Legislature(2001 - 2002)
04/05/2002 01:11 PM House JUD
| Audio | Topic |
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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
April 5, 2002
1:11 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Scott Ogan, Vice Chair (via teleconference)
Representative Jeannette James
Representative John Coghill
Representative Kevin Meyer
MEMBERS ABSENT
Representative Ethan Berkowitz
Representative Albert Kookesh
COMMITTEE CALENDAR
HOUSE BILL NO. 376
"An Act relating to management of fish and game in and on the
navigable waters and submerged lands of Alaska."
- MOVED CSHB 376(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 393
"An Act relating to unfair and deceptive trade practices and to
the sale of business opportunities; amending Rules 4 and 73,
Alaska Rules of Civil Procedure; and providing for an effective
date."
- MOVED CSHB 393(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."
- MOVED CSHB 385(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 499
"An Act relating to the sale, lease, exchange, or other
disposition of business property and assets."
- HEARD AND HELD
HOUSE BILL NO. 472
"An Act relating to persons who buy and sell secondhand articles
and to certain persons who lend money on secondhand articles."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 376
SHORT TITLE:FISH & GAME IN NAVIGABLE WATERS
SPONSOR(S): REPRESENTATIVE(S)OGAN
Jrn-Date Jrn-Page Action
02/01/02 2121 (H) READ THE FIRST TIME -
REFERRALS
02/01/02 2121 (H) RES, JUD
03/01/02 (H) RES AT 1:00 PM CAPITOL 124
03/01/02 (H) Heard & Held
03/01/02 (H) MINUTE(RES)
03/04/02 (H) RES AT 1:00 PM CAPITOL 124
03/04/02 (H) Failed To Move Out Of
Committee
03/04/02 (H) MINUTE(RES)
03/15/02 (H) RES AT 1:00 PM CAPITOL 124
03/15/02 (H) Moved Out of Committee
03/15/02 (H) MINUTE(RES)
03/18/02 2575 (H) RES RPT 4DP 2NR
03/18/02 2575 (H) DP: CHENAULT, GREEN, FATE,
MASEK;
03/18/02 2575 (H) NR: STEVENS, SCALZI
03/18/02 2575 (H) FN1: INDETERMINATE(DFG)
03/18/02 2592 (H) FIN REFERRAL ADDED AFTER JUD
03/25/02 (H) JUD AT 1:00 PM CAPITOL 120
03/25/02 (H) Scheduled But Not Heard
04/05/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 393
SHORT TITLE:SALES OF BUSINESS OPPORTUNITIES
SPONSOR(S): REPRESENTATIVE(S)STEVENS
Jrn-Date Jrn-Page Action
02/08/02 2182 (H) READ THE FIRST TIME -
REFERRALS
02/08/02 2182 (H) L&C, JUD
02/25/02 (H) L&C AT 3:15 PM CAPITOL 17
02/25/02 (H) Heard & Held
02/25/02 (H) MINUTE(L&C)
02/27/02 (H) L&C AT 3:15 PM CAPITOL 17
02/27/02 (H) Moved Out of Committee
02/27/02 (H) MINUTE(L&C)
03/01/02 2435 (H) L&C RPT 2DP 5NR
03/01/02 2435 (H) DP: CRAWFORD, HAYES; NR:
ROKEBERG,
03/01/02 2435 (H) MEYER, KOTT, HALCRO,
MURKOWSKI
03/01/02 2435 (H) FN1: INDETERMINATE(LAW)
03/01/02 2445 (H) FIN REFERRAL ADDED AFTER JUD
03/18/02 (H) JUD AT 1:00 PM CAPITOL 120
03/18/02 (H) Heard & Held
MINUTE(JUD)
04/05/02 (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
03/22/02 (H) Heard & Held
MINUTE(JUD)
04/05/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 499
SHORT TITLE:DISPOSITION OF BUSINESS ASSETS
SPONSOR(S): JUDICIARY
Jrn-Date Jrn-Page Action
02/27/02 2407 (H) READ THE FIRST TIME -
REFERRALS
02/27/02 2407 (H) JUD
03/15/02 (H) JUD AT 1:00 PM CAPITOL 120
03/15/02 (H) Heard & Held
03/15/02 (H) MINUTE(JUD)
04/05/02 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
BILL CHURCH, Staff
to Representative Scott Ogan
Alaska State Legislature
Capitol Building, Room 108
Juneau, Alaska 99801
POSITION STATEMENT: Presented HB 376 on behalf of the sponsor,
Representative Ogan.
HEATHER M. NOBREGA, Staff
to Representative Norman Rokeberg
House Judiciary Standing Committee
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
POSITION STATEMENT: Provided information about the proposed
committee substitute for HB 393 and responded to questions;
provided information about the proposed committee substitute for
HB 385 and responded to questions.
CYNTHIA DRINKWATER, 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: During discussion of HB 393 responded to
questions.
STEVE CONN, Executive Director
Alaska Public Interest Research Group (AkPIRG)
PO Box 101093
Anchorage, Alaska 99510
POSITION STATEMENT: During discussion of HB 393 spoke briefly
about disseminating information to the public.
JAMES M. POWELL, Attorney
Hughes Thorsness Powell Huddleston & Bauman, LLC
550 West 7th Avenue, Suite 1100
Anchorage, Alaska 99501-3563
POSITION STATEMENT: Testified in opposition to HB 499, provided
information regarding Savage Arms Inc. v. Western Auto Supply
Co., and responded to questions.
THEODORE M. PEASE, JR., Attorney
Burr, Pease & Kurtz, PC
810 North Street
Anchorage, Alaska 99501
POSITION STATEMENT: During discussion of HB 499, responded to
comments made by Mr. Powell and to questions posed by the
committee.
TERRY BANNISTER, Attorney
Legislative Legal Counsel
Legislative Legal and Research Services
Legislative Affairs Agency
Terry Miller Building, Room 329
Juneau, Alaska 99801
POSITION STATEMENT: Spoke as the drafter of HB 499 and
responded to questions.
RAY R. BROWN, Attorney; Member
Alaska Academy of Trial Lawyers (AATL)
510 L Street, Suite 603
Anchorage, Alaska 99501
POSITION STATEMENT: Testified in opposition to HB 499.
ACTION NARRATIVE
TAPE 02-42, SIDE A
Number 0001
CHAIR NORMAN ROKEBERG called the House Judiciary Standing
Committee meeting to order at 1:11 p.m. Representatives
Rokeberg, Ogan (via teleconference), James, Coghill, and Meyer
were present at the call to order.
HB 376 - FISH & GAME IN NAVIGABLE WATERS
[Contains brief mention of the commission proposed by HB 266 and
SB 219.]
Number 0026
CHAIR ROKEBERG announced that the first order of business would
be HOUSE BILL NO. 376, "An Act relating to management of fish
and game in and on the navigable waters and submerged lands of
Alaska."
Number 0063
BILL CHURCH, Staff to Representative Scott Ogan, Alaska State
Legislature, sponsor, presented HB 376 on behalf of
Representative Ogan. Paraphrasing the sponsor statement, he
said:
In 1953, the U.S. Congress passed the Submerged Lands
Act, which affirmed the constitutional doctrine giving
state sovereignty over all navigable waters within
their borders. This sovereign power was devolved to
the State of Alaska on equal footing in the Statehood
Act and Compact. In an Anchorage Daily News article
dated March 3, 2000, Governor Knowles said, "No
governor of any state would - or should - ever
voluntarily relinquish authority back to the federal
government." He went on to say, "As Alaska's
governor, I believe it is my clear responsibility,
even [in] the face of a difficult political battle, to
vigorously defend this important aspect of state
sovereignty." Additionally the governor said, "The
Alaska State Supreme Court has ruled exactly the
opposite of federal court and unanimously said the
State of Alaska controls all navigable waters."
In New York v. United States, 1992, the U.S. Supreme
Court ruled that Congress may not simply "commandeer
the legislative processes of the States by directly
compelling them to enact and enforce a federal
regulatory program." By choosing not to appeal the
Ninth Circuit Court of Appeals decision in the John v.
U.S. case to the U.S. Supreme Court, Governor Knowles
made Alaska a second-class state, ignoring the fact
that we were admitted to the union on equal footing.
This bill affirms that the State of Alaska has not
assented to federal control of fish and game in or on
the navigable waters and submerged lands in Alaska.
Number 0213
MR. CHURCH paraphrased the fourth paragraph of the sponsor
statement, which read:
In the "Alaska 'Digest' Email News" of September 3-9,
2001, Alaska [Senator] Frank Murkowski supported
appealing the Ninth Circuit Court of Appeals decision
to the U.S. Supreme Court. Murkowski said, "I don't
believe such an appeal would endanger justified
subsistence protections, but it would protect the
rights Alaskans thought they had secured at Statehood.
An appeal would actually help to end the discord over
subsistence by providing finality to the legal
arguments. That would help all Alaskans come together
and settle this in Alaska, where it should be
settled." Governor Knowles abrogated his "clear
responsibility to defend this important aspect of
state sovereignty."
MR. CHURCH, again paraphrasing the sponsor statement, said:
[House Bill] 376 further strengthens the State's
position with language asserting that the State may
not expend funds to adopt [or] enforce the
implementation of federal regulatory programs for
control of fish and game in or on the navigable waters
or submerged lands in the state. It does not,
however, prevent authorities from conducting
emergency, life saving, statutory, or other
appropriate activities.
CHAIR ROKEBERG asked Mr. Church to speak to Amendment 1.
MR. CHURCH said that Amendment 1 adds a paragraph (4) to Section
3 of HB 376. Paragraph (4) would ensure that the state is not
prohibited from "participating in or cooperating with a joint
state-federal program relating to the identification of
navigable waters in the state". Such a program, he surmised,
would be specifically designed to help settle the issue of who
has control of the navigable waterways within Alaska.
CHAIR ROKEBERG sought confirmation that there is legislation
pending that would establish "a commission on this topic."
MR. CHURCH said that there is: HB 266 and SB 219. He confirmed
that the purpose of Amendment 1 is to allow for the cooperative
activity of that proposed commission.
Number 0399
REPRESENTATIVE MEYER made a motion to adopt Amendment 1. There
being no objection, Amendment 1 was adopted.
REPRESENTATIVE MEYER asked Mr. Church whether he agrees with the
indeterminate fiscal note [provided by the Alaska Department of
Fish & Game (ADF&G)]. He added that he is having a hard time
seeing where there would be additional costs.
MR. CHURCH said that he did not agree with the fiscal note. He
said that one of the main reasons he disagrees is that back in
the 21st legislature, when Representative Ogan introduced HB
109, which added "Glacier Bay National Park and Preserve or the
navigable waters within or adjoining the park and preserve" to
AS 16.20.010(a)(2), the ADF&G had submitted a zero fiscal note.
He opined that the indeterminate fiscal note submitted by the
ADF&G for HB 376 merely reflects that the department is
concerned that fiscally, under dual federal/state subsistence
management, it will not be able to achieve, in a cooperative
manner, its constitutional mandate of maintaining the sustained
yield principle. He stated that HB 376 is not intended to
impact or limit the ADF&G's ability to maintain its
constitutional mandate. Therefore, he doesn't believe that an
indeterminate fiscal note is appropriate; rather, it should be
the same as was submitted for HB 109 - a zero fiscal note.
REPRESENTATIVE MEYER asked what the difference is between HB 109
and HB 376.
REPRESENTATIVE OGAN, as the sponsor, explained that HB 109 just
dealt with navigable waters in Glacier Bay and associated
[areas], whereas HB 376 deals with navigable waters statewide.
CHAIR ROKEBERG posited, then, that if there was a zero fiscal
note "for Glacier Bay" there should also be a zero fiscal note
[for HB 376].
MR. CHURCH agreed.
Number 0632
REPRESENTATIVE MEYER made a motion to adopt Amendment 2, which
would turn the ADF&G's indeterminate fiscal note into a zero
fiscal note. There being no objection, Amendment 2 was adopted.
REPRESENTATIVE OGAN, returning to the issue of HB 376, said:
"It's really unfortunate that we're at this juncture."
CHAIR ROKEBERG asked Mr. Church, "It's my understanding that
because we cannot expend any funds, would any cooperative
activities between the federal Fish and Wildlife Service and
[ADF&G] be curtailed, or would those activities have to be
stopped because of this bill, were it enacted?"
MR. CHURCH replied: Not at all. He pointed out that language
in HB 376 specifies: "the state may not expend funds to adopt
or enforce the implementation of a federal regulatory program,
or part of a program". He said that according to his
understanding, the cooperative action currently taking place is
that of tracking and maintaining the resources in adequate
numbers to support all users, if at all possible. He noted that
the information the ADF&G receives from federal agencies is
important in ensuring that those resources are maintained as
required.
REPRESENTATIVE JAMES, referring to a letter provided by the
Department of Law (DOL), said:
The second paragraph ... indicates that the state law
is naturally preempted to the extent of any conflict
with federal statute. And I agree that's where we are
today, and that the state has no other alternative
except to go where we're going. But I disagree with
the fact that there isn't some remedy. And ... we
ought to be able to take the remedy of taking this
issue to the U.S. Supreme Court, because I believe
that the law on the books in ANILCA [Alaska National
Interest Lands Conservation Act] is against our U.S.
Constitution, ... specifically under equal
protection....
Had ANILCA mentioned, as the identification for the
rural priority, that it was for Natives - which it has
already been, in court, determined not to be Indian
Law - but had they put Native, I think we'd be in a
different situation today. But they put "rural", and
we've heard recent testimony that 50 percent of the
people living in the rural area are Native and the
other 50 percent are not, so there's a definite issue
in the state in applying this. And the language in
ANILCA is what we're being driven under; so,
therefore, I am confirmed, again, that ANILCA - by
itself, as is stated - is unconstitutional under U.S.
law under the equal protection [clause].
Number 0967
CHAIR ROKEBERG opined that Representative James's comments say,
in a nutshell, what the majority of the committee believes. He
said that it is unfortunate that the governor did not pursue
"our legal remedies that were underway." He noted that one of
his concerns, as implied in the letter from the DOL, is that [if
HB 376 is adopted], the state regulators will have difficulty
coordinating with the federal regulators, particularly with
regard to keeping track of harvests. He asked, "Is there
anything constraining in this bill that would prohibit that?"
MR. CHURCH said no, there isn't. "Quite to the contrary, I
believe that the bill allows the room for the state to operate
and fulfill its mission," he added. [House Bill 376] is not
intended to hinder the legitimate efforts of the ADF&G; it's not
intended to prohibit the state from protecting and enhancing the
state's fish and wildlife resources. He said the state has a
priority of maintaining opportunities for all users of fish and
game; HB 376 is just part and parcel of that process.
REPRESENTATIVE OGAN offered that HB 376 is consistent with the
Alaska Supreme Court ruling that the state, not "the feds,"
control the navigable waterways in Alaska. He remarked that HB
376 does not say that the state is not going to manage its
[resources]; it is simply saying, in statute, that the state is
not willfully ceding its sovereignty to the feds.
CHAIR ROKEBERG mentioned that the governor issued a press
release that morning pertaining to the commencement on May 15
[2002] of a special session regarding subsistence.
REPRESENTATIVE OGAN mentioned that he would be back in Juneau
around May 1.
Number 1178
REPRESENTATIVE JAMES moved to report HB 376, as amended, out of
committee with individual recommendations and the accompanying
amended zero fiscal note. There being no objection, CSHB
376(JUD) was reported out of the House Judiciary Standing
Committee.
REPRESENTATIVE JAMES, with regard to the issue of fiscal notes,
remarked that when the departments are "given a chore that
they're already supposed to be doing, they shouldn't have a
fiscal note."
CHAIR ROKEBERG called an at-ease from 1:32 p.m. to 1:33 p.m.
HB 393 - SALES OF BUSINESS OPPORTUNITIES
Number 1273
CHAIR ROKEBERG announced that the next order of business would
be HOUSE BILL NO. 393, "An Act relating to unfair and deceptive
trade practices and to the sale of business opportunities;
amending Rules 4 and 73, Alaska Rules of Civil Procedure; and
providing for an effective date." Chair Rokeberg noted that
Doug Letch, staff to Representative Gary Stevens, Alaska State
Legislature, sponsor, was present.
Number 1318
REPRESENTATIVE MEYER moved to adopt the proposed committee
substitute (CS) for HB 393, version 22-LS1356\J, Bannister,
4/3/02, as a work draft. There being no objection, Version J
was before the committee.
Number 1335
HEATHER M. NOBREGA, Staff to Representative Norman Rokeberg,
House Judiciary Standing Committee, Alaska State Legislature,
explained that Version J incorporates the amendments that were
discussed during the previous hearing on HB 393. She mentioned
that the language regarding the exemption limit of $200 is
located on line 5 of page 13, and that the sponsor and the
Department of Law (DOL) recommend that this limit be raised to
$250.
REPRESENTATIVE JAMES, referring to business opportunities (biz
opps) that she has seen advertised on television, asked how the
DOL determines whether the provisions of HB 393 would apply to
those biz opps.
Number 1450
CYNTHIA DRINKWATER, Assistant Attorney General, Fair Business
Practices Section, Civil Division (Anchorage), Department of Law
(DOL), remarked that it is difficult to make a general statement
without knowing which ads Representative James is referring to.
However, once a person calls in and is told how much the initial
payment is, if it is more than $200, Ms. Drinkwater explained,
then it can be determined that the provision of HB 393 would
apply.
CHAIR ROKEBERG noted that the language in HB 393 specifies that
in order to qualify for the exemption, the total amount of the
payments cannot exceed $200.
REPRESENTATIVE JAMES remarked that according to her observation,
the price paid for a biz opp grows over time: only a small
amount of money may be required at first, but folks are
subsequently talked into making further payments. She asked how
the DOL plans to handle those kinds of operations, particularly
those that use interstate television advertising. Is the DOL
going to wait for people to make individual reports, or will it
take those advertisements off of the television if those
companies don't do what HB 393 requires? How is HB 393 going to
be implemented?
MS. DRINKWATER offered that the way HB 393 would work is similar
to how Alaska's telemarketing law currently works: when the DOL
becomes aware - either through consumer complaints or through
other means - of businesses who are operating in the state
without registering, the DOL can send those businesses a cease-
and-desist letter notifying them that they are in violation of
the law and that they have to register.
REPRESENTATIVE JAMES mentioned that she still has concerns that
neither the public nor the entities selling biz opps will have
any idea that this law exists. She posited that the goal ought
to be to educate the public so that folks don't contact
fraudulent biz opps to begin with.
MS. DRINKWATER noted that by requiring companies to register,
consumers will be provided with more information about the
companies, and the DOL will have an additional enforcement tool
to use when fraudulent businesses try to evade the law.
REPRESENTATIVE JAMES opined that Alaska's television stations
should be notified of the provisions in HB 393 [if it becomes
law] so that those stations can prohibit such advertisements.
Number 1663
REPRESENTATIVE MEYER, referring to the $200 limit, opined that
fraudulent biz opps should be prohibited regardless of the
amount charged. He also opined that regardless of what the
limit is, the provisions of HB 393 would not apply to legitimate
businesses such as Mary Kay [Inc.], Amway [Corporation], or Avon
[Products, Inc.], for example. He asked why the DOL is
recommending a $250 limit.
MS. DRINKWATER said that the $250 limit is offered as a
compromise to ensure that the Direct Selling Association (DSA)
and other legitimate businesses do not oppose HB 393. She
offered that some sort of limit was called for because although
the DOL wants to provide as much protection as it can to
consumers, it would not be possible for the DOL to pursue every
case, and a $250 limit is used in other states and seems to be a
reasonable limit. She pointed out that HB 393 would not cover
products that appear to be scams; rather, HB 393 is intended to
cover fraudulent biz opps, which are marketing schemes that may
include selling products.
REPRESENTATIVE MEYER noted that if, for $199, a company is
selling faulty software which supposedly enables people to start
their own businesses, those companies would not be covered under
HB 393 because of the $200 or $250 exemption.
MS. DRINKWATER pointed out, however, that even if the cost of
the software was above the exemption threshold, in the
aforementioned example, the software by itself would not be
considered a business opportunity unless the person/entity that
sold the software promised "to do something else with it." For
example, she said:
If they promised to sell you medical billing software
by which you could do medical billing from your home
and make thousands of dollars, and ... they promised,
then, to provide you [with] the names of doctors who
wanted to use outside medical billing services, that
would be a business opportunity. But if they're just
selling you the software, it would not be. And if
they were selling you just software that was defective
or fraudulent, it may well be that our general
consumer protection law would cover that scenario, but
not necessarily the business opportunity statute.
MS. DRINKWATER, in response to questions about the limit that
other states have, explained that those limits range from $200
to $500: nine states have a threshold between $200 and $300,
and 13 states have a $500 threshold as does the Federal Trade
Commission (FTC). She added that 23 states - including Alaska -
have business opportunity [bills/statutes], but not all of those
states require registration.
Number 1928
STEVE CONN, Executive Director, Alaska Public Interest Research
Group (AkPIRG), testified via teleconference, noting simply that
AkPIRG, AARP, and the Better Business Bureau (BBB) could assist
in disseminating information about HB 393 and the scams that it
is intended to target.
Number 1965
CHAIR ROKEBERG made a motion to adopt Amendment 1, which would
replace "$200" with "$250" on page 13, line 5. There being no
objection, Amendment 1 was adopted.
Number 1983
REPRESENTATIVE MEYER moved to report the proposed committee
substitute (CS) for HB 393, version 22-LS1356\J, Bannister,
4/3/02, as amended, out of committee with individual
recommendations and the accompanying fiscal note. There being
no objection, CSHB 393(JUD) was reported from the House
Judiciary Standing Committee.
HB 385 - UNFAIR TRADE PRACTICES ATTY FEES/COSTS
Number 2012
CHAIR ROKEBERG announced that the next 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." [At the hearing on 3/22/02, the proposed
committee substitute (CS) for HB 385, version 22-LS1224\C,
Bannister, 3/21/02, was adopted as a work draft.] Chair
Rokeberg noted that the committee also had before it for
consideration the proposed committee substitute (CS) for HB 385,
version 22-LS1224\F, Bannister, 4/2/02.
Number 2023
HEATHER M. NOBREGA, Staff to Representative Norman Rokeberg,
House Judiciary Standing Committee, Alaska State Legislature,
explained that Version F deletes Section 1 of Version C, which
would have waived, for a [plaintiff], the requirement that
he/she pay attorney fees as stipulated by [Civil Rule 82 of the
Alaska Rules of Civil Procedure]. With Version F, she
explained, "we're keeping the award of full [attorney fees] when
the state brings forth the lawsuit." She confirmed that with
regard to Rule 82 as it applies to plaintiffs, Version F
maintains the status quo.
CHAIR ROKEBERG relayed that the sponsor of HB 385 "reluctantly
concedes that half a loaf is better than none." Version F, he
noted, gives the attorney general the right to have full award
of attorney fees when prevailing in lawsuits pertaining to
unfair trade practices.
MS. NOBREGA confirmed that currently, Rule 82 applies to all
parties in such lawsuits, including the attorney general; with
Version F, if the attorney general brings forth the lawsuit and
is the prevailing party, Rule 82 would be waived and the state
would get full attorney fees. That money would then go into the
general fund (GF) with the intention that it would be used to
help further fund the [Fair Business Practices Section] of the
Department of Law (DOL).
Number 2170
CHAIR ROKEBERG moved to adopt the proposed committee substitute
(CS) for HB 385, version 22-LS1224\F, Bannister, 4/2/02, as a
work draft. There being no objection, Version F was before the
committee.
Number 2193
REPRESENTATIVE JAMES moved to report the proposed committee
substitute (CS) for HB 385, version 22-LS1224\F, Bannister,
4/2/02, out of committee with individual recommendations and the
accompanying zero fiscal note. There being no objection, CSHB
385(JUD) was reported out of the House Judiciary Standing
Committee.
CHAIR ROKEBERG called an at-ease from 1:55 p.m. to 1:59 p.m.
HB 499 - DISPOSITION OF BUSINESS ASSETS
Number 2209
CHAIR ROKEBERG announced that the last order of business would
be HOUSE BILL NO. 499, "An Act relating to the sale, lease,
exchange, or other disposition of business property and assets."
Chair Rokeberg noted that the committee was awaiting the arrival
of the drafter and a proposed committee substitute for HB 499;
that at the last hearing on HB 499, Mr. Pease presented
information [regarding Savage Arms Inc. v. Western Auto Supply
Co.]; and, as requested by Representative Berkowitz, that the
committee would hear testimony from "opposing counsel."
Number 2254
JAMES M. POWELL, Attorney, Hughes Thorsness Powell Huddleston &
Bauman, LLC, relayed appreciation for the opportunity to testify
on HB 499. He explained that he represented [Western Auto
Supply Co. ("Western Auto")], which he termed "the innocent
retailer," in the Savage Arms Inc. v. Western Auto Supply Co.
case, which stemmed from an accident that occurred in Kenai. He
said that he had three points to address:
The first is, I'd like to give you a little bit of
background [regarding] who the players are and what's
going on that's not apparent on the surface and may
not have been shared with you previously by other
people. The second point relates to some problems
that I think will be created by HB 499 as it is
presently drawn.... And the third thing relates to
the retroactivity of this bill and some problems that
I think that creates.
MR. POWELL elaborated:
First of all, just so that it is clear, ... I want to
address some of the misunderstandings that I think
might have been generated, ... so that you'll be
accurately tuned in to what is really going on here.
This accident occurred in April of [1989], and this
change in "Savage" occurred in October of that year:
On October 31 [Savage Industries, Inc. ("Savage
Industries")] signed the agreement for sale of assets
and they ceased to do business, and on ... November 1
the new company [Savage Arms, Inc. ("Savage Arms")] -
just recently formed - started up and went forward as
a going concern.
We believe that we can show in the court - and made
some representations to the supreme court on that -
that essentially the shareholders were the same: a
group called [Cerrito Partners, Ltd. ("Cerrito
Partners")] were the shareholders in Savage
[Industries] and also - through some corporations -
continued to control the new company that was made.
It was simply a change of -- some slight changes that
were made. They were the same officers, the same
employees, the same plant, the same product that they
were manufacturing; they had the same patents and ...
equipment; and they advertised to the public, "We've
been in business for 100 years" - in effect, "You can
trust us [because] we've been around a long time."
With that, we think that we can make out a case ...
against them, at least on the "continuity of
enterprise," probably on [just the continuity of] ...
[Side A of the tape ends mid-sentence.]
TAPE 02-42, SIDE B
Number 2375
MR. POWELL continued:
... the business - although [because of] the
shareholders, because some corporate entities were
involved, [it] becomes a little more difficult for us.
What I think has not been shared with you is that
Cerrito Partners is a group of Texas businessmen -
very wealthy businessmen - who, as part of this
transaction - although not in October and November of
1989, but not too long after that - signed a
guarantee, in order to promote the sale and the
operation of the business, ... that they would ...
indemnify Savage Arms against any judgment that was
made as the result of the Kevin [Taylor] incident in
Kenai, Alaska. ...
MR. POWELL indicated that Savage Sports Corporation ("Savage
Sports") was also involved, but added that he wouldn't go into
that point right now. He said:
They continue, this company that Cerrito Partners has.
It was [Challenger, Ltd. ("Challenger")] and then it
was [Intelect Communications, Inc. ("Intelect")] - [it
was] actually Intellect that signed the indemnity
agreement - and they have changed their name again to
[TerraForce Technology Corporation ("TerraForce")],
which is a publicly traded company under the symbol
TERA. And TerraForce, in their SEC [U.S. Securities
and Exchange Commission] filings, publicly
acknowledged that they have this guarantee on this
judgment. So, what this is all about is, this group
of Texas businessmen have this promise and they're
trying to find a way out of their promise. And, as
drawn, [HB 499] arguably will give them an out. ...
And I doubt that that information has been shared with
you, so that you know what is really going on with
regard to the tremendous interest that Savage Arms has
in helping us out with Alaska law: they're trying to
get out of an obligation that they have.
MR. POWELL added:
Likewise, in that situation, I represented Western
Auto; we were innocent in the transaction, but we were
a retailer, and retailers have an obligation to stand
good for any problems with a product, and then they're
supposed to be able to [go] back against the people
that made the product. "Savage" would not participate
in the trial, and so we had to defend their product as
best we could, and eventually we ended up settling the
claim for $5.4 million. So Kevin Taylor is out of the
picture, and we are now trying to recover that amount
of money, our defense costs as well, and a lot of
interest that has accumulated over the years.
Number 2279
CHAIR ROKEBERG asked Mr. Powell whom he is [currently]
representing.
MR. POWELL said that he was retained to defend Western Auto.
Western Auto, being a responsible company, he added, had
insurance; they had a primary policy with Allstate Insurance
Company ("Allstate") for $5 million, and an excess policy with
Certain Underwriters at Lloyd's of London ("Underwriters"). He
explained that it was actually Underwriters that brought him in,
30 days before trial, to defend the action, and that Allstate,
which had the major interest, paid defense costs of nearly $1
million.
REPRESENTATIVE JAMES relayed her appreciation that Mr. Powell
has filled in "some gaps." She said that in the beginning, she
was concerned because she thought that the whole case, as
initially presented by Mr. Pease, revolved around a bankruptcy
sale and the purchaser of the bankruptcy's assets, and so "there
should have been a separation of responsibility there."
However, because it was a Chapter 11 bankruptcy rather than a
Chapter 7 bankruptcy, it was not a sale by the trustee; it was
merely "a sale by the company to the same person, which is not
an arms-length transaction," she noted. The main person was the
same person in both [companies]; therefore, she opined, "there
is no severance of any relationship or any knowledge or anything
else in that [transaction]." She said she is surprised that the
bankruptcy judge agreed to a sale that didn't specifically have
a severance of liability; however, because [the sale was to] the
same person, she suspected that [the judge] assumed that there
would be no severance of the liability.
CHAIR ROKEBERG observed that the issue of whether it's the same
person or not is "a matter of material fact" and is a central
point to the whole case.
REPRESENTATIVE JAMES agreed. She noted, however, that another
point the committee was not initially aware of was the existence
of "this guarantee that was made." She added:
For the life of me, I can't figure out why they did
that. There had to be some reason, and I don't think
they've told us ... why they did that, because that
seems extremely unusual to have done that unless they
knew they were liable.
Number 2139
MR. POWELL responded:
We have not been able to take the testimony to ask ...
what was the motivation. It appears to be that
"Savage" ... [was] transferring the stock, and the
people who were investing $20-plus million, as I
recall, wanted to have some protection against this
judgment that was out there when they were selling the
stock a few years after. It may have been in [1990 or
1991] that this happened, and Savage Sports was being
formed about that time, and the investors wanted some
protection against this claim coming back. They
continued to do business as Savage Arms, and so that's
why this guarantee was given, as I understand it.
CHAIR ROKEBERG asked: Were "they" aware of a claim at the time?
MR. POWELL said that at that time, "they were; they specifically
identified this litigation - the Taylor case."
CHAIR ROKEBERG relayed that after Mr. Powell finishes his
presentation, the committee would be focusing on:
The concepts that we're dealing with as a matter of
law; that is to say, ... whether or not we should, by
statute, overturn the doctrine that the [Alaska]
Supreme Court utilized, number one, and, number two,
speak to the issue on the retroactivity vis-a-vis
"prospectivity". ... I've concluded that I agree with
the [American Law Institute's Restatement (Third) of
the Law of Torts ("Third Restatement of Torts")], and
I do not agree with Justice Eastaugh on the
"[continuity] of enterprise" theory. ... Just to
refresh everybody's memory, there was a case at the
[Alaska] Superior Court level - the finding - and then
the parties asked the [Alaska] Supreme Court to rule
on the point of law, which just has to be this whole
idea of successor liability. They've issued that, but
they've remanded the case back to the [Alaska]
Superior Court. So this case is still in progress; so
that's another issue that we have to be sensitive to.
Number 2037
MR. POWELL, continuing with his presentation, opined that as
written, HB 499 goes too far, in effect giving carte blanche to
businesses that might want to do "what we are alleging and we
hope we can prove that 'Savage' has done." It is an open
invitation for business owners that have marginal businesses to
"do a little restructuring" - sell their assets to another
corporation that would be almost identical and would be owned by
the same people. They could perhaps do this every year, he
suggested, as a sort of prophylactic move. Would this be
considered fraud? He posited that under HB 499, it might just
become a precautionary move that businesses would engage in per
their lawyers' advice. Proving fraud is very difficult, he
added; he has never seen it successfully proven in the
courtroom, even after 37 years of practice. "It is like a
criminal proceeding, and you have to go to the intent; 'what did
the person know and what did they intend' is really tough to
prove," he noted. A business owner who is getting stiffed on a
bill for $10,000 or $20,000 or $30,000 isn't going to have the
resources to be able to prove fraud. He reiterated that HB 499
goes too far: to just say that there is no successor liability
would really change the climate of the way Alaska business is
done.
CHAIR ROKEBERG asked Mr. Powell, as a matter of public policy,
whether the insertion of "product liability" would give him more
comfort.
MR. POWELL said that it would: it would avoid a lot of problems
for innocent retailers who are at the mercy of unscrupulous
manufacturers that take advantage of "this apparent void in our
law" regarding successor liability. He observed that cases
involving product liability usually involve substantial claims.
CHAIR ROKEBERG asked whether there were any other areas of HB
499 that the committee should focus its attention on.
MR. POWELL referred to the "retroactivity aspect" of HB 499. He
pointed out that none of the tort-reform packages adopted over
the years have retroactive provisions; none of them attempt to
reach back in time
CHAIR ROKEBERG asked: "Why did the court do it, then?
Number 1884
MR. POWELL explained that as a general rule when dealing with
particular litigants, the court has to hand down decisions based
on the past actions of those particular litigants. [Some]
rulings must have retroactive application; otherwise, he noted,
nobody would ever bring a case to the courts. If a court ruling
could only be applied prospectively, it would be the same as
going to court and being told, "[We] can't help you out in the
particular factual situation that you have, [but] thank you for
bringing it to our attention ...; the next people that bring it
up, they're going to get a good deal." Therefore, as a
practical matter, on many occasions the court has said, "We will
address this issue, and we will make it applicable to these
facts, since it's not been addressed before and we're addressing
it for the first time." He noted that this is what occurred
when the [Alaska] Supreme Court made its interlocutory ruling in
the Savage Arms Inc. v. Western Auto Supply Co. case.
MR. POWELL said that retroactivity raises questions, and that he
could provide the committee with case examples that illustrate
that there are problems with retroactivity. Something that the
committee may not have considered, he explained, "has to do with
the potential taking that occurs if the state tries to make it
retroactive and affect transactions that have already taken
place: there may be some financial exposure to the state." He
added, "Nothing would make me happier than for the state to step
in and pay off this judgment, but I don't think that's a good
deal for the [state]. He elaborated:
I think that would be backing into a potential problem
that the state should not back into, by the potential
taking by a retroactivity that affects litigation
that's in process. I think we would have a good case
for inverse condemnation and a taking by the state,
and I ... don't want you to be blindsided by that; I
think that is a problem with making it retroactive, at
least ... for this case, which is so far along, which
occurred so long ago, and we're just sort of in the
closing chapters of it here.
Number 1771
CHAIR ROKEBERG mentioned that the legislature has the statutory
authority to make laws retroactive, "particularly if it is
curative legislation."
MR. POWELL acknowledged that there is an exception for curative
legislation, and asked permission to submit [written] comments
on [the issue of retroactivity] to the committee by the
following Friday.
CHAIR ROKEBERG agreed to that.
REPRESENTATIVE JAMES alluded to the possibility that any action
taken via HB 499 might not necessarily affect the current case
that Mr. Powell and Mr. Pease are involved in.
CHAIR ROKEBERG, after mentioning that the aforementioned case is
merely the genesis for HB 499 and discussion of it helps put
things in context, pointed out that the specifics of that case
are not the issue that is before the committee.
REPRESENTATIVE JAMES posited that the committee needs to look at
the decision that was made in the court: "It appears to me that
there is a conflict and something we should fix."
Number 1662
THEODORE M. PEASE, JR.; Attorney; Burr, Pease & Kurtz, PC;
testified via teleconference, noting that he is representing
Savage Arms. In response to comments made by Mr. Powell, Mr.
Pease explained that the aforementioned guarantee was a
guarantee given to Mr. Coburn, the present owner of Savage Arms,
who was seeking protection [from] a potential judgment against
Savage Arms in the Savage Arms Inc. v. Western Auto Supply Co.
case. Mr. Pease noted that the company which gave that
guarantee, and from which Mr. Coburn bought the stock in 1995 -
Intelect - is now, itself, in a rather precarious situation and
is reportedly not in a "position to respond." He indicated that
this guarantee was given years after [the original sale of
assets by Savage Industries] took place.
MR. PEASE, turning to issues raised by the legislation, remarked
that the latest version of HB 499 that he has seen makes it
clear that fraud is not exempted. With regard to the issue of
retroactivity, he said that clearly statutes permit, and the
courts certainly recognize, that the legislature has the
authority to make laws retroactive. To do so, he remarked, the
legislation has to either be curative or be made specifically
retroactive, as is the case with HB 499.
MR. PEASE opined that the point raised in a memorandum by the
drafter, that the state risks financial exposure because of
"taking," is absurd. He posited that Article I, Section 18, of
the Alaska State Constitution, which is cited in that
memorandum, "has to do with instant title," and that HB 499 does
not address private property or contract rights. He mentioned
that even Section 15 of Article I does not address tort law. He
opined that nothing prohibits making HB 499 retroactive, and
that doing so is critically important in ensuring uniform
application. He mentioned that at this time, he will not be
commenting on the insertion of "product liability" language.
CHAIR ROKEBERG noted that insertion of such language is his own
suggestion. He reiterated that he tends to agree with the Third
Restatement of Torts with regard to "what law should apply here
in terms of successor liability, which would include the 'mere
[continuation]' doctrine, but it repudiates specifically the
'[continuity] of enterprise' and the 'product line' doctrines."
"And I think that's what we want to do," he remarked. He opined
that HB 499 rightly makes contract and corporate law the primary
focus, but that it may not serve the public interest because of
language throughout the bill that says, "in tort or otherwise",
which is very broad. He added:
So, if they're contractually set forth - that there is
a prohibition on the responsibility for liabilities -
and then we run into a product liability situation, I
think I've come to the conclusion that the traditional
four-pronged standards ... expressed and articulated
in the "Restatement" should prevail and be the
standard in the state of Alaska, as they are in about
47 other states. And that would require that we amend
the bill to at least include product-liability cases.
And then that would leave the "mere continuation"
doctrine, as expressed in our supreme court and other
jurisdictions, available.
Number 1197
CHAIR ROKEBERG asked Mr. Pease to comment.
MR. PEASE asked where such a change would be located.
CHAIR ROKEBERG referred to page 1, line 14, and suggested
inserting the language, "except for product liability or
successor interest product liability," or something similar.
MR. PEASE argued that such a change would "take all product-
liability cases out of this rule," and so "the same thing could
happen again.
CHAIR ROKEBERG stated that [via a committee substitute (CS)] the
committee "will be adopting specific language overturning the
'continuity of enterprise' - and I'd also like to add the
'product line' doctrines - and excluding them from
consideration."
MR. PEASE said: "It's a step in the right direction, ... but I
think the basic problem still remains that we've got an Alaska
Supreme Court that is a very adventuresome court in the tort
area.
CHAIR ROKEBERG agreed, adding that that is why he wanted to
"rein them in."
MR. PEASE said that there is too much left open in these
doctrines, "these four 'Restatement' exceptions," that the court
could still use to come up with "successor-liability areas" that
are unpredictable and unfair to parties involved in commercial
transactions.
CHAIR ROKEBERG said he agreed, in the main, with Mr. Pease's
thrust. He added that he is concerned, however, with coming up
with legislation that fits the public's overall best interests.
Noting that the drafter of HB 499 had arrived, Chair Rokeberg
asked Mr. Pease to comment on inverse condemnation, which, it
had been suggested, could subject the state to a $14-million
bill if the state were sued because of the inclusion, in HB 499,
of a retroactive provision.
MR. PEASE said that the eminent-domain section of the Alaska
State Constitution deals with personal property or real property
that the state has taken. He offered that HB 499 instead deals
with an area of tort law; thus the concept of eminent domain
does not apply. He reiterated that not even Section 15 of
Article I applies with regard to HB 499. He opined that "this"
is an effort to intimidate, and that "it" just isn't fair.
CHAIR ROKEBERG asked Mr. Pease to provide, in writing,
additional comments regarding the "retroactivity and taking"
issue.
Number 0872
TERRY BANNISTER, Attorney, Legislative Legal Counsel,
Legislative Legal and Research Services, Legislative Affairs
Agency, referring to her memorandum of February 12, 2002, said
that, basically, the state is not allowed to take property, and
that in saying that, she is not talking about eminent domain;
rather, she is talking about a basic requirement that the state
cannot take property without providing a person with just
compensation. She explained that once the property is vested,
the person actually owns the property.
CHAIR ROKEBERG said, "But we're talking about a judgment here."
MS. BANNISTER, with regard to judgments, explained that "once a
judgment has been entered for someone, generally they're
considered to have a vested right in what they've been given
under the judgment," although, she acknowledged, a judgment
could be changed during the appeal process. "But once you get
to something [that] can be called [a] vested right like that,
you run the risk of triggering this clause" in the Alaska State
Constitution that requires a person be compensated if that right
is taken, she said. She also mentioned that one could possibly
argue that there could be an "impairment of contract, too, if
you were to change the effect of contracts, ... if the big part
of the contract ... were this consideration of what liabilities
the person would be exposed to, and they based it on the current
law at the time." "So, if you went back and changed all their
contracts in the past, and this was a primary consideration - a
make or break consideration - in the contract, you would have an
impairment-of-contracts issue," she added.
CHAIR ROKEBERG mentioned that Alaska did not have too many
manufacturers.
MS. BANNISTER remarked: "Well, we're talking here about a lot
of transfers of property between companies; there's a lot
involved here."
CHAIR ROKEBERG, pointing out that the "subject case" that
prompted the legislation involves product liability and
successor interests, conceded that HB 499 covers a multitude of
transactions that may have happened in the past. He remarked
that case law and common law are the law of the state, and that,
presumably, Alaska statutes are silent on this issue, or else
everybody would have been aware of "it." He surmised that in
Alaska, there would probably not be too many cases similar to
that of Savage Arms Inc. v. Western Auto Supply Co., in which
successor liability and product liability in a manufacturing
setting are the main issues; "we won't find ourselves in that
situation too many times."
MS. BANNISTER concurred.
CHAIR ROKEBERG noted that testimony has indicated that the
insurers of Western Auto have paid a [settlement] of $5.4
million and are now seeking recovery from Savage Arms in the
amount of $14 million. He asked Ms. Bannister: "In your
opinion, would we be taking a risk, were we to put a retroactive
applicability section in this bill?"
Number 0503
MS. BANNISTER, in response, said: "Anytime you do that, when
you've had a judgment entered, you're going to be taking a risk.
I don't know how it'll eventually turn out, but ...
CHAIR ROKEBERG interjected to ask: "Has the state ever been
sued for inverse condemnation? Is that what that is?"
MS. BANNISTER said that she would have to check the cases,
adding that she was not sure that it would be called inverse
condemnation. She reiterated that it could be considered,
arguably, that once there is a judgment, the right to whatever
one gets out of that judgment "would be considered a vested
right, and the issue attaches." She indicated that [a
retroactive provision] would go back and say that that judgment
doesn't apply any more.
CHAIR ROKEBERG, referring to the legal situation that prompted
the creation of HB 499, said: "We've got a settlement that was
made, we've got a ..."
MS. BANNISTER interrupted to ask whether there was a judgment
entered. She pointed out that "usually when you have a
settlement, you enter a judgment based on the settlement."
MR. POWELL explained: "There was a judgment of dismissal; there
was a court order officially approving the minor's [Taylor's]
settlement - the amounts, the [attorney] fees, and that."
CHAIR ROKEBERG said: "And then there is the subrogation, and
now the case is proceeding because it's been remanded back to
the [Alaska] Superior Court. So, could you say there's a final
judgment?"
MR. POWELL said: "It's not strictly accurate to say there's a
final judgment because there is no judgment entered against us
except the judgment of dismissal based upon the fact that we
paid a ton of money to the injured parties."
Number 0411
CHAIR ROKEBERG said:
Right. But I guess one of the concerns I have, and I
don't understand and I don't think the -- is that
we're kind of in the middle of the case, if you will,
here, because there was a third party brought in. And
then there was a unique situation where the case [was]
ruled on in part by the [Alaska] Supreme Court and
then remanded back to the [Alaska] Superior Court for
final adjudication. So, we don't have a final
judgment or anything; we're right in the middle of it.
So, Ms. Bannister, can the legislature, in your
opinion, act now?
MS. BANNISTER replied that there are issues there and she did
not know how it would come out.
CHAIR ROKEBERG said: "Okay, so it's an issue that ... you can't
counsel us, one way or another, how it would.
MS. BANNISTER added: "It depends also -- did they remand it as
-- you're taking about the remand from the court with the
instructions on this ...?
CHAIR ROKEBERG interjected, saying: "On the theory of law ..."
MS. BANNISTER pointed out: "Well, they tell you, basically, how
to go for it. ... It's just very complicated because the remand
tells you what law to apply."
CHAIR ROKEBERG said: Well, that's what happened there. The
[Alaska] Supreme Court, by their ruling, decided which law to
apply.
MS. BANNISTER said: "It's not a clean remand like ..."
CHAIR ROKEBERG, interjecting, said: "And then that's what we're
going to be trying to overturn here, in this [proposed] statute.
MS. BANNISTER said: "I think it's an issue, and I just don't
know how it'll come out."
CHAIR ROKEBERG asked: "Is there a potentiality the state could
be liable for $14 million, which is the amount in question at
this juncture?"
Number 0292
MS. BANNISTER asked: "You mean the party received $14 million?
CHAIR ROKEBERG said: "Well, they're praying for it, because
that's -- they got [$5.4 million] and there's the fees and
interest."
MS. BANNISTER said:
Well, I think there's the potential, yeah. ... I
can't say how it would come out, though, because
whenever you've gotten that far, ... the issue goes
right there - ... the issue is present. You can't
just say, "Well, they haven't quite reached the point
where the right has vested"; the right has vested to
this extent ... and you've gotten instructions from
the court. And I think the issue is present, and I
don't know how it would be resolved.
MR. PEASE said:
I think we're getting carried away. Semantics and
other things are getting involved here. This
suggestion that [you're] liable, frankly, I think is
totally out of place. Let's suppose this thing plays
out: this statute is passed - made retroactive. Then
it goes back down to the court, and there are
proceedings. And, say, the lower court says, "Well,
in the light of this, what the state has done, I'm
dismissing the action." Then Mr. Powell (indisc.)
this to the [Alaska] Supreme Court and says, "You
can't do this, (indisc.) got a vested right here based
on your previous (indisc.)." The court's then either
going to say, "Yes, it is" [or] "No, it isn't." If
they say, "No, it isn't," the case is over; if they
say, "Yes, it is," then it goes back under the
[Alaska] Superior Court again, by the law which the
(indisc.) originally laid out, which is this
'continuity of enterprise' theory. (Indisc.) it's not
(indisc.) inverse Allstate. It's just not realistic.
Things just don't happen that way.
[Committee staff distributed the proposed committee substitute
(CS) for HB 499, version 22-LS1490\S, Bannister, 4/5/02.]
CHAIR ROKEBERG asked Ms. Bannister to research "this particular
issue regarding our position in [the] course of the trial, and
also this issue on potential liability to the legislature as to
'taking.'"
MS. BANNISTER agreed to do more research, but cautioned that "it
will still remain an issue - it will not go away." She noted
that a long time ago, she did research on "this type of thing,"
and that it just comes down to the fact that she can't say for
sure; it'll just remain an issue.
CHAIR ROKEBERG, mentioning that the legislature, within certain
parameters, can create retrospective statutes, asked whether [HB
499] could be considered curative legislation.
MS. BANNISTER offered that it could be considered curative to
some extent, but cautioned that generally, curative legislation
addresses very serious, major problems. She mentioned that
during the Depression, for example, when people's farms were
being taken, some retroactivity was allowed because it was a
such a major social issue.
TAPE 02-43, SIDE A
Number 0001
MS. BANNISTER mentioned that although "the issues" would be
factors in the court's forthcoming decision, none of them would
be determinative. "I can't tell you what would be determinative
at this time," she added.
CHAIR ROKEBERG asked Ms. Bannister to "check and see if there's
ever been anything analogous to this, where the legislature has
interceded in court ... in the middle of a case." He noted that
he would not want to subject the state to a judgment stemming
from "a taking."
MS. BANNISTER offered that instead of the state being held
liable, the court might simply say, "You can't do this, we have
to follow the other way." In that case, she noted, there
wouldn't be any liability; the court would not "switch the
awards" [if the language] was found to be unconstitutional.
CHAIR ROKEBERG asked Ms. Bannister to describe the changes
encompassed in Version S of HB 499.
MS. BANNISTER said that according to her understanding of her
instructions, essentially she was to keep the language in the
original bill, but make an exception for the "products
liability, in which case, in the products-liability situation,
you would have the four exceptions that are in the 'Restatement'
apply." To this end, she pointed out, these four exceptions
have been added, via [subsection] (b), to Sections 2-6 and 8.
CHAIR ROKEBERG asked whether the four exceptions needed to be
specified.
Number 0272
MS. BANNISTER pointed out that it would not be a good idea to
simply refer in statute to the "Restatement"; for clarity, the
four exceptions should be specifically identified. She
concurred that the "balance of the bill" remains, pointing out
that the language in the introductory part of [subsection (a) of
Section 2] has been changed slightly to "parrot, more or less,
... some language in the 'Restatement'" and to include the term
"fraudulent transfer," which is used in AS 34.40.
CHAIR ROKEBERG suggested that the definition of "mere
continuation" could be tightened up. He then asked Ms.
Bannister to speak to the "product line" doctrine. He relayed
that in the Savage Arms Inc. v. Western Auto Supply Co. case,
the court used the term "new doctrines" when it talked about
"continuity of enterprise" and "product line," but when it
adopted the "continuity of enterprise" [doctrine], it declined
to consider the "product line" [doctrine], saying that it did
not fit the facts. Chair Rokeberg said that he wanted to reject
the "product line" [doctrine], and asked Ms. Bannister whether
the [Legislative] Intent section could specify rejection of that
[doctrine] too, even though it was not specifically considered
in the aforementioned case.
MS. BANNISTER pointed out that intent language is simply that -
intent language.
CHAIR ROKEBERG said: "By what you've done, that should be
pretty clear. ... Would it not?"
MS. BANNISTER observed, "you've set the parameters out, here."
CHAIR ROKEBERG, after referring to specific wording in the
Savage Arms Inc. v. Western Auto Supply Co. case, reiterated
that he wanted HB 499 to expressly reject the "product line"
[exception].
MS. BANNISTER agreed that language to that effect could be added
[to the Legislative Intent section], even though "you've laid
out what they can use ... in the other parts" of the bill.
Number 0620
RAY R. BROWN, Attorney; Member, Alaska Academy of Trial Lawyers
(AATL), testified via teleconference in opposition to HB 499.
After noting that he did not yet have a copy of Version S, he
said that he finds it troubling that "litigants are making a
point on a specific bill involving a specific case that is still
active," and are thereby attempting to influence a decision on a
pending case or influence the ramifications of the results of a
pending case. He said that he agrees with Mr. Powell that fraud
is very difficult to prove. He explained that the problem he
has with HB 499 is that it reaches much further than simply
addressing the Savage Arms Inc. v. Western Auto Supply Co. case.
He opined that the language, "in tort or otherwise", which was
mentioned earlier, is extremely broad and expansive with regard
to a liability or an obligation of the disposing corporation.
He posited that such language would have more of an impact on
commercial litigation than it would on tort law.
MR. BROWN shared aspects of a case he recently concluded
involving the North Slope Borough as the plaintiff, and opined
that had HB 499 been in effect at that time, it would have
vitiated the liability of the offending tort-feasor, a
substantial corporation that had several iterations of itself
between the initial activity and the time of litigation, before
finally being subsumed by a large, global "filter" corporation.
Had HB 499 been in place, he added, the North Slope Borough
would have been out approximately $7 million and the village
water purification projects that it had engaged in with the
offending tort-feasor would not have been completed.
Number 0809
MR. BROWN offered:
In a day when we have so many problems right now with
potential corporate abuses, and I think right offhand
of [Enron Corporation] and [Global Crossing, Ltd.],
unless I've misread this bill and the breadth of this
bill to address a very simple issue of "continuity of
enterprise," this would do away with -- it would be
better to sell a corporation to an Alaska corporation
than to declare bankruptcy. You'd get the benefit of
your bargain: you'd get the money as the selling CEO
[Chief Executive Officer] or some of the directors,
and you wouldn't have to worry about preferential
transfers as long as you sold the corporation to an
Alaska corporation that was protected under this
[proposed] statute.
I think the issue regarding inverse condemnation is
inapplicable, and I think that should be the least of
the legislature's concern about how this would impact
the state of Alaska. I doubt it would impact the
state of Alaska at all; they are not a party to that
underlying Savage [Arms] litigation. So, I can't
imagine that it would have any direct impact - it
could; I haven't analyzed it to that extent - but I
think it does have a significant impact on a lot more
far-reaching issues than what was addressed by the
Savage Arms case. And I would certainly urge this
body to look at this very closely and to work very
closely with the attorney general's office, and not
just plaintiffs' lawyers, not just defense lawyers,
but all of us that practice in this field, because it
will have some far-reaching effects, far beyond a
products-liability case.
CHAIR ROKEBERG thanked Mr. Brown for his testimony and asked him
to "follow up on that."
Number 0915
REPRESENTATIVE JAMES moved to adopt the proposed committee
substitute (CS) for HB 499, version 22-LS1490\S, Bannister,
4/5/02, as a work draft. There being no objection, Version S
was before the committee.
CHAIR ROKEBERG announced that copies of Version S would be made
available to all interested parties. He mentioned that he is
interested in hearing more from Mr. Brown regarding some of the
issues that he raised. Chair Rokeberg announced that HB 499
[Version S] would be held over.
ADJOURNMENT
Number 0991
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:07 p.m.
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