no final judgment in the                                                               
case. When  the legislature first  passed tort reform  and capped                                                               
punitive damages,  there were pending lawsuits  that applied. The                                                               
Alaska  Supreme Court  ruled  that  it was  not  an improper  and                                                               
unconstitutional  retroactive application  because no  one had  a                                                               
judgement  entitling them  to damages.  It's a  matter of  public                                                               
policy  for  the  legislature  not  the  courts  because  it's  a                                                               
penalty,  not  a  remedy  for actual  damages  that  someone  has                                                               
suffered.                                                                                                                       
                                                                                                                                
The industry supports the legislation.                                                                                          
                                                                                                                                
2:56:26 PM                                                                                                                    
CHAIR COSTELLO  asked if he's  testifying as a  representative of                                                               
the defendants or as a member of the public.                                                                                    
                                                                                                                                
MR. TRICKEY confirmed  he is being paid to address  the issues as                                                               
part of the representation he undertook years ago.                                                                              
                                                                                                                                
2:57:02 PM                                                                                                                    
ERROL  CHAMPION,  Chair,  Legislative  Issues  Committee,  Alaska                                                               
Association  of Realtors  (AAR),  stated support  for  SB 76  and                                                               
noted that he submitted a letter stating the reasons.                                                                           
                                                                                                                                
CHAIR COSTELLO announced  that she would hold SB  76 in committee                                                               
and public testimony would remain open.                                                                                         

Document Name Date/Time Subjects
SB 76 - Version H.PDF SL&C 3/31/2015 1:30:00 PM
SB 76
SB 76 - Fiscal Note.pdf SL&C 3/31/2015 1:30:00 PM
SB 76
SB 76 - Sectional Analysis.PDF SL&C 3/31/2015 1:30:00 PM
SB 76
SB 76- Sponsor Statement.pdf SL&C 3/31/2015 1:30:00 PM
SB 76
SB 77 - Fiscal Note DCCED 2.pdf SL&C 3/31/2015 1:30:00 PM
SB 77
SB 77 - Fiscal Note DCCED.pdf SL&C 3/31/2015 1:30:00 PM
SB 77
SB 77 - Sectional Analysis.PDF SL&C 3/31/2015 1:30:00 PM
SB 77
SB 77 - Version E.PDF SL&C 3/31/2015 1:30:00 PM
SB 77
SB 77 Sponsor Statement.pdf SL&C 3/31/2015 1:30:00 PM
SB 77