Legislature(2001 - 2002)
03/22/2002 01:22 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
March 22, 2002
1:22 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Jeannette James
Representative John Coghill
Representative Kevin Meyer
Representative Ethan Berkowitz
Representative Albert Kookesh
MEMBERS ABSENT
Representative Scott Ogan, Vice Chair
COMMITTEE CALENDAR
CS FOR SENATE JOINT RESOLUTION NO. 24(RLS)
Proposing amendments to the Constitution of the State of Alaska
relating to the budget reserve fund.
- MOVED HCS CSSJR 24(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 385
"An Act relating to the attorney fees and costs awarded in
certain court actions relating to unfair trade practices; and
amending Rules 54, 79, and 82, Alaska Rules of Civil Procedure."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SJR 24
SHORT TITLE:AMEND CONSTITUTIONAL BUDGET RESERVE FUND
SPONSOR(S): FINANCE
Jrn-Date Jrn-Page Action
04/09/01 1013 (S) READ THE FIRST TIME -
REFERRALS
04/09/01 1013 (S) FIN
04/17/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/17/01 (S) Heard & Held
04/17/01 (S) MINUTE(FIN)
04/23/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/23/01 (S) Moved Out of Committee
04/23/01 (S) MINUTE(FIN)
04/23/01 1215 (S) FIN RPT 6DP 3NR
04/23/01 1215 (S) DP: DONLEY, KELLY, GREEN,
WILKEN,
04/23/01 1215 (S) LEMAN, WARD;
04/23/01 1215 (S) NR: AUSTERMAN, HOFFMAN, OLSON
04/23/01 1216 (S) FN1: (GOV)
04/30/01 (S) RLS AT 11:50 AM FAHRENKAMP
203
04/30/01 (S) <Bill Postponed to 5/1/01> --
Time Change --
04/30/01 (S) RLS AT 4:45 PM FAHRENKAMP 203
04/30/01 (S) -- Meeting Canceled --
05/01/01 (S) RLS AT 12:15 PM FAHRENKAMP
203
05/01/01 (S) -- Time Change --
05/01/01 (S) MINUTE(RLS)
05/01/01 1412 (S) READ THE SECOND TIME
05/01/01 1412 (S) RLS CS ADOPTED UNAN CONSENT
05/01/01 1413 (S) ADVANCED TO 3RD READING
FAILED Y14 N6
05/01/01 1413 (S) ADVANCED TO THIRD READING 5/2
CALENDAR
05/01/01 1401 (S) RULES TO CAL W/CS 1OR 5/1
SAME TITLE
05/01/01 1401 (S) FN1: (GOV)
05/02/01 1443 (S) READ THE THIRD TIME CSSJR
24(RLS)
05/02/01 1444 (S) HELD IN THIRD READING TO 5/3
CALENDAR
05/03/01 1472 (S) HELD IN THIRD READING TO 5/4
CALENDAR
05/04/01 1503 (S) BEFORE THE SENATE IN THIRD
READING
05/04/01 1503 (S) PASSED Y14 N6
05/04/01 1504 (S) ELLIS NOTICE OF
RECONSIDERATION
05/05/01 1527 (S) RECON TAKEN UP - IN THIRD
READING
05/05/01 1527 (S) PASSED ON RECONSIDERATION Y14
N6
05/05/01 1559 (S) TRANSMITTED TO (H)
05/05/01 1559 (S) VERSION: CSSJR 24(RLS)
05/05/01 1571 (H) READ THE FIRST TIME -
REFERRALS
05/05/01 1571 (H) JUD, FIN
10/19/01 (H) JUD AT 11:00 AM Anch LIO Conf
Rm
10/19/01 (H) Heard & Held
10/19/01 (H) MINUTE(JUD)
02/04/02 (H) JUD AT 1:00 PM CAPITOL 120
02/04/02 (H) Heard & Held
02/04/02 (H) MINUTE(JUD)
03/22/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 385
SHORT TITLE:UNFAIR TRADE PRACTICES ATTY FEES/COSTS
SPONSOR(S): REPRESENTATIVE(S)CROFT
Jrn-Date Jrn-Page Action
02/06/02 2164 (H) READ THE FIRST TIME -
REFERRALS
02/06/02 2164 (H) JUD
03/22/02 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
DEB DAVIDSON, Staff
to Senator Dave Donley
Senate Finance Committee
Alaska State Legislature
Capitol Building, Room 506
Juneau, Alaska 99801
POSITION STATEMENT: During discussion of SJR 24 responded to
questions on behalf of the Senate Finance Committee, sponsor.
REPRESENTATIVE ERIC CROFT
Alaska State Legislature
Capitol Building, Room 400
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 385.
LES S. GARA, Attorney
1242 West 10th Avenue
Anchorage, Alaska 99501
POSITION STATEMENT: Testified in support of HB 385.
STEVE CONN, Executive Director
Alaska Public Interest Research Group (AkPIRG)
PO Box 101093
Anchorage, Alaska 99510
POSITION STATEMENT: Provided comments in support of HB 385.
MARIE DARLIN, AARP
415 Willoughby Avenue
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 385.
PAM LaBOLLE, President
Alaska State Chamber of Commerce
217 2nd Street
Juneau, Alaska 99801
POSITION STATEMENT: Provided comments in opposition to HB 385.
CLYDE (ED) SNIFFIN, JR.
Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department of Law (DOL)
1031 West 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Testified in support of HB 385 and
responded to questions.
ACTION NARRATIVE
TAPE 02-35, SIDE A
Number 0001
CHAIR NORMAN ROKEBERG called the House Judiciary Standing
Committee meeting to order at 1:22 p.m. Representatives
Rokeberg, James, Coghill, and Meyer were present at the call to
order. Representatives Berkowitz and Kookesh arrived as the
meeting was in progress.
SJR 24 - AMEND CONSTITUTIONAL BUDGET RESERVE FUND
Number 0043
CHAIR ROKEBERG announced that the first order of business would
be CS FOR SENATE JOINT RESOLUTION NO. 24(RLS), Proposing
amendments to the Constitution of the State of Alaska relating
to the budget reserve fund. He noted that at a prior hearing,
the administration's representative had raised four points in
opposition to SJR 24.
Number 0073
DEB DAVIDSON, Staff to Senator Dave Donley, Senate Finance
Committee, Alaska State Legislature, on behalf of the Senate
Finance Committee, sponsor, confirmed that those points had been
raised at the prior hearing, and mentioned that in members'
packets is a letter of response to those issues. To elaborate,
on the point that SJR 24 is a policy change, she concurred that
it is, and noted that this is intentional. Under SJR 24, funds
could be withdrawn from the constitutional budget reserve (CBR)
fund with a majority vote, provided that they are used for
appropriations from the general fund (GF). Currently funds from
the CBR can be used to fund any shortfall [in] any program,
although there is a three-fourths vote requirement. With SJR 24
in effect, for example, a majority vote could withdraw CBR funds
in order to pay for a shortfall in education funding, which is a
GF program; however, in order pay to for a shortfall in a
program that is funded entirely by program receipts, for
example, CBR funds could only be withdrawn with a three-fourths
vote.
MS. DAVIDSON, on the point regarding the use of the term
"unrestricted general funds", said that staff had checked with
the Legal and Research Services Division, Legislative Affairs
Agency, and had been told that there would not be a problem with
using that term and that its use was merely a policy choice. On
the point regarding the possibility that deleting the "sweep
provision" without first eliminating the liability to the CBR
would cause a problem with the bond market, she noted that there
is no straight answer to this complex issue. Basically, she
explained, the debt owed to the CBR is a debt that "we owe
ourselves"; therefore, legally, getting rid of the sweep
provision automatically gets rid of the liability. So while it
appears from an accounting viewpoint, on paper, as though there
is a liability, it is merely money that the state owes itself.
She opined that getting rid of the sweep provision should not
cause any problem because it would also get rid of the
liability. She noted that if, in the future, any questions were
raised by the bond market or "Wall Street," the legislature
would have several options with which to address those
questions.
MS. DAVIDSON, on the point of whether SJR 24 would have any
effect should the CBR become empty in two years, said that the
sponsor contends that getting rid of the sweep provision is
still an important and necessary change because, otherwise, that
provision would still apply regardless of whether there was any
money in the CBR. In response to questions, she pointed out
that under [subsection] (b), page 1, lines 13-16, "amounts
available for appropriation or appropriated from federal funds,
income of the permanent fund, or this budget reserve fund may
not be considered". She said that the main intent of this
language is to ensure that "these same funds are either included
or excluded from the amount available for appropriation, and
appropriated, to make sure that the comparison was based on this
same..."
Number 0583
REPRESENTATIVE JAMES interjected that she was a member of the
legislature during the implementation of the constitutional
budget reserve [fund] and, according to her recollection of the
debate at that time, the court decision regarding implementation
was different than how the CBR was intended to work and
different than what she had in mind when she voted for it. She
opined that there has been a problem ever since that court
decision was made. One of the issues that the court had to
decide was, at what level of appeal does resulting money go into
the CBR; she noted that she did not have any problems with the
[decision] on that issue. Another issue, she explained, that
the court had to decide revolved around "what was available for
appropriations, based on what last year's budget was, so that if
your current year's budget was more than your last year's
budget, if you didn't have enough money to cover it, you could
take the money out with a majority vote." She said that the
court determined that when "you're measuring in the first place,
if you have enough money to cover the budget, they did not
include the permanent fund; and yet they did include the
permanent fund, so you never would ever get there as long as you
had any money in the permanent fund." However, she added, at
the end, because that money had to be paid back and everything
was "swept," then the earnings of the permanent fund were not
included.
REPRESENTATIVE JAMES opined that that was a gross
[misinterpretation] of the language in the original ballot
measure. "It either should be counted at one end and the other,
or at neither end," she added. She said that another problem is
"the payback," which is the sweep provision. "As we go forward
we do need a budget control or ... slush fund ...; we need to be
able to build up a budget surplus because we never know what the
conditions are going to be," she said. But the rules of the CBR
are so restrictive, that it is not going to be the best vehicle
for surpluses unless some changes are made. She remarked,
however, that she is not convinced that [SJR 24] is going to
"solve the problem; it seems to me like if we wish to take the
money from the CBR rather than the earnings reserve of the
permanent fund, then, as far as I'm concerned, we'll always have
a [three-fourths] vote." She opined that there are only two
solutions: "one is to fix it so we don't have to pay it back,
which ... solves part of the problem, ... and this is all that
you've done here."
Number 0787
MS. DAVIDSON argued that in addition to repealing the sweep
provision, SJR 24 changes "the phrasing in how the funds can be
withdrawn with a majority vote, to clarify when that may
happen." She offered that the phrasing in Section 1 specifies
that the federal funds, the permanent fund, or the budget
reserve fund cannot be considered when calculating amounts
available for appropriation or the amounts appropriated, the
comparison has been made level on both sides. She surmised that
part of the problem, initially, was that amounts available for
appropriation and amounts actually appropriated were defined in
statute, and the court found that this was inconsistent with the
[Alaska State] Constitution. By placing "this" in the
constitution, she opined, it would squarely set out what the
comparison is.
REPRESENTATIVE JAMES asked whether SJR 24 would be removing the
stipulations pertaining to the prior year's budget and, if so,
whether that meant that the budget could be raised and just a
majority vote would be needed to access the CBR.
MS. DAVIDSON said not entirely, no. She elaborated:
What this says is, ... if the amount that you were
appropriating this year is more than you have
available to appropriate, you may withdraw funds from
the CBR up to the total that was appropriated the year
before with a majority vote - anything more than that
will require the [three-fourths] vote - and the
difference in that amount may only be used for
appropriations from the unrestricted general fund. As
I said, for funding education, if you needed to make
up that difference, you would be able to do it up to
the last year's level with the general fund. If you
were funding a shortfall from another funding source -
something funded by [Alaska Housing Finance
Corporation] AHFC receipts, something like that - that
would require a [three-fourths] vote. So it restricts
more than the current does [with regard to] what may
be withdrawn....
REPRESENTATIVE JAMES remarked that although she understands the
sponsor's intent, if the public were to be asked "this question,
they'd say no." She acknowledged that there are some problems
with "the CBR," but opined that [SJR 24] is not going to resolve
them.
Number 0982
REPRESENTATIVE BERKOWITZ asked whether the "exceptions to the
amount of appropriations made in the current year apply to those
made in previous years?" That is, if the permanent fund or
federal funds had been used - appropriated - in prior years,
does that impact how this mechanism would work?
MS. DAVIDSON said that she didn't believe so because of the
addition of the phrase, "For purposes of applying this
subsection, amounts available for appropriation or appropriated
from federal funds, income of the permanent fund, or this budget
reserve fund may not be considered." She opined that if the
funds were appropriated in the prior year, they would not be
considered in what was calculated for the current year or for
the current year's appropriations.
REPRESENTATIVE BERKOWITZ asked: "If you had appropriations of
federal funds in a prior year, and you needed to reach that
aggregate funding level, ... what would the mechanism be to get
into the CBR in the current year?"
MS. DAVIDSON replied that that would be the [three-fourths]
vote. The section in the [Alaska State] Constitution that
allows appropriations from the CBR to be made for any public
purpose with a [three-fourths] vote remains there; that has not
changed at all. "So, if you wanted to use funds from the CBR to
make up a loss of federal funds or to get to a total, you could
do that; it would, however, require a [three-fourths] vote
rather than a majority vote," she said.
REPRESENTATIVE BERKOWITZ referred to the phrase, "For purposes
of this subsection, 'unrestricted general fund' shall be defined
by law". He asked whether the sponsor had any ideas regarding
how "unrestricted general fund" might be defined.
MS. DAVIDSON said that she did not know whether the sponsor had
any specific definition in mind regarding "unrestricted general
fund". She mentioned that although currently there is not a
specific definition of what constitutes "unrestricted general
funds", that phrase is used in several statutes. Referring to
members' packets, she pointed out an example of a statute - AS
37.05.146 - which specifies items that "are not made from the
unrestricted general fund". She said that it is her belief that
"when the definition came through, there would be consideration
of that, as well as other things."
REPRESENTATIVE JAMES opined that the [lack of a current
definition] seems to "give us a little trap here as to what
that's going to be." She mentioned that she considers dividends
from Alaska Industrial Development and Export Authority (AIDEA),
for example, to be general funds "when they come over," but
acknowledged that they are not counted as such.
Number 1227
MS. DAVIDSON remarked that if funding is needed for any of the
program receipts listed in AS 37.05.146(b), a [three-fourths]
vote would be required to access the CBR because the statute
specifically says that appropriations for those items are not
made from the unrestricted general fund. She said that the best
example of what unrestricted general funds are currently used
for is "partially doing the education funding," adding her
belief that revenue sharing also comes from the unrestricted
general fund. Thus, although there is no definition of what
unrestricted general funds are, there is a definition of what
they are not.
REPRESENTATIVE JAMES indicated that she thought that funds which
are appropriated would still be general funds until spent,
although they would be considered restricted [funds] because
they'd already been appropriated.
CHAIR ROKEBERG, mentioning that he had concerns about drafting,
referred to the phrase on lines 13-15: "For purposes of
applying this subsection, amounts available for appropriation or
appropriated from federal funds". He asked, "Why is that
disjunctive there?"
MS. DAVIDSON offered that it is because of how lines 5-6 are
drafted: "If the amount available for appropriation for a
fiscal year is not sufficient to fully fund the amount
appropriated".
CHAIR ROKEBERG mentioned that he does not understand lines 13-15
the way they are drafted; they appear to essentially say,
"amounts available for appropriation may not be considered."
REPRESENTATIVE JAMES agreed that the language on lines 13-15
doesn't make sense.
Number 1394
MS. DAVIDSON said that in her mind, she translated that language
to: "For applying this subsection, amounts available for
appropriation [pause] or amounts appropriated from [pause] then
federal funds, income of the permanent fund, or the budget
reserve fund may not be considered."
CHAIR ROKEBERG remarked that according to the way Ms. Davidson
spoke regarding her interpretation of lines 13-15, it sounded as
though there was a long pause before the word "or", in which
case perhaps some form of punctuation is needed in that phrase.
He said:
To translate what I think the meaning should be, it
should be that ... when you're defining amounts
available for appropriations, you may not consider
federal funds, income of the permanent fund, or budget
reserve funds. Is that what it means?
MS. DAVIDSON replied:
Not only for when considering amounts available for
appropriation, but also when considering amounts
appropriated, because we compare amounts available for
appropriation with amounts actually appropriated, and
when you're considering either one of these two items,
you may not consider federal funds, income from the
permanent fund, or the budget reserve fund.
CHAIR ROKEBERG mentioned that "it's not real clear."
REPRESENTATIVE JAMES said:
I see the comparison now, when I read lines 5 and 6,
because there's two things there: there's the
"available for appropriation" and "the amount
appropriated". So, I think that's what they meant,
that for purposes of this subsection, when they're
talking about - at the beginning of (b) - amounts
available for appropriation or appropriated from
federal funds, ... there is an "available for
appropriation" and "amount appropriated".
CHAIR ROKEBERG asked:
Would it be fair to say that it could be redrafted to
say, "For purposes of applying this subsection,
amounts available for appropriation or appropriated
from federal funds do not include income from the
permanent fund or this budget reserve"?
Number 1512
REPRESENTATIVE JAMES said she did not see any connection at all
between "that and federal funds." "Federal funds are one thing
and these other things are something else," she added.
CHAIR ROKEBERG said, "You're right." He asked what the
distinction is between "appropriated" and "appropriation".
REPRESENTATIVE JAMES offered that perhaps the language is
attempting to address, in one fell swoop, both of those amounts
in that first sentence, and that by doing so, it is leading to
confusion. She mentioned that there are two measurements: one
is, "available for appropriation", and the other is, "the amount
appropriated". And they're saying that from either one of
those, it doesn't include income of the permanent fund or the
budget reserve fund," she surmised.
CHAIR ROKEBERG said he assumes that [amounts] "appropriated from
federal funds" should also be excluded.
REPRESENTATIVE JAMES acknowledged that it should be, and thus it
is the wrong "conjunctive." She pointed out, however, that it
is still necessary to say, "available for appropriation or
appropriated", and stop there, and then say, "income from the
permanent fund, or the budget reserve, or federal funds should
not be considered."
CHAIR ROKEBERG suggested that putting a colon "there" would
work, although "it's not real good language." He asked Ms.
Davidson whether he and Representative James were on the right
track with regard to the meaning of subsection (b).
MS. DAVIDSON said that they were. She suggested that it might
help to say, "For the purposes of applying this subsection,
amounts available for appropriation or amounts appropriated may
not consider federal funds, income from the permanent fund, or
the budget reserve fund".
CHAIR ROKEBERG remarked that if [SJR 24] goes out to the general
public, and the general public cannot understand it, they are
not going to vote for it.
Number 1620
REPRESENTATIVE BERKOWITZ asked: Shouldn't the "or" on line 15
be an "and"?
CHAIR ROKEBERG said: "I would think so, also.... That's what
I'm worried about: it's either so poorly drafted or I don't
understand what they're getting at here."
REPRESENTATIVE JAMES opined that that sentence [on lines 13-15]
needs to be rewritten. She also opined that it might be
difficult to get "it" into one sentence.
MS. DAVIDSON continued with her suggested change. It would say,
"amounts available for appropriation or amounts appropriated may
not consider federal funds, income of the permanent fund, or
this budget reserve fund."
REPRESENTATIVE JAMES offered that "does not consider" would be
better than "may not consider".
CHAIR ROKEBERG surmised that because [the language] is in the
negative, that is why "or" is used rather than "and".
REPRESENTATIVE BERKOWITZ remarked that from a legal perspective,
"or" usually means: any one of these and all of them.
CHAIR ROKEBERG surmised, then, that using "or" would be alright.
Number 1696
CHAIR ROKEBERG made a motion to adopt Conceptual Amendment 1,
which would, on line 14, add the word "amounts" between "or" and
"appropriated"; add the words "should not consider" after the
word "appropriated"; striking "from"; and then going on to read
"federal funds, income of the permanent, or this budget reserve
fund." There being no objection, Conceptual Amendment 1 was
adopted.
Number 1786
REPRESENTATIVE MEYER moved to report CSSJR 24(RLS), as amended,
out of committee with individual recommendations and the
accompanying fiscal notes.
Number 1790
REPRESENTATIVE BERKOWITZ objected.
REPRESENTATIVE JAMES requested confirmation that repealing the
"sweep provision" [of the Alaska State Constitution], as
proposed by Section 2, would also "do away with the debt."
MS. DAVIDSON confirmed that it would.
REPRESENTATIVE BERKOWITZ, speaking to his objection, commented:
The premise that the sponsor repeats over and over
again is that the CBR has somehow led to leveraging of
the budget, and I brought with me our budget requests
that we negotiated with the majority last year. It
came to a grand total of $9,571,000. Now, I don't
know whether the majority helped leverage it up the
other $140 million - it may well be - but our
contribution and use of the CBR is clearly overstated,
and to use that as a premise for advancing this
constitutional amendment seems a little flawed. I
also have a little difficulty reconciling the
sponsor's other proposed amendment with this. In that
other constitutional amendment, he requires a
supermajority to get to increased funds, on the theory
that if you require a supermajority, it makes it
harder to spend more. And here, he seems to suggest
that if we have a simple majority, you can access
funds and that will decrease the budget, and it seems
that those are somewhat discordant notions of how the
budget works.
CHAIR ROKEBERG remarked that in drawing on his own experience,
with few exceptions, he does not find Representative Berkowitz's
analysis of the situation to be accurate.
REPRESENTATIVE BERKOWITZ asked Chair Rokeberg whether he had
information to the contrary regarding how much [the House
minority] negotiated, which he recalled to be roughly $10
million.
Number 1924
REPRESENTATIVE JAMES said that according to her evaluation of
SJR 24 it is very likely that there would never be a time when
they could access the CBR with a majority vote unless "we're
going to do a real ramp-down of spending."
CHAIR ROKEBERG argued that [SJR 24] is "supposed to encourage it
more often," since just a majority vote would be required.
REPRESENTATIVE JAMES pointed out, however, that accessing the
CBR could only be done "if the money that you have is less than
last year's budget, and that's all the further you can go with
it," otherwise a [three-fourths] vote would be required.
REPRESENTATIVE BERKOWITZ remarked that from the minority's
perspective, or at lease from his perspective, "this" is
somewhat of a mute argument because the CBR is going to be gone
in two years anyway. He reiterated that he is having a
difficult time reconciling SJR 24 with the sponsor's other
amendment. He continued:
I also have concerns with the language here: there's
loose terms - we don't know what "unrestricted general
fund" is. It's unclear how the mechanism works. And,
in the [Alaska State] Constitution, I thought we were
striving for clarity and simplicity, and this
amendment doesn't move us in that direction.
CHAIR ROKEBERG remarked that in terms of clarity, Amendment 1
has certainly helped a little bit. He acknowledged that in the
last couple of years, with regard to the [three-fourths] vote,
there has been less difficulty in working towards common goals.
He noted, however, that he does not share Representative
Berkowitz's thoughts regarding the elimination of the CBR in two
years.
REPRESENTATIVE BERKOWITZ asked for an explanation of why, on the
one hand, a [simple] majority vote on the CBR would help
diminish spending while, on the other hand, a supermajority
[vote] on a spending cap is also supposed to diminish spending.
REPRESENTATIVE JAMES, returning to the motion regarding SJR 24,
opined that the language in the resolution is complicated, and
therefore she is sure that the public will vote "no" because it
is not easily understood. She offered that the only way to fix
the CBR is to repeal it and start over, making the language
specifically clear with regard to what is intended. "The
language in the original CBR was so strange and so misunderstood
[because] of the way it was drafted - as I understand it, on a
napkin in the middle of the night - that that's what we got, and
this sounds like they're trying to fix something that's already
so flawed it can't be fixed," she added.
Number 2108
A roll call vote was taken. Representatives James, Coghill,
Meyer, and Rokeberg voted to report CSSJR 24(RLS), as amended,
out of committee. Representatives Berkowitz and Kookesh voted
against it. Therefore, HCS CSSJR 24(JUD) was reported out of
the House Judiciary Standing Committee by a vote of 4-2.
HB 385 - UNFAIR TRADE PRACTICES ATTY FEES/COSTS
Number 2124
CHAIR ROKEBERG announced that the last order of business would
be HOUSE BILL NO. 385, "An Act relating to the attorney fees and
costs awarded in certain court actions relating to unfair trade
practices; and amending Rules 54, 79, and 82, Alaska Rules of
Civil Procedure."
Number 2162
REPRESENTATIVE BERKOWITZ moved to adopt the proposed committee
substitute (CS) for HB 385, version 22-LS1224\C, Bannister,
3/21/02, as a work draft. There being no objection, Version C
was before the committee.
Number 2213
REPRESENTATIVE ERIC CROFT, Alaska State Legislature, sponsor,
said that HB 385 does two things. Section 1 attempts to provide
a shield for consumers who are pursuing their own claims by
precluding them from having to pay attorney fees to a prevailing
defendant unless the suit is found to be frivolous. He remarked
that the fundamental problem with consumer protection [cases] is
the lack of available legal counsel who are willing to pursue
what are essentially small claims. He elaborated:
When you buy a $100 toaster and it does not work, and
the major corporation that sold it to you does not
give you any satisfaction under the warranty, you're
in a difficult situation trying to get a lawyer to
pursue that kind of claim. They will say, "First of
all, it will cost you ... $5,000 to pursue this all
the way through." And the worst part about it is, the
major corporation knows that, and they can tell you
... essentially what they want because very few people
are going to have the ability to spend $5,000 to get
their $100 toaster fixed.
REPRESENTATIVE CROFT said that currently, even if someone is
able to pursue such a case, if it gets thrown out on some sort
of technicality, that person could be assessed either all or a
large portion of the major corporation's attorney fees. He
explained that in developing HB 385, he used a model from the
Civil Rights Act, which, because of a lack of attorneys willing
to pursue such cases, enabled private individuals to pursue
their claims without being assessed attorney fees if they lost.
REPRESENTATIVE CROFT explained that Section 2 of HB 385 would
give the attorney general the power to collect fees and put them
in a special fund that would be used for "consumer protection
defense actions." He mentioned that although Sections 1 and 2
are severable, he opined that together, Sections 1 and 2 provide
a little more help for individual plaintiffs and a slightly more
certain funding stream for the Office of the Attorney General so
that it can pursue [consumer protection] claims.
CHAIR ROKEBERG noted that language similar to that of Section 1
was heard and rejected in a prior legislature.
REPRESENTATIVE CROFT remarked that the decisions of one
legislature are not binding on future legislatures.
Number 2360
REPRESENTATIVE JAMES mentioned that she learned early on that
for less serious issues, the best advice she could give people
is for them to stay out of court to begin with if at all
possible. People who go to court expecting to be compensated
for their losses are bound to be disappointed because of the
additional emotional costs; going to court is a dart game. She
said that it is her belief that if people are willing to go to
court over an issue, they should be willing to pay the price if
they lose.
REPRESENTATIVE CROFT agreed that Representative James's advice
is good advice, but noted that this is unfortunate, since the
justice system is intended to fix "some of these problems." The
reality, however, is that there is very little cost-effective
remedy for small indignities, he noted. When an entity has sold
a shoddy piece of goods of a relatively low value, "are we
really going to say that Alaskans have no recourse to fix that?"
he asked. He said the corporations that do so, although they
are probably few in number, know that the disadvantages of going
to court are so big that very few individual consumers are going
to do it; therefore, those corporations are willing to sell 100
defective toasters, for example, since 99 of the buyers aren't
going to seek recourse. He remarked that although the justice
system works well for resolving large injustices, he is
searching for a cost-effective, relatively quick way for
ordinary consumers to get risk-free relief for small injustices.
REPRESENTATIVE JAMES pointed out, however, that there is an
inherent risk to living, that not everything can be fixed, and
that time is money.
TAPE 02-35, SIDE B
Number 2489
REPRESENTATIVE JAMES said whether "it's your own time or someone
else's time," the amount of money it's costing to pay attorney
fees and court fees is only a small part of the cost of going to
court." If it's a big issue, she said, it should be pursued,
but if it's a small issue, "you just need to swallow and go on
with life."
REPRESENTATIVE BERKOWITZ, referring to the "100 toasters"
example, pointed out that it is usually not the single consumer
who would bring the action against the seller; it would be
someone who knew that there were a 100 folks who'd been ripped
off by a bad toaster. Therefore, any problem that could
possibly be corrected by the language in Section 1 of HB 385
only exists if one aggregates all of those small indignities.
REPRESENTATIVE COGHILL asked how many suits have been deemed
frivolous.
REPRESENTATIVE CROFT said he does not have any statistics
regarding the number of frivolous suits. And although there are
sanctions for frivolous actions, he surmised that the very
burdens that Representative James spoke of tend to keep many
[frivolous suits] from being filed.
CHAIR ROKEBERG mentioned that prior legislation, which later
became law, contained a definition of frivolous. He suggested
that there has never been "a finding of [Civil Rule 11 of the
Alaska Rules of Civil Procedure]"
REPRESENTATIVE BERKOWITZ argued to the contrary that if the
committee's staff researched that issue, "she would come up with
a long list of Rule 11 cases."
REPRESENTATIVE CROFT, to summarize, said that Section 1 and
Section 2 reflect two different approaches. Section 1 empowers
individual consumers to pursue their own cases, whereas Section
2 helps the government pursue consumer protection cases. Via
Section 2, when the government wins consumer protection cases,
it would be allowed to keep the fees and use them to further
consumer protection activities. He opined that there is a
problem that needs solving, and to that end, he observed, the
committee can either keep both Sections 1 and 2, so that they
can work in tandem, or keep one of the sections and delete the
other, depending on which philosophy the committees prefers -
individual empowerment or governmental [intervention]. He also
opined that Alaskans are increasingly becoming targets of
consumer fraud, and the legislature should do something about
it.
REPRESENTATIVE BERKOWITZ asked Representative Croft whether he
would characterize [Section 1] as form of privatization.
REPRESENTATIVE CROFT indicated that he would. He mentioned that
four years ago, he'd introduced legislation to provide the
Office of the Attorney General with more funds with which to
pursue consumer protection issues, but other legislators,
notwithstanding concerns regarding consumer fraud, were
reluctant to support [the increased funding].
Number 2213
REPRESENTATIVE BERKOWITZ surmised, then, that legislators who
generally support privatization as a concept should feel
comfortable with Section 1.
REPRESENTATIVE CROFT said: "You would think so."
CHAIR ROKEBERG asked for confirmation that currently, plaintiffs
in "these private rights of actions [get] the costs, by court
rule, and full reasonable [attorney] fees."
[An unidentified speaker indicated that was correct.]
CHAIR ROKEBERG continued, pointing out that currently,
defendants are subject to [Civil Rule 82 of the Alaska Rules of
Civil Procedure]; therefore, there is already an inequity in
favor of plaintiffs, since they get full attorney fees.
REPRESENTATIVE CROFT countered that although that is a correct
analysis, plaintiffs currently face an unbalanced field in terms
of the difference in power between an individual with a faulty
toaster and a major corporation. He acknowledged that [Section
1] would be providing an individual who sought redress for a
small injustice another tool that the defendant would not have.
CHAIR ROKEBERG remarked that [current statute] already gives
plaintiffs full right of recovery, which, he opined, is a pretty
major concession.
REPRESENTATIVE CROFT, after restating his opening remarks that
there is a problem that needs to be fixed and what the aspects
of that problem are, opined that although current statute
provides some protection for consumers, it does not go far
enough.
Number 2053
LES S. GARA, Attorney, testified via teleconference, and said:
Five years ago we enacted the first round of
amendments to the "consumer protection" Act, and ...
they tried to make a fix to what was a pretty broken
consumer protection system. ... We took a look over
the last five years to see how well what we did five
years ago was working. We held a consumer law
conference in November; it was attended by about 100-
125 people. [Representative] Dyson was there;
[Representative] Croft was there. And what we got out
of that conference was that we still had two major
problems. Two major problems that keep the consumer
protection system from working, and that's what these
two provision aim to solve. ...
This bill ... is timely; at a time when we're asking
the members and citizens of the state to contribute to
possibly help fund government, I think we have to find
ways to save people money at the same time, and that's
what this does. The bill also saves people money and
enhances the consumer protection system without
impacting the budget, and I think that's also
important. We've really tried to work to come up with
a better system that doesn't impact the budget. The
provisions of [HB 385] are well tried and tested.
The provision ... that currently allows plaintiffs
full [attorney] fees if they win their consumer fraud
case, ... that ... is called privatizing the attorney
general's function. What it does is, it says we know
that ... the government isn't going to be able to
stand up and help people when they've been victimized
by consumer fraud, so let's try and make it so that
they can represent and help themselves. And so five
years ago we enacted a bill that said plaintiffs in
consumer fraud cases, if they prove they've been
defrauded, can recover full [attorney] fees; that's
the only way they're going to find private attorneys
to help them.
Number 1937
MR. GARA:
But there's still an impediment. And the impediment
is that when somebody walks into an attorney's office
and they say, "Look, I've been defrauded by a used car
dealer to the tune of $800," the attorney's advise has
to be to that person, "You know, we can pursue the
claim, it's a really good claim, but let me tell you
this: If we lose the case, you might owe $10,000;
$20,000; $30,000; $40,000; $50,000 in [attorney] fees
to the other side and there are many ways you can lose
the case." That other person just walks out of the
office and says, "Well that's an indignity I'm just
going to have to keep to myself." And that's what
happens in these consumer cases: they're small, and
people are scared out of going to court to vindicate
themselves and to stand up against an injustice.
They're ... scared out by the [attorney] fee provision
in Rule 82.
So what we've done in this Section 1 of [HB 385] is
... followed 100 years of practice from the federal
civil rights arena. It's in the title (indisc.)
that's been there since 1964; it's been in the Civil
Rights Act ... since the 1800s. And it says this:
"If you win your case, if you prove that you've been
wronged, you do get full [attorney] fees, so you can
go out and find an attorney; we're not going to scare
you out of court by saying if you lose, you have to
pay [attorney] fees, except ... if your case is
frivolous, you will be penalized - you'll have to pay
full [attorney] fees to the other side." That's the
system that works under the civil rights statutes, the
system that works under a number of sort of states'
and federal remedial statutes in areas just like this,
and so this is a system that's worked for a long time.
Number 1880
MR. GARA continued:
It's a system that I think we need to enact here: A,
in order to stop scaring people out of standing up for
their rights; B, because we're never going to give the
attorney general's office enough funding so that the
attorney general's office will represent consumers in
all the cases that are brought over to their office -
they just can't do it and we don't have the money to
do that. So, if we're going to have a private system
that works, this is how we're going to have to do it.
We tried enacting half of the bill five years ago,
which was to just give full [attorney] fees to
plaintiffs if they won their cases. But the part that
... practitioners in the area say is still scaring
people out of standing up for themselves is the part
that says that, as an attorney, you have to tell your
client, "If you take this case and lose, even if it's
a good-faith case, you might owe $10,000; $20,000;
$30,000; $40,000 in [attorney] fee penalties." ...
The system is just not working very well with that
threat in place, so I think it's a fair compromise to
do what the federal and state laws in many areas do,
which is only impose [attorney] fees against a
plaintiff, in these kinds of cases, if they file a
frivolous lawsuit, and in that case they should be
penalized.
The second part, Section 2, does this -- we're in a
time where we don't have a lot of money for things. I
don't think anybody would say that preventing consumer
fraud is a bad thing; I don't think anybody would say
that having a consumer protection section at the
[Office of the Attorney General] is a bad thing.
Those are good things that Republicans think are good
things, Democrats think are good things, everybody
thinks are good things. But how are we going to fund
a state consumer protection agency? Well, it's hard
in these times and we should do what many laws do in
other areas, which is when the state pursues a
consumer fraud claim and proves consumer fraud, they
should be able to recover their full enforcement
costs. And that's what Section 2 does. It makes the
state whole for their time.
Number 1797
MR. GARA:
... Where's the money come from? The money ends up
coming from people who commit consumer fraud. ...
What better group of people are there out there to
fund a state consumer protection section? So that's
what Section 2 says: that the state - if it prevails,
if it proves consumer fraud - is entitled to be fully
compensated for its time and for its efforts. And
then what'll happen is that money will go into a
special account, and at the end of the year you'll be
able to see how much money has been raised. You don't
have to appropriate it back to the [Office of the
Attorney General], but we do this in some of the
environmental cases [and] we do this in other areas of
law: you create this special account just so you can
... see how well the system is working, and you can
appropriate the money anywhere you want. But that's
what that new Section 3 does.
Places where this Section 2 system is in place - the
federal environmental laws that have been amended,
even under what's been called the Republican
revolution in Congress - they still allow the
government to recover full [attorney] fees in those
cases. In the Clayton Act - that's the federal sort
of an antitrust law - that's what we do: we let the
government recover full [attorney] fees when they
prove their cases. ... It should be no different
here, and the extra motivation we have here is that we
don't have a lot of money in the state any more. And
so if we're going to fund government, we should have
government funded in a way that's meaningful and is
smart, and I think it's meaningful and smart to have
those people who commit consumer fraud pay for this
part of our governmental function.
... Representative James made a good point; ... as an
attorney, I told my clients ..., "You know, filing a
lawsuit in this state is like Russian roulette - it's
a crapshoot." But one of the things that makes it a
crapshoot is this Rule 82 ... that says if you lose
your case you have to pay the other side's [attorney]
fees. And so we can stop it from being a crapshoot.
And when I say Russian roulette, we have an even worse
provision on the books right now than that ...; even
today, if you win your lawsuit, you might have to pay
[attorney] fees to the other side ... [because of
[Civil Rule 68 of the Alaska Rules of Civil
Procedure]. ...
MR. GARA concluded:
The thing is, it is a crapshoot, there is Russian
roulette, and we're trying to stop it from being a
crapshoot and we're trying to sort of minimize this
Russian roulette concept in the law that keeps people
from standing up for their rights. If we don't do
anything about it, we're going to make sure the people
who make $20,000; $30,000; $40,000 a year [get] to
absorb the cost of shoddy business practices. That's
not right. I don't think we should ask people to keep
bearing those costs, especially people who live on the
economic margins; ... those are ... really the people
that this bill helps. ... As we've watched ...
[current law] work, we've seen that there's still some
somewhat major shortcomings, and through experience
and through what we've learned in the last five years,
we've determined that these are the two provisions
that would really make ... this system work without
costing the state any money. ...
Number 1570
STEVE CONN, Executive Director, Alaska Public Interest Research
Group (AkPIRG), testified via teleconference, and remarked that
in his experience, change does not occur in consumer-justice
laws unless it is [done in a] bipartisan [manner]. He mentioned
that there are two barriers for the consumer, and that the
second one, as experienced by middle-class consumers, is
addressed by HB 385. The first barrier, he noted, is that most
consumers - 99 percent - are too embarrassed by being cheated to
speak out, particularly if they are elderly, because relatives
and friends might take it as a sign that they are entering some
state of dementia.
MR. CONN, returning to the second barrier, said that neither the
rich nor the poor need to worry about penalties for filing
frivolous lawsuits, because the poor are "judgment-proof" and
the rich "have got deep enough pockets." He said that the
people who need HB 385 "are people like you and people like me,"
adding that he defined the middle-class as those who have
something to lose but can't afford to lose it. He opined that
HB 385 is needed in order to secure some justice for the middle-
class, should they have "the guts enough" to go to court. He
remarked that the toaster example is an insult to the consumers
that he has met: "people really do suffer major hurts that hit
them where they live, that stop them from feeding their family,
[or] from getting to work; this is serious business if they're
going to spend the time to go to court or even be not
embarrassed enough to talk about their complaint."
MR. CONN said that HB 385 speaks to something that is rooted in
bipartisanism; that this legislature has got a great bipartisan
movement going on several fronts, in several areas of consumer
justice; that he is very positive about this [issue]; and that
HB 385 emerged from the consumer roundtable discussions
[organized] by Representatives Dyson and Croft. With regard to
setting aside the money won from judgments for ongoing consumer
protection as is proposed by Section 2 of HB 385, Mr. Conn
commented that "in olden days," the state "paid consumer justice
as they went." With regard to Section 1 of HB 385, he commented
that if people are willing to take the time and trouble to go to
court to say that they've been cheated, they mean business, they
have something to lose, and they deserve the shield that HB 385
could provide. He noted that such people are also acting on
behalf of the many people who won't invest the time and money or
who are too embarrassed to speak up.
Number 1312
REPRESENTATIVE JAMES, after relaying that her understanding of
HB 385 does not comport with Mr. Conn's explanation, asked him
whether he is claiming that plaintiffs who win are not awarded
attorney fees, or whether he is saying that the problem revolves
around the fact that when plaintiffs lose "they have to pay."
MR. CONN said:
If they had a sensational case and it's handled by
themselves or by a good lawyer, they're going to win.
But we're talking about cases that are harder to
prove. They're small-money damages to start off with
- so most attorneys aren't interested in them - and
they're probably going to be somewhat back on the
statutory/civil penalties provided in the Act. And
... they give it their best shot, but they lose
because, as you said earlier, you don't know if you
are going to win or lose. But they're not doing it to
play games with the opposition or to play games with
the courts; they're doing it because they're outraged
- they're righteously outraged.
REPRESENTATIVE JAMES responded:
I have known cases of people who have been aggrieved
... and they've gone to court and they've won and
they're still stressed out because the experience was
so horrible. And so I think that if we were to do
this, what you're doing is encouraging more attorneys
to convince them to go to court. And I'm not
convinced that that's the thing they ought to do,
because of all the other kinds of experiences that
they can have and the net results when they're done:
they're still not whole when it's over.
MR. CONN said a sense of outrage is satisfied in a lot of ways.
Sometimes money will never compensate, whether one is the victim
of a physical crime or a financial crime; however, he noted,
what he has experienced is that for a lot of people, the
satisfaction of making a crook stand in the light of day has a
cathartic effect. He also remarked that people are often
emboldened by the fact that others have gone forward with cases
involving crimes against consumers. He opined that many
consumer fraud perpetrators are not amateurs, they are real
criminals that commit fraud for a living.
REPRESENTATIVE JAMES said that her concern is that it is not the
plaintiff who receives the real benefit of winning such cases,
it is the attorney.
Number 1088
MR. CONN remarked that there are areas of the law that
attorneys "won't touch with a ten-foot pole," such as workers'
compensation cases, in which people just have to do for
themselves. He mentioned that consumer protection is not an
area of the law that lends itself to "ambulance chasers," and
that oftentimes consumers just need a little assistance from
lawyers who are honestly trying to help and are not just trying
to get rich, in order to put their cases forward.
REPRESENTATIVE JAMES remarked that with [HB 385], unlike
legislation pertaining to workers' compensation, "the other
issues are too broad ... and I'm just not willing to go there."
CHAIR ROKEBERG asked Mr. Conn whether he is aware of any
instances occurring in the last five years that would justify
"this remedial [legislation]."
MR. CONN said yes, adding that he has people call him all the
time who are angry and in despair and who have tried without
success to get help from attorneys regarding contractors, house
repairers, and roofing specialists, for example.
CHAIR ROKEBERG mentioned that the limit [for] small claims court
has been raised to $10,000; thus, he surmised, Mr. Conn must be
referring to cases in excess of that amount.
MR. CONN indicated that he was not.
CHAIR ROKEBERG asked, then, why folks didn't just go through
small claims court to get satisfaction, since that was the
proper venue.
MR. CONN argued that the problem lies with the fact that "the
other side can still bring their attorney into small claims
court" and, through that attorney, can "remove that case out of
that court." He noted that if small claims court were limited
only to people representing themselves, "we might have a
different story," but such is not the state of the law.
CHAIR ROKEBERG mentioned that he would like to hear some
specific cases for which current law is not working.
Number 0867
MARIE DARLIN, AARP, mentioned that the AARP was very involved in
trying to get responsibility for consumer protection placed back
into the [Office of the Attorney General], and was very glad to
see support for doing so because the AARP had received a lot of
complaints from members and other folks asking what they could
do in situations of consumer fraud, and so it was nice to be
able to finally say, "Call the attorney general's office; there
is somebody there who will at least speak to you and give you
some advice and perhaps help you out." In conjunction with
that, she said, the AARP has written a letter of support for HB
385, with the idea that it will take [consumer protection] one
step further.
REPRESENTATIVE JAMES stated that she certainly supports the
consumer protection agency to a greater extent than [the
legislature] has currently done, because that is where the
responsibility belongs, since that is where the expertise is; it
would be able to settle such cases more quickly and with less
trauma for the [plaintiffs].
MS. DARLIN commented: "But again we come back to the fact that
the rich and the poor maybe don't have to worry as much as some
of the middle-income-class people and particularly some of those
who may not go into small claims court."
CHAIR ROKEBERG asked Ms. Darlin whether she knew of anybody that
wanted to file a lawsuit but didn't because he/she was afraid of
losing attorney fees.
MS. DARLIN said no, she is not aware of any specific instances
at this time, but suggested perhaps that is because "there has
been another place for them to go" to receive help.
REPRESENTATIVE BERKOWITZ suggested that perhaps that question
should also be asked of Mr. Conn and Mr. Gara.
CHAIR ROKEBERG indicated that he would be doing so after others
had a chance to testify.
Number 0666
PAM LaBOLLE, President, Alaska State Chamber of Commerce ("the
Chamber"), remarked that the vast majority of businesses in
Alaska are small businesses, and, thus, the vast majority of the
Chamber's members are small business owners. She opined that
the premise upon which HB 385 is based is that all business is
big and thus can afford to absorb the costs of "this sort of
thing." She remarked that things have already been changed
greatly by "allowing Rule 82 to not apply ... if you are ...
found guilty: you're going to pay all the attorney fees." With
HB 385, not only will [defendants] have to pay if they are
guilty, but they will also have to pay all of their own costs
even if they are innocent. "This is just taking it way too
far," she opined.
MS. LaBOLLE remarked that small business is what enables the
Alaskan business world to operate, and that these are businesses
which might only have 5-10 employees. She said that it might be
the corner grocer who's hauled into court because somebody
thinks the vegetable scale is rigged. It's not big business,
it's not some giant company like the Proctor & Gamble Company or
the General Electric Company; it's the small companies in Alaska
that are going to be affected by HB 385. However, regardless of
whether it is small business or big business, business people
deserve equal protection under the law; they should not be
treated so differently, as is proposed by HB 385.
CHAIR ROKEBERG asked Ms. LaBolle how many small business would
go out of business if they were "slapped with a $20,000 or
$30,000 legal bill."
MS. LaBOLLE surmised that such costs would cause a great many
small business to consider going out of business, even if they
were found innocent.
REPRESENTATIVE BERKOWITZ asked Ms. LaBolle how she feels about
section 2 of HB 385.
MS. LaBOLLE said that her organization does not like Section 2
either.
REPRESENTATIVE BERKOWITZ noted that Section 2 merely provides
that if the state wins, the state gets full attorney fees.
MS. LaBOLLE asked how that differs from current practice.
CHAIR ROKEBERG posited that currently, the state, too, is
subject to Rule 82, which provides that prevailing parties are
awarded attorney fees according to a scale.
Number 0337
CLYDE (ED) SNIFFIN, JR.; Assistant Attorney General; Fair
Business Practices Section; Civil Division (Anchorage);
Department of Law (DOL), testified via teleconference,
confirming that currently, the state is subject to the
limitations of Rule 82, which provides that attorney fees can
only be recovered according to a specific scale. He noted that
this scale calls for a substantial reduction in the amount of
attorney fees that the state can collect.
REPRESENTATIVE JAMES pointed out that a big part of Section 2 is
the establishment of the separate fund.
CHAIR ROKEBERG opined that there were other problems as well.
MS. LaBOLLE indicated that even having to pay only 20-30 percent
of a large legal bill would still be a huge financial burden for
most small businesses. In conclusion, she said that she would
like business people to receive equal protection under the law.
CHAIR ROKEBERG mentioned that according to his reading of HB
385, the separate fund has the potential to grow to "$680
million based on the tobacco settlement."
MR. SNIFFIN pointed out that only the attorney fees portion
could have gone into the separate fund proposed by Section 2,
not the entire settlement.
TAPE 02-36, SIDE A
Number 0001
CHAIR ROKEBERG mentioned he recalled a special payment for those
costs that amounted to about $15 million.
MR. SNIFFIN commented that the DOL supports the concept embodied
in Section 1 of providing more incentive to consumers who
wouldn't otherwise bring some of these types of small lawsuits
against businesses. In response to testimony from the Alaska
State Chamber of Commerce representative, he pointed out that
the provision of Section 1 could benefit small businesses as
well in that if larger companies were victimizing them, they,
too, might be more inclined to pursue litigation. Small
businesses are oftentimes the subject of predatory action by
other companies; small businesses get scammed just like other
people, he added.
MR. SNIFFIN said that the DOL primarily supports Section 2 in
that there is no provision, currently, that would allow the
attorney general to recover its full fees. He remarked that in
a lot of the bigger, multistate cases in which the DOL becomes
involved, [Section 2] could be an important settlement tool for
the state. Currently, because the state cannot make a claim for
full attorney fees, Alaska is not in as favorable a position as
other states when settling with large, national companies; as a
result, Alaska is sometimes forced to negotiate a lesser amount
than other states. He also noted that adopting a provision such
as Section 2 would bring Alaska in line with a lot of other
federal and state laws across the country that allow for the
full recovery of attorney fees in prevailing situations.
MR. SNIFFIN, in response to questions posed of other testifiers,
said that the DOL has not kept any statistics regarding
consumers who decide not to go forward with a lawsuit because of
the fear of having to pay the opposition's attorney fees. He
said that a lot of consumers come to his office seeking help
because they can't afford a lawyer, and he opined that Section 1
would give such people an opportunity to pursue the action on
their own.
CHAIR ROKEBERG asked whether Section 2 would apply to attorney
fees from class action lawsuits that the state engages in.
MR. SNIFFIN said it would give the state more authority when
negotiating in such suits.
REPRESENTATIVE BERKOWITZ, referring to page 1, line 13, asked
Mr. Sniffin for his opinion regarding changing "shall" to "may".
MR. SNIFFIN said that such a change would be fine with the DOL.
Number 0480
CHAIR ROKEBERG asked Mr. Gara and Mr. Conn to provide the
committee with examples of cases in which people wanted to file
a lawsuit but didn't because they were afraid of losing attorney
fees.
MR. GARA said that he could provide two examples in which people
decided not to pursue very valid consumer claims: one case
involved an elderly woman, and the other case involved someone
who was defrauded by an insurance company. He said he would be
happy to send the committee written testimony regarding those
examples.
MR. CONN, also in response to testimony made by the Alaska State
Chamber of Commerce representative, said that it is not just
middleclass retired people and elderly people who contact AkPIRG
for help; he also hears from small entrepreneurs all the time
because they are getting abused by bigger businesses like banks,
insurance companies, or suppliers. Thus, contrary to the
Chamber's testimony, small businesses would also be able to
benefit from HB 385, he remarked.
CHAIR ROKEBERG asked Mr. Conn whether he is suggesting that
commercial operators should take advantage of [HB 385] in
commercial transactions.
MR. CONN said he was not suggesting that. He said that he is
talking about consumer fraud perpetrated against small
businesses, which are also consumers. For example, the owner of
a delivery service who gets cheated by a big car dealer could
have his/her business destroyed. He noted that the idea "of
putting small businesses on one side [and] setting them up
against consumers is completely nonsensical."
CHAIR ROKEBERG remarked that he has not heard from any small
business owners who were clamoring for relief.
REPRESENTATIVE BERKOWITZ pointed out that Mr. Conn just
mentioned examples of such.
MR. CONN confirmed that, noting that unlike the Better Business
Bureau, AkPIRG does not "process cases"; rather, he simply tries
to provide additional information, resources, and encouragement
to people, including small business owners, who call AkPIRG for
help.
CHAIR ROKEBERG announced that HB 385 would be held over.
ADJOURNMENT
Number 0693
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:05 p.m.
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