Legislature(2003 - 2004)
05/06/2003 08:06 AM Senate JUD
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ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
May 6, 2003
8:06 a.m.
MEMBERS PRESENT
Senator Ralph Seekins, Chair
Senator Scott Ogan, Vice Chair
Senator Gene Therriault
Senator Hollis French
Senator Johnny Ellis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 8
"An Act relating to tampering with public records."
MOVED CSSB 8(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 224
"An Act relating to a tobacco product manufacturer's compliance
with certain statutory requirements regarding cigarette sales;
and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 93
"An Act relating to limitations on actions to quiet title to,
eject a person from, or recover real property or the possession
of it; and providing for an effective date."
MOVED CSSB 93(JUD) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 214(JUD)
"An Act relating to the recovery of punitive damages against an
employer who is determined to be vicariously liable for the act
or omission of an employee; and providing for an effective
date."
HEARD AND HELD
SENATE BILL NO. 13
"An Act prohibiting discrimination in insurance rates based on
credit rating or credit scoring; and providing for an effective
date."
ITEM REMOVED FROM AGENDA
PREVIOUS ACTION
SB 8 - See HESS minutes dated 3/5/03, 3/10/03, 3/24/03 and
Judiciary minutes dated 4/25/03.
HB 224 - No previous action to record.
SB 93 - See Labor and Commerce minutes dated 3/11/03 and 4/1/03.
See Judiciary minutes dated 4/16/03, 4/30/03 and 5/2/03.
HB 214 - See Labor and Commerce minutes dated 4/29/03 and
5/1/03.
WITNESS REGISTER
Mr. Mike Barnhill, Assistant Attorney General
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Supported HB 224.
Senator Wagoner
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 93.
Mr. John Tillinghast
Sealaska Corporation
One Sealaska Plaza
Juneau AK 99801
POSITION STATEMENT: Commented on SB 93.
Representative Ralph Samuels
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 214.
Ms. Sarah Nelson
Staff to Representative Samuels
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on HB 214.
Ms. Marsh Davis, General Counsel
Era Aviation
POSITION STATEMENT: Supported HB 214.
Mr. Jim Wilson
Chairman, Legislative Committee
Alaska Air Carriers
Juneau, AK 99801
POSITION STATEMENT: Supported HB 214.
Ms. Pam LaBolle, President
Alaska State Chamber of Commerce
217 2nd Street
Juneau, AK 99801
POSITION STATEMENT: Supported HB 214.
ACTION NARRATIVE
TAPE 03-38, SIDE A
SB 8-TAMPERING WITH PUBLIC RECORDS
CHAIR RALPH SEEKINS called the Senate Judiciary Standing
Committee meeting to order at 8:06 a.m. Present were Senators
Ogan, Therriault and French. The first order of business to come
before the committee was SB 8.
SENATOR THERRIAULT moved to adopt committee substitute, \D
version, SB 8. There was no objection and it was so ordered.
CHAIR SEEKINS said that the Department of Law did not expect the
number of new felony prosecutions to rise and didn't anticipate
a fiscal impact with passage of the legislation.
SENATOR OGAN moved to pass CSSB 8(JUD), version \D, from
committee with individual recommendations and zero fiscal note.
There was no objection and it was so ordered.
SENATOR ELLIS arrived at 8:13 a.m.
HB 224-CIGARETTE SALES REQUIREMENTS
CHAIR SEEKINS announced HB 224 to be up for consideration.
MR. MIKE BARNHILL, Assistant Attorney General, supported HB 224,
which is the companion to SB 162. This bill relates to the
Master Settlement Agreement, which is the settlement between
Alaska, 45 other states and the major tobacco companies.
Litigation was settled in 1998 in exchange for a permanent
revenue stream and a few weeks ago, Alaska got our first annual
payment of about $17.5 million.
The agreement has provisions for reducing the revenue stream in
certain circumstances. One of them is a non-participating
manufacturer adjustment (NPM) (manufacturers who haven't signed
on to the Master Settlement agreement with the states). The way
to avoid that is to do two things: first, the state has to enact
a NPM statute, which we did in 1999. It requires all NPMs to
deposit a certain amount of money into escrow for every
cigarette they sell in the State of Alaska. For the past two
years, they have had to deposit about 1.5 cents per cigarette.
The other thing they have to do to avoid the downward revenue
adjustment is to diligently enforce that statute. Alaska has
been doing that since it's enactment in 1999. However, they have
found in certain circumstances, enforcement can be difficult,
because many of the NPMs are small tobacco manufacturers that
are located in far flung parts of the world like India, China
and the Philippines. As an example, a company in India makes
hand rolled candy flavored cigarettes and was selling a
substantial amount of them into the state, but weren't
depositing the escrow. The Department of Revenue (DOR) sent
several letters advising them of our laws and they refused to
comply. Finally, the case was referred to him and he decided to
sue. They had to hire a process server to hand carry the
complaint and summons that was filed in Juneau to India and they
ultimately got a default judgment.
Other states have had similar experiences with this company and
others and decided there has to be another way to deal with
them. In 2001, legislation that is designed to enhance our
ability to enforce our laws was enacted. It created a contra-
band list of companies that did not comply with our escrow laws.
By last summer, about 15 other states followed suit. However,
the problem was that each of the statutes was different. Then,
the National Association of Attorneys General got involved and
with the help of the states a uniform law was drafted. It
creates a directory of cigarette companies that are permitted to
sell cigarettes in Alaska. To get on the list, the manufacturer
has to certify annually either that they are a participating
manufacturer under the Master Settlement Agreement or that they
are a NPM, but in compliance with our laws. Local distributors
look up the web page on the Department of Revenue's web site and
import cigarettes accordingly.
Other provisions in the bill concern monitoring compliance with
information supplied to the DOR and the penalties for non-
compliance. There is a tax credit for cigarettes a distributor
brings into the state relying on the DOR list and then finds
that the company is out of compliance. There is also a provision
for service of process, which allows him to serve the
commissioner of the Department of Community and Economic
Development.
SENATOR OGAN asked if other states were enacting this
legislation verbatim.
MR. BARNHILL replied the 12 states that have enacted it have
done so nearly verbatim. Our tax credit provision is a variance,
but the DOR thought it important to do that.
SENATOR OGAN said he thought it didn't look like streamlining,
but more like adding more regulations and hoops to jump through.
SENATOR THERRIAULT said the escrow was set up as a source of
paying possible future judgments. He didn't understand how this
prevents them from becoming judgment proof.
MR. BARNHILL explained that the context of this is the Master
Settlement Agreement. The states sued the major tobacco
companies, not the hundreds of small ones. To fund the revenue
stream the tobacco companies raised the price of cigarettes. The
concern was that only the major companies were raising the price
of cigarettes and the smaller companies could come in and grab
market share. That would essentially undermine the agreement.
This provision was put in to level the economic playing field
for those smaller companies. The money sits in escrow for 25
years. In Alaska, the total amount of escrow that has been
required to be deposited over the 3.5 years this program has
been in effect is about $40,000. So, there's not much point in
suing the companies, because there's not much to recover from
the escrow accounts.
SENATOR THERRIAULT asked how they get to be judgment proof
before liability arises.
MR. BARNHILL replied if they are a small company and they go
bankrupt in 10 years, there's no money to recover from them
unless there is money sitting in the escrow account. The tax
provision is on page 5, line 16, and is paid at the point of
importation, not at the point of sale to the consumer.
SENATOR FRENCH asked if this legislation works in conjunction
with tax stamps and pricing floors in other legislation they are
discussing this year.
MR. BARNHILL replied he is aware of that legislation and
although HB 224 doesn't work in conjunction with it, it's not
inconsistent with it, either.
SENATOR FRENCH said that he needed more time to consider the
bill.
CHAIR SEEKINS said they would hold the bill for further work.
SB 93-ADVERSE POSSESSION
CHAIR SEEKINS announced SB 93 to be up for consideration.
SENATOR WAGONER, sponsor of SB 93, explained that version X
creates two subsections - one for utilities and one for the
state. Subsection (c), line 14, will allow public utilities to
get rights to an easement for utility purposes after 10 years.
Subsection (d) was made for DOT with slightly different
language, but accomplishes the same goal.
SENATOR FRENCH said the coastal trail runs along the coast in
his district and about 100 yards behind it, homes have been
developed for 40 years. There are lots between the trail and the
homes that will go up for sale pending soil testing. Folks have
been accessing the coastal trail with a little by way through
the woods since the trail was built (20 years ago). It looks
like there's going to be a fight now between the developers and
the homeowners over access to the coastal trail. They haven't
recorded title of any kind or easement or taken any legal
action. He wanted to know if this bill would alter their right
to litigate access they have been using.
SENATOR WAGONER replied he couldn't answer that, but Mr.
Tillinghast could.
MR. TILLINGHAST, Sealaska Corporation, said the answer is no.
"Whatever rights the public acquired by virtue of that past
usage wouldn't be affected by this bill."
SENATOR FRENCH asked if it would from this time forward.
SENATOR THERRIAULT interrupted to move to adopt CSSB 93(JUD),
version \X. There was no objection and it was so ordered.
MR. TILLINGHAST replied page 2, line 19 says, "the continued
ability to perfect access to public trails" so access is
preserved in the bill to the extent of DOT's ability to preserve
access for a paved road.
SENATOR OGAN asked if anyone remembers the Hillside park access
case.
SENATOR FRENCH said that he remembers it was about access to
Rabbit Lake - from a trailhead across private land to state park
land. The trail had been used for perhaps 30 years. Through a
series of state bungles, that access was lost and the litigants
ended up buying access from the owner.
CHAIR SEEKINS asked what caused Sealaska to bring this issue
before the Legislature and how this might address it.
MR. TILLINGHAST replied that Sealaska has had to expend
significant attorney's fees and time evicting squatters from
their property, who squatted in reliance on the law, as it
exists today. The fact that they were successful in getting them
off is almost beside the point, because they had to spend a lot
of money to do that and they continue to have to patrol the
property. The philosophical reason is that as private property
owners, they do not feel they should have obligations placed on
them to consistently patrol their property to chase off
"thieves" any more than the government should have that
obligation. It may have had social value in the past when we
didn't want to take land from the railroads, but those days are
over.
CHAIR SEEKINS asked if there are regulations that protect Native
lands from notorious adverse possession.
MR. TILLINGHAST replied there are. The doctrine of adverse
possession protects any land a corporation received under ANGSA
until that land is developed. Unfortunately, the courts have
developed a very low threshold for the meaning of developed
saying that lands are developed as soon as they are subdivided.
There is no question that logging would be considered
developing.
CHAIR SEEKINS asked why some of the other large corporations
weren't sitting here with him because they surely had the same
problem.
MR. TILLINGHAST responded that he assumed they did, but he
couldn't speak for them.
SENATOR OGAN asked why section 1 was divided into two
paragraphs.
SENATOR WAGONER explained the original bill had a section that
pertained to DOT. Chugach Electric and Homer Electric expressed
concern and they tried to combine them with the DOT section, but
it didn't work out. So, they were separated.
CHAIR SEEKINS said this bill in effect eliminates squatters'
rights and if there's a good faith mistake about someone's
property line, that's not affected by this.
SENATOR WAGONER concurred.
SENATOR THERRIAULT moved to pass CSSB 93(JUD) from committee
with zero fiscal note and individual recommendations. There was
no objection and it was so ordered.
8:40 - 8:45 a.m. - at ease
HB 214-PUNITIVE DAMAGES AGAINST EMPLOYERS
CHAIR SEEKINS announced HB 214 to be up for consideration.
REPRESENTATIVE RALPH SAMUELS, sponsor of HB 214, said the bill
creates new guidelines for damages against an employer under
vicarious liability. It stipulates that an employer shall not be
responsible for paying damages unless he okayed the act. The
point is if a company did nothing wrong, it should not be
punished, which is what punitive damages are for.
The bill does not have anything to do with direct damages or
compensatory damages. Language comes from restatements of
National Standards. The Alaska Supreme Court found in the
Laidlaw case, that if it had come up in trial, they would have
leaned toward the National Standards.
SENATOR FRENCH said he thought the purpose of this bill was to
overturn the result of the Laidlaw case.
REPRESENTATIVE SAMUELS said he didn't know how the case ended,
but he knows what the court said.
SENATOR FRENCH said the one place this bill differs from the
restatement of National Standard has to do with the employee
working in a managerial capacity for the employer.
REPRESENTATIVE SAMUELS said they wanted to make sure they had
someone who had control over the policies of the company.
SENATOR FRENCH said he noticed that the restatement was careful
to add to the managerial reference "who was acting in the scope
of employment." This bill says you can only award punitive
damages if the employee was a manager of the employer, not that
they were acting within the scope of employment.
MS. SARAH NELSON, Staff to Representative Samuels, responded
that there are two different kinds of this law, the narrower
complicity of rule and the one that is acting within the scope
of employment. They were aiming at a narrower construction.
MS. MARSHA DAVIS, General Counsel, Era Aviation, said she
thought that language was left out because it resulted in a
tighter definition than the restatement, but it broadens the
number of people it would affect.
TAPE 03-38, SIDE B
SENATOR FRENCH asked if this would penalize the lead on a night
shift for Exxon or BP.
MS. DAVIS replied that you would have to ask yourself whether
that individual has sufficient authority and control to make
decisions for the alter ego - the employer. They are looking for
someone who can create and alter company policies.
SENATOR OGAN said the most infamous case of vicarious liability
he could think of was Joe Hazelwood on the Exxon Valdez. Exxon
has a policy that you don't drink and drive their ships. So, are
they suddenly not liable because he violated their policy?
MS. DAVIS replied that the $5 million in punitive damages were
assessed against Exxon directly. Mr. Hazelwood had punitive
damages for $5,000. This bill wouldn't touch anything that has
to do with maritime law, but it would make Exxon or BP liable
for Mr. Hazelwood's punitive damage assessment.
SENATOR FRENCH asked if she thought this bill would have
produced a different result in the Laidlaw case.
MS. DAVIS replied she didn't think it would, but it would be a
very close question. The question was did Laidlaw know the
individual had a drug/alcohol problem and yet allow him to drive
the van. The jury could conclude that was reckless behavior on
the part of Laidlaw and that would have the same result, that
Laidlaw was responsible for the punitive damages.
MS. DAVIS said one reason the vicarious liability should stay
with the employee is that lawyers go after the deep pockets. In
this case Laidlaw was liable to pay the $100,000 that was
assessed and the employee got off scot-free.
It's appropriate if you're going to punish someone for
the wrong doing that they actually be punished rather
than sliding that punishment to what is essentially an
innocent party in the transaction and allows the bad
behavior to proceed on because they [don't have the
deepest pocket.]
SENATOR FRENCH asked why they wouldn't include the phrase "held
in the course and scope of employment" since that's the test
they used in Laidlaw.
MS. DAVIS replied that under Alaska law, you couldn't be
determined to be vicariously liable without an initial finding
that the conduct of the employee was within the scope of
employment. It's a bit duplicative to have a precondition that
presumes the action was within the scope of employment. It
wouldn't hurt anything to put it back in, but it would be
duplicative.
SENATOR THERRIAULT asked if is he acting as an employee if he
lets an employee use one of his mobile rigs over the weekend.
MS. DAVIS said the question would be whether his business
receives any compensation for that use.
SENATOR THERRIAULT said no.
MS. DAVIS said she would question whether any conduct by that
employee could be tied back to his business.
MR. JIM WILSON, Alaska Air Carriers, supported HB 214 saying it
would reduce the cost of their insurance. They have an extensive
training program, but one pilot didn't follow procedure and use
the mirror to observe external loads carried under the aircraft
when landing in a confined area. His blades hit a stump and the
aircraft was totaled. Fortunately, there were no injuries or
deaths, but had there been, they could have seen punitive damage
suits. The pilot put the company at risk and those are the kind
of things he is concerned about.
SENATOR FRENCH asked if he was sued or whether any money changed
hands.
MR. WILSON replied it was an expensive accident; they lost a
helicopter and the pilot lost his job.
SENATOR ELLIS asked if he thought his insurance rate would go
down with this legislation.
MR. WILSON replied his insurance underwriter told him it would
be one of the tools that would help it go down.
SENATOR ELLIS asked Mr. Wilson if the insurance underwriter said
he would reduce his insurance premium if he got this bill
passed.
MR. WILSON repeated he just said it would be one of the tools
that would make it go down.
SENATOR ELLIS said after the bill has been signed into law, he
wanted Mr. Wilson to tell him how much his insurance went down.
"I'll be really excited if that, in fact, ever happens."
MR. WILSON said he believed it would.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
supported HB 214. Prior to the passage of tort reform in 1996 or
97, the insurance rates in this state were escalating at an
astonishing rate. A great deal of it was because of the punitive
damage assessments, because you can't insure against punitive
damages because they are used to punish a wrongdoer.
If you go to court, however, you run the risk of getting a
punitive assessment and that causes many businesses and their
insurance companies to settle out of court rather than take that
chance. She said the insurance rate might not go down, but it
could level out or rise slightly versus the astronomical
increases that happened before passage of the tort reform
legislation and the punitive damages definition.
CHAIR SEEKINS said that negotiating an insurance rate is a long
process, especially with a business. He agreed that rates could
fall or at least not rise as fast as they find ways to keep the
truly responsible parties liable for their actions.
SENATOR FRENCH said he thought this bill restricts the doctrine
too far.
Reading the Laidlaw is kind of an eye-opener for
anybody with a child who goes to school, because in
the Laidlaw case this bus driver was, as far as I can
tell, smoking marijuana every single day and showing
up to work after having smoked marijuana and, in the
course of her job, rolled the bus with a bunch of kids
in it and hurt the kids. The trial jury, as they
sometimes do, kind of lays down a big heavy punitive
award, which the trial court reduced substantially -
because contrary to popular opinion, there is some
oversight of punitive damage awards. Frankly, I think
a bus company that employs a bus driver that is
smoking marijuana every single day should tighten down
the screws a little bit to make sure that isn't
happening. If it takes a punitive damage award to make
them tighten down the screws, I'm okay with that. I
think this bill needs to be amended to make sure that
employees acting within the scope of their employment
are included within the definition of those
individuals who put the company on the hook.
He would be much more comfortable if the bill mirrored the
language of the restatement, which is the national standard.
SENATOR THERRIAULT said he needed more time to go through the
issues.
SENATOR SEEKINS said they would hold HB 214 for further
consideration. There being no further business to come before
the committee, he adjourned the meeting at 9:20 a.m.
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