03/23/2006 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB383 | |
| SB86 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 383 | TELECONFERENCED | |
| += | HB 354 | TELECONFERENCED | |
| += | SB 86 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 23, 2006
8:14 a.m.
MEMBERS PRESENT
Representative Paul Seaton, Chair
Representative Bob Lynn
Representative Jay Ramras
Representative Berta Gardner
Representative Max Gruenberg
MEMBERS ABSENT
Representative Carl Gatto, Vice Chair
Representative Jim Elkins
COMMITTEE CALENDAR
HOUSE BILL NO. 383
"An Act limiting motor vehicle dealer charges for fees and
costs; relating to the disclosures required for certain motor
vehicle transactions; and requiring consumers to be informed of
finance charges paid to a motor vehicle dealer by a financing
institution on the sale of a used motor vehicle."
- MOVED CSHB 383(STA) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 86(CRA)(efd fld)
"An Act relating to the liability of the state and
municipalities for attorney fees in certain civil actions and
appeals."
- HEARD AND HELD
HOUSE BILL NO. 354
"An Act relating to qualifications of the adjutant general; and
providing for an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 383
SHORT TITLE: MOTOR VEHICLE TRANSACTIONS
SPONSOR(s): REPRESENTATIVE(s) GARA
01/20/06 (H) READ THE FIRST TIME - REFERRALS
01/20/06 (H) TRA, STA
02/07/06 (H) TRA AT 1:30 PM CAPITOL 17
02/07/06 (H) -- Meeting Canceled --
02/09/06 (H) TRA AT 1:30 PM CAPITOL 17
02/09/06 (H) Moved CSHB 383(TRA) Out of Committee
02/09/06 (H) MINUTE(TRA)
02/13/06 (H) TRA RPT CS(TRA) NT 1DP 4NR
02/13/06 (H) DP: KAPSNER;
02/13/06 (H) NR: SALMON, NEUMAN, GATTO, ELKINS
03/07/06 (H) STA AT 8:00 AM CAPITOL 106
03/07/06 (H) Heard & Held
03/07/06 (H) MINUTE(STA)
03/23/06 (H) STA AT 8:00 AM CAPITOL 106
BILL: SB 86
SHORT TITLE: STATE/MUNI LIABILITY FOR ATTORNEY FEES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/31/05 (S) READ THE FIRST TIME - REFERRALS
01/31/05 (S) CRA, JUD
02/09/05 (S) CRA AT 1:30 PM BELTZ 211
02/09/05 (S) Heard & Held
02/09/05 (S) MINUTE(CRA)
04/04/05 (S) CRA AT 1:30 PM BELTZ 211
04/04/05 (S) Moved CSSB 86(CRA) Out of Committee
04/04/05 (S) MINUTE(CRA)
04/05/05 (S) CRA RPT CS 1DP 2DNP 2NR
SAME TITLE
04/05/05 (S) NR: STEVENS G, STEDMAN
04/05/05 (S) DP: WAGONER
04/05/05 (S) DNP: ELLIS, KOOKESH
04/15/05 (S) JUD AT 8:00 AM BUTROVICH 205
04/15/05 (S) Heard & Held
04/15/05 (S) MINUTE(JUD)
04/18/05 (S) JUD RPT CS(CRA) 3DP 2DNP
04/18/05 (S) DP: SEEKINS, THERRIAULT, HUGGINS
04/18/05 (S) DNP: FRENCH, GUESS
04/18/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/18/05 (S) Moved CSSB 86(CRA) Out of Committee
04/18/05 (S) MINUTE(JUD)
05/06/05 (S) TRANSMITTED TO (H)
05/06/05 (S) VERSION: CSSB 86(CRA)(EFD FLD)
05/07/05 (H) READ THE FIRST TIME - REFERRALS
05/07/05 (H) STA, JUD
03/23/06 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE LES GARA
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Reviewed HB 383 as sponsor.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law
JOHN COOK, Legislative Director
Alaska Automobile Association
(No address provided)
POSITION STATEMENT: Testified on behalf of the association in
opposition to HB 383.
CRAIG TILLERY, Deputy Attorney General
Civil Division
Office of the Attorney General
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Introduced SB 86 on behalf of the Senate
Rules Committee, sponsor by request of the governor.
RANDY RUARO, Assistant Attorney General & Legislative Liaison
Legislation & Regulations Section
Civil Division (Juneau)
Department of Law
Juneau, Alaska
POSITION STATEMENT: Responded to a question during the hearing
on SB 86.
SCOTT A. BRANDT-ERICHSEN, Attorney at Law
Ketchikan Gateway Borough
Ketchikan, Alaska
POSITION STATEMENT: Testified on behalf of himself during the
hearing on SB 86.
ACTION NARRATIVE
CHAIR PAUL SEATON called the House State Affairs Standing
Committee meeting to order at 8:14:32 AM. Representatives Lynn,
Ramras, Gardner, Gruenberg, and Seaton were present at the call
to order.
HB 383-MOTOR VEHICLE TRANSACTIONS
8:15:09 AM
CHAIR SEATON announced that the first order of business was
HOUSE BILL NO. 383, "An Act limiting motor vehicle dealer
charges for fees and costs; relating to the disclosures required
for certain motor vehicle transactions; and requiring consumers
to be informed of finance charges paid to a motor vehicle dealer
by a financing institution on the sale of a used motor vehicle."
[Before the committee was CSHB 383(TRA).]
The committee took an at-ease from 8:15:49 AM to 8:16:15 AM.
8:16:28 AM
REPRESENTATIVE LES GARA, Alaska State Legislature, reviewed the
committee substitute, CSHB 383(TRA), as sponsor. He said there
had been concern raised during the previous meeting's discussion
of the CS [held on 3/7/2006] as to whether the term "negotiated
price" needs to be better defined. He said Mr. Sniffen, who
runs the [Commercial/Fair Business] Section of the Office of the
Attorney General has responded to that question in a letter
saying he does not feel the phrase needs further clarification
or definition. Another question was in regard to the practice
of some car dealers to imply to the consumer that the bank loan
they offer reflects only the interest rate the bank is charging,
when in fact the dealer is keeping part of the total percentage.
He said the dealer can keep whatever it wants; the bill just
asks that the dealer informs the consumer that it will be
keeping a portion of it. He indicated that is more obvious when
the loan comes from the car dealer that the markup will be there
than it is when the loan comes from a bank that is unaffiliated
with the car dealership. He said there is a possible amendment
that would say that the dealer reserve part of the bill will
only apply when the offer in the contract is only coming from a
bank or credit union.
8:19:49 AM
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law, said he spoke with Representative Gara's
office in regard to the term, "negotiated price", and he said
all the attempts at clarifying the definition made the phrase
more complicated than it presently is. He said he thinks most
people in the [car] industry know what that phrase means and it
is clear enough for enforcement purposes.
8:21:12 AM
MR. SNIFFEN, in response to a query from Representative Ramras,
highlighted what his thought process had been in trying to come
up with a better definition of "negotiated price".
8:22:30 AM
REPRESENTATIVE RAMRAS indicated that Mr. Sniffen's trouble in
[finding the right words] parallels the trouble that the
committee is having.
8:23:18 AM
REPRESENTATIVE GRUENBERG said he is less concerned with the
language, "in addition to the advertised or negotiated price",
than with the words, "Additional fees and costs", [on page 1,
line 6]. He directed attention to [page 1, lines 11-13, which
read as follows]:
(b) In this section, "[DEALER] fees or
costs" includes dealer preparation fees, document
preparation fees, surcharges, and other [DEALER-
IMPOSED] fees and costs.
REPRESENTATIVE GRUENBERG opined that car dealers are "sharp,
both in the intellectual sense and the bargaining sense of the
connotation of that word." He asked, "How can we be sure that
they won't impose additional sums in addition to 'fees and
costs.'"
8:24:29 AM
MR. SNIFFEN replied that he doesn't know that it is possible to
predict what car dealers will try to do with the language of
bill, but typically, fees and costs are what consumers are
required to pay as part of the automobile transaction. He said
the bill "gets us 95 percent there" and will take care of "the
majority of all the transactions."
8:25:38 AM
CHAIR SEATON asked if Mr. Sniffen is saying that the fees and
costs should include any additional charges that would be added
on by a dealer at the time [of the transaction], except for
those that are specifically exempted fees paid to a state agency
for licensing, registration, and title transfer.
8:26:22 AM
MR. SNIFFEN answered that's correct. He said:
It's our position that consumers are best served when
they understand the price they have to pay for a car,
absent those fees and costs that a dealer actually
pays to the State of Alaska for a title and
registration. And that's because some of these other
fees and costs ... can be confusing and misleading to
a consumer as being costs actually paid to someone
else, when in fact they're just cost and fees that the
dealers keep.
8:27:06 AM
REPRESENTATIVE GARA said he doesn't think the language needs to
be changed, but if the committee wants a change, he suggested
that adding the word "charges" would be all-encompassing.
8:27:25 AM
REPRESENTATIVE GRUENBERG suggested changing the language
starting on page 1, line 13, to read, "and any other fees,
costs, and charges of any kind."
8:27:49 AM
REPRESENTATIVE GARA recommended the change should be [on page 1,
line 12], to add "charges" after "surcharges".
8:27:58 AM
MR. SNIFFEN said he thinks any language that would make it clear
that fees, costs, and charges include everything other than fees
and costs paid to the for title and registration would be good.
8:28:26 AM
REPRESENTATIVE RAMRAS said, "Do you think we could insert the
word[s] 'and profit' in there also, so that we could let the
consumers know that the car dealers are there to try to generate
a profit?"
CHAIR SEATON asked Representative Ramras if that is a rhetorical
question.
REPRESENTATIVE RAMRAS said no. He stated, "We're going over
everything that seems to be involved. Don't we want to make the
consumer aware that we're going to let the dealership generate a
profit in this transaction?"
8:29:09 AM
MR. SNIFFEN said he thinks it is understood by most consumers
that car dealers generate a profit.
REPRESENTATIVE RAMRAS said he disagrees and he restated his
question.
MR. SNIFFEN said the intent of the bill is not to "let the car
dealers not make a profit," but rather to disclose all the types
of charges that are added on to a transaction that potentially
could be misleading. He said, "I don't know that profit falls
into that category."
8:30:01 AM
CHAIR SEATON offered his understanding that "this" wouldn't
eliminate profit; it would just mean that the profit is also
included in the negotiated price.
8:30:32 AM
MR. SNIFFEN said he believes that is correct.
8:30:42 AM
REPRESENTATIVE GRUENBERG asked if the industry has come up with
anything else that it feels it might want to or should
legitimately charge that may still be excluded by the language.
He stated that he does not want to be unreasonable to the
industry; he just wants to ensure that the law is drafted as
accurately as possible.
8:31:40 AM
MR. SNIFFEN responded that he is not aware of anything else that
needs to be included at this time. He talked about the original
intent of the bill and said, "I don't know that we want to get
this portion of the bill headed in a direction it wasn't
intended to head ...."
8:33:17 AM
CHAIR SEATON asked Mr. Sniffen, "Does this bill require them to
line item out everything they're charging, or does it only
require them to include in the price that they negotiate ... all
the fees that they're going to charge?"
MR. SNIFFEN answered it's the latter. He indicated that the
goal is to have the amount the dealer wants to charge - however
that dealer wants to line item those charges - equal the amount
the consumer agreed to pay.
8:34:11 AM
CHAIR SEATON said the committee was talking about "profit" and
he thinks the word could be added possibly elsewhere in the
bill, but not on [page 1], line 11, because "that's the
definition of 'fees' and 'costs'."
8:34:35 AM
REPRESENTATIVE RAMRAS asked Mr. Sniffen if he could provide a
definition for the words "advertised" and "negotiated" as they
relate to the bill.
8:34:53 AM
MR. SNIFFEN replied as follows:
"Advertised price" is in the statute currently and
there is no definition for that term in the statute,
and "negotiated price" does not have a separate
definition as well. The way I understand those terms
to mean: an advertised price is the price that you
advertise for the vehicle. That can include
advertisement in the newspaper, on the radio, [and] on
your dealership lot, if it's a big postcard or placard
in the window of the vehicle. It's any price you
advertise to the public in any way .... And then
negotiated price is the price that the consumer agrees
with the dealer to purchase a vehicle for.
8:35:38 AM
REPRESENTATIVE RAMRAS asked for Mr. Sniffen's interpretation of
the phrase "advertised or negotiated".
8:36:04 AM
MR. SNIFFEN offered his interpretation that if a car dealer
advertises a vehicle for a specific price, that price needs to
include "all the fees discussed in this bill." He continued:
If I go into your dealership and I start negotiating
with you for the purchase of a vehicle and we no
longer are looking at the advertised price of the
sales price, but another price, and it's [the] price
that I discussed with you as the dealer that I'm
willing to purchase the vehicle for - that is the
negotiated price, and it is no longer the advertised
price.
8:36:40 AM
REPRESENTATIVE RAMRAS asked at what point the transaction takes
place. He reminded the committee that he recently bought a car
in Juneau and paid a $200 doc fee. He said he knows what the
advertised price and negotiated price were - and they were
different prices. However, he said it didn't seem like the
transaction took place until after that.
8:38:07 AM
MR. SNIFFEN responded that in that situation it sounds like
Representative Ramras negotiated a price for the vehicle and,
during the negotiation, the dealership told him that price would
include a doc fee. He said HB 383 would not prevent that from
happening. He said if the dealer wants to include a doc fee in
the price of the car, then he needs to negotiate that with the
consumer at the time of negotiation. He said, "If you see a car
for $3,000 on the lot, ... that $3,000 would be the advertised
price if it was advertised on the car, if it was in the paper,
[or] if you knew it was $3,000 for some reason - ... the
advertised price before you started negotiation."
8:39:04 AM
CHAIR SEATON asked, "At that point in time, that $3,000 has to
include the documentation fee. Is that correct?"
8:39:25 AM
MR. SNIFFEN answered yes, under current law. He continued with
his example:
And then, when you start negotiating perhaps a lower
price, you say, "Well, I'm not going to give you
$3,000 - I'll give you $2,500 though," and the dealer
says, "Well, I'll take $2,500 but I have to add a $199
doc fee in there," and you say, "Okay." Your consent
to that charge is now part of a negotiated price,
because that was included in the negotiations between
you and the dealer.
What this bill would not allow the dealer to do is to
say, "Okay, $2,500, you've got a deal Mr. Ramras.
Let's go do up the paperwork." And then you sit down
there and start eating the free little mints on the
table and the dealership comes back with the
paperwork, and as you said, now you're confused
because the paperwork shows a final price of $2,700.
And you say, "Well, what's this $2,700? I thought we
agreed on $2,500." And the dealer says, "Oh, that's a
doc prep fee. I'm sorry, we have to add that to the
cost of the car."
That's the practice that we're trying to prevent here.
We want the dealers to tell you everything that you're
going to have to pay for the car during those
negotiations, so when you get to signing the documents
there aren't these additional fees that are added that
really are nothing more than just profit.
8:40:56 AM
REPRESENTATIVE RAMRAS said that scenario is what happened to
him. He said he bought a car for $3,000, he "went in to close,"
and "there was the doc fee." He said, "But I thought we were
still negotiating; nobody was holding a gun to my head to buy
that car." He said he had the option to get up and leave or to
refuse to pay the doc fee.
8:41:10 AM
CHAIR SEATON said the point of the bill is that many consumers
are led to believe that [the doc fee] is a separate charge that
is necessary to complete the deal other than the negotiation
with the dealer. He said nobody is saying the doc fee can't be
charged; the bill would just require that there be no hidden
charge that is added later after there has been an agreement
made on the price of the car.
8:41:55 AM
REPRESENTATIVE RAMRAS responded, "I think that's precisely the
axle that I'm getting wrapped around, which is: What does this
word 'hidden' mean?" He said finding out about the doc fee
happened during his transaction with the car dealer before the
moment that he wrote the check. He said until the moment he
wrote the check, he had the opportunity to leave the dealership.
CHAIR SEATON asked Representative Ramras:
Your feeling is that the current ... law that we have
- that those document fees have to be in the
advertised price - should not be there as well, ...
because that forces us to include that in the
advertised price as well. I mean, is that where we're
really coming through here?
REPRESENTATIVE RAMRAS replied, "I didn't follow you Mr.
Chairman, but I think so."
8:42:57 AM
REPRESENTATIVE LYNN said he doesn't care if [the doc fee] "comes
before or after," he just wants it clear to the consumer that it
is pure profit. He stated that he is not opposed to pure
profit; he just wants to see fair and honest practices. He
concluded, "I think many of us in this room, perhaps, have
fallen victim to this practice. I know I have in the past, and
I don't like it."
8:43:56 AM
REPRESENTATIVE GRUENBERG mentioned an amendment to a past bill
that required car repair staff to post a sign if they work on
commission. He asked Mr. Sniffen if that requirement is being
observed.
8:45:02 AM
MR. SNIFFEN said he assumes dealers are complying, but he has
not heard any complaints and, thus, has not investigated the
issue.
8:45:34 AM
MR. SNIFFEN shifted focus to the issue of the dealer's reserve,
and he said he wanted to address some comments made during the
last hearing of HB 383, relating to requiring car dealers to
disclose when they mark up financing, when "in virtually every
other kind of transaction that takes place on the planet you
don't have to do this." He said he doesn't want the committee
to be misled "by some of that information." He stated that the
car buying experience is unique; it's one of the only times that
a person can negotiate a price for a product. He continued:
You've got a situation where you go into a dealership
and there are a bunch of people who sort of ascend on
you right away, and they do this sort of dance with
you about how you have to go through these hoops to
buy a car. It's ... a very unique transaction that
really isn't comparable to a lot of other kinds of
transactions, which is why I think the disclosure of
the marked up interest rates in the dealer reserve is
important for this kind of transaction that
distinguishes it from a lot of other transactions.
MR. SNIFFEN, in response to a question from Representative
Ramras, said he works for the State of Alaska.
8:47:32 AM
REPRESENTATIVE RAMRAS stated that transactions in a variety of
services are unique. He said he thinks Mr. Sniffen's comments
show a pretty clear bias against the automobile industry. He
stated, "I appreciate the specific nature of your opinion, but I
could do without the editorializing of the industry."
8:48:41 AM
CHAIR SEATON stated that he understands where Representative
Ramras is coming from "as far as the State of Alaska," but said
people can offer their opinions through testimony. He initiated
a question for Mr. Sniffen.
8:49:21 AM
REPRESENTATIVE GRUENBERG interjected to call a point of order.
He said he has known Mr. Sniffen professionally for a long time
and he has the highest reputation. He stated, "It is most
important that witnesses before this committee be allowed to
testify freely. He is a professional, and he should be treated
with the appropriate courtesy by the members of this committee."
8:49:56 AM
REPRESENTATIVE RAMRAS apologized for possibly stepping over the
line. Nevertheless, he said he would like people to be careful
how they characterize industries in Alaska that contribute to
the state's economy.
8:50:09 AM
CHAIR SEATON asked Mr. Sniffen if additional interest is
"allowable for real estate agents or other such sales."
8:50:32 AM
MR. SNIFFEN offered his understanding that it is not. He said
real estate agents, brokers, and lenders are free to charge
whatever interest rate they choose, but he said he thinks that
when a person consummates a transaction, the interest rate
he/she pays is up front.
MR. SNIFFEN expressed his appreciation for Representative
Ramras' comments. He apologized for seeming to pick on the auto
industry. He said he works closely with that industry and has a
good relationship with it and respect for it. He stated, "I
just wanted to make sure we were comparing apples to apples, and
oranges to oranges, and some of the comments in the last meeting
seem to indicate that that wasn't the case."
8:51:35 AM
CHAIR SEATON told Mr. Sniffen that he may add anything else that
he deems appropriate, and he said the committee is not taking
[umbrage] at his testimony.
8:52:09 AM
REPRESENTATIVE LYNN remarked that anyone who speaks probably
expresses his/her bias, because everyone is unique. He said he
is a licensed real estate agent. He said there are only two
things that are really negotiated in the United States:
automobiles and houses. He asked if the bill would require that
the doc fee be indicated as pure profit whether it comes before
or after the negotiated price and, if not, whether it should.
8:53:20 AM
REPRESENTATIVE GARA said he doesn't think that should be done,
because he doesn't think it could be done accurately. He
offered further details. He said he runs a restaurant, and if
the price of a burger is $3.99, that isn't $3.99 plus a document
fee. He said, "We don't charge a buck for the credit card slip,
even though that only costs us 10 cents." He continued:
You don't want to do some sort of accounting thing
where you're trying to determine how much of the doc
fee is profit and how much of it is out of pocket
cost. I suspect almost all of it is profit, and
that's, truthfully, what the car dealer said, but we
don't know if it's 100 percent, or 99 percent, or 97
percent.
8:54:36 AM
CHAIR SEATON said if that was included in the bill he would
probably vote against it, because it is not appropriate to make
a business say what is profit and what is not.
8:55:38 AM
REPRESENTATIVE LYNN reiterated that he believes in full and
honest disclosure.
8:56:14 AM
REPRESENTATIVE GRUENBERG directed attention to an amendment that
had not been offered but was in the committee packet, [labeled
24-LS1287\X.1, Bannister, 3/15/06.] He noted that line 15 [as
numbered on Amendment X.1], read "from a bank or credit union".
He said that excludes other types of financing, such as through
[General Motors Acceptance Corporation (GMAC)], and he said he
is not sure why.
8:57:48 AM
REPRESENTATIVE GARA explained that when a loan is coming from
the car company, the argument can be made that the consumer
expects that somebody is making some money and there is probably
some relationship between the car dealer and the loan company.
9:00:17 AM
REPRESENTATIVE GRUENBERG said he doesn't think that he or his
constituents would know that.
REPRESENTATIVE LYNN concurred.
REPRESENTATIVE GRUENBERG said he would like to get away from
saying who the lending institution is, but having the amendment
apply to any lender. He asked Representative Gara if he has any
objection to that.
9:01:40 AM
REPRESENTATIVE GARA responded that Representative Gruenberg's
proposal is exactly what the bill does now. He said he sees no
problem in giving consumers information, which is all the bill
proposes. In response to a question from Representative
Gruenberg, he said he doesn't have strong feelings one way or
the other regarding whether the aforementioned amendment should
be offered. He added that he thinks Mr. Sniffen has
communicated that it is not necessary.
9:03:21 AM
JOHN COOK, Legislative Director, Alaska Automobile Association,
testified on behalf of the association in opposition to HB 383.
He stated that there is no difference between GMAC and a bank.
He revealed that the Alaska Automobile Association is comprised
of 70 new and used car dealerships, 2,400 employees in the new
car dealerships alone, and an annual payroll in excess of $120
million, plus benefits. He noted that much of the testimony has
been centered on unfair practices. He said, "I can tell you we
wouldn't be in business for 60 years if we operated in that
manner, nor if any of our members consistently operated in that
manner. The legal community would have us out of business ...."
MR. COOK stated that the association has a close and positive
working relationship with Mr. Sniffen; however, he said he
respectfully disagrees with Mr. Sniffen on a couple points. He
said he does not agree that the term "negotiated price" is
clear. He said if statute is passed without a clear definition,
the car dealer's will have to live with the consequences and the
legal community will have to hash it out. Mr. Cook said
deceptive practices are currently prohibited in statute under
the Unfair Trade Practices Act. The Act carries severe fines
and penalties, including possible civil penalties from the
state. Regarding doc fees, he stated that not all dealerships
charge them. He said in his dealership the doc fee is disclosed
and delineated separately. He said that is the standard
practice of all the major dealerships. He stated that
everything in regard to a vehicle transaction other than the
Division of Motor Vehicle (DMV) fees is negotiable and "we can
do away with all this language." However, he stated, "If a
consumer comes to us and has an objection with a doc fee, we
will reduce the ... selling price of the vehicles before we will
reduce a doc fee." He explained the reason for doing that is
that charging a different doc fee from person to person could be
considered a discriminatory lending practice, which is
prohibited under a federal regulation: Regulation Z.
9:08:52 AM
CHAIR SEATON said the committee had heard testimony from other
car dealers [at the last hearing] stating that the doc fee was
really just profit, and he offered his understanding that Mr.
Cook is indicating that the doc fee is a flat fee that is
something other than just another portion of profit.
9:09:16 AM
MR. COOK prefaced his clarification by revealing that he is also
a certified public accountant (CPA). He said the doc fee is not
pure profit; it is revenue. He continued:
Our practice and most dealers' practice is to charge a
consistent doc fee. ... All dealerships charge,
generally, the same fee to everyone. It is
delineated. It is revenue.
9:09:59 AM
CHAIR SEATON said some dealers have told the committee that the
doc fee is negotiable and that seems different from what Mr.
Cook is saying.
9:10:24 AM
MR. COOK explained that it is not different, because where the
negotiation would take place would be within the vehicle price.
In other words, if the customer says he/she refuses to pay, for
example, a $189 doc fee, the dealer would most likely keep the
doc fee the same, but reduce the selling price of the vehicle by
$189. He said the majority of the association's membership
treats the situation exactly the way that he just described.
9:11:39 AM
MR. COOK, regarding the dealer reserve, said although he would
term himself a sophisticated borrower, he has never had anyone
disclose to him that he may be able to get a better rate
somewhere else. Furthermore, he said he has never seen any
industry be required to tell a person that he/she may be able to
get a better rate somewhere else; therefore, that proposed
provision in the bill seems to be specifically looking at the
car industry. He continued:
I can tell you that mortgage brokers ... are not
originators of paper; they receive fees for selling
mortgages. Of course, ... that industry is not
regulated by the State of Alaska - federal lending is
not. So, Mr. Sniffen is correct in that in House
transactions you have the right of rescission and
other things, but federal law supersedes state
statute. That doesn't make it right, but that is the
reason that that's different.
MR. COOK pointed out that dealers of recreational vehicles
(RVs), boats, and snowmobiles have the same dealer agreements
with banks that car dealers do. He added, "But we're sitting
here as the only people that are being discussed ... in this
bill." He said the car dealers in Alaska are competing against
dealerships all across the country and are held to one of the
highest standards of any industry in the country.
9:14:48 AM
MR. COOK said this bill hearing makes it sound like foul play
related to doc fees and dealer reserves is common practice, but
he has never received a complaint from a consumer regarding
either of those issues, nor has he ever received a consumer
complaint through Mr. Sniffen's office regarding these two
issues. He noted that there are seven dealers in Juneau with
him today, and none of them have received such complaints. He
said at the last hearing [Representative Lynn] had asked why
it's necessary to fix all industries before the car industry can
be fixed. Mr. Cook said he is trying to figure out where the
problem is. He said there is one case of a dealer who was new
to the market from out of state, and that story was publicized
in the Anchorage Daily News. He asked why the legislature feels
the need to fix what isn't broken.
9:16:28 AM
REPRESENTATIVE GRUENBERG suggested that since all parties
interested in the bill are present, perhaps a definition of
"negotiated price" could be formulated.
9:17:38 AM
MR. COOK said he is not an attorney and does not have the
ability to come up with a legal definition of the term. He
reported that his legal council has told him that he thinks the
term is too vague. He said he would rather something come from
the other parties and then the he would be willing to look at
it.
9:18:35 AM
REPRESENTATIVE GRUENBERG suggested that if Mr. Cook thinks there
should be a definition, he should take the issue up in the next
committee of referral, because the House State Affairs Standing
Committee can't [address the issue] "on the fly."
REPRESENTATIVE GRUENBERG said he would like to know if a
violation of the bill would be a violation of the Unfair Trade
Practices Act.
9:20:21 AM
MR. SNIFFEN answered yes. He said AS 45.25.400 addresses the
regulation of dealer practices. He stated, "Any violation of
that 400 section of this statute is also a consumer protection
violation."
9:20:41 AM
REPRESENTATIVE GRUENBERG said his constituents may not be the
most sophisticated, and he noted that many of them are not high
wage earners and English is their second language. He said,
"Maybe they do need to be told up front that the deal really is
negotiable." He asked Mr. Cook, "Would your industry support
such a disclosure?"
9:21:57 AM
MR. COOK said he thinks "it's something that's already there."
He said that he would have no problem putting up a sign telling
customers that they can negotiate, but said he thinks they do
that already.
9:22:47 AM
REPRESENTATIVE GRUENBERG said he would like to ask
Representative Gara the same question.
9:23:11 AM
REPRESENTATIVE LYNN, in response to a statement previously made
by Mr. Cook, said the legislature is not picking on one
industry; it is simply focusing on one issue at a time. He said
he understands that negotiating is done when people buy
vehicles, but he wants to know "what is truly negotiable." He
said he didn't previously know that a doc fee was negotiable,
whether by being lowered, or buy having the vehicle price
lowered instead. He asked, "What is the problem with full and
public disclosure on what is and is not the actual thing we're
trying to buy, which in your case is an automobile?"
9:24:57 AM
MR. COOK reiterated that he believes in full disclosure and
provides it. He reemphasized the lack of problems that the car
dealerships have experienced in this regard, which is the reason
that the association does not support the bill.
9:25:58 AM
CHAIR SEATON asked Mr. Sniffen how often he gets complaints on
the issues raised in the bill.
9:26:21 AM
MR. SNIFFEN responded that although he cannot discuss the
complaints in any detail because of confidentiality statutes, in
a broad sense, Mr. Cook is right that there are not a lot of
written complaints about the doc fee issue. He stated his
belief that the reason there are not a lot of complaints is
specifically because consumers don't understand that it's
something that they could complain about. He said he is
currently involved in a case where the department has audited
some files of dealerships and, in nearly every transaction
looked at so far, has found a doc fee that was charged
inappropriately. He added, "We had no complaints about those
transactions either." In response to a question from Chair
Seaton, he confirmed that [regarding these cases], the doc fees
charged were added on above the advertised price.
9:27:45 AM
REPRESENTATIVE GARDNER seconded Mr. Sniffen's comment that the
reason people don't make the complaints is that they are
unaware.
9:28:33 AM
MR. COOK noted that the case to which Mr. Sniffen referred
relates to advertised price. He reminded the committee that
advertised prices are policed by Mr. Sniffen's office
vigorously. He reiterated that the definition of negotiated
price is unknown. He asked, "If you do not have a doc fee in
one place and you try to put it in another or disclose it as
being a mandatory fee, ... wouldn't that already be considered a
deceptive practice, and isn't that covered under statutes
currently on the books?"
9:29:39 AM
CHAIR SEATON stated:
I want to make sure we don't get anybody into hot
water anywhere here; ... everybody realize what
they're putting on the record. I mean, if we're into
a situation where we're saying that we're going to be
putting these uniformly across all cars because we
might run into federal law prohibitions, it's almost
as if we're saying those charges are a separate charge
that must be maintained. And if what we're saying
under state law - ... there is no true separate charge
- we want to make sure we don't get -- I just want to
put everybody under awareness that we don't want to
have people commit themselves to statements that they
don't want in the future.
9:30:26 AM
MR. SNIFFEN said Mr. Cook raises a good point; a lot of
practices that are being discussed in the bill could already be
illegal under Alaska's Consumer Protection Act. He said it is
not illegal for car dealers to have a "holdback"; it is illegal
for them to engage in any kind of deception that would have
mislead the consumer into believing he/she was getting financing
from the bank, when in fact that wasn't the true financing from
the bank. He illustrated that point as follows:
Let's say you go to a dealer and you say, "What can
you do for me on this car?" And the dealer says,
"Well, the best I can do for you is 5 percent." The
dealer doesn't say, "The best the bank can give you is
5 percent"; the dealer says, "The best I can give you
is 5 percent." [It's a ] very subtle difference, but
very important. If the dealer said, "Well the best
the bank will do for us is 5 percent," when in fact
the bank is giving the dealer a 4 percent rate and
[the dealer is] holding back that 1 percent, well
that's just fraud - that is deception - and it is
illegal under our Consumer Protection Act.
MR. SNIFFEN said a lot of consumers may not understand that
distinction when they are negotiating for the purchase of a new
vehicle, which Mr. Sniffen said is a significant event for most
people. He said, "So, it really is a matter of trying to prove
what the dealer said, what the consumer thought, and you get in
front of a court and it's a he said/she said kind of thing."
Mr. Sniffen expressed his wish that all dealers were as upfront
and honest as Mr. Cook so that these problems would not exist at
all, but he said that is not the case. He concluded:
So, yes they could be unlawful under our Act. It's
difficult to prove that they are. And it would remove
that uncertainty if we had our statute that said ...
you can do it, but if you do it you have to disclose
it ... clearly.
9:33:45 AM
REPRESENTATIVE GRUENBERG referred to a handwritten amendment in
the committee packet, which would change the bill as follows:
On page 1, line 8:
Between "price" and ","
Insert ", including the price stated at any point
during the negotiation or transaction"
REPRESENTATIVE GRUENBERG asked Mr. Cook and Mr. Sniffen if "that
would at least put some kind of a definition on the record."
9:35:05 AM
MR. COOK said he cannot speak on behalf of the association on
this matter, but he personally does not like the wording and
would still be opposed to the bill.
9:35:41 AM
CHAIR SEATON closed public testimony.
9:36:06 AM
REPRESENTATIVE GARDNER suggested the previously stated amendment
should say, "including the price stated at any point and agreed
or accepted", because she indicated that the transaction is not
complete until the dealer accepts the amount offered by the
consumer.
9:36:15 AM
REPRESENTATIVE GRUENBERG said he shares that concern.
9:36:24 AM
REPRESENTATIVE GARA stated that "negotiated price" never became
an issue until the legislature passed a bill in 2002 banning doc
fees. He said as a response to that bill, the car industry said,
"Oh, you used the advertised price, so we're going to charge the
doc fee in the negotiated price." He said the industry well
knew what the negotiated price was; "they were the ones that
created the issue." He stated, "What we're trying to do is say
at no point during the process may you insert a doc fee - in
your advertisement, when you negotiate with the consumer -
never." Representative Gara said there are only two kinds of
prices: the advertised price and the negotiated price.
9:37:56 AM
CHAIR SEATON agreed that the wording in the bill is sufficient.
He said:
The only question is, "Can you add in additional fees that
aren't in the advertised price after you go to
negotiations?" And that's what this bill says is that you
are working from an advertised price, and anything that's
included in the advertised price is included in
negotiations.
9:38:59 AM
REPRESENTATIVE GRUENBERG said he would not offer the amendment.
Regarding additional charges, he asked Representative Gara where
language addressing them would go in the bill.
9:39:27 AM
REPRESENTATIVE GARA suggested inserting "charges," between
"surcharges," and "and other" on page 1, line 12. In response
to a follow-up question from Representative Gruenberg, he said
he would support such an amendment.
9:39:51 AM
REPRESENTATIVE GRUENBERG moved Conceptual Amendment 1, as
follows:
On page 1, line 8:
Between "surcharges," and "and other"
Insert "charges,"
CHAIR SEATON asked if there was any objection to Conceptual
Amendment 1. There being none, it was so ordered.
9:40:49 AM
REPRESENTATIVE GRUENBERG explained that he is trying to cut down
on "wiggle room" in the bill. He directed attention to page 2,
line 24, and expressed concern about the word "arranges". [Page
2, lines 23-25 read as follows:
(f) In addition to the other requirements of
this section, if a motor vehicle dealer arranges
financing for a proposed buyer, the dealer shall
disclose in writing and before the sale is finalized
9:41:50 AM
REPRESENTATIVE GARA, in response to Representative Gruenberg,
suggested inserting "or offers financing to a proposed buyer" in
that language. In response to a follow-up question, he said he
would support such an amendment and would run it by Mr. Sniffen
before the bill reaches the House floor.
9:43:06 AM
REPRESENTATIVE GRUENBERG moved Conceptual Amendment 2, as
follows:
On page 2, line 24:
Following "proposed buyer,"
Insert "or offers financing to a proposed buyer,"
CHAIR SEATON asked if there was any objection to Conceptual
Amendment 2. There being none, it was so ordered.
9:44:08 AM
REPRESENTATIVE LYNN said he thinks the fact that the bill has
been heard in two lengthy meetings by the committee and is still
unclear shows that the plight of the new car buyer is remarkable
and speaks to the necessity of the bill.
9:46:14 AM
MR. SNIFFEN, in response to a question from Chair Seaton, said
he has no objection to the adopted Conceptual Amendment 2.
9:46:24 AM
REPRESENTATIVE GARDNER opined that although there may be
elements that can be improved upon, the committee has done its
best on what is a good bill. She said she views the bill as
addressing consumer protection and in no way would interfere
with a dealer's right to be in business and earn a profit; it is
about obligations for disclosure that would allow consumers to
make informed decisions.
9:46:54 AM
REPRESENTATIVE GARDNER moved to report CSHB 383(TRA), as
amended, out of committee with individual recommendations.
9:47:22 AM
REPRESENTATIVE RAMRAS objected. He opined that HB 383 is a bad
bill that hampers commerce.
9:47:45 AM
A roll call vote was taken. Representatives Gardner, Gruenberg,
Lynn, and Seaton voted in favor of moving CSHB 383(TRA), as
amended, out of committee with individual recommendations.
Representative Ramras voted against it. Therefore, CSHB
383(STA) was reported out of the House State Affairs Standing
Committee by a vote of 4-1.
SB 86-STATE/MUNI LIABILITY FOR ATTORNEY FEES
9:48:36 AM
CHAIR SEATON announced that the last order of business was CS
FOR SENATE BILL NO. 86(CRA)(efd fld), "An Act relating to the
liability of the state and municipalities for attorney fees in
certain civil actions and appeals."
9:49:45 AM
CRAIG TILLERY, Deputy Attorney General, Civil Division, Office
of the Attorney General, Department of Law, introduced SB 86 on
behalf of the Senate Rules Committee, sponsor by request of the
governor. He paraphrased his written testimony, as follows:
Since territorial days, Alaska has had a statutory
policy of requiring a losing party in most civil cases
to pay a portion of the prevailing party's attorney
fees. Soon after statehood, this policy was embodied
in Civil Rule 82 by the Alaska Supreme Court pursuant
to a legislative delegation. ...
SB 86 addresses the use of state and municipal funds
to subsidize certain types of litigation through
awards of attorney fees to prevailing parties that are
higher than the partial fees that are the norm in
Alaska. The legislation would limit those enhanced
awards to instances in which the legislature has made
the policy judgment to provide for them by statute.
Enhanced fee awards against state and municipal
governments, which [are] the amount above normal
compensation, represent a significant impact on the
state treasury and, on a more irregular basis, on
municipal funds. Ordinarily, the basis for these
enhanced awards has been the judicially created public
interest litigant policy, whereby selected litigants,
suing to advance ends deemed by the court to reflect
strong public policies, are granted full fees as a
subsidy from the state treasury.
For the state alone, over last 10 or so years, this
has averaged about $600,000 per year above normal
compensation.
SB 86 would address this by creating a new provision
in a chapter of title 9 that is devoted to immunities.
It relies on the legislature's constitutional
authorities to regulate suits against the state and to
confer immunities on the state and municipalities, as
well as on the doctrine of sovereign immunity. It
sets limits on liability that are similar and
essentially identical to those limits found in Civil
Rule 82 that courts have found for years to represent
fair partial compensation to a prevailing party.
The limits do not apply to condemnation proceedings -
and that's because payment of full attorney fees in a
condemnation proceeding is a constitutional
requirement - or in instances where the legislature
has provided for the enhanced fee awards, for example,
in a fair business practices-type case. There is also
an exception allowing courts to enhance attorney fees
as a sanction for misconduct by a party or by counsel.
The immunity created by SB 86 is intended to do two
things: One, it will save the state significant money
each year, but, most importantly what it does, is to
reassert legislative control over state expenditures
to encourage litigation on public concerns, based on
policy priorities that are determined by the
legislature.
MR. TILLERY said the proposed legislation was introduced in 2005
and has come across to the House from the Senate. He noted that
there is also a companion House bill that is in the House State
Affairs Standing Committee.
9:53:09 AM
MR. TILLERY said since the bill was introduced, a couple cases
of relevance have occurred: the ACLU case and the Bachner case.
He said what these cases tend to demonstrate is "the creeping
nature of the court's award of attorney fees against
governments, essentially headed towards what appears to be full
liability any time that the government would lose." Initially,
he said, public interest litigant doctrine came about as a
shield to prevent public interest litigants from having to pay
attorney fees under Civil Rule 82. Later, however, the idea of
a public interest litigant doctrine as a sword - where "they
were entitled to enhanced fees" - was put into the court's
doctrine, he said. Subsequently, the court expanded that
doctrine to say, "You not only get fees for ... those items that
you win, but if you win on anything, you get full fees ... for
... all of your work on the case." Mr. Tillery indicated that
was the [Dansereau v. Ulmer 955 P.2d 916] decision. He said the
court then expanded that decision to say, "Well, you don't
actually have to win if you bring the case and the state or the
government reacts in such a way that suggests that you were the
catalyst for that action, then you can get your full fee."
MR. TILLERY said one of the factors that has been the most
effective in making any public litigant make sense is the fact
that "you had to show that it was not an independent,
sufficient, economic incentive to bring the case." He said the
ACLU case dealt with benefits for state employees, and the court
was faced with the request that "they be accorded public
interest litigant status." He continued:
There the court stated that certainly "the plaintiffs
below contended that they were denied valuable
benefits. We have implicitly recognized the benefits
to which they're entitled are economically valuable."
Nonetheless, the court went on to find that it was not
a sufficient economic incentive, for the reason that
the plaintiffs might change their domestic status in
the future, before they actually got a benefit, or
they might cease to work for the state. In essence,
the court has said, "If you can imagine a contingency
by which you will not get this benefit, then you don't
have a sufficient economic incentive." In effect,
that means that public interest litigant status would
be accorded in all prospective litigation against the
state and municipalities. That concern was heightened
for us shortly after that in procurement case, where
the losing bidder in a procurement sued and was
afforded public interest litigant status, again, on
the assumption, "Well, maybe [we'll] get the bid next
time if ... it is tossed out."
9:56:15 AM
CHAIR SEATON surmised, "The procurement case was then basically
challenging the procedures that were used to go through a
bidding process but didn't actually change the award of the bid.
Is that the rationale behind that, or not?"
9:56:26 AM
MR. TILLERY answered, "It challenged a procurement ... for an
office building, and it tossed out the procurement and said you
have to go back and rebid."
9:56:40 AM
CHAIR SEATON concluded, "So, ... the court found faulty
procedures that were followed by the state or a municipality,
but it didn't actually award a bid to the prevailing party."
9:57:07 AM
MR. TILLERY responded, "No, they have to go back and go through
it." He added, "And by the way, ... that was a superior court
case; the first one I mentioned was a supreme court decision."
9:57:24 AM
REPRESENTATIVE GRUENBERG asked if the superior court opinion was
appealed.
9:57:34 AM
MR. TILLERY said it will be appealed. In response to a follow-
up question from Representative Gruenberg, he said he would
provide the "slip opinion number." Mr. Tillery summarized that
the bill attempts to do two things: control the fiscal impact
on the state and municipalities, and return to the legislature
the right to set the policies as to when litigation will be
subsidized. He said it is the view of the administration that
it is the legislature that should do that, not the court system.
9:59:05 AM
CHAIR SEATON asked, "Did we put an exemption exception in so
that if there was a constitutional challenge - if the basis of
the challenge was based on constitutional grounds - then those
fees would be awarded?"
9:59:34 AM
MR. TILLERY answered that four or five years ago, the
legislature introduced House Bill 145, which included a
provision that "a party would be entitled to full fees in a
constitutional case if they didn't have independent economic
incentive." He said House Bill 145 would be "an exception to
this bill." He noted that [House Bill 145] was struck down by
the [Alaska] Superior Court and is currently being considered by
the [Alaska] Supreme Court.
10:00:13 AM
CHAIR SEATON spoke of a case in 2002 that challenged
reapportionment under constitutional grounds and resulted in one
of the two largest attorney fees paid by the state in a public
interest litigant case. He mentioned an amount of $2 million.
He asked if any analysis has been done related to how many
public interest litigant fees have been granted in the past
based on constitutional grounds and whether there would be a
reduction in attorney fees paid by the state in public interest
litigant cases should the bill pass.
10:01:37 AM
MR. TILLERY said he has not. He said to do so would involve
going back and reading the decisions, which would be difficult.
He explained, "Because the other thing that the bill does is it
deals with the Dansereau problem by providing that you'd only
get them on the actual claims that you raise that were on
constitutional grounds. ... That's what [House Bill] 145 did
also." He offered an example as follows:
If you were to have ... an apportionment, or whatever,
and you raised four grounds - two of them
constitutional [and] two of them statutory - and you
only won on the constitutional ground, then you would
only get your fees for that portion.
10:02:23 AM
CHAIR SEATON suggested that the year 2002 would readily show
that "almost all of it was based on the challenge by a ...
political party to the redistricting based on a constitutional
challenge." He asked if that is correct.
10:02:47 AM
MR. TILLERY replied that he is not familiar with that case;
however, he offered his believe that redistricting has some
statutory elements to it.
10:02:57 AM
RANDY RUARO, Assistant Attorney General & Legislative Liaison,
Legislation & Regulations Section, Civil Division (Juneau),
Department of Law, confirmed, "There are statutes on it."
10:03:19 AM
REPRESENTATIVE GRUENBERG directed attention to page [6] of 8 on
the handout entitled, "Legislative Research Report February 17,
2006, Report Number 06.097" [included in the committee packet].
He pointed out the O'Callaghan v. Coghill case listed on the
page and revealed that that was his case, which he won. He
stated, "I do have a conflict of interest, having from time to
time taken these cases, and I guess I should ask to be excused
from participating ...."
10:03:48 AM
REPRESENTATIVE LYNN stated his objection.
10:03:58 AM
REPRESENTATIVE GRUENBERG, in response to a question from Chair
Seaton, confirmed that the O'Callaghan v. Coghill case was on
constitutional grounds. He added that subsequently the U.S.
Supreme Court reversed that decision.
REPRESENTATIVE GRUENBERG said if a public interest litigant
loses, attorney fees cannot be awarded against that litigant.
He offered his understanding that that is the current state of
the law.
MR. TILLERY responded that actually the legislature essentially
abolished the public interest doctrine, "as the court had done,"
through House Bill 145. In response to a follow-up question
from Representative Gruenberg, he confirmed that that doctrine
was ruled unconstitutional by the superior court, but is the
current state of law until the supreme court rules on it.
10:06:29 AM
REPRESENTATIVE GRUENBERG said, "If you win, you get full
attorney's fees under the current state of the law." He added
that that is both at the trial court level and on appeal. He
offered further details.
10:07:00 AM
MR. TILLERY confirmed that Representative Gruenberg's statements
were correct.
10:07:08 AM
REPRESENTATIVE GRUENBERG said cases where there is a money
judgment are not public interest cases, but are just run of the
mill civil lawsuits.
MR. TILLERY said that's correct.
REPRESENTATIVE GRUENBERG proffered that normally under Rule 82,
if it is a nonmoney judgment, the attorney gets a percentage of
his/her actual attorney fees. He offered his understanding that
the amount is 20 percent if the case does not go to trial and 30
percent if the case goes to trial and is won.
REPRESENTATIVE GRUENBERG said on appeal the situation is quite
different. He continued:
The supreme court, on an appeal, is under an appellate
rule, not Rule 82, and the appellate rule gives total
discretion to the supreme court. ... They award very
few attorney fees to anybody in a nonpublic interest
case; ... it's generally somewhere between $500 and
$1,000 .... So, it's almost a token, because it's a
lot more expenses to take an appeal .... They
determine whether you win an appeal as an appellate.
Generally, if you prevail on a single issue, they
would hold you as a prevailing party. They might not
award you the full $1,000 - you might only get half of
it, or something like that.
REPRESENTATIVE GRUENBERG directed attention to page 2, lines 22-
24, which read as follows:
(3) in an appeal in which the
prevailing party does not recover a money judgment, 20
percent of the prevailing party's reasonable actual
attorney fees that were necessarily incurred in
litigating issues upon which the party prevailed.
REPRESENTATIVE GRUENBERG explained:
In an appeal now, if you're a prevailing party - even
against the state - in an injunction or a declaratory
judgment action, you'd only get something less than
$1,000, which is far less than 20 percent. So, this,
I believe, Mr. Tillery, ... might significantly
increase the amount a prevailing party would get in a
run-of-the-mill declaratory judgment appeal against
the state. ...
A typical appeal might cost $8-10,000 in attorney fees
[for] actual time. ... Let's say there's a mine and
they've closed the road, and you want an injunction to
require the state to change their administrative
decision so the road to the mine goes open. [You] pay
$10,000 [and] you win on the appeal. Now you would
only get $1,000 against the state, but you've spent
ten grand in your ... successful appeal. Under this,
you double the amount you'd get against the state, ...
which I would support, by the way. You might actually
find prevailing appellate in ... nonmoney judgment
cases getting a higher amount against the state than
you do under the current appellate rule.
10:11:17 AM
MR. TILLERY responded to Representative Gruenberg's statements
by saying, "This wouldn't affect that; this is only ... a cap on
what the state will pay." He added that in cases where it would
have given a thousand dollars, the supreme court presumably will
continue to give a thousand dollars. He said, "What this would
deal with was the situation where they ... might provide for
full fees."
10:11:45 AM
REPRESENTATIVE GRUENBERG asked Mr. Tillery if the intent of the
bill is not to change court rules.
10:12:10 AM
MR. TILLERY responded:
[What] it basically finds is a matter of sovereign
immunity - that the state will not be liable for more
than this amount. Then the amounts that it has in
here, as I'm sure you've noted, mirror Civil Rule 82.
REPRESENTATIVE GRUENBERG said, "Except it doesn't mirror the
appellate rule in the case I'm talking about."
MR. TILLERY mentioned Appellate Rule 508. He said, "Courts have
been ... a little bit all over the board, but the normal
practice is to, by analogy, apply Civil Rule 82 standards ... to
administrative appeals." He added, "And 508 applies to both of
those."
10:13:07 AM
REPRESENTATIVE GRUENBERG asked, "So, you're saying that in
administrative appeals they apply Rule 82 both at the superior
court and the supreme [court]?"
10:13:20 AM
MR. TILLERY answered not on the supreme court; it would more
typically give the $1,000, except in the case of public interest
litigants. He explained, "This would simply set a cap on
liability; it wouldn't change the court's normal practice."
10:13:40 AM
CHAIR SEATON asked Representative Gruenberg to meet with the
Office of the Attorney General on "these points that are really
somewhat off the bill." He asked Mr. Tillery if public interest
litigants have to win on the main issue, or if they can win on
some small subsidiary issue and receive full attorney fees as if
having won the main issue. He mentioned Hillman v. Nationwide.
10:14:59 AM
MR. TILLERY replied that under Dansereau "you don't have to be
the primary prevailing party." He said in that case, the court
awarded full fees, even though the party won on only one of its
three claims. He offered a couple other examples in: State v.
Alaska Civil Liberties Union - a 1999 case, and another 1999
case involving the Cook Inlet areawide lease sale.
10:17:49 AM
SCOTT A. BRANDT-ERICHSEN, Attorney at Law, Ketchikan Gateway
Borough, said he is testifying on behalf of himself, using his
18-year experience in litigation and advice giving. He
indicated that although it would make his job more frustrating
if SB 86 "did away with the shield presented by the public
interest litigant status," he thinks the way the bill is
structured in "just doing away with the sword aspect" is a
reasonable compromise. He told the committee that in his
experience representing municipalities he has had six to seven
cases over the years that have involved public interest litigant
issues.
MR. BRANDT-ERICHSEN described one case involving a two-way
lawsuit. He said, "We were sitting in the middle with public
interest litigants on both sides, assured that we would lose to
at least one of them and have to pay full attorney fees with no
prospect of getting our fees covered." He stated, "While that's
an unusual case, the situation of facing litigation over an
issue which may be of minor importance to the entity, but of
significant concern in terms of the financial risk to the
community involved, ...is a concern that I would like to see
addressed." Mr. Brandt-Erichsen opined that SB 86 addresses
this concern. He continued:
The public interest attorney [fee] is not a court rule
as it is now, and so it doesn't require an amendment
to a court rule to achieve the things that this bill
is seeking to achieve. The changes in this bill I
don't believe would create a sufficient disincentive
to public interest litigants to keep them from
challenging governmental actions which they believe
were taken improperly. I think we'll see a comparable
number of challenges in the future if this bill is
adopted, but the stakes for those challenges, for
municipalities and for the state, will not be as
lopsided.
10:23:03 AM
MR. BRANDT-ERICHSEN, in response to a question from Chair
Seaton, stated:
There are occasionally issues where ... you realize
there's a significant risk of litigation over the
validity of the provision because there is a party
that is either philosophically or economically
motivated to challenge it. ... There's always a
certain level of care, but the level of care that you
take to try to ensure that you have covered all
possibilities to avoid successful litigation by
someone challenging the legislation or regulation is
probably higher in those instances.
These public interest litigant cases however - ...
only about half of the ones that I've had have come up
in the context of political issues, regulatory type,
or law changes. Half of the ones that I have
encountered have arisen out of administrative
discharge of statutory duties, for example, the
municipal clerk being charged with processing recall
petitions. There are specific duties that the clerk
is charged with carrying out, and someone challenging
how those duties were carried out isn't really
challenging legislation so much as that the action was
not taken consistent with what the rules are.
10:24:59 AM
CHAIR SEATON asked if there has been any heightened awareness or
execution of those duties knowing that there could be public
interest litigant challenges if the duties are not properly
executed.
10:25:46 AM
MR. BRANDT-ERICHSEN answered yes. He relayed that in most of
the instances where public interest litigation develops, it
tends to be in areas where there is certain controversy, for
example, timber sales, recall issues, election contests, or
certain legislation. He said the people who are not pleased
with the way a particular policy issue was handled or with the
decision that was made by an administrative official will look
for anything they can find to try to get that decision reversed.
He concluded, "And so, regardless of how careful you are, it
will not prevent them from going to court to try and get it
overturned anyway."
10:27:15 AM
REPRESENTATIVE GRUENBERG recalled that Mr. Brandt-Erichsen had
testified that SB 86 is designed to change certain court
interpretations, thus, the court rule does not need to be
amended. He said, "We find that quite often what we're dealing
with is legislation designed to modify or reverse
interpretations, say, of statutes. And the way the legislature
works, if you're doing that, you amend the statute. And it's
the same with a court rule; I don't see any difference." He
asked Mr. Brandt-Erichsen what basis he had for the
aforementioned statement.
10:28:16 AM
MR. BRANDT-ERICHSEN clarified that he had meant that SB 86 would
change a court interpretation; however, that interpretation "has
not been reduced to a rule in one of the court rules." He
explained, "The concept of public interest litigants and the way
fees are awarded in public interest litigant cases is a
construction of court decisions, rather than a rule, such as
Rule 82. And so, while this legislation would have an
interaction with prior court decisions, it does not change the
court rules themselves."
10:29:07 AM
REPRESENTATIVE GRUENBERG said he thinks that is an issue that
should be examined, because normally the attorney fee provisions
are an interpretation of the court rules.
10:30:43 AM
REPRESENTATIVE GRUENBERG said he would like to know if Mr.
Tillery and Mr. Brandt-Erichsen have opinions regarding whether
a two-thirds vote or only a majority vote under the court's
interpretive power would be necessary should the court rules be
modified.
10:31:05 AM
[SB 86 was heard and held.]
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at
10:31:37 AM.
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