Legislature(1997 - 1998)
02/03/1997 03:17 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 3, 1997
3:17 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
*HOUSE BILL NO. 31
"An Act relating to civil liability for certain false allegations
or material misstatements of fact in a civil pleading or
proceeding, for certain improper acts relating to signing a civil
pleading, for certain improper acts relating to civil pleadings or
proceedings, for making an intentional false statement of a
material fact, for acting on a civil claim or defense without
probable cause, or for acting for a purpose other than proper
adjudication of a civil claim; amending Rules 13(e) and 82(b),
Alaska Rules of Civil Procedure; and providing for an effective
date."
- MOVED HB 31 OUT OF COMMITTEE
HOUSE BILL NO. 68
"An Act relating to the exemption from the requirement for payment
for overtime under a voluntary work hour plan; and providing for an
effective date."
- SCHEDULED BUT NOT HEARD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 31
SHORT TITLE: CIVIL LIABILITY FOR IMPROPER LITIGATION
SPONSOR(S): REPRESENTATIVE(S) MULDER,Cowdery
JRN-DATE JRN-DATE ACTION
01/13/97 35 (H) PREFILE RELEASED 1/3/97
01/13/97 35 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 36 (H) L&C, JUDICIARY, FINANCE
02/03/97 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE ELDON MULDER
Alaska State Legislature
Capitol Building, Room 501
Juneau, Alaska 99801
Telephone: (907) 465-2647
POSITION STATEMENT: Sponsor of HB 31.
CHRIS KENNEDY, Assistant Attorney General
Environmental Section
Civil Division
Department of Law
1031 West Fourth Avenue, Suite 200
Anchorage, Alaska 99501-1994
Telephone: (907) 269-5100
POSITION STATEMENT: Testified on HB 31
MICHAEL LESSMEIER, Attorney
Lessmeier and Winters
One Sealaska Plaza, Suite 303
Juneau, Alaska 99801
Telephone: (907) 586-5912
POSITION STATEMENT: Testified in support of HB 31
CHARLES E. COLE, Attorney
406 Cushman Street
Fairbanks, Alaska 99701
Telephone: (907) 452-1124
POSITION STATEMENT: Testified against HB 31
BOB MINTZ
3035 Bettles Bay Loop
Anchorage, Alaska 99515
Telephone: (907) 344-3035
POSITION STATEMENT: Testified
PAM LaBOLLE, President
Alaska State Chamber of Commerce
217 Second Street, Suite 201
Juneau, Alaska 99801
Telephone: (907) 586-2323
POSITION STATEMENT: Testified in support of HB 31
STEPHEN CONN, Executive Director
Alaska Public Interest Research Group
P.O. Box 101093
Anchorage, Alaska 99510
Telephone: (907) 278-3661
POSITION STATEMENT: Testified
JEFF BUSH, Deputy Commissioner
Office of the Commissioner
Department of Commerce and Economic Development
P.O. Box 110800
Juneau, Alaska 99811-0800
Telephone: (907) 465-2500
POSITION STATEMENT: Testified on behalf of the Administration
ACTION NARRATIVE
TAPE 97-7, SIDE A
Number 0000
VICE CHAIRMAN JOHN COWDERY called the House Labor and Commerce
Standing Committee meeting to order at 3:17 p.m. Members present
at the call to order were Representatives Cowdery, Sanders, Brice
and Ryan. Representative Rokeberg was in attendance via
teleconference from Anchorage. Representative Hudson arrived at
3:19 p.m. and Representative Kubina arrived at 3:32 p.m. Vice
Chairman Cowdery turned over the chair responsibilities to Chairman
Rokeberg.
HB 31 - CIVIL LIABILITY FOR IMPROPER LITIGATION
Number 0120
CHAIRMAN ROKEBERG said the committee would conduct a public hearing
on HB 31, "An Act relating to civil liability for certain false
allegations or material misstatements of fact in a civil pleading
or proceeding, for certain improper acts relating to signing a
civil pleading, for certain improper acts relating to civil
pleadings or proceedings, for making an intentional false statement
of a material fact, for acting on a civil claim or defense without
probable cause, or for acting for a purpose other than proper
adjudication of a civil claim; amending Rules 13(e) and 82(b),
Alaska Rules of Civil Procedure; and providing for an effective
date."
Number 0146
REPRESENTATIVE ELDON MULDER, sponsor of HB 31, said the bill which
is subtitled the "Frivolous Lawsuit Prevention Act," has the
intention to prevent frivolous lawsuits by requiring that parties
to lawsuits be truthful and responsible in their pleadings. This
bill discourages false statements, and litigation and encourages
responsibility by all parties and their attorneys. It requires
more careful and focused preparation in the presentation of
pleadings. This bill creates an obligation for litigants and
attorneys to make responsible efforts to assure that claims have a
probability of succeeding. If the claim is knowingly and
recklessly false, then both the attorney and the party can be
assessed damages.
REPRESENTATIVE MULDER said, currently, there is no effective way of
holding parties responsible for frivolous pleadings. Frivolous
pleadings increase the litigation costs for the involved parties.
They also increase the cost of our judicial system.
Number 0252
REPRESENTATIVE MULDER said there would be people who will testify
against HB 31, who would say there are already effective mechanisms
in place including a $1,000 potential assessment, levied by the
judge against an attorney or party for such actions. He said he
would present to the committee that he does not feel that this
piece of legal action is utilized today, so it is not effective.
He said last summer when the tort reform group worked with
Representative Porter to come up with a tort reform bill, they
recommended increasing the potential fine to $10,000. He said his
position is if this mechanism is not being utilized at $1,000, why
would they use it at $10,000. A deterrent is only a deterrent if
it is utilized.
Number 0327
REPRESENTATIVE MULDER said HB 31 requires attorneys as well as
their clients to research their claims to assure that they are
factually supported before filing a suit. This bill will help
eliminate "boiler plate pleadings and lawsuits" and encourages
responsible and focused pleadings. He said boiler plate pleadings
include everything anyone could ever imagine could ever happen,
rather than focusing on the specific issues that actually did
happen. Boiler plate pleadings increase the time and the cost of
litigation. These extraneous pleadings are expensive to work
through and are most often thrown out. They simply cause one party
and the court system to spend significant dollars to pare filings
down to the real issues. He said many suits are often less
expensive to settle than litigate, regardless of their merit. He
added that this is another important point of HB 31.
REPRESENTATIVE MULDER said that oftentimes litigation is thrown at
a claimant or a defendant and it is in his or her interest to
settle, rather than to debate the merits of the issue. He said the
case should be argued on its merits. The case should be factually
based on the merits rather than the fact that he could probably get
$25,000 out of you because it is in your interest to settle and you
have the deep pockets.
Number 0420
REPRESENTATIVE MULDER said HB 31 does not effect suits filed in
good faith, but it will have a significant deterrent effect on
those cases without merit. A system that allows deceit to be
rewarded must be changed. He said this is our current system. He
indicated that this type of system is not why we have and support
a judicial system. In a nutshell, HB 31 assigns financial ability
to those who file lawsuits without probable cause, to those who
provide false information, to those who use claims and cross claims
to cloud the issues and also for those who file unsuccessful claims
on the hope of finding someone, somewhere willing to settle rather
than spending dollars to fight the suit. He said the trier of
fact, usually the jury, will make the determination whether the
untrue information presented was intentional and material. If
honest errors are made, then there are no sanctions. A jury can
make those decisions. The deterrent effect of HB 31 will reduce
those cases that are inappropriate without inhibiting the filings
of cases believed to have merit.
Number 0506
REPRESENTATIVE MULDER said he introduced the bill last session in
the form of HB 316 which passed the House 39 to 0 before being
rolled into the tort reform bill which was ultimately vetoed by the
Governor. He said HB 316 did have support through the last
process. He said not unexpectedly, HB 31 will be opposed by the
Trial Attorney's Association. He said, "I think, Mr. Chairman -
members of the committee, that anything we can do to help expedite
the legal system, to base it upon merit and fact, and to limit the
amount of time that people have to be exposed to court, and to base
those decisions upon merit and fact and substance and get away from
boiler plate proceedings, get away from intimidation and from
stalling tactics, that we're going to be doing the public a
service. I think that's what the public expects in the end."
Number 0583
REPRESENTATIVE MULDER said Mr. Lessmeier and Mr. Mintz, attorneys
who are in support of HB 31, are both on teleconference. He
referred to the fiscal note from the Department of Law. He said
the fiscal note says that if the Department of Law is forced to
live under these same rules, there will be some litigation or costs
in relation to federal cases. He said he had a proposed amendment
which exempts the state from this statute, which would eliminate a
fiscal note from the Department of Law.
Number 0649
CHAIRMAN ROKEBERG said Mr. Kennedy was on teleconference in
Anchorage if there were any questions about the fiscal note.
Number 0665
REPRESENTATIVE MULDER said Mr. Christensen represents the Alaska
Court System. He said their fiscal note is approximately $37,000.
He added he isn't concerned with their fiscal note, he is concerned
about the fiscal note from the Department of Law.
CHAIRMAN ROKEBERG said Mr. Kennedy from the Department of Law was
in Anchorage to testify.
Number 0749
REPRESENTATIVE BILL HUDSON asked that the committee address the
proposed amendment so that the committee can adequately address the
fiscal note.
CHRIS KENNEDY, Assistant Attorney General, Environmental Section,
Civil Division, Department of Law, was next to testify via
teleconference from Anchorage. He said he didn't intend to testify
on HB 31. He said he was at the Legislative Information Office to
testify at another hearing. He said he was familiar with the HB
316 from last year. He indicated he had not seen the current
fiscal note.
Number 0830
REPRESENTATIVE JOE RYAN referred to the last page of HB 31, Section
3, and said Rule 82 was being modified. He said his understanding
was that rule was modified some years ago and the court went and
changed it instead of paying the fees, they paid a percentage of
the fee. He asked what is to stop the court from doing the same
thing over again. He asked if HB 31 would require that two-thirds
of the actual rule change to make the court obey the change.
Number 0871
REPRESENTATIVE MULDER said the intention of HB 31 is for an actual
rule change, so they are trying to get a two-thirds vote.
Number 0889
REPRESENTATIVE COWDERY clarified that HB 31 is basically about
truthful testimony and asked him if he believes the fiscal note
from the Administration is a truthful response.
Number 0908
REPRESENTATIVE MULDER said the fiscal note received from the court
system is accurate. He said he has worked with the court system to
come up with what is believed to be an actual number. He referred
to the fiscal note from the Department of Law and said, "It has
been my experience, Mr. Chairman, if the Administration doesn't
like the bill it has a strange correlation with getting an inflated
fiscal note. If they like the bill it is amazing how the number
comes down. I'm not really conjecturing, all I can say is I
believe that the amendment we have prepared will address that
concern and virtually, what I think, eliminate their fiscal note.
So, I'm happy to work with them to do that."
Number 0967
REPRESENTATIVE MULDER said once HB 316 was rolled into HB 158, the
tort reform bill, the proposed amendment to HB 31 was adopted into
HB 158. He said HB 31 is not rolled into the tort reform bill this
year as tort reform is a separate issue.
Number 1027
MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, testified via
teleconference on behalf of State Farm. He noted he has been in
practice in Alaska since 1979. He explained most of his practice
involves litigation work on behalf of insurance companies. He said
he believes HB 31 has two important concepts. One is a concept
emphasizing truth. The second concept emphasizes the
responsibility of those who use the litigation system.
Number 1077
MR. LESSMEIER said if we look at the concept of truth, HB 31 has a
specific provision in subsection (b) that basically says if a
party, it doesn't matter which party, comes to court and makes a
statement that is intentional, false and material that they
automatically loose. He said this is a good idea because there is
no disincentive to lie in the system today. Most of the time the
only sanction that a person would face would be the damage done to
his or her credibility. He said the benefit of HB 31 is that it
would make the consequences of exaggeration or lying certain and
apparent to everyone that comes to the court system. He said the
civil justice system ought to encourage the telling of truth and
there isn't much of an argument to the contrary on this particular
provision. This provision, to his knowledge, was not controversial
last year. The only argument raised against it was that there are
presently things that judges can do to discourage people who come
to court and lie. In his experience, he has seldom ever seen
judges, particularly after a case has been resolved, spend the time
to get involved in issues like that. He has very rarely, if ever,
seen attorneys sanctioned. He has hardly ever seen parties
sanctioned for making false statements.
MR. LESSMEIER said the difficulty is that many of these cases that
involve false statements impose a huge cost on the system to
discover them. He said the system would be much better off if
every lawyer, who brought a case to court, had an obligation to sit
down with their client and explain the consequences of making a
false statement of material fact intentionally. He said most of
the good lawyers have such a discussion with their clients, but the
sanction is not certain and HB 31 makes it certain. He said it is
a sanction that could be placed in the system without any
significant cost because the only thing that it would take would be
a jury instruction. He said probably the most significant benefit
from this provision is the deterrent effect and the claims it would
weed out ahead of time. He said he felt this was a good provision
and encouraged the committee to pass HB 31.
MR. LESSMEIER referred to the attorney's responsibility provision,
and said there is a lot of litigation which is expensive in terms
of time and emotional cost. He said HB 31 is designed to address
some of that litigation and noted Mr. Mintz can speak to that.
Number 1259
MR. LESSMEIER said last year a fear was expressed that if HB 316
was passed it would lead to a lot of secondary litigation because
the winning side would always sue the losing side saying that their
position didn't have a reasonable basis. He said he did not think
that would happen because of the sanction that is set forth in the
later part of HB 31. He said HB 31 basically provides that if you
file one of these actions and you lose, you will pay actual costs
and attorney's fees to the other side. He said not many people are
going to run that risk. Mr. Lessmeier said he felt we would see
fewer claims, rather than more claims.
Number 1307
CHAIRMAN ROKEBERG referred to Mr. Lessmeier's written testimony and
said it states that as much as a 17 percent to 20 percent on
increase in total claims based on the potentiality of fraud or
"padding" or build-up claims.
Number 1328
MR. LESSMEIER said that information came from a study that was done
by the Insurance Research Council.
Number 1337
CHAIRMAN ROKEBERG asked Mr. Lessmeier if HB 31 were enacted, would
the potentiality for that type of suit decrease in the state of
Alaska with a potential savings to consumers.
Number 1348
MR. LESSMEIER said he could not put a number on it, but HB 31 would
have a positive effect. He said many of the cases that ultimately
go to trial are cases where damages are hard to quantify. For
example, soft tissue claims and things of that nature. He
questioned the difficulty of the situation if any of those cases
would have an element of either having untruthful statements or
exaggerating statements. He said the benefit of HB 31 goes far
beyond cases that involve insurance claims. He thought every
single claim and every single person who is forced to either defend
a claim or bring a claim would benefit from this bill. If their
goal was to decide cases on their merit and to encourage truth,
then HB 31 will fundamentally change a lot of what happens in our
justice system because there is no present certain deterrent if a
jury finds that someone is lying. The only damage that they suffer
is to their creditability and in many cases they still have to go
on to decide the merits of the claim. He said HB 31 would have a
benefit, certainly, in the kinds of claims that he is typically is
involved with, in literally every plaintiff.
MR. LESSMEIER stated he believes that HB 31 would benefit both
sides, it doesn't favor one side or the other.
Number 1432
REPRESENTATIVE RYAN asked if a majority of these cases civil
actions are filed by what is known as personal injury attorneys,
people who are looking at contingencies to make some fees for their
work.
Number 1454
MR. LESSMEIER said he wouldn't say the majority, but some of them
might. He wanted to make it clear that in his testimony that the
plaintiff's attorneys as well as the defense attorneys for the most
part are trying to do their job. He said HB 31 would get at the
attorneys that are not trying to live to that level of
responsibility.
Number 1477
REPRESENTATIVE RYAN asked if it would be a normal practice to
instruct the client what their testimony should be under oath.
Number 1486
MR. LESSMEIER said a lot of attorneys talk about and discuss the
testimony of their client. He hoped that not many or few would
instruct the client what to say under oath.
Number 1504
REPRESENTATIVE RYAN said he is trying to establish what the
actuality is and what causes a bill like this to be necessary.
Number 1510
MR. LESSMEIER said the actuality is that, whether conscious or not,
there are a lot of claims where it is hard to get at what the truth
really is. He said there are a lot of claims where there is a
great deal of money spent trying to determine what the truth is.
Some of those claims involve fraud, some involve a false statement
of material fact, they involve lying. He said those are the claims
that he thought HB 31 was designed to address. He said we are
never going to eliminate those claims totally, but we can reduce
them. Mr. Lessmeier stated HB 31 does that for both plaintiffs and
defendants. He said the less that we spend on litigating claims,
the better off everybody is. If we can get to the truth quicker,
everybody is better off.
Number 1572
REPRESENTATIVE HUDSON referred to page 2, lines 18 through 20, and
said it talks about a person injured by a violation of this new
provision who might bring an action for compensatory and punitive
damages. He asked if there were any limits on the punitive
damages.
Number 1598
MR. LESSMEIER indicated that currently there is no specific limit
in the law. Presently, he said he thought that our supreme court
has said that the punitive damages should have some reasonable
relationship to compensatory damages, but indicated that there is
no formal system.
Number 1611
REPRESENTATIVE HUDSON asked if this same action would apply to
government as well as to the individuals who are filing a claim.
Number 1621
MR. LESSMEIER said this question would be addressed by
Representative Mulder's proposed amendment. He said the proposed
amendment will say that this action does not apply against the
state of Alaska. In other words, you couldn't bring an action for
violation of this section against the state of Alaska. His view is
that depending on what that proposed amendment says, the state
would probably be exempt. He said it is interesting that at least
one of these concepts already exists with respect to certain
litigation against the state; in part the concepts set forth in
subsection (b).
Number 1661
REPRESENTATIVE SANDERS referred to page 2, line 25, (d), which
reads, "a person who...as a representative of a party," and asked
if the person was the attorney.
Number 1678
MR. LESSMEIER said Mr. Mintz might be able to answer the question
better than he is able to. He said in his opinion, it would be the
attorney.
Number 1686
REPRESENTATIVE SANDERS said the purpose of HB 31 is to create
consequences for people who lie in these situations. He indicated
he likes HB 31. He said he has an amendment before him that says
that the state's attorneys would be exempt so they can lie.
Number 1714
REPRESENTATIVE MULDER said he would let the Department of Law
address this concern.
Number 1731
REPRESENTATIVE SANDERS said that sounds like what we are trying to
fight in the trials. They are making it so expensive that you
can't afford to do the right thing, you have to roll over and do
what they want. He said he would have a lot of trouble voting for
this amendment.
Number 1745
REPRESENTATIVE MULDER said the Department of Law has a logical
argument about why they feel the state should be exempted.
Number 1773
CHARLES E. COLE, Attorney, came before the committee to give his
testimony. He informed the committee he was admitted the Alaska
State Bar in 1955, and has practiced law in Alaska continuously
since that time. He noted he is speaking on his own behalf. He is
not a member of the Trial Lawyers Association. He stated he does
not generally view himself as a trial lawyer although he has
practiced in the courts over the years. He stated he opposes HB
31.
Number 1813
MR. COLE said in 1938, the federal rules of civil procedure were
adopted, applicable to the federal courts. They made a momentous
change in the procedural rules in the federal courts. One of the
things that they did, among others, was to adopt discovery
proceedings which we know of today as depositions, the production
of documents, written interrogatories and things of that nature.
He said among the other provisions which were adopted at that time
was what is known as Federal Civil Rule 11.
MR. COLE said, in general, that rule provided for the provisions
that are in Section 1, subsections 2 and 3, which include lines 3
through 10 on page 2. He said that rule remained in the federal
rules civil procedure as Rule 11 until approximately 1982. He said
there had been prior concern about frivolous lawsuits and a
lawyer's obligation in signing a pleading which led to amending
Rule 11. He said they tightened Rule 11 (indisc.--paper shuffling)
greater burdens of investigation, research before filing a
complaint or signing their name to any pleading. This was hailed
as the savior to these lousy lawyers who were abusing the system
much as what Mr. Lessmeier stated in his testimony.
MR. COLE said it was about three years before Rule 11 started
wreaking havoc with litigation in the federal courts. Beginning in
about 1986, articles were written in various law reviews, federal
rules decisions and in other literature commenting upon this rule
because it wasn't working, it was a disaster. He said the
amendment to Civil Rule 11 in 1982, was a small tightening of the
obligations of rules compared to what happens in HB 31. He said
federal district court judges started complaining in literature
about Rule 11. Courts of appeal judges, including those on the
court of appeals who (indisc.) friends in the Ninth Circuit,
started having huge problems with this rule.
MR. COLE said that one of the things they found was that lawyers
started suing lawyers right off the bat. Every time a motion would
be filed, the opposition would file another motion seeking sanction
against the lawyer who filed the motion. Then the lawyer who was
the recipient of that motion would file a motion back for sanctions
under this amended and tightened Rule 11 against the lawyer who
made the sanctions motion against them. He said pretty soon this
squabbling between lawyers who kept seeking sanctions against the
other started consuming the path of the litigation.
MR. COLE said, "The number of appeals which went not only required
decisions on these issues by the United States district judges, but
then the litigation in the courts of appeal over this issue started
proliferating." He noted he has the statistics that he could
provide to the committee. Rule 11 became such a disaster that they
convened in 1990, at a conference in Washington, D.C., dealing with
all the lawyers, judges and people who worked with the federal rule
and said the rule is a disaster and it needs to be done away with
it. He said they did do away with the rule.
MR. COLE said if you think that this rule is going to reduce the
cost of litigation to the consumer, to put it softly, he doubted
it. He said there is nothing worse than litigation when lawyers
start fighting lawyers. They start writing the time slip, file
opposition to motion and then send those bills to the client. He
said clients are receiving these huge bills from lawyers who are
fighting each other, who can't communicate over the phone and are
mad at each other for filing these motion against them. He said
the clients are paying staggering bills and nothing is happening to
their lawsuit. He said in 1993, they changed the rule to relax it.
Number 2134
MR. COLE said he represented a prominent Anchorage attorney who had
a motion filed against him for a $2 million sanction. He said it
took him a better part of a year to defend that motion. He wrote
a 525 page analysis of the case including the tracing of all the
decisions on this subject in the Ninth Circuit and throughout the
country. He said when he finished, the bill was sent to the
insurance company for about $150,000. He said it took a massive
amount of work to defend against it. The motion was denied and the
$8,000 sanction previously imposed was vacated.
MR. COLE said, if HB 31 comes to law, it will ruin the civil
practice in the courts because there will be attorneys fighting and
fighting. He referred to lines 18 through 22 and said then this
claim for compensatory and punitive damages shall be asserted in
the same action in which the injury arose. He asked the committee
to think how that is going to work. He presented a scenario where
a client comes to you and says he has this claim. There are the
pleadings and finally someone is going to say that they have to sue
the other lawyer and send this case to the jury. The jury is going
to have decide between the lawyers and then decide on the claims
against the client. It will be a terrible mess and this will
happen. He said he respects Representative Mulder and Mr.
Lessmeier, but HB 31 is going to ruin the system.
MR. COLE said he went to the law library in Fairbanks and looked
through the periodicals starting with 1986, copying a hundred pages
of articles telling what a disaster the 1982 amendments to the
Federal Civil Rule 11 was. He said with all due respect, bear in
mind the experience of the federal courts to this rule. It did not
work there and it would be a disaster here. He said HB 31 would
not affect him, but we have to preserve the system.
Number 2278
REPRESENTATIVE HUDSON clarified that the old Rule 11 is essentially
what we have in HB 31, but not as extensive.
Number 2286
MR. COLE said that the old Rule 11 is by light years not as
extensive. He said there is a similar rule in the Alaska Rules of
Civil Procedure which was adopted by our supreme court which does
not go nearly this far, but it is there and available for use by
the judges when they want to use it if they feel some lawyer is not
doing what he or she is not doing what they should be doing. He
said there are plenty of hours such as striking pleadings and
things like that which deal with this.
Number 2308
REPRESENTATIVE HUDSON asked what spurs this concern over frivolous
losses. He asked if there was anything in the existing law that
could be applied or enlarged which would reduce or eliminate some
of the knowingly false claims.
Number 2327
MR. COLE said he speaks with superior court judges and said the
tort reform group heard from them in their proceedings. He said
Judge Shortell said he did not see these frivolous lawsuits. He
urged the committee to speak with these judges and repeated that he
would provide information to the committee.
Number 2372
REPRESENTATIVE RYAN said the period from 1795 to 1815, when
Napoleon was emperor of the French, there was a British perception
that a great tyranny was being done to the European continent. He
said there was a toast in the British army which was called the
confusions of the French. He said the confusion that Mr. Cole
brings forth to the passage of HB 31 is intriguing.
MR. COLE said Justice Rabinowitz, who has been on the trial bench
for years, is retiring. He said the committee should ask what his
views are and not just listen to the trial lawyers. He said they
all have economic interests. The committee should ask people who
are not economically involved and get their views.
Number 2429
REPRESENTATIVE COWDERY recited personal examples where witnesses in
a lawsuit lied, but the insurance company settled the lawsuit. It
had nothing to do with justice. He said a lot of public people are
not lawyers and many of them have experiences similar to what his
was and that is perhaps why HB 31 is before the committee.
TAPE 97-7, SIDE B
Number 0000
REPRESENTATIVE COWDERY said the public has concerns about the
existing situation.
Number 0013
MR. COLE said, "That I recognize. The remedy for that is trial
judges, if they are convinced perjury has been committed, they
should summarily refer that case to the district attorney for
investigation and possible prosecution. And furthermore, district
attorneys should prosecute people who commit perjury and people who
are prosecuted for perjury should not only be the people who lie
while testifying for the defense in a criminal case, but they
should prosecute people who lie in civil cases. I mean that's the
way you clean up people who lie in this system. And, you know,
lawyers they don't have a lot of control over people who lie. And
let me just say, technically, what is a material misstatement of
facts, I mean, if you don't think that in the, the last line in
page one of this is going to cause litigation, that will (indisc.)
the court system for, in litigation for the next hundred years. I
mean, that is just an invitation to litigation and big expenses."
Number 0056
REPRESENTATIVE MULDER asked what could be wrong with the public's
expectation that lawsuits be based upon truth and fact.
Number 0070
MR. COLE said lawsuits should be based on truth and fact. He said
he thinks the existing procedures are adequate to do that. If what
we are really looking for in our civil judicial system, as well as
our criminal judicial system, is the prompt, expeditious and fair
resolutions of disputes between litigants, whom we should
concentrate our function toward resolving disputes in that fashion
and not create satellite litigation which will exist. He said this
litigation will cause more expense and confusion to the resolution
of civil disputes then you can ever imagine and certainly, far more
than HB 31 would solve.
Number 0111
BOB MINTZ was next to testify, via teleconference from Anchorage,
on his own behalf. He indicated he has practiced law, primarily
commercial litigation, but for the past 15 years he has been
working for Carr Gottstein Properties, primarily in real estate.
He said currently, nothing bad happens to attorneys and clients who
violate the standards that are set forth in HB 31. He said HB 31
does two things: It establishes standards which are not novel for
the most part and it provides for a more efficient enforcement of
the standards of conduct. He agreed with Mr. Cole that perjury
should be punished and prosecuted which would result in a cleaning
up of the system, but said this does not happen now. He said right
now, for a violation of Civil Rule 11, Standards of Conduct, the
judge has discretion to impose the fine or not. He said the judge
is in the best place to be offended by a violation of that
standard. He said HB 31 puts the hammer of enforcement of these
Standards of Conduct into the hands of people who are actually
injured. He said the other thing that HB 31 does is that it makes
the person, who is violating the standard of conduct, responsible
for paying any of the damages that they caused, not a discretionary
slap-on-the-wrist fine. Standards are whether you can knowingly or
recklessly file false or material misstatements of fact. It is
whether or not you are responsible for making a reasonable inquiry
before you file a claim for defense and allegation and determining
that it is well grounded.
MR. MINTZ said it requires that you have probable cause and a valid
motive for filing a claim or defense. He said most people would
take it for granted that this happens and usually it does, but
sometimes it doesn't. He cited a personal experience where he was
personally sued by two people with 22 claims in each complaint. He
said of the 22 claims, 2 or 3 of them were good fair shots and the
rest of them were not valid. He said it took two years to
adjudicate the cases with the state paying for the defense which
cost $250,000 in attorney's fees. He said in one case they
received summary judgement and in the other case it was dismissed
while the final motion for summary judgement was pending. He said
it comes back that nothing bad happens to attorneys and clients who
take a shot like the one he cited. He felt there should be a
substantial disincentive for people who flagrantly abuse the
system.
MR. MINTZ said that HB 31 is designed to be a substantial
disincentive. He encouraged the committee to not just talk to
judges, but to people who have been sued and which of the claims
were fair shots and which were not. He said the intent of HB 31 is
to pare litigation down to save the time and energy of people who
sue, are being sued and of the court system.
Number 0309
CHAIRMAN ROKEBERG asked if there was factitious litigation statute
in the state of Alaska.
Number 0340
MR. MINTZ said there is none that he was aware and he has spent a
generous amount of time and energy looking for one. He said the
people of the state have no protection at all, it is completely
discretionary with the court and is rarely, if ever, enforced.
Number 0362
REPRESENTATIVE TOM BRICE referred to Mr. Cole's testimony regarding
the federal changes causing lawyers to sue each other and asked him
to comment on how HB 31 might affect our judicial system.
Number 0410
MR. MINTZ said the fear that HB 31 will be used as a vehicle for
increasing frivolous claims are predicated on the existing system
in which frivolous claims are rampant and there are no severe
consequences for bringing frivolous claims. He said if you impose
consequences for bringing frivolous claims, then iterative suing,
counter-suing will be much less of a problem. He said the federal
rule change in 1983 is the subject of a law review article in 43
Kansas Law Review, page 207. He said this article does a nice job
of tracing the history of the original Federal Rule 11, the 1983
change and then the subsequent 1993 change. He said the reason we
use the standard that is embodied in HB 31 is because it was listed
right out of the Alaska Civil Rule 11. He said this rule is based
on the old 1983 Federal Civil Rule, which was supposedly such a big
problem. It apparently has not been such a big problem in Alaska
because if you look at the Alaska Rules of Court and the
adaptations of the cases under Civil Rule 11 there hasn't been a
whole lot of litigation regarding the same 1983 Federal Rule of
Civil Procedure that Mr. Cole referred to.
Number 0477
REPRESENTATIVE HUDSON referred to page 2, "false allegations and
material misstatements of fact," and said Mr. Cole had said these
are the buzz words that would lead to lawyers suing lawyers and
asked him to comment on that.
Number 0495
MR. MINTZ said they tried to use words in HB 31 that have been
interpreted by case law so that it would be defined standards of
conduct. As far as he was concerned if you wanted to put the word,
"lies" in there instead it would be fine its just that it would
generate litigation over what the word, "lie," means. He said
there has been a lot of case law interpreting what a material
misstatement or a false allegation is.
Number 0538
PAM LaBOLLE, President, Alaska State Chamber of Commerce, was next
to testify. She referred to the legislative history on HB 31. She
suggested that perhaps if lawyers had to sue each other on the own
time, it would be a different story as to whether or not they would
sue each other. She thought the argument that judges don't feel
there is a lot of frivolous lawsuits is because often times these
cases don't get to court. There in an inherent blackmail in having
to use your life savings to defend your business against a lawsuit.
She said with the lack of sanctions against those who lie what are
the chances for fairness, honesty or justice.
MS. LaBOLLE said last January, the Alaska State Chamber of Commerce
conducted a survey of Alaska voters asking them about the civil
justice system. She said two out of three Alaskans said that we
have too many frivolous lawsuits, the justice system needs to be
tightened up, there ought to be truth and honest in the system.
She said 83 percent of them said that if the legislature passed a
bill on this subject it ought to be passed into law.
Number 0683
MS. LaBOLLE said HB 31 is such an important element for addressing
the concerns of those Alaskans that we strongly urge support of
this legislation.
Number 0714
STEPHEN CONN, Executive Director, Alaska Public Interest Research
Group (AKPIRG), was next to testify via teleconference from
Anchorage. He said the mandate of AKPIRG is to look out for the
consumers. He reviewed the bill, stating that he attended the
Commission on Civil Liability and heard the sponsor's hopes for HB
31 and said he sees this bill as fodder for retaliatory lawsuits.
He said there are words in this bill that are totally undefined and
referred to the word, "nonparty," on page 2, line 23. He said it
does not say witness, it does not indicate whether this person is
even involved and maybe this person induced litigation, but HB 31
makes them responsible for it in its entirety. A fisherman, a
villager who desires a lawsuit to be brought against a cooperation
might find himself on the receiving side of a retaliatory lawsuit.
Number 0801
MR. CONN referred to page 2, line 30, and said the notion that
someone who promotes litigation for a purpose other than securing
the proper adjudication of the claim raised another specter for
him. He said many groups engage in what is known as public
interest litigation which promotes and encourages litigation other
than the precise claim. He referred to the way HB 31 is written
and said even if a litigant loses they can still come back and slap
at entities that may or may not have been involved in the immediate
litigation but encouraged it to occur. He encouraged the committee
to separate his concerns about HB 31 and how it will spawn
litigation from their concern over frivolous litigation and greedy
attorneys.
Number 0933
CHAIRMAN ROKEBERG asked if AKPIRG would be in harm's way if this
bill were to pass.
Number 0941
MR. CONN referred to a lawsuit that AKPIRG is currently encouraging
the state to pursue and said if HB 31 passes, his organization
might be accused of material misstatements.
Number 1010
CHAIRMAN ROKEBERG said if AKPIRG makes a misstatement, they would
have a cause of action against his organization.
Number 1018
MR. CONN referred to Section 1 (a) of HB 31, "knowingly or
recklessly file, or cause to be filed, a civil complaint, answer,
or other civil pleading that contains false allegations or material
misstatements of fact;" and suggested that he is not talking about
lawyers suing lawyers, but public spirited citizens who would like
to see a matter brought to court. Their reasons have to do with
their belief that if that matter goes through the court process
their concern over a public policy matter will be effectuated.
He said these citizens might find themselves on the sidelines and
this is the danger that he sees in HB 31.
Number 1119
CHAIRMAN ROKEBERG said he is concerned with people litigating
something just because they don't like something. He said the
courts are not the proper forum for that problem.
Number 1148
JEFF BUSH, Deputy Commissioner, Office of the Commissioner,
Department of Commerce and Economic Development, stated that he
served on the Governor's tort reform or civil justice reform task
force and what the results of the task force meeting were. He said
although the task force, the Administration and he, after working
on a subcommittee dealing with this specific issue, are all
sympathetic with the purpose behind HB 31 the Administration and
the task force came out opposed to HB 31 for many of the reasons
heard today. He said the Administration supports the concept of
getting rid of frivolous litigation and anything that can
effectively do that without, at the same time, increasing the
litigation burden on the system is a good thing. He said we don't
want to get rid this particular problem by in fact increasing
litigation which he believed to be the point of the tort reform
movement.
MR. BUSH mentioned Mr. Cole's testimony that Judge Shortell, and
added Justice Fabe's testimony, that frivolous is really in the
mind of the beholder. He referred to Mr. Mintz's personal
experiences and said those experiences may in fact be somewhat
outrageous, but it doesn't in fact make them frivolous. He said
just because a particular party loses does not mean that the case
was frivolous. He said one party will win and the other will lose
if the case goes to a jury system. He said the judges say it is
extremely rare where you have cases that they can, on their face,
see as frivolous.
Number 1270
MR. BUSH said HB 31 proposes to set up a system which increases
litigation costs. He referred to the proposed amendment to
decrease some of those costs outlined by the Department of Law, and
said that these same types of costs outlined by the Department of
Law are reflective of the same kinds of costs that private
litigants are going to have. He said the court system fiscal note
talks at length about HB 31 will increase litigation, not decrease
it. He said we can all sit here and say that this "Party X" should
not be allowed to file a frivolous lawsuit against this particular
defendant "Party Y" and that we ought to have a system that allows
us to go back after "Party X" for doing so.
MR. BUSH said a problem arises when "Party X" is essentially
judgement proof. He said this is where you have your so called
frivolous litigation to begin with. There is nothing in HB 31
which is designed to protect against those type of situations. If
you have pro se litigants or judgement proof litigants, they have
no reason to be afraid of the sanctions imposed by this piece of
legislation. It is in their interest to file motions or separate
pleadings against the defendant's attorneys for so called frivolous
motion and then the attorney would counter files something back
saying that motion was frivolous. He said the risk on the initial
party that caused this escalation of litigation is nil, because
they are judgement proof. This is the problem that HB 31 is going
to cause and it is why the costs for both the Department of Law and
the private sector would go up. He said he was surprised by Mr.
Lessmeier's testimony because it is defendants in insurance
companies that face the highest risk with HB 31.
MR. BUSH said the subcommittee looked at this proposal, based on HB
158 from last year, and rejected it. He said the subcommittee
consisted more of defense oriented people, tort reform supporters.
He said there was a defense lawyer, a lawyer who splits his time
about 50/50, a doctor, an engineer and himself on this
subcommittee. He said these people looked at this thing and said
the risk for this type of legislation is on the defendants because
we are the ones that the abuser is going to use this type of
proposal and abuse the system with it. He said this is why the
subcommittee unanimously rejected this proposal and came up with
the alternative of increasing the fines that the court, at its
discretion, can levy against attorneys from $1,000 to $10,000.
Number 1438
MR. BUSH said Mr. Lessmeier testified that there would be a
reduction in overall litigation as a result of HB 31 and added that
he is the first and only person he has ever heard said that.
He said he has talked with people in the court system, witnesses at
the task force, read the fiscal note, all of whom say that HB 31
will increase litigation, not decrease it. He said some so called
frivolous litigation may not be filed, but you will find more
likely and more often that this will be used as a strategic measure
by lawyers engaged in complex litigation as another way of
attacking the opposing lawyer, causing additional costs to the
litigants.
Number 1509
MR. BUSH referred to the proposed amendment and said the task force
had the same concerns that Representative Sanders voiced which is
why should the state have special privileges. He said the task
force did not deal with this issue specifically to HB 31, but dealt
with the issue in terms of several proposals that were on the table
relating to the state. The general feeling of the task force was
that the state should not have any special privileges. He said, if
HB 31 were to pass, the state would support the proposed amendment
because of fiscal implications.
Number 1568
MR. BUSH referred to Mr. Mintz's testimony that there are no
options available to him and pointed out that in Alaska there is a
cause of action which is called abusive process. He felt this is
what the committee is talking about in some ways. He said there is
a right to file a legal lawsuit against somebody who is abusing the
legal system improperly, called an abusive process action. He
suspected that when Mr. Mintz said he could not find an avenue to
solve his wrongs it was because he may not have been able to meet
the standard necessary. He said this is because, as the judges all
said, it is difficult for anyone to prove that something was done
maliciously or improperly and is frivolous or false despite
spending a lot of time and money to do. He said by putting a cause
of action that encourages people to make that claim, it is very
easy to claim that something the other guy did is frivolous and you
can spend a lot of time and money litigating that question. He
said even if you lose you can use it as a strategic ploy against
the opposing lawyer.
Number 1636
REPRESENTATIVE COWDERY asked him if he felt the system was okay the
way it currently is.
Number 1647
MR. BUSH said he was probably the strongest supporter of the
increase in the fines available for the courts to access. He said
$1,000 is really a slap on the wrist. If a lawyer is abusing the
system and is encouraging frivolous litigation, then the court
ought to be able to impose something stronger than a $1,000 fine.
Number 1678
REPRESENTATIVE COWDERY referred to his testimony and asked how many
private citizens he talked to who had been involved in cases that
were settled outside of court at great expense.
Number 1731
MR. BUSH said there is no question that this was a major concern
that the task force had. He said it is not just with the function
of frivolous cases. If he gets sued and he does not believe that
the lawsuit is valid, he is going to believe that it is a frivolous
lawsuit which is a common feeling among litigants. He said a
contrary feeling among plaintiffs when the litigant slaps him with
some sort of affirmative defense to the claim and hires a big,
expensive lawyer, then they are not being fair and their defense is
frivolous. He said the task force spent a lot of time trying to
figure out how to deal with the problem of people who are
essentially differing on their opinions.
MR. BUSH said the solution they came up with was to set up a system
which will resolve cases in a quick and less expensive manner. He
said if you get sued it will cost you a lot of money to try to
defend that case. He said they tried to set up, through the task
force report and the Governor's bill, a system that allowed for the
resolution of cases more quickly and, therefore, more cheaply.
Number 1810
REPRESENTATIVE COWDERY asked him if he didn't think people would
sue if they didn't think there was a deep pocket to get to.
Number 1826
MR. BUSH said there is no question there is a deep pocket, but
lawyers do not bring up cases unless they feel there is a
reasonable chance of success. He said judges do have the authority
to throw out a case that has absolutely no merit whatsoever.
Lawyers have to think that they are going to get it to the jury.
Number 1867
REPRESENTATIVE COWDERY felt that lawyers believe in a success that
will happen before it ever gets to a judge or jury.
Number 1883
REPRESENTATIVE MULDER conceded the fact that in the short term
litigation will increase, but felt in the long term that there will
be a decrease as the lawyers and the litigants learn the
consequence of protracted litigation. He said a case has to be
based on merit and fact and not on a personal disagreement with the
court deciding on the new policy.
Number 1938
MR. BUSH said his understanding, at least the understanding of the
judges, that there is nothing in the word frivolous which would
prevent someone from bringing a case with the intention of changing
the law. He said they may reasonably believe that the way the law
has been interpreted in the past they will lose, but that is not
grounds for calling it frivolous. He said it is not frivolous to
bring up a case in an effort to try to change the law. He said we
heard from the court system that they do not see frivolous cases.
He said if they are not seeing them now, the only time that you are
going to see them is when frivolous motions are filed as a result
of HB 31.
Number 1999
REPRESENTATIVE COWDERY clarified that he believed many of these
cases are settled outside of the courts.
Number 2015
REPRESENTATIVE RYAN referred to his earlier question of
Representative Mulder about recovering reasonable attorney fees as
modified by the supreme court's thirty percent, instead of all the
fees. He believed that in 1990, we voted to do away with joint
civil liability which the supreme court has chosen to ignore. He
said the Alaska Supreme Court has approximately a 75 percent
reversal rate which makes a lot of people wonder why we have the
inferior court system. He said HB 31 is designed out of
frustration to try to send a strong message to the court to give us
justice, not excess amounts of litigation.
Number 2103
REPRESENTATIVE HUDSON made a motion to adopt proposed Amendment 1,
Ford, dated 2/3/97, O-LSO193\A.1 to HB 31.
Number 2130
REPRESENTATIVE BRICE objected to the motion. He said the state, if
involved in litigation that is considered frivolous, should be as
liable as a private citizen.
Number 2313
A roll call vote was taken regarding the adoption of Amendment 1.
Representatives Hudson and Cowdery were in favor of adopting the
amendment. Representatives Sanders, Ryan and Brice voted against
the amendment. So Amendment 1 failed to be adopted.
Number 2333
REPRESENTATIVE HUDSON made a motion to move HB 31 out the House
Labor and Commerce Standing Committee with accompanying fiscal
notes and individual recommendations. Hearing none, HB 31 moved
out of committee.
ADJOURNMENT
Number 2302
There being no further business to conduct, VICE CHAIRMAN COWDERY
adjourned House Labor and Commerce Standing Committee meeting at
4:50 p.m.
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