Legislature(1995 - 1996)
02/01/1995 01:05 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE February 1, 1995 1:05 p.m. MEMBERS PRESENT Representative Brian Porter, Chairman Representative Con Bunde Representative Bettye Davis Representative Al Vezey Representative Cynthia Toohey Representative David Finkelstein MEMBERS ABSENT Representative Joe Green, Vice Chairman COMMITTEE CALENDAR * HB 19:"An Act relating to the definition of `fault' as that term is used for the purposes of determining the liabilities of parties in civil actions, setting limitations on civil liability, and authorizing the award, in conformance with applicable court rule, of attorney fees in civil actions." HEARD AND HELD * HB 103:"An Act relating to the sale of correctional industries products and services." HEARD AND HELD (* First public hearing) WITNESS REGISTER REPRESENTATIVE GENE THERRIAULT Alaska State Legislature State Capitol, Room 421 Juneau, AK 99801-1182 Telephone: (907) 465-4797 POSITION STATEMENT: Sponsor of HB 19 SHELDON WINTERS, Attorney One Sealaska Plaza, Suite 303 Juneau, AK 99801 Telephone: (907) 586-5912 POSITION STATEMENT: Provided information regarding HB 19 SUSAN COX, Assistant Attorney General Civil Division, Special Litigation Section Department of Law P.O. Box 110300 Juneau, AK 99811-0300 Telephone: (907) 465-3603 POSITION STATEMENT: Provided information regarding HB 19 ROD MOURANT, Legislative Aide to Representative Pete Kott Alaska State Legislature State Capitol, Room 432 Juneau, AK 99811-1182 Telephone: (907) 465-3777 POSITION STATEMENT: Testified in favor of HB 103 WALLY ROMAN, Correctional Industries Program Manager Department of Corrections P.O. Box 112000 Juneau, AK 99811-2000 Telephone: (907) 465-3309 POSITION STATEMENT: Testified in favor of HB 103 HERB SIMON Little Nelchina Farm, Mile 135 Glenn Highway, HC03 P.O. Box 8591 Palmer, AK 99645 Telephone: (907) 822-3059 POSITION STATEMENT: Testified against HB 103 PREVIOUS ACTION BILL: HB 19 SHORT TITLE: DEFINITION OF "FAULT" FOR CIVIL LIABILITY SPONSOR(S): REPRESENTATIVE(S) THERRIAULT JRN-DATE JRN-PG ACTION 01/06/95 25 (H) PREFILE RELEASED 01/16/95 25 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 25 (H) JUD, FIN 01/30/95 (H) JUD AT 01:00 PM CAPITOL 120 02/01/95 (H) JUD AT 01:00 PM CAPITOL 120 BILL: HB 103 SHORT TITLE: COMPETITION W/ PVT SECTOR:CORRECTION IND. SPONSOR(S): REPRESENTATIVE(S) KOTT,Bunde JRN-DATE JRN-PG ACTION 01/20/95 101 (H) READ THE FIRST TIME - REFERRAL(S) 01/20/95 101 (H) JUD, FIN 01/30/95 (H) JUD AT 01:00 PM CAPITOL 120 02/01/95 (H) JUD AT 01:00 PM CAPITOL 120 ACTION NARRATIVE TAPE 95-6, SIDE A Number 000 The House Judiciary Standing Committee was called to order at 1:05 p.m. on Wednesday, February 1, 1995. A quorum was present. CHAIRMAN BRIAN PORTER noted all members were present, with the exception of Representative Green, who was on his way to Washington, D.C. He stated the following bills would be heard: HB 19, and HB 103, via teleconference. He called Representative Gene Therriault to come forward and introduce HB 19. HJUD-02/01/95 HB 19 - DEFINITION OF "FAULT" FOR CIVIL LIABILITIES REPRESENTATIVE GENE THERRIAULT, Sponsor, described HB 19 as intending to clarify a gray area of state liability law, which allows defendants to argue that they are not liable for offenses they have committed intentionally. Defendants have argued that because the law refers only to acts that are negligent or reckless, and not specifically to acts that are intentional, it does not allow for a portion of a fault to go to those who have committed offenses intentionally. In cases where more than one person contributed to the injuries, or could be sued, the law is unclear as to whether or not a person who committed an offense intentionally can be held responsible for any portion of the fault. In the cases that have been heard so far, the judges have found the argument to be without merit. Tightening the law would eliminate the need for these costly court proceedings. REPRESENTATIVE THERRIAULT said he introduced this bill after a scenario that arose out of a mail bombing case. He understood that in the civil action, the mail bombers were trying to make the case that because they intentionally meant to injure somebody by sending the bomb, they would not be covered by this definition, and therefore no portion of the fault could be attached to their actions. The courts have turned that argument down so far, but clarifying that language would close the potential loophole that somebody may be able to take advantage of in the future. This would also avoid some abuse of court time. Number 075 REPRESENTATIVE AL VEZEY supported the philosophy of this change, but also expressed concerns as to how it may increase insurance premiums. Insurance policies cover accidental acts, but if they were to cover intentional offenses, rates would rise. Number 120 REPRESENTATIVE THERRIAULT noted that up to now, the courts have turned down that argument. The intentional acts are excluded by the current definition of fault. We are basically clarifying and codifying what the courts have said up to this point. REPRESENTATIVE CON BUNDE thought that broadening the definition of "fault" may affect other areas of tort reform. Number 150 REPRESENTATIVE THERRIAULT believed most insurance policies exclude acts committed intentionally. Number 160 CHAIRMAN PORTER called both Susan Cox and Sheldon Winters forward to testify and answer questions. Number 185 SHELDON WINTERS, Attorney representing State Farm Insurance Company, stated their main concerns were about how the language change may affect the liability aspects in our tort system. This statute does not address when you may be liable, but when you may apportion liability. The general rule is that the intentional tortfeasor is always liable for all the damages. You completely ignore apportionment. An intentional tortfeasor cannot recover, in a lawsuit, for his own damages. There is not a realistic chance of the courts varying from their theme. He felt what Representative Therriault was proposing would create the ability of an intentional tortfeasor to avoid some of his responsibility, when he should be responsible for the whole portion. Number 260 SUSAN COX, Assistant Attorney General, spoke about the problem she encounters when defending the state. A victim may choose not to sue her rapist, because the accused has no money; and instead sues only the property owner. We have a problem of whether the property owner is going to be stuck holding the liability for the entire event, when there is the conduct, arguably intentional, of another party who is not named in the lawsuit. This problem occurs in a number of scenarios. It is not a situation where the truly culpable party is sued at all. It arises in a situation where the defendants who are sued, were allegedly negligent, want to bring the most culpable party to the lawsuit, and that is the intentional tortfeasor, or the arguably intentional tortfeasor. MS. COX continued, saying the tort reform legislation we have in Alaska has attempted to deal with fault, so every defendant bears only their portion of the fault; and so we have had several liabilities since March of 1989, when the most recent enactment became effective. The problem is that juries are told to apportion fault among all people who are parties to the litigation, who were in any way negligent, grossly negligent, or even wilfully and wantonly conducted themselves. When you have multiple defendants, the jury apportions fault among all of them to the extent of the liability. Then those defendants pay only the portion of their personal fault. They are not paying for the fault of someone else who is a defendant who may have no money. That is a policy decision that has been made in this state. The plaintiff may walk away not recovering from those who have no resources to pay a judgment against them. We have decided to abandon the system of joint and several liability where one defendant is responsible for the whole group, and seeks contribution from other defendants if they have any resources to chip in to the final outcome. We have a situation where plaintiffs have chosen not to go after the intentional or arguably intentional tortfeasor because that person has no money. They, instead, go only after one or more possibly negligent parties, and those defendants want to bring a third party into the arguably intentional act. MS. COX continued, saying it has arisen in the mail bombing case Representative Therriault mentioned, where in all but one of the decisions, the courts have said if they are going to apportion fault and make it fair, so that no defendant is paying more than their fair share of fault, we have to allow the defendants who are allegedly negligent to bring in the allegedly intentional actor. It has been in the context where those negligent tortfeasors wanted the intentional tortfeasor in the case, because they were being left out. One case where it has not happened, raises something of an anomaly. We have a ruling from one judge that involves sexual abuse by uncles of a victim. The state has been sued from failing to prevent the abuse to these young victims, and the uncles who committed the sexual abuse were not originally parties. The state sought to bring them in as parties, because they perpetrated the act that is the subject of the lawsuit. The judge says that arguably, they did not act intentionally to cause the resultant harm. They acted intentionally in doing the act, but did not necessarily intend the harm, so it was going to be a question for the jury. If the jury decides that the uncles committed the abuse, but did not intend to hurt the girls, then they were unintentional acts, in the allocation of fault. However, if they intended the harm, then they were intentional actors; and because that is not included in the definition of `fault' in AS 09.17.900, that fault will not be considered or apportioned by the jury. It seems something of an anomaly. MS. COX said there is a problem in making things fair to the defendants who are brought into the litigation by the plaintiff. The proposal here before you in HB 19 would do what at least several courts have implied should be done in terms of fault among all parties. Tortfeasors should not be allowed to be absolved altogether from allocation of fault when under AS 09.17.080. Number 400 CHAIRMAN PORTER noted they intended to file a bill to address and solve that problem soon. There was a big hole in passing the elimination of joint and several liability, because we stated that any party to the suit would be involved. Immediately, those involved on one side of these kinds of issues took that to the court and argued that, by definition, it is only the parties to the suit; those named, as opposed to those unnamed, but still shared in the responsibility. The tort reform bill that will hopefully be going through this legislature should correct that problem. Number 425 MS. COX did not object to the provision in this bill. It would be helpful to the attorneys defending the state because the fact is, the state has the deep pocket and is the one being sued, and there are circumstances in which the culpable party is not there. It does raise an awkward situation when someone is trying to decide how to apportion fault between someone who has acted intentionally in doing something, which is often criminal conduct, and there is no question about it, versus the state for failing to prevent the criminal from doing whatever it was they did. It would be a hard thing for a jury to do. The bottom line is, if they are not there at all, the existing defendants in the case would bear 100 percent of it. This is better than what we have now. She mentioned another better way to go at this is where we included something else in the existing tort reform law that spells out exactly what happens when you have an intentional tortfeasor and specifies that other people, allegedly negligently involved, do not have any responsibility; and if you determine that someone has acted intentionally and caused any of these damages, you go no further in allocating any fault. There are other possibilities, but certainly, as far as this bill is concerned and what it does, Ms. Cox did not have any problem with it. Number 460 REPRESENTATIVE VEZEY asked where the issue of double jeopardy comes in, if it does. Number 470 MS. COX said it does not come in if they are sued civilly. That is not precluded by double jeopardy. There is nothing to prevent someone from suing a criminal who has victimized them. They can definitely sue an intentional tortfeasor. The situation we are confronting is a case where they choose not to because that person has no money, so they have nothing to gain by suing the intentional actor, and instead try to go after the resources of someone else who arguably failed to prevent the intentional actor from doing what they did. Number 495 REPRESENTATIVE VEZEY asked if bringing the party in who has no money, would actually decrease the state or other deep pocketed defendant's liability. Would there be a hole in the award? Number 502 MS. COX said yes. If the person is a party, under the tort reform system, when we have gone from joint and several liability to several liability, it means that each party pays only their share. A jury goes through a verdict form and says, "How much is the plaintiff responsible for whatever happened, if at all?," and for each defendant, "What percentage of the harm was caused by them to the plaintiff?" The plaintiff will not recover for whatever amount is awarded as to the defendant. Number 525 REPRESENTATIVE DAVID FINKELSTEIN was afraid of including "intentional" in this. There is a chance it may be interpreted as removing it from the category it is in now, which is taking complete fault, in some cases. Number 530 MR. WINTERS felt the issue Ms. Cox had discussed can be addressed by the bill that will be filed shortly. That is, saying if you want to apportion fault, you can, even of non-parties. Number 540 CHAIRMAN PORTER noted the courts have impled that "intentional" is in this statute. Number 545 MR. WINTERS knew of no case where they have apportioned intentional conduct with negligent conduct for an allocation of fault. It has basically held that if your act was intentional, you are liable for the whole ball of wax. Number 550 MS. COX clarified that. In Benner v. Whitman, the Supreme Court said in order to allocate fault among parties, they all really have to be parties in the case. Defendants who are not satisfied that everyone who could be responsible is in the case, have brought in any of the defendants who should be part of the litigation in order to get that allocation done. When we have tried to bring in third parties to part of the case, we have had plaintiffs object, saying you cannot do that because they are criminals and they have committed intentional acts, and they cannot be in this lawsuit. The courts have, in a number of situations, let them be in this lawsuit, even recognizing that the word intentional is not in the definition of "fault" in this statute. Number 575 REPRESENTATIVE FINKELSTEIN felt it was unclear that we would be putting "intentional" into a new category, where it would be apportioned out, versus its current category, where it is not apportioned out. If we are doing that, do we know why we are doing it? Are we intending to change this case law conclusion that intentional acts have no sharing, that they are completely liable, and if we are changing that, why? Number 590 MS. COX noted that if you look at AS 09.17.080, it does refer to allocation of fault among the parties, so when you look at fault, it does mean if we include intentional in the definition of fault, those parties that are in there, whether intentional or otherwise, are going to be included in the allocations, so there will be an allocation. The people who are arguing that this party acted intentionally, will argue that, if so, they should bear 100 percent of the liability, and then all the rest of the defendants in there would get a zero for their allocation of fault if the jury is convinced of that. If the jury is not convinced that they acted intentionally, but only negligently, or somewhere else on the scale, they will be in for whatever percentage the jury gives them. One thing that could be done would be to express in some kind of legislative intent, that is not the committee's intention to change the law with respect to the extent of the liability of the intentional actors. This is to make clear that you are not trying to change the common law with respect to intentional fault, only to include allegedly intentionally acting parties in the litigation. Another way to achieve this would be not to change the definition of fault, but to create another section in the tort reform statute that enables the defendant in this situation to bring allegedly intentional tortfeasors into litigation and let the consequences flow from that. Number 625 CHAIRMAN PORTER summed up that this bill would not do anything more than make sure that someone is not excluded from consideration because of an intentional act. It would not affect case law as relates to a case where there are negligent and intentional actors, in a single act; that the intentional actor is going to be apportioned 100 percent of the take. Number 633 MR. WINTERS felt it would, because in layman's terms, the jury shall apportion all fault, and in this amendment, we are redefining "fault" as "negligence, recklessness, and intentional conduct." So the jury is going to be instructed that you shall apportion negligent tortfeasor fault with intentional tortfeasor fault. Number 640 CHAIRMAN PORTER found it hard to believe legislation would supersede case law. He asked Susan Cox to work on a committee substitute or a letter of intent with Anne Carpeneti. The bill would be held until Monday, and then heard again. HJUD - 02/01/95 HB 103 - COMPETITION W/PVT SECTOR: CORRECTION IND. Number 685 ROD MOURANT, Aide to Representative Kott, sponsor of HB 103, stated Representative Kott is a strong endorser of the correctional industries program. Current statute allows correctional industries to enter into a competitive environment with previously existing private industry operations. This legislation attempts not to force the correctional industry to back out of those circumstances, but merely to charge their prices competitively in those circumstance; thereby not defeating the purpose of the correctional industries program, but rather protecting a circumstance where a government subsidized operation at a correctional industry is competitive with the private sector. Its investments are therefore protected. Specifically, there are letters from different meat packing industries, both of whom are affected by the current circumstances described. In a slaughterhouse/meatpacking operation, which is actually under state control, there is no requirement to charge competitive overhead and wage expenses. They are able to price their product at a considerably less than market value price. That adversely affects these companies in the private sector. In those circumstances where competition exists with the private sector, this bill calls for the correctional industries' workers to be paid a competitive wage for the service. Those wages would be paid over to the Commissioner of Corrections; for paying both to the inmate and for deposit into the state general fund. A negative fiscal note accompanies the bill, indicating if they had to charge higher prices for their services, they would lose business. Number 750 REPRESENTATIVE CYNTHIA TOOHEY asked if the Palmer facility was the only registered slaughterhouse in Alaska. Number 760 MR. MOURANT thought there were two slaughterhouses, but there is no competition in the slaughterhouse industry. Therefore the slaughterhouse operation is not affected by this legislation at all. The two slaughterhouses are in two different environments. One is a federally inspected slaughterhouse and the other is a state licensed and inspected facility; two different categories, and there is no competition within the state in that regard. Number 764 REPRESENTATIVE TOOHEY was confused by the letters from Mikes' Quality Meats and Indian Valley Meats, complaining about the competitiveness of the Palmer slaughterhouse. Are we not talking about apples and oranges? MR. MOURANT said there is no competition in regards to slaughter operations. The competition is within the cutting, packaging and marketing of products. The slaughterhouse provides both functions. Number 781 REPRESENTATIVE BUNDE asked if the meat was currently on the market at below market prices. Number 785 MR. MOURANT thought that the wholesale purchase price for the finished product was considerably lower than the fair market rate. Number 795 REPRESENTATIVE FINKELSTEIN asked why the existing system was not working and what the negative impact was. Number 800 MR. MOURANT understood that it falls through the cracks in the existing statutes because it is not privately owned, and that is, in fact, what the current legislation speaks to, in regard to the commission not entering into competition with a privately owned facility. The facility we are dealing with is one that used to have a loan through the Agricultural Revolving Loan Fund. That loan was foreclosed on in 1986. The state now owns that Mt. McKinley operation. Number 825 REPRESENTATIVE FINKELSTEIN understood the statute to mean that within the system, they are supposed to look at the impact of these activities on private industry; that private industry being other folks who might want to do it. If the correction industries is involved with it, they have to make the determination that it will not adversely impact other companies out there who are offering the same services. He thought there was a system in place to handle these types of conflicts - a commission to make these determinations. He was confused as to why that did not work. TAPE 95-6, SIDE B Number 000 WALLY ROMAN, Corrections Industries Program (CIP) Manager, Department of Corrections, gave a little background about CIP to bring the committee up to date. The purpose of the CIP is to reduce idleness and to employ prisoners in realistic work experiences. Recently, they have developed two cooperative ventures with the private sector. The part of the statute being talked about is the part that allows them to do that. During hearings four years ago, the legislature clearly defined more requirements on establishing new markets and new industries to minimize the impact on the private sector. Since 1992, CIP has striven to communicate all of its activities to the public sector through advanced advertising, citizens advisory groups, chamber of commerce presentations, and more hearings to receive public comment. The program has been very conservative in ensuring that all proposed ventures are scheduled for discussion before the CIP implements any operations. In addition, the program has promoted cooperative ventures with the private sector that would control the possibility of competition. Of the total $2,000,000 in gross sales, approximately 20 percent have been sales to nonprofit organizations, private individuals, and wholesale to the private sector businesses. MR. ROMAN said the department does have several concerns with the provision of HB 103. It is anticipated that the proposed provisions may be difficult to define and implement, and in addition, there are existing statutes that already provide for the defined process we are talking about, and can be addressed under the Correctional Industries Commission. We believe they should evaluate and regulate the potential competition of the private sector. He said their primary concerns were that the statute establishing free venture businesses has been utilized to implement several different models of correctional industries operations in conjunction with the private sector. This section of the bill was put in there in 1986 to allow them to take advantage of a program called the Prison Industry Enhancement Act, which was under the United States Department of Justice. It was specifically put in there to design a level playing field with the private sector. They have had operations under that program and are in the process of implementing a couple more. They are concerned that adjusting the provisions of 43.32.017 may affect future implementations of cooperative ventures with the private sector. MR. ROMAN explained the difficulty that would result from trying to pay comparable wages to workers, since their workers are completely untrained inmates. If actual costs reflected training hours, the prevailing rate would be so much higher, they would place themselves out of the market. Another aspect that keeps them noncompetitive with the other slaughterhouses is that they are only allowed to cut and wrap one animal per customer per year. They are unlimited in the number of animals they can slaughter for wholesale distribution purposes. Number 330 REPRESENTATIVE BUNDE asked if the Department of Corrections' meat prices in the stores are comparable to meat purchased from private meat packing operations. MR. ROMAN explained that their meats would not be found in stores, because they cannot keep up with the demand for volume. They sell to private restaurants. REPRESENTATIVE TOOHEY stated she was opposed to the state competing at all with the private sector, if the playing field is not totally level at all perceptions. Number 415 REPRESENTATIVE VEZEY commented that we have a large societal problem in incarcerating people. He supported anything they could do to make this cost of incarceration less of a burden to society. He did not know of anything constructive that could be done that does not, conceivably, compete with private sector. He felt there needs to be a balance between the need to have an affordable system of incarceration and maintaining a healthy private sector. He felt the commission that is in place would be a much better forum to address the fairness of this type of competition than a statute or legislative committee. If there is a problem, maybe the makeup of the commission should be looked at, rather than trying to codify what competition is. Number 450 HERB SIMON, resident of Nelchina, explained his frustrations with the complications involved in conveying his public opinion to the committee members in time for the meeting. He then explained in full detail, the slaughter process and how that relates to their pricing formula. He felt the Mt. McKinley facility to be unique in its services due to the equipment used, quality of inspections, and capacity for processing. Also, it is the only facility that slaughters animals grown exclusively in Alaska. He said it would be hard for the Department of Corrections' operations to compete with private sector wages. He also thought the industry should be deregulated. Number 660 CHAIRMAN PORTER felt that if the committee were to consider this bill, it would be more to the point to recognize that there is already a system in place to deal with these issues. He asked the bill sponsor to meet with the Department of Corrections to see if the constituent concerns could be addressed through another avenue. REPRESENTATIVE DAVIS agreed with Chairman Porter. She felt that maybe the two private industries who expressed concern, do not fully understand what Mt. McKinley does, exactly. They need to be educated and included in the discussion. She felt there was a difference between what is going on at the private meat packing plants and the Mt. McKinley slaughterhouse. Number 711 CHAIRMAN PORTER noted the statute provides a mechanism to deal with the problem they are expressing, which is unfair competition. The competition comes in the sale, not what goes into the costs; and so the sale price mechanism is there. REPRESENTATIVE BUNDE observed that the competition question could be answered by having comparable prices placed on the finished product. Number 730 REPRESENTATIVE DAVIS asked about the pricing on products going to the wholesalers. Number 735 MR. ROMAN explained that their prices are based on an agricultural index and the restaurant index. MR. SIMON mentioned that Alaska is known as a dumping ground for the lower 48, for products they do not want; so the fresher products coming from Mt. McKinley are higher in quality. Number 750 REPRESENTATIVE BUNDE felt maybe Mt. McKinley's prices were too low for what the product is. Number 825 CHAIRMAN PORTER asked what happens if there are no competitors when starting a new business, and one pops up two years later. Are you then required to adjust, based on what that business does? Number 840 MR. ROMAN said that has happened, and what they did is stayed in the business and tried to meet the prevailing market rate created within the business. The free venture statute allows for somebody to come in and run a business inside the prison with their managers completely. It also allows them to sell to a private company at wholesale, according to their specifications. That is what they are doing with Aurora Caskets right now. It allows them to come in and purchase a block of hours from the inmate work force. It also allows them to do some business with the public. For all of those, they have to go out and receive special certifications, and if it is interstate commerce, they have to meet certain federal guidelines before they can do business. CHAIRMAN PORTER announced the bill would be held. ADJOURNMENT The House Judiciary Committee adjourned at 2:45 p.m.