Legislature(1995 - 1996)
02/21/1996 03:15 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE February 21, 1996 3:15 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Beverly Masek Representative Jerry Sanders Representative Brian Porter Representative Kim Elton Representative Gene Kubina MEMBERS ABSENT All members present COMMITTEE CALENDAR Confirmation of Governors Appointments: State Board of Registration for Architects, Engineers, and Land Surveyors; Alaska Workers' Compensation Board; Alaska State Board of Public Accountancy; Board of Clinical Social Work Examiners; Board of Dispensing Opticians; Alaska Labor Relations Agency; Board of Marine Pilots; Board of Marital and Family Therapy. HOUSE BILL NO. 414 "An Act requiring conciliation panel review in a civil action against an architect, engineer, or land surveyor; and providing for an effective date." - HEARD AND HELD PREVIOUS ACTION BILL: HB 414 SHORT TITLE: MANDATORY MEDIATION/DESIGN PROF LAWSUITS SPONSOR(S): REPRESENTATIVE(S) GREEN JRN-DATE JRN-PG ACTION 01/12/96 2428 (H) READ THE FIRST TIME - REFERRAL(S) 01/12/96 2429 (H) LABOR & COMMERCE, JUDICIARY 01/29/96 (H) L&C AT 3:00 PM CAPITOL 17 01/29/96 (H) MINUTE(L&C) 01/31/96 (H) L&C AT 3:00 PM CAPITOL 17 01/31/96 (H) MINUTE(L&C) 02/07/96 (H) L&C AT 3:00 PM CAPITOL 17 02/07/96 (H) MINUTE(L&C) 02/21/96 (H) L&C AT 3:00 PM CAPITOL 17 WITNESS REGISTER JEFF LOGAN, Legislative Assistant to Representative Joe Green Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-6547 POSITION STATEMENT: Reviewed changes made to HB 414. COLIN MAYNARD, Legislative Liaison Chair Alaska Professional Design Council 1400 West Benson, Suite 500 Anchorage, Alaska 99917 Telephone: (907) 274-3660 POSITION STATEMENT: Testified in support of HB 414. REPRESENTATIVE JOE GREEN Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-6547 POSITION STATEMENT: Sponsor of HB 414. RUSS WINNER 900 West Fifth, Suite 700 Anchorage, Alaska 99501 Telephone: (907) 277-9522 POSITION STATEMENT: Testified on HB 414. ACTION NARRATIVE TAPE 96-11, SIDE A Number 001 The House Labor and Commerce Standing Committee was called to order by Chairman Pete Kott at 3:15 p.m. Members present at the call to order were Representatives Kott, Elton, Kubina and Masek. Representative Rokeberg arrived at 3:35 p.m. Representative Porter arrived at 4:02 p.m. Number 107 CHAIRMAN PETE KOTT announced the committee would address confirmation appointments. He said the intent is to read the appointees names and which board they are being appointed to. The first board the committee addressed was the confirmation of Ernie Siemoneit-Healy to the State Board of Registration for Architects, Engineers, and Land Surveyors. CHAIRMAN KOTT noted the committee had a copy of Mr. Siemoneit-Healy's resume. He asked if there was an objection to the appointment. There wasn't objection. He announced the other nominee was Byron Haynes. CHAIRMAN KOTT noted he doesn't believe there is anybody signed up to speak in behalf or in opposition to the appointments. Number 302 REPRESENTATIVE KIM ELTON moved the slate of names for the State Board of Registration for Architects, Engineers, and Surveyors. CHAIRMAN KOTT asked if there was an objection. Hearing none, the two appointees were moved. Number 329 CHAIRMAN KOTT announced the next two individuals the committee would address would be Dean Nelson and Joanne Stoots appointed to the Alaska State Board of Public Accountancy. He asked if there was an objection to the appointments. There wasn't objection. Number 380 REPRESENTATIVE GENE KUBINA moved that the committee move the appointments to the Alaska State Board of Public Accountancy. There being no objection, CHAIRMAN KOTT said the appointments will be referred to the committee of the whole. Number 415 CHAIRMAN KOTT announced the next appointment would be Beverly Haywood to the Board of Clinical Social Work Examiners. He asked if there was an objection to Ms. Haywood's appointment. There wasn't objection. Number 444 REPRESENTATIVE ELTON moved the Governor's appointee, Beverly Haywood, to the Board of Clinical Social Work Examiners. CHAIRMAN KOTT asked if there was an objection. There being no objection, Chairman Kott said that member has been moved forward. Number 470 CHAIRMAN KOTT announced the next appointment would be Mary Seutter to the Board of Dispensing Opticians. He asked if there was an objection to this appointment. There wasn't objection. Number 482 REPRESENTATIVE KUBINA made a motion to move the nomination of Mary Seutter to the Board of Dispensing Opticians. Number 492 CHAIRMAN KOTT asked if there was an objection to moving the nomination of Mary Seutter to the full body. Hearing none, that member was moved. Number 508 CHAIRMAN KOTT announced the next member was Raymond Smith to the Alaska Labor Relations Agency. He said he will hold this appointment until the committee receives some further information from Dwight Perkins, Department of Labor. There is a requirement in statute not to have any more than three members from a party. Chairman Kott said the committee isn't sure if he is affiliated with a party. Number 515 CHAIRMAN KOTT announced the next appointments up for consideration were Dan Hensley, John Klepper, Bernie Smith and Michael Spence to the Board of Marine Pilots. He asked if there was an objection to these appointees. There wasn't objection. Number 565 REPRESENTATIVE ELTON moved the Governor's nominees to the Board of Marine Pilots. CHAIRMAN KOTT asked if there was an objection to moving the nominees. Hearing none, he announced those members were moved. Number 583 CHAIRMAN KOTT said the next appointments up for consideration were for Mercy Dennis, Dixie Hood and Sandra Samaniego to the Board of Marital and Family Therapy. He asked if there was an objection. There wasn't objection. REPRESENTATIVE KUBINA made a motion to move the Governor's nominees to the Board of Marital and Family Therapy. CHAIRMAN KOTT asked if there was an objection. Hearing none, he announced those nominees would move forward. Number 632 CHAIRMAN KOTT announced the next nominees the committee would address would be Dorothy Bradshaw and Philip Ulmer to the Alaska Worker's Compensation Board. He asked if there was an objection. There wasn't objection. Number 707 REPRESENTATIVE BEVERLY MASEK moved to pass the Governor's appointees to the Alaska Workers' Compensation Board. CHAIRMAN KOTT asked if there was an objection. Hearing none, those members were moved. REPRESENTATIVE ELTON referred to there being more nominees to the Alaska Workers' Compensation Board. CHAIRMAN KOTT noted those additional members would be before the committee the following Monday. Number 820 CHAIRMAN KOTT informed the committee the next nominee the committee would address would be Raymond Smith to the Alaska Labor Relations Agency. He said based on the research by Mr. Perkins, Mr. Smith is nonpartisan. Chairman Kott asked if there was an objection to Mr. Smith's appointment. There wasn't objection. Number 868 REPRESENTATIVE KUBINA made a motion to move the Governor's nominee to the Alaska Labor Relations Agency. Hearing no objection, Mr. Smith was moved. HB 414 - MANDATORY MEDIATION/DESIGN PROF LAWSUITS Number 900 CHAIRMAN KOTT announced the committee would hear HB 414 "An Act requiring conciliation panel review in a civil action against an architect, engineer, or land surveyor; and providing for an effective date." He asked the sponsor to give an overview of the proposed committee substitute Number 952 JEFF LOGAN, Legislative Assistant to Representative Joe Green, prime sponsor of HB 414, informed the committee members they should have a new work draft, Version M, dated 02/20/96. He noted there are two very minor changes in the work draft. MR. LOGAN referred the last meeting on the measure and said Representative Rokeberg had asked if there wasn't some type of a choice for an election at the beginning of the process. Mr. Logan said after speaking with the design professionals, the drafter and others involved in the process, that is the way the bill remains. There is no election, it's mandatory. If you were going to file against a design profession, you'd go through this process. MR. LOGAN said Representative Elton had asked why the process proceeds without discovery or before discovery can occur. He explained that has been addressed in one of the two changes in the proposed committee substitute. Mr. Logan said Representative Elton also asked about why there is a design professional on the panel. He said throughout the statutes there are examples of when a professional person is on a panel. If a case involving a design professional is being heard by a panel, it is common to have a member of that profession on the panel. Number 1068 MR. LOGAN informed the committee that Representative Elton had a question relating to a section of the previous version of the bill where a design professional could waive the mediation process within seven days of being notified that a claim had been filed against him or her. He noted that is another change made. It now reads that the mediation process is mandatory for both parties, the claimant and the design professional. There is no way for the design professional to get out once the claim is filed unless it is mutually agreed to by both parties. MR. LOGAN said there was also a question by Representative Elton about the hearings being closed to the public. After discussion with the parties involved and the drafter, it seemed perfectly appropriate to keep the proceeding closed and they have done so. Number 1145 MR. LOGAN said he would review Version M. The first change is on page 2. He referred to Article 9, which begins on line 6, and said in the previous version of the bill there was subsections (a) and (b). Subsection (a) is currently in the new version on lines 7, 8, 9 and 10. He said subsection (b) was the language that allowed the design professional seven days to opt out. That language is gone. The design professional can no longer opt out of the process. Number 1172 MR. LOGAN explained the next change in on page 5, lines 16, 17 and 18. There was a question from Representative Elton as to why there is no discovery. He said basically, about 25 percent of the claims are for personal injury and 75 percent are between contractors, design professionals and building owners. In those cases, the facts are well known to all the parties. Usually those are situations where correspondence has been traded back and forth. In the cases where there is a personal injury or death claim, a provision has been inserted on page 5, line 17, where discovery can be conducted under the new Alaska rule of civil procedures called, "Immediate Mandatory Discovery." Mr. Logan said, "It's basically give me everything you've got, I'll give you everything I got, we're going to do it right away, it's not a long drawn out process." That is the provision included in the bill for discovery. Number 1288 COLIN MAYNARD, Legislative Liaison Chair, Alaska Professional Design Council, came before the committee to address HB 414. He informed the committee that the council has worked with Representative Green's office to answer some of the concerns that were raised by the committee. In terms of discovery, the trial attorneys are still trying to work on the indigent issue and how it will be handled. They are going to try and get some language from the court system. Mr. Maynard said it is something that is not going to happen very often. He explained 75 percent of the cases are brought up by owners and contractors would have a hard time proving indigency. Out of the 25 percent left, most of those were workmens' comp cases where the workmens' comp actually ran out. They then went after the design professional which is a practice that is no longer legal. Designers now have an exemption from that kind of lawsuit. MR. MAYNARD said there has been some concern that this could drag out forever. There is a very specific time line in the bill where within 30 days you'll be notified and within 30 days after that, there will be a hearing. Within 30 days after that there has to be a decision. This isn't something that'll drag out for years and years. Mr. Maynard said there is also a provision which states that the statute of limitations tolls while that is going on. So as soon as the claim is filed, the clock on the statute of limitations stops and doesn't start again until after the decision is filed or six months after this process starts. The plaintiff is protected having his statute of limitations rights. The design professional can't stall and stall and try to get past the statute of limitations. Number 1407 REPRESENTATIVE ELTON questioned where the definitive time limitation language is. MR. MAYNARD indicated it is on page 2, line 16, "Within 10 days after receiving a claim, the department shall provide notice of the claim..." He then referred to line 18, "The notice must include a date, at least 10 but not more than 20 days after mailing the notice, within which a design professional against whom a claim is made may file a written response..." Mr. Maynard said it would be 30 days by the time the response is back. He referred to line 30, and said 15 days after the response is returned, they form a panel. Mr. Maynard referred to page 3, line 27 and said within five business days after the panel is formed, the panel shall give notice of the hearing, which would be at least 15 but not more than 30 days after that. The maximum is 65 days for the hearing. The hearing is an informal hearing and will last a day or two. The parties will review the facts and come to a quick determination as to whether there is merit or not. MR. MAYNARD referred to the panel's decision and page 5, line 30, and said within 15 days after the completion of the hearing, the panel shall file a written advisory opinion. So there is essentially 65 days until the hearing, you have a hearing of couple of days and 15 more days after that, the panel has to file their decision. Number 1509 CHAIRMAN KOTT referred to the time elements and asked if it would be a mixture of both work days and running consecutive days. MR. MAYNARD explained there is a new section which specifies the days on page 8, line 8, "COMPUTATION OF TIME." Number 1535 MR. LOGAN gave committee members a copy of the statute. Number 1548 REPRESENTATIVE ELTON asked what would happen if one of the parties wants to bring in an expert witness and that expert witness isn't available for 15 days. He said the time lines have limited almost everything except the length of the hearing. Representative Elton indicated this is a complicated process, and some of them will be, whether it is a lack of a guard rail on a bridge or the collapse of a school roof. He said he is skeptical that hearings can be accomplished within one or two days. He said he is more skeptical that when you're paying somebody per diem and a flat fee of $300, they're going to be working quickly to issue a written opinion. If someone has planned a trip to Mexico, that is going to take some precedence over the issuance of an opinion from the design review panel. He asked Mr. Maynard what he could say to assure him that wouldn't happen or couldn't happen. MR. MAYNARD said he didn't know that it couldn't happen. He pointed out that the reports he has read from the Department of Commerce in the state of Hawaii, hasn't cited any instances of that kind of a problem. He referred somebody that may want to bring in a specific expert witness, and said part of the thing is that nobody would have those witnesses lined up. You file a claim and get going. Most of the expertise would be on the panel. If there was a particular technical issue where you needed some kind of expertise, the panel could bring in somebody that is an expert in that field. They could subpoena them if they didn't want to come. If the parties wanted to get a particular person and everybody agreed to it, they could postpone the hearing until that person was available. It would be a mutually agreeable event. It wouldn't be something where one party could try to stall the whole operation. MR. MAYNARD recalled a construction case he heard about where a school burned down because some kids were playing with some lighters under the school. The school district sued the contractor, the designers, the barge company that carried all the material and the material suppliers. Most of those people had nothing to do with the fact that the school burned down, the barge suppliers certainly didn't. The legislation would take those people out so they don't have to spend the $10 or $20 thousand covering all the depositions, etc., and get to the people who are really at fault. Number 1735 REPRESENTATIVE ELTON said it seems to him that what happens in court may be the same thing that happens during a mediation process. The other way of saying that is the school district or the plaintiff, in this case, may say, "We're going to make this as difficult as possible and we want somebody from the barge company there and we want somebody from, you know, so and so there because they will back up our claims." He pointed out that sometimes it is the intimidation factor that is at work as well as the process of getting to the truth. There is nothing in the bill that precludes that from happening. Representative Elton referred to cost control and explained another problem he has with the bill is the cost of this process is going to be borne equally by the parties. One of the things that may happen is somebody with deep pockets or somebody that has an insurance company with deep pockets is going to say, "O.K., lets bring in these special witnesses and we're going -- this is going to be an intimidation factor because (indisc.) the plaintiff is going to see the costs mounting and say, `Hey, O.K. I give,'" if they have to bear the costs of the trial. MR. MAYNARD pointed out the costs are only borne equally if there is really no determination, one way or the other, about who is to blame. If there is determination that the case has no merit, then the plaintiff will be on the hook for those costs. If there is a determination that there is merit, then the defendant is on the hook for the costs. He noted the panel members are running the procedure and they're not going to be interested in sitting there and listening to ten expert witnesses telling them the same thing. Mr. Maynard said part of the problem with lawsuits in his field of work is that the frivolous suits are placed with no intention of ever getting court, 95 percent of the cases never get to court. He also noted in about 80 percent of the cases against design professionals they never have to pay out to the defendant. What the frivolous suit is intending to do is make it so onerous on the defendant that it is cheaper to pay the plaintiff off to make him go away than it is to drag it through court and hope that you get the facts out so the jury understands it. The judge then will give you his attorney fees or a portion of them. It isn't worth the trouble, you pay them off and tell them to go away. Going before the panel will be a much cheaper version. REPRESENTATIVE ELTON explained there is nothing in the bill that gives the panel the power to say, "O.K., you can't have an attorney." There is nothing that gives the panel the power to say, "You cannot call that witness." MR. MAYNARD said he thinks there is. REPRESENTATIVE ELTON said he is interested to know where it prohibits that. Mr. Maynard said it doesn't specifically prohibit it, but on page 4, line 13, "A panel hearing shall be informal." He read from line 16, "The panel may receive oral or documentary evidence." Mr. Maynard read from line 19, "The panel may designate who, among the parties, shall have the burden of going forward with the evidence with respect to the issues it may consider." Basically, they have the power to say, "O.K., you bring your witnesses." They also have to the power to say, "O.K., lets hear from this side now and is there anything else you need to tell us." The panel basically controls the hearing. It's not a trial. It is more of an informal arbitration mediation type process. Number 1995 REPRESENTATIVE ELTON said he reads the language completely different. He said he reads it as one of the parties has the burden and it's up to the parties to fulfill that burden. They may fulfill that by asking their attorney to be there or by asking that witness to be there or be flown in to be there. It says the panel may designate who among the parties, but it doesn't say how they must present their case. Representative Elton said if he were on the panel, he wouldn't look at the bill as giving him the ability to limit who can appear before the mediation panel as long as one of the parties wants to bring the person before them. Number 2032 REPRESENTATIVE ROKEBERG referred to the previous hearing on the bill and said there was discussion regarding some bypasses in the event that there was a threshold met of the amount of claim. He noted there are some methods for that in the state of Hawaii. He referred to the current draft and asked if there is any kind of a dollar threshold that allow the litigants to go right into superior court. MR. MAYNARD explained the experience in Hawaii is that very few of the cases met that limit. He then said actually they don't have a specific limit. They said if the amount is too big, they can go straight to court and not go through the panel process. So, something like 126 out of 133 cases never went to a panel. He said he doesn't see the point in having a panel if nobody has to go through it. Mr. Maynard referred to there being an option for the design professional to opt out which is something that never occurred in Hawaii even though they had that option. There was a concern that it wasn't fair for the professional to have that option. That was taken out of the bill, so basically, everybody goes through this process. Once you've gone through the panel process and you don't like the result of the panel's decision, you can go on to court. Number 2288 REPRESENTATIVE KUBINA asked who pays the $750. He questioned whether it would be everybody who is listed. He said the claimant has to pay. He asked if there were five different architects listed each one would have to put up $750. MR. MAYNARD said it's not (indisc.), but he doesn't see any problem with that happening. It could be clarified. Number 2308 REPRESENTATIVE KUBINA referred to page 2, lines 25, 26 and 27 of the proposed committee substitute, "If the design professional fails to deposit the funds required by this subsection, the claimant may proceed with a civil action..." In other words, if the architect doesn't want to pay the money, then the person who is filing the claim has to take them to court to get them to put up their money. MR. MAYNARD said it is saying that if the design professional doesn't pay the money and respond, then they don't have to go through this procedure and they can take the case to court. The design professional can't stall and not be responsive. He has a duty to cooperate with this function. If he is not cooperative, he doesn't get the benefit of the review panel and the case goes to court. REPRESENTATIVE KUBINA asked if that was the same as the original bill. MR. LOGAN indicated it was. REPRESENTATIVE KUBINA said he thought this forces people to go through this process and if they didn't, they would actually lose their license. MR. MAYNARD said the loss of a license is in a different section. If you've gone through the panel process and the funds that are deposited don't cover all the expenses and it is found that the suit had a merit, then the design professional will have to come up with the difference. If he doesn't come up with a difference, then he would lose his license. REPRESENTATIVE KUBINA said the claimant has to go through this but the person who is being accused does not. MR. MAYNARD said he guesses in essence that is what it says. He then clarified the claimant has to go through this process if the design professional is unresponsive. He doesn't get the protection of this and they go right to court. REPRESENTATIVE KUBINA questioned why this is even being done if the design professional can just ignore it and then the person has to file in court anyway. He asked why even make them go through this process. MR. MAYNARD said he doesn't think there will be very many cases where the design professional would not be responsive. Basically, this procedure is set up to cut his costs and it would be sort of "cutting off you nose despite your face," to not go through this to try to cut the costs of the lawsuit. If the case had merit, you'd probably want to settle. Mr. Maynard explained that if somebody decided to not pay, you'd then haul them to court and go through the normal process. Number 2455 REPRESENTATIVE ELTON said he thinks it is slick bill writing. There was testimony that it would be a mandatory process for both the design professional and for the claimant. Now it is no longer mandatory because it can go straight to court if the design professional says he/she is not going to pay the $750. This is not mandatory for the design professional. MR. MAYNARD said it wasn't intentional. He said they just didn't realize that that portion provided an out. It is more of a protection for...[End of Tape] TAPE 96-11, SIDE B Number 001 REPRESENTATIVE ELTON said it does give the plaintiff the right to decide whether or not they want to go through the mediation process. MR. MAYNARD said in essence, it does. Number 017 REPRESENTATIVE BRIAN PORTER explained the first thing that came to his mind when he read the bill was a concern that was dealt with in the tort reform bill which was the Turner Construction v. Scales case that dealt with the statute of repose. It established a suspected class and omitted the other construction elements and the court said that wasn't good - unconstitutional. He said he thinks that the out is to address that concern. The voluntary nature of the process, in general, might be the out as it only effects design professionals as opposed to contractors. Number 056 REPRESENTATIVE ELTON asked if the voluntary out has to be equally available to both parties or if it only applies to one party. REPRESENTATIVE PORTER said as he understands the bill, it applies to both. REPRESENTATIVE ELTON said he thinks the voluntary out would only apply to the design professional. REPRESENTATIVE PORTER said he thought it would also apply to the plaintiff. Number 081 MR. MAYNARD said there isn't a voluntary out for the plaintiff, mainly because this wouldn't act much as a deterrent if you could just say, "I don't want to do it." It doesn't cut the cost to the court system. It doesn't reduce the frivolous suit. Part of the point is to cut down the number of frivolous suits by making them more onerous. He noted in California when similar legislation was passed the number suits went down 25 percent. If the design professional gets a (indisc.--coughing) he has liability, then there is no interest on his part to drag this out. He would want to get this settled so there wouldn't be the long process. The cost of the panel also gets thrown in. Number 178 REPRESENTATIVE JOE GREEN, sponsor of HB 414, said, "It is something to the effect that because if the - if the defendant decides he doesn't want to pony up his portion of this, that in effect is saying that he has an out that he can go straight to court. This is not the court hearing we're having, this is an intermediate process, and I don't see that's necessarily a negative. Lets supposing that it isn't -- it absolutely is frivolous and rather then waste a bunch of time, he just says, `O.K., I'm not gonna pay up, we'll go to court and settle it there,' or it may be just the opposite. It may be a very big issue and he would not want to hesitate in this process because he knows there isn't gonna be... I mean we're talking about a very few number of cases now. Most, as the history shown, most all the cases are gonna be resolved either before or during this process and not end up going to court, but you're bringing up the `what if case,' the strange case, and I'm submitting to you that that may be one of those who says, `O.K., it's so frivolous or it's so big we want to go to court.' So why waste time here, whereas most of the cases it's not a waste of time, it is actually expedient." Number 226 REPRESENTATIVE ELTON said he thinks the goal is absolutely laudatory. He said he thinks we should be diverting a lot to the mediation process and not just for design professionals. Part of the problem is the mandatory nature for the claimant and the voluntary nature for the defendant. He said he thinks mediation should be the goal, but each party should have an equal opportunity to either participate in that process or to get out of that process. Representative Elton said he was somewhat encouraged when a previous testifier said the bill has been redrafted to allow that to happen. The language is kind of a "back door way" for it to be voluntary for one party. He said he thinks that an assumption is being made that may not be really based on reality. REPRESENTATIVE ELTON referred to the children who burned down the school and said he doesn't think the school district just arbitrarily said, "O.K., we're going to sue twelve people and we're going to go for the deepest pockets." He said he thinks they probably made that decision in conjunction with their attorney. In that case, the attorney's advise is going to be the same whether it is part of a civil court or part of the mediation. Number 364 REPRESENTATIVE GREEN said Representative Elton covered two issues, one is what is to prevent this from dragging on because they can't reach a conclusion. That is covered in the bill. If you can't reach a conclusion, that is one of the outs. Then the cost is shared and they go to court. They tried, they couldn't come to a conclusion, so it goes on to court. There are four different issues in the bill that are covered, the plaintiff wins, the defendant wins, you can't make a decision or it's frivolous. He indicated that he would have to stop and think if it is really worth it, as a frivolous lawsuit, that he may end up paying the whole thing but certainly if he thinks he has a case against a person as a designer, he would go through the process and find out if he really has a case. Number 452 REPRESENTATIVE KUBINA referred to page 2, line 32, "A panel shall consist of one individual acting as the chair, selected from among individuals who are familiar with and experienced in the tort claims settlement process, one attorney licensed in this state and experienced in trial practice, and one design professional." He said he doesn't understand the wording. Somebody would be acting as a chair and then the department is going to appoint a chair later on. He said that language is very confusing. REPRESENTATIVE KUBINA asked referred to page 2, lines 24 and 25 and asked if the per diem amount is (indisc.--coughing) fiscal note. Number 0555 MR. MAYNARD said that is included in the fiscal note. He noted he thinks there is a zero fiscal note. REPRESENTATIVE GREEN indicated the fiscal note is not a zero fiscal note. He said this will be paid for either mutually or by the loser. Representative Green said he believes the fiscal note has to do with the pass through. There is going to be some amount of money that the department would get in from the loser and then pay out to this person. He also pointed out that the panel is impaneled from a judge who would be covering the first part Representative Kubina asked about, someone that is familiar with court proceedings. MR. MAYNARD said the chair is appointed by the department. He referred to the phrase, "Individuals who are familiar with and experienced in the tort claims settlement process," and said they envision that as a mediator, arbitrator or another attorney, or somebody with tort claim settlement experience. Number 596 REPRESENTATIVE KUBINA asked how long the acting chair would be chairman. MR. MAYNARD responded it would only be for the life of the panel because one panel is appointed for each case. REPRESENTATIVE KUBINA agreed. He said he is isn't sure why there would be an acting chair when the department also appoints a chair. REPRESENTATIVE GREEN said acting as the chair of the group. He said, "You have been appointed and so you're gonna act as chair, but you're gunna be there throughout this thing. It's not that you're acting until something else happens. You're doing the job of chair instead of using the word acting. One will be doing the job as a chairman." Number 637 REPRESENTATIVE KUBINA said he understands that, but the very next sentence says, "The chair shall be appointed by the department." REPRESENTATIVE GREEN said, "It says O.K. where this guy comes from who is acting as the chair of the committee." REPRESENTATIVE KUBINA explained the bill also says that the panel may deny the person his legal counsel if the panel so desires on page 4, line 8, "A person, other than the panel, witnesses, consultants called by the panel, and the persons listed in AS 09.55.740, may not be present at a panel hearing except with the permission of the chair." MR. MAYNARD noted 09.55.740, on page 5, line 28, lists the council. He read, "REQUIRED PANEL ATTENDANCE. (3) counsel representing the parties, if any." REPRESENTATIVE KUBINA said unless excluded by the panel. He questioned why the panel has the right to exclude somebody's attorney. He said it is on page 5, line 22, "Unless excluded or excused by the panel, the following persons shall attend..." Representative Kubina questioned why they have to right to exclude an attorney. He said it doesn't make sense to him. MR. MAYNARD said he would find out why that language is included. He noted it is from the national law. Number 774 REPRESENTATIVE KUBINA explained the bill does not specifically say that the claimant or their attorney can cross examine. It says on page 4, lines 18 and 19, "the panel may, in its discretion, permit a party or counsel for a party to question other parties, witnesses, or consultants." You don't even have the absolute right to ask questions. He noted the panel is dominated by basically two attorneys and a design professional. He asked if isn't an absolute right that you'd be able to cross examine a person. REPRESENTATIVE KUBINA referred to page 5, lines 16 and 17, "the parties may not conduct discovery." He said he thought that from earlier discussion that they were going to ensure that discovery took place at the very beginning, immediately. MR. MAYNARD said for the 75 percent of the cases where owners and contractors are involved in the construction and you know the facts and you know why they're suing, there isn't a discovery process. For the case where the guy slips on the sidewalk or the building falls on his head, then there is the immediate mandatory discovery that is allowed by court rules because they don't know what is going on. They don't know if this guy screwed up or not. This will give them a chance to look at the records and find out if they did. He said there is no reason to go through the process with the contractors and owners because they already know what the issues are. They already have the information. REPRESENTATIVE KUBINA read, "except for when it involves injury or death, the parties may not conduct discovery." He said he is unclear of what the ramifications of that are. Representative Kubina said that when Mr. Maynard visited his office, he talked about including a section for the indigent and asked if it has been included in the bill. Number 922 MR. MAYNARD indicated it has not been included in the bill because he hasn't received information from the court system as to how they currently handle it. He said he thought it was something the Judiciary Committee could handle once the information is received. REPRESENTATIVE KUBINA said he has great respect for the chairman of the Judiciary Committee, but not getting answers in the Labor and Commerce Committee would be leaving it up to someone else to deal with. He said his last point is that he would also like to see a sunset clause so that there would be a three year period to see how it would work. Number 989 REPRESENTATIVE PORTER explained he is familiar with mediation arbitration procedures and in a very general sense, some of the apparent reductions in due process are purposeful because if you include it in the mediation process, every due process step you have in court, you would change the location of the trial. You haven't affected a resolution process that can cost less, take a shorter period of time and still, hopefully, reach an equitable decision. That is what mediation arbitration is all about. You just can't do everything that you're going to do in court or you haven't really accomplished anything. REPRESENTATIVE GREEN referred to Representative Porter's point and said discovery is one of those issues. He said when you get into discovery, it is a time vacuum and it goes on and on and on. In most cases, discovery is a method of looking at files. Number 1093 REPRESENTATIVE ROKEBERG suggested instead of having a sunset clause, they should report back to the legislature in two years. MR. MAYNARD pointed out that there is a required report in the bill. REPRESENTATIVE ELTON asked if there is a requirement that testimony be given under oath. He explained the reason he asked is because if a person is going to go through this process and if it is advantageous for either party to lie, you can't make a rational decision on whether to proceed beyond the mediation process. Number 1184 REPRESENTATIVE ROKEBERG pointed out on page 4, line 31, it states, "A member of the panel may administer oaths and affirmation,". REPRESENTATIVE ELTON asked if it shouldn't say "shall" instead of "may." REPRESENTATIVE ROKEBERG pointed out it is an informal proceeding. MR. MAYNARD said it is not meant to be a trial. It is meant to be an informal mediation arbitration type process that you basically bring the parties together, get the facts, get a read on where the case is and whether it has merit or not, and if it does have merit, decide whether it is against one party or all the parties. REPRESENTATIVE ELTON said he agrees, but if somebody is allowed the option to perjure themselves and there is no penalty for that or if there is no way of knowing whether or not they have, it would be difficult for a claimant to determine whether or not they have a good enough case to go forward after the mediation process is done, or vice versa. You need to be able to count on what you hear if you're going to be, at some point, making a decision on whether to proceed beyond the mediation stage. REPRESENTATIVE ROKEBERG said there doesn't seem to be much value in having a person swear under oath and then not have a contempt ability. He said in the statute itself, it allows the invocation of the appropriate court if there is a breach of the subpoena process. REPRESENTATIVE GREEN said he doesn't see that changing "may" to "shall" would weaken it any. MR. MAYNARD said he isn't sure that it exists in the current arbitration or mediation processes but if that is what the committee wants, it could be added. REPRESENTATIVE GREEN said it could be added to satisfy the concern and then if it is wrong, when the bill gets to the Judiciary Committee, and if there is a reason it can't be there, it could be removed. Number 1344 REPRESENTATIVE KUBINA said he isn't sure it does any good because you can't use proceedings for anything else anyway and there is not even a requirement to keep a tape or records. In fact, it seems to say that the only reason you would is it would be for the panel's benefit and not anybody else. So if somebody lied, there is nothing you can do about it anyway. He said this is part of the problem he has with some of the language. It seems like it could be set up against the claimant. He explained he is concerned about the individual person who thinks he/she got a raw deal. He said he is not so concerned about the contractor who also has the resources to deal with these things. It is the individual who may not be that sophisticated or wealthy and have the resources that could be set up by the way this process is written. Representative Kubina said he assumes that if somebody were to file a complaint or a claim that included the contractor and the designer, it couldn't go through this process. Although the designer may be able to get out of it, the person could still file against the contractor which may be a disadvantage because there is a way to sever one group out. Number 1512 REPRESENTATIVE GREEN said, "Well, I think actually as far as the claimant is concerned, ya, I suppose there is the chance that he can lie. As we said, either you shall administer the oath, that doesn't necessarily mean that he won't lie if there is no penalty. But as far as the professional is concerned, he is going to be sitting there with another professional whose professional licenses is on the line. If he says, `Hey, we'll go into cahoots and we're gonna say that this guy who has this claim against you isn't gonna get anything,' I don't think you'll find that in medical boards and other situations where you're judged by your peers, you're professionalism is so -- almost sacred that you don't risk it for anything because you're putting your professional stamp on this as one of these panel members. Now if it doesn't go for either one, the claimant says, `Hey, I got a bad back, I know darn well it went there, they said it didn't,' he still has the right to litigation, and this attorney that he got, whether it is contingency or a certain amount of money as it goes along, he still has that right to sue, because he has been lead to believe he has a very good case, in which case -- if it -- if this arbitration didn't come up with that, they could still go to court. So I don't see you've sacrificed anything that way. It just says that `Well, boy, you know I thought maybe we could hoodwink them but I don't think it's gonna work. We'd better probably pull in.' That's the kind of stuff this is supposed to avoid." REPRESENTATIVE KUBINA said then the claimant would have to deposit additional money if they lost. REPRESENTATIVE GREEN said if it was decided that it was frivolous and they lost, they'd have to come up with the additional money over the initial deposit which is as it should be if it is a frivolous claim. Number 1660 REPRESENTATIVE ROKEBERG moved that the committee substitute for HB 414, Version 9-LS1508\M, Ford, 2/21/96, be adopted. CHAIRMAN KOTT asked if there was an objection. Hearing none, Chairman Kott said the committee substitute is before the committee. Number 1689 RUSS WINNER testified via teleconference from Anchorage. He noted he was giving testimony on behalf of the trial lawyers. Mr. Winner explained the trial lawyers are generally supportive of legislation or any efforts to resolve litigation early. The (indisc.) Bar is not interested in delaying or dragging litigation out. They are interested in early resolution of litigation. He said they support the purpose of the bill, however, for the reasons that he testified to on February 7, the current version has the same problems that were present in the earlier draft. He said it appears to be special interest legislation favoring the design professionals alone. He said he believes that there could be constitutional problems. The bill imposes unnecessary roadblocks in going forward with resolution of a case. Mediation is a good idea but the way that it is set up in the bill seems to have the effect of being an obstacle rather than to encourage mediation and resolution of the case. He said it seems to his organization that a great majority of cases that are filed are not frivolous lawsuits. It was suggested that because 95 percent of all cases that are filed don't actually go to trial, it was indicated that it is really an indication of the number of frivolous lawsuits that are filed. He said that is correct as he has settled nearly all the cases he has handled. Mr. Winner noted he doesn't take frivolous cases, but when the cases he takes settle, they generally settle for a significant amount of money. That is not because they're frivolous, but because the plaintiff, defendant and their counsel have reached an agreement to solve the case without going into a trial before a jury. The fact that 95 percent of those civil cases settle is not a reflection of the fact that there are a large number of frivolous lawsuits filed. It is a reflection of the fact that plaintiffs, counsel, defense counsel and the litigants make an effort to and are generally successful in settling the lawsuit somewhere in the course of the legal proceeding that takes place between the time of filing a lawsuit and the time the jury is empaneled. MR. WINNER said his organization believes that the panel, as constituted, would be a biased panel for the reasons that he testified on the earlier version of the bill. He said they also believe that there is insufficient payment that's being offered to the panel members and it will be difficult to attract people and have an effective panel. MR. WINNER referred to the change that was mentioned in Section 2, AS 09.55.700, which dropped the provisional line that it's not professional to wave conciliation and said he doesn't know why that was done. He said it isn't clear to him if both the plaintiff and the design professional wished to waive mediation, that is something that could be accomplished. That is simply not clear in the current version of the bill. MR. WINNER said the other change that appears in the bill is that it allows discovery during the mediation process for personal injury cases or wrongful death cases, but apparently not for property damage or commercial cases. Mr. Winner said the way the bill is worded, it is not clear to him what is intended. The rules of discovery include rules 26 through 37. He pointed out only rule 26 deals with the mandatory exchange of discovery. It is a new rule and has only been on the books for several months. Mr. Winner said the if intent of the bill is to apply only rule 26, the mandatory exchange of discovery, then he would suggest the bill be clarified to say that. If that is what is intended, why not wait until suit is filed and until after the mandatory discovery normally takes place under rule 26 before the mediation takes place. He questioned why require mediation before suit is filed. MR. WINNER said what this bill constitutes or involves is a change in the court rules. He referred to Article 4, Section 15 of the Alaska Constitution, this bill would require a two-thirds vote by both bodies. The bill has the effect of changing civil rule 100 which calls for mediation. It allows the court to order the parties to enter mediation after a suit has been filed. This bill would require mediation before suit is filed. It is, in effect, a change in the court rules. Also, civil rules 26 through 37 are the discovery rules. They are invoked after suit is filed. Mr. Winner said the bill invokes at least rule 26 before suit is filed. MR. WINNER said the stated purpose of the bill is to cut down on frivolous lawsuits. He said he hasn't seen any statistics that indicates that there is a large number of frivolous lawsuits filed. He said he has no doubt that it happens on occasion. Any time you deal with changing the legal system, it is easy to illustrate an example of a horror story. Everybody can present an antidote and he can present antidotes on the other side. Anecdotical (indisc.) is very dangerous. He said he thinks it is much more useful, although much more boring and harder to do, to come up with hard statistics that indicates whether there is a problem or not. He said he has not seen and doesn't believe there are any statistics that show there is a large number of frivolous lawsuits filed in this area. He questioned the need for legislation that has a dramatic effect on lawsuits against a class of defendants. MR. WINNER said he believes if the bill is enacted, it would have an onerous effect not only on frivolous lawsuits, but on all lawsuits that involve design professionals. Rule 11 prohibits a attorney from filing a pleading unless he, in good faith, believes that it is true. Rule 95 allows the court, after a hearing, to post sanctions against an attorney if such a thing happens. Mr. Winner pointed out that under the civil law, there is the opportunity to bring a lawsuit against somebody who has filed harassing litigation or fictitious litigation. There are already mechanisms in place to detour frivolous lawsuits. MR. WINNER said the other deterrent of bringing a frivolous lawsuit is that most lawsuits brought on behalf of injured people or people who have died and are brought on via a contingent fee bases by the attorney because the injured victim or the estate does not have the funds to pay the attorney by the hours. In that case, a contingent fee is really the only way the victim or the estate can retain counsel. In his experience, plaintiff's lawyers generally do not take cases that they view as frivolous because they figure they'll put in a whole lot of work and spend a whole lot of money and never get paid. There is a very strong market incentive against frivolous lawsuits being filed by virtue of....[End of tape] TAPE 96-12, SIDE A Number 001 CHAIRMAN KOTT thanked Mr. Winner for his testimony. There being no further testimony, Chairman Kott closed public testimony. CHAIRMAN KOTT said there has been a lot of discussion on the bill. The objectives of the bill is to potentially cut down on frivolous lawsuits and the other is to hopefully keep the parties from going to court and encourage them to settle out of court. Most of the areas of concern are dealing with judicial matters. He said he thinks there are some constitutional issues that need to be addressed. Also, some of the civil rules should be reviewed. CHAIRMAN KOTT said there was another issue which dealt with whether or not all the design professionals named would have to post $750. He said he would like to call on Mr. Maynard to clarify that. MR. MAYNARD said he would clarify it if he could. He informed the committee that he isn't sure that it is clear that every defendant has to pay this. CHAIRMAN KOTT referred to page 2, line 16, "Within 10 days after receiving a claim, the department shall provide notice of the claim and of the deposit requirement under (b) of this section to all design professionals against whom the claim is made." He said if they're a party, he would suspect they would have to post the $750 each. He asked if there is more than one plaintiff, would they also have to post the money. REPRESENTATIVE GREEN said he didn't think so. He explained the claimant, whether it is several or one, would post $750 and they would end up splitting that or assigning it to one. If there are six people as defendants, all six of them would need the $750. Representative Green said that wasn't the intent and he doesn't think that is the way it would read by an attorney. That would certainly be subject to review in the Judiciary Committee. CHAIRMAN KOTT said the bill would be brought back before the committee. ADJOURNMENT Number 275 CHAIRMAN KOTT adjourned the House Labor and Commerce Committee meeting at 4:55 p.m.