Legislature(1995 - 1996)

02/14/1996 01:07 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE JUDICIARY STANDING COMMITTEE                              
                       February 14, 1996                                       
                           1:07 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Brian Porter, Chairman                                         
 Representative Joe Green, Vice Chairman                                       
 Representative Con Bunde                                                      
 Representative Bettye Davis                                                   
 Representative Al Vezey                                                       
 Representative Cynthia Toohey                                                 
 Representative David Finkelstein                                              
 MEMBERS ABSENT                                                                
 COMMITTEE CALENDAR                                                            
 HOUSE BILL NO. 109                                                            
 TITLE: "An Act relating to telephone directory listings and                   
      - CSHB 109(JUD) PASS OUT OF COMMITTEE                                    
 PREVIOUS ACTION                                                               
 BILL:  HB 109                                                               
 SPONSOR(S): REPRESENTATIVE(S) BROWN,Navarre,B.Davis                           
 JRN-DATE     JRN-PG             ACTION                                        
 01/23/95       115    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/23/95       116    (H)   LABOR & COMMERCE, JUDICIARY                       
 01/26/95       148    (H)   COSPONSOR(S): B.DAVIS                             
 04/28/95              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/28/95              (H)   MINUTE(L&C)                                       
 05/01/95              (H)   L&C AT  3:00 PM CAPITOL 17                        
 05/01/95              (H)   MINUTE(L&C)                                       
 05/04/95      1849    (H)   L&C RPT  CS(L&C) 5DP 2NR                          
 05/04/95      1849    (H)   DP: KOTT, ROKEBERG, KUBINA, PORTER                
 05/04/95      1849    (H)   DP: ELTON                                         
 05/04/95      1849    (H)   NR: MASEK, SANDERS                                
 05/04/95      1849    (H)   ZERO FISCAL NOTE (DCED)                           
 02/12/96              (H)   JUD AT  1:00 PM CAPITOL 120                       
 02/14/96              (H)   JUD AT  1:00 PM CAPITOL 120                       
 WITNESS REGISTER                                                              
 DAVEED SCHWARTZ, Assistant Attorney General                                   
 Commercial Section                                                            
 Department of Law                                                             
 1031 W 4th Avenue, Suite 200                                                  
 Anchorage, Alaska  99501-1994                                                 
 Telephone Number:  (907) 269-3697                                             
 POSITION STATEMENT:  Provided information regarding HB 109                    
 ACTION NARRATIVE                                                              
 TAPE 96-20, SIDE A                                                            
 Number 000                                                                    
 CHAIRMAN BRIAN PORTER called the House Judiciary committee meeting            
 to order at 1:07 p.m.  Members present at the call to order were              
 Representatives Green, Bunde, Toohey, Vezey and Finkelstein.                  
 Representative Davis arrived at 1:09 p.m.                                     
 CHAIRMAN PORTER informed those present that this was a continued              
 hearing on HB 109 and invited Representative Brown to the table.              
 He also noted that Daveed Schwartz from the Department of Law,                
 would provide information from Anchorage by speaker phone.                    
 Number 140                                                                    
 DAVEED SCHWARTZ, Assistant Attorney General, Consumer Protection              
 Enforcement, testified that part of his responsibilities as                   
 Assistant Attorney General includes enforcing Alaska's telephonic             
 solicitations statute at AS 45.63.00, which was enacted in 1993.              
 Since this time, the department has had quite a lot of experience             
 regulating telemarketers.  They've found that the vast majority of            
 these telemarketers are from outside the state.  Alaska is more a             
 victim state, rather than one which houses telemarketer operations,           
 in contrast to state's such as Georgia, Nevada, Florida and                   
 MR. SCHWARTZ stated that Alaska has never had their regulations               
 challenged by out of state telemarketers, either in the area of               
 jurisdiction which is provided for under a long arm jurisdiction              
 statute at AS 09.05.015, or on federal pre-emption grounds.  He               
 felt as though HB 109 would attempt to regulate many of the same              
 telemarketers which the state already regulates under AS 45.63.00,            
 by imposing a "do not call" provision under the Consumer Protection           
 Law.  Mr. Schwartz also outlined that there were federal laws which           
 deal with "do not call," provisions, one of which is entitled the             
 Telephone Consumer Protection Act of 1991.  This is enforced by the           
 Federal Communications Commission.  He noted a more recent act                
 entitled, The Telemarketing and Consumer Fraud and Abuse Prevention           
 Act, which was enacted in 1994.  The provisions of this act are               
 enforced by the Federal Trade Commission, which just promulgated              
 regulations that went into effect December 31, 1995.  Mr. Schwartz            
 noted that the "do not call" provisions in each of these laws are             
 very similar.                                                                 
 MR. SCHWARTZ referred to questions raised in the previous meeting             
 of the House Judiciary Committee, as to whether or not federal law            
 would preempt the state of Alaska's regulating their interstate               
 calls.  He felt as though this was grey area at best.  In                     
 Congress's most recent pronouncement outlined in The Telemarketing            
 and Consumer Fraud and Abuse Prevention Act, Congress regulates               
 through the federal Trade Commission, interstate calls.  They do              
 have a "do not call" provision in this act.  Additionally, part of            
 this federal statute says that, "Nothing contained therein, shall             
 prohibit an authorized state official from proceeding in state                
 court on the basis of an alleged violation of any civil or criminal           
 statute of such state."  This is Congress's pronouncement                     
 concerning possible peremption in relation to regulating interstate           
 calls.  Under this particular statute it would be a fair                      
 interpretation to say that states can also enact (indisc.), which             
 would have an effect of regulating interstate as well as, out-of-             
 state calls.                                                                  
 Number 430                                                                    
 MR. SCHWARTZ said he was unable to find any cases which indicated             
 that there was some type of federal pre-emption of a state's                  
 efforts to prohibit telemarketers from calling those individuals              
 who do not wish to receive calls.  Florida, among other states, has           
 a statute which does much of what CSHB 109 seeks to do.  This                 
 Florida law has been on the books since 1991 and was actually                 
 enacted prior to the Federal Telephone Consumer Protection Act.               
 There has never been a challenge to the Florida law on either                 
 jurisdictional or federal pre-emption grounds.  Although, there's             
 no iron-clad guarantee that Alaska can insulate themselves from a             
 federal pre-emption attack, he thought that it was fair to say that           
 this is a grey area in terms of federal pre-emption and an argument           
 could certainly be paid that Alaska can, like other states, under             
 their telephonic registration acts, regulate interstate calls for             
 this purpose.  In terms of asserting jurisdiction, as long as the             
 telemarketer consummates a sale of goods over the phone, there                
 shouldn't be any problem asserting jurisdiction allowed under AS              
 Number 593                                                                    
 REPRESENTATIVE AL VEZEY asked Mr. Schwartz to explain Alaska's                
 long-arm intervention statute.  How does this work and what success           
 has Alaska had in trying to impose these laws on these non-resident           
 MR. SCHWARTZ answered that the state has had quite a lot of success           
 in imposing their telephonic solicitation registration requirements           
 on out-of-state telemarketers.  He used an illustration of a San              
 Diego, California telemarketer who attempted to continue their                
 efforts without registering with the Alaska Department of Law,                
 which is required under AS 45.63.00.  He went to court against this           
 company and obtained a permanent injunction against them in March             
 of last year.  They have now challenged a portion of this                     
 injunction in the Alaskan Supreme Court, but in raising the many              
 other arguments in relation to this suit, they have not raised a              
 challenge to Alaska's jurisdiction over them.  AS 09.05.015 which             
 relates to personal jurisdiction allows the state to serve an out-            
 of-state defendant and then bring them into court to answer and               
 defend against law suits the state might bring.  This company was             
 served in San Diego through the rules of civil procedure.  It's a             
 recognized principle in civil procedure across the nation that if             
 a state can serve an out-of-state defendant and if this state's               
 statute permits this assertion of jurisdiction over an out-of-state           
 defendant to the maximum extent allowed under the due process                 
 clause of the 14th amendment of the U.S. Constitution, which the              
 Alaska statute does, then jurisdiction is appropriate under these             
 Number 825                                                                    
 CHAIRMAN PORTER asked where a hearing is required to take place               
 when the telemarketer is from out-of-state.                                   
 MR. SCHWARTZ pointed out that as long as Alaska can establish                 
 service on the out-of-state telemarketer, the hearing would take              
 place in Alaska, by filing a complaint in state Superior Court.               
 This is done routinely.                                                       
 CHAIRMAN PORTER asked how does Alaska then enforce this judgment              
 after they are able to prevail.                                               
 MR. SCHWARTZ said that they obtain an injunction from the court               
 under the Consumer Protection Act.  This injunction usually                   
 prohibits a telemarketer from engaging in telephonic solicitations            
 to Alaska without first registering with the Department of Law.  If           
 the telemarketer continues to violate this law, as well as the                
 court's injunction, instead of subjecting itself to a civil penalty           
 of up to $5,000 per violation, they can subject themselves to a               
 civil penalty of up to $25,000 per violation of a court injunction.           
 The court would impose a civil penalty in the form of a judgment              
 and then the state would be in the position to execute on this                
 judgment if the telemarketer did not pay the civil penalty.  Alaska           
 is able to do this even if a defendant is located out-of-state.               
 Number 1111                                                                   
 REPRESENTATIVE VEZEY asked if this San Diego Case was the only case           
 that he had taken to court.                                                   
 MR. SCHWARTZ pointed out that the telemarketing law has been on the           
 books since 1993.  This San Diego case was the first and only case            
 which the state has had to bring because on every other occasion              
 other telemarketers have relented.  Mr. Schwartz has sent over 100            
 cease and desist, warning letters to telemarketers, all of whom               
 were located out-of-state and he's obtained more than $430,000 in             
 refunds for consumers in Alaska in the last 12 months or so from              
 these telemarketers.  The state has filed many assurances of                  
 voluntary compliance documents with the court, in which the                   
 telemarketers agree to do all sorts of things to help consumers as            
 a result of their violations of the law.  This San Diego case is on           
 appeal at the Alaska Supreme Court, but not related to the issues             
 of federal pre-emption or personal jurisdiction under Alaska's long           
 arm statute.                                                                  
 Number 1035                                                                   
 REPRESENTATIVE TOOHEY asked Mr. Schwartz how the state obtained the           
 names of these telemarketing companies.                                       
 MR. SCHWARTZ noted that after the state Attorney General's lost               
 most of their funding for consumer protection complaint                       
 investigations, they negotiated a complaint referral and                      
 information sharing agreement with the Better Business Bureau of              
 Alaska in 1991.  This agreement is still in effect.  The state has            
 a long standing working relationship with the Better Business                 
 Bureau which handles most of the individual complaints from                   
 consumers in Alaska, they then refer patterns of complaints to the            
 attorney general's office for enforcement, where the Better                   
 Business Bureau is unable to mediate complaints.  The department              
 immediately acts to send a cease and desist warning letter whenever           
 they receive a referral from the bureau.                                      
 Number 1035                                                                   
 REPRESENTATIVE VEZEY wondered how they are able to get an address             
 of where these telemarketers are located.                                     
 MR. SCHWARTZ said that typically what happens is the people who               
 complain to the Better Business Bureau are those who have actually            
 made a purchase or have at least received some literature from the            
 Number 1268                                                                   
 REPRESENTATIVE KAY BROWN responded to some concerns from the                  
 previous committee meeting regarding HB 109.  She noted the two               
 pieces of correspondence distributed at this same meeting from ATU            
 Communications and the Alaska Telephone Association.  She offered             
 amendment number 1, (F3) which would rectify the areas of concerns            
 outlined by these two firms.  These amendments would apply to the             
 version (F) of HB 109.  The language changes outlined in amendment            
 1 would read as follows:                                                      
 Page 1, line 12: Delete "uses" and insert, "originates a telephone            
 call using";                                                                  
 Page 2, line 2, after ".":, insert, "A residential customer who               
 requests to be so identified shall pay for the cost of the                    
 Page 3, line 57, after".":, insert, "The local exchange                       
 telecommunications company may impose a reasonable cost for the               
 Page 2, line 15 after "(1)", insert, ""charitable organization" has           
 the meaning given in AS 45.68.900."                                           
 REPRESENTATIVE BROWN outlined that the first portion of this                  
 amendment dealt with rectifying a situation where a company might             
 want to insert an advertizement on a recording that a caller could            
 hear.  This legislation's intent is not to regulate businesses from           
 using their own phones for advertisements, hence the change as                
 REPRESENTATIVE BROWN spoke to the remainder of the changes outlined           
 in this amendment number 1, and stated the language used was                  
 implicit and certainly has addressed conversations of record all              
 along.  Representative Brown said she did not have a problem                  
 clarifying these issues further.  In regards to defining a                    
 charitable organization, she stated for the record that under AS              
 45.68.900 a charitable organization is a "non-profit organization             
 that is (a) operated for the relief of poverty, distress or other             
 condition of public concern in the state, or (b) the Internal                 
 Revenue Service determines to be a tax-exempt organization under 26           
 USC 501.C3 Internal Revenue Code."  She stated that this bill                 
 builds in a prior relationship exception both for the commercial              
 operations and for the charities.  She felt it made sense to pick             
 up these other non-profits as well, as accomplished by the                    
 reference to this definition of a charitable organization in                  
 Number 1525                                                                   
 REPRESENTATIVE CON BUNDE made a motion to move amendment number 1,            
 (F3) as described by the sponsor.  Hearing no objection it was so             
 REPRESENTATIVE BROWN pointed out that amendment number 2 was put              
 forward as a consideration of policy matters.  Mr. Schwartz pointed           
 out that some of these telemarketers might continue to abuse                  
 persons over a long period of time.  Representative Brown looked              
 for a reasonable side-board on this exception.  She pointed out               
 that what these two proposals outlined in amendment number 2 would            
 accomplish, would add to both the charitable organization exception           
 and the to the prior commercial relationship exception the                    
 requirement that this prior relationship needs to be made current             
 in the last 24 months.  This language would serve as a further                
 limitation.  This amendment number 2 would read as follows:                   
 Page 2, line 27, after "who," insert, "within the last 24 months,"            
 and on Page 3, line 3 delete "previously," and insert, ",within the           
 last 24 months."                                                              
 REPRESENTATIVE GREEN made a motion to adopt version (F) for CSHB              
 109 as the working draft of the bill before the committee.  Hearing           
 no objection it was so moved.  Representative Bunde moved again               
 amendment number 1.  Hearing no objection it was so moved.                    
 Number 1645                                                                   
 REPRESENTATIVE BUNDE made a motion that amendment number 2 be                 
 moved.  Hearing no objection, it was so adopted.                              
 Number 1656                                                                   
 REPRESENTATIVE BROWN stated that amendment number 3 was a letter of           
 intent at the request of the Alaska Telephone Association.  They              
 would like the record to reflect that the legislature doesn't                 
 intend that any violation of this law would put any liability on              
 them.  She pointed out that it doesn't make sense to put this                 
 language in the statute because it's a non-issue in her opinion.              
 She used the following illustration to make her point in the                  
 context of this intent, say for example, under a criminal statute             
 they wouldn't add, "if anybody uses the phone for the commission of           
 a crime the phone company's not at fault.  Even if someone wanted             
 to bring suit against the phone company, the amount of money they             
 would have paid would be so small for this exclusion service.                 
 Number 1721                                                                   
 REPRESENTATIVE FINKELSTEIN moved that CSHB 109 (F) be passed from             
 the Judiciary Committee with individual recommendations and fiscal            
 notes as attached with amendments.  Hearing no objection, it was so           
 Number 1752                                                                   
 REPRESENTATIVE DAVIS made a motion to move the letter of intent as            
 outlined.  Hearing no objection, the letter of intent was adopted.            
 CHAIRMAN PORTER adjourned the meeting at 1:35 p.m.                            

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