Legislature(1999 - 2000)
04/10/2000 02:20 PM Senate JUD
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SENATE JUDICIARY COMMITTEE
April 10, 2000
2:20 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Rick Halford, Vice-Chairman
Senator Dave Donley
Senator Johnny Ellis
MEMBERS ABSENT
Senator John Torgerson
COMMITTEE CALENDAR
SENATE CONCURRENT RESOLUTION NO. 3
Relating to the sovereignty of the State of Alaska and the
sovereign right of the State of Alaska to manage the natural
resources of Alaska.
-MOVED SCR 3 OUT OF COMMITTEE
SENATE CS FOR CS FOR HOUSE BILL NO. 37(JUD)
"An Act relating to restricting sale of cigarettes, to enforcement
of certain laws relating to sales of cigarettes, and to smoking
education and cessation programs administered by the Department of
Health and Social Services."
-MOVED SCS CSHB 37(JUD) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 239(FIN)
"An Act relating to the Uniform Commercial Code; relating to
secured transactions; amending Rule 79, Alaska Rules of Civil
Procedure; and providing for an effective date."
-MOVED CSHB 239(FIN) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 435(JUD)
"An Act making corrective amendments to the Alaska Statutes as
recommended by the revisor of statutes; and providing for an
effective date."
-MOVED CSHB 435(JUD) OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SJR 3 - See State Affairs minutes dated 1/28/99 and Rules minutes
dated 3/15/99.
HB 37 - No previous action to report.
HB 239 - No previous action to report.
HB 435 - No previous action to report.
WITNESS REGISTER
Representative Scott Ogan
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Supports SCR 3
Representative Norman Rokeberg
State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 37
Mr. Elmer Lindstrom, Special Assistant
Department of Health and Social Services
Office of the Commissioner
PO Box 110601
Juneau, Alaska 99811-0601
POSITION STATEMENT: Testified on HB 37
Ms. Christie McIntire
American Lung Association of Alaska
500 West International Airport Road, Suite A
Anchorage, Alaska 99518
POSITION STATEMENT: Testified on HB 37
Ms. Delisa Culpepper
Alaska Tobacco Control Alliance
500 West International Airport Road, Suite A
Anchorage, Alaska 99518
POSITION STATEMENT: Testified on HB 37
Representative Lisa Murkowski
Alaska State Capitol Building
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 239
Mr. Jerry Kurtz
National Conference of Commissioners on Uniform State Laws
1050 Beech Lane
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 239
Mr. Steve Weise
Heller Ehrman White and McAuliffe
601 South Figueroa Street
Los Angeles, CA 90017-5758
POSITION STATEMENT: Testified on HB 239
Ms. Sharon Young
State Recorder's Office
Department of Natural Resources
3601 C Street, Suite 1180
Anchorage, Alaska 99503-5947
POSITION STATEMENT: Testified on HB 239
Ms. Pamela Finley
Division of Legal Services
Alaska State Legislature
Terry Miller Office Building
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 435
ACTION NARRATIVE
TAPE 00-20, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 2:20 p.m. Present were SENATOR HALFORD, SENATOR DONLEY,
SENATOR ELLIS and CHAIRMAN TAYLOR. The first order of business to
come before the committee was SCR 3.
SCR 3-SOVEREIGNTY OF THE STATE; RESOURCES
CHAIRMAN TAYLOR stated that SCR 3 makes a statement to Congress.
SCR 3 cites U. S. Supreme Court cases and puts Congress and federal
agencies on notice that Alaska will not put up with the federal
mandate and intervention of fish and game management. If Congress
chose to ignore Alaska's rights by passing the Alaska National
Interest Lands Conservation Act (ANILCA), then Alaska needs to take
this issue forward and litigate. The dispute revolves around
whether or not the federal government can force a sovereign state
to amend its constitution and to amend the equal protection clause
of its constitution to provide for discrimination based on
residency.
REPRESENTATIVE SCOTT OGAN said he strongly supports SCR 3.
Sovereignty of Alaska should be defended by the legislature and the
governor. This issue is not about subsistence, it is about
Alaska's right to manage its resources and whether Alaska will be
a first or second class state. The Equal Footing Doctrine states
that Alaska was admitted to the Union on equal footing with other
states--this was specifically mentioned in the 1953 Submerged Land
Act in the Statehood Compact. Representative Ogan said he finds it
outrageous that the federal government has stepped in and taken
over the management of Alaska's sovereign property. When Alaska
became a state it received title to its submerged land and having
title is a property right.
CHAIRMAN TAYLOR agreed wholeheartedly with a quote in Governor
Knowles' appeal of the Katie John case, "No governor should ever
barter away the state's sovereign right to manage its lands, its
waters, or its natural resources."
SENATOR HALFORD moved SCR 3 from committee with individual
recommendations. Without objection, the motion carried.
Number 377
HB 37-CIGARETTES:SALES/ EDUC & CESSAT'N PROGRAM
SENATOR ELLIS moved to adopt a proposed SCS CSHB 37(JUD), labeled
version Y. There being no objection, the motion carried.
REPRESENTATIVE ROKEBERG, sponsor of HB 37, said that on page 2,
line 20, after the word "is" the word "not" was deleted, and "any
health warning, including" was added to the sentence. The new
wording is: (B) any health warning, including a health warning
that is specified in 15 U.S.C. 133 (Federal Cigarette Labeling and
Advertising Act).
On page 3, line 20, "required to be" was added. The new wording
is: (g) A person who is required to hold a business license
endorsement under this section, or who is required to be licensed
or agrees to be licensed under AS 43.50.010, or an agent or
employee of the person, may not...."
Page 5 contains the outline of what a tobacco control and cessation
program should do and more emphasis on youth was added.
REPRESENTATIVE ROKEBERG noted that, in large part, the bill
includes a provision prohibiting grey market sales, the sale of
export cigarettes for manufacture for export. HB 37 also has a
provision prohibiting the sale of loose cigarettes, and a provision
that applies to the duty-free shop at the Anchorage airport. HB 37
does have a fiscal note that will be addressed by the Senate
Finance Committee. That fiscal note reflects the need for HB 37 to
be in compliance with the Master Smoking Agreement. Over the years
Alaska should receive around $680 million from that settlement so
the fiscal note represents a mere token of that amount. The Center
for Disease Control recommends that the State of Alaska spend as
much as $8 million to add a comprehensive smoking control program.
REPRESENTATIVE ROKEBERG said the primary thrust of HB 37 is the
provision on page 5 that dictates the state shall administer the
program by grant or contract. He emphasized that he sees no need
to create a bureaucracy to do that as DHSS will only be passing
money to other agencies. The wording for that provision reads:
(15) a comprehensive smoking education, tobacco use prevention, and
tobacco control program; to the maximum extent possible, the
department shall administer the program required under this
paragraph by grant or contract with more than one organization in
the state; the department's program must include.
Representative Rokeberg explained that his intention is to send a
policy statement from the legislature saying there is no need for
the bureaucracy to administer these programs, there are existing
organizations in the state that have that capability.
Number 634
CHAIRMAN TAYLOR asked for the meaning of the phrase "an enforcement
component." He wondered if this will enable a review of the grants
and programs.
REPRESENTATIVE ROKEBERG said an evaluation component is essential
to make sure the program is working. The enforcement provision
contains broad language intended for follow-up.
CHAIRMAN TAYLOR asked what the penalties are for grey market sales.
REPRESENTATIVE ROKEBERG said there is no penalty, the department
confiscates and destroys the cigarettes. A provision on page 4,
line 8, (h) A violation of (g) of this section is an unfair or
deceptive act or practice under AS 45.50.471, makes grey market
sales a violation.
CHAIRMAN TAYLOR said that his only concern with HB 37 is that the
crime is not even a class B misdemeanor. He noted that he would
like to hold the bill in committee just long enough to get an
amendment for the purpose of stiffening the penalty provision.
Number 835
SENATOR HALFORD said that on page 2 the bill reads, "the
commissioner shall treat as confidential certain information," and
he wondered what the information is and why it has to be
confidential.
REPRESENTATIVE ROKEBERG replied it is marketing information.
SENATOR HALFORD noted that on page 3, line 7, the language says
"for personal use free of federal tax or duty," and it looks like
this only applies to importation for sale. He asked if there is a
penalty in existing law for importation of large quantities not for
sale.
Number 925
REPRESENTATIVE ROKEBERG said he can only answer in part, cigarettes
cannot be brought in from a foreign country.
SENATOR HALFORD said his real concern is with importation from a
state that has a lower tax rate than Alaska.
REPRESENTATIVE ROKEBERG said he believes that is prohibited but he
is not certain.
SENATOR HALFORD asked if HB 37 creates an exemption that does not
exist or if a penalty that exists is being reduced.
REPRESENTATIVE ROKEBERG said he would get back to the committee
with that information.
Number 992
CHAIRMAN TAYLOR asked if there was an objection to the adoption of
Version Y. There being no objection, Version Y was adopted.
MR. ELMER LINDSTROM, Special Assistant for the Department of Health
and Social Services (DHSS), said he has been working with Section
3 of HB 37 and recommends two minor changes. First, DHSS suggests
deleting the word "tobacco" on page 5, line 7, and inserting the
word "nicotine" prior to the word "gum." The new wording will
read: (A) a community-based tobacco use prevention and cessation
component addressing the needs of youth and adults that includes
use of cessation aids such as a nicotine patch or a nicotine gum
tobacco substitute;".
REPRESENTATIVE ROKEBERG agreed with the amendment.
SENATOR DONLEY moved to adopt amendment 1. There being no
objection, amendment 1 was adopted.
MR. LINDSTROM said the other change DHSS suggests is on page 5,
line 12; delete the word "smokers" and insert "tobacco users." The
new language will read: (C) anti-tobacco counter-marketing
targeting both youth and adult populations designed to communicate
messages to help prevent youth initiation of tobacco use, promote
cessation among current tobacco users, and educate the public about
the lethal effects of exposure to secondhand smoke;.
REPRESENTATIVE ROKEBERG agreed with the amendment.
SENATOR DONLEY moved to adopt amendment 2. There being no
objection, amendment 2 was adopted.
Number 1138
MS. CHRISTIE MCINTIRE, Executive Director of the American Lung
Association of Alaska (ALA), said she supports CSHB 37. The ALA
supports the prohibition of the sale of single cigarettes or
"LUCYS", as they are commonly known. LUCYS are easier and cheaper
to purchase; requiring cigarettes to be purchased in packs of 20
will limit the number of cigarettes that end up in the hands of
children. Laws which limit the supply of tobacco is one strategy
for reducing addiction. ALA supports DHSS administering a
comprehensive tobacco prevention, cessation, and control program in
Alaska. As a leading cause of preventable death in Alaska, tobacco
addiction needs to be specifically identified and recognized as the
tragic epidemic that it is. Other states have made significant
improvements in reducing tobacco use. These improvements are only
effective if three conditions are met. They must be comprehensive,
sustained over time, and well funded. The cost to Alaska will be
about $8 million dollars annually.
MS. MCINTIRE noted that during the last legislative session, $1.4
million was allocated to a startup effort aimed at reducing tobacco
addiction. There are now several components in place for that
program: counter-marketing advertising, media campaigns, theater
slides, and bus panels. The theme of this advertising campaign is
cessation and environmental tobacco smoke, and currently a program
is being developed around youth prevention. There are also four
other pilot projects for cessation. ALA is also working with the
Alaska Tobacco Control Alliance (ATCA) to develop goals and
objectives for future programs, as well as evaluation measures.
ALA has received 22 proposals totaling over $1.1 million for
cessation needs alone. The current level of funding is inadequate
for the job at hand.
Number 1367
CHAIRMAN TAYLOR asked Ms. McIntire if she is employed by the Lung
Association as part of the $1.1 million grant.
MS. MCINTIRE replied that she is the executive director of ALA and
the $1.4 million grant is to her organization.
CHAIRMAN TAYLOR asked if any other organization has applied for
this grant.
MS. MCINTIRE replied that last year it was a designated grant to
the ALA and they are serving on behalf of the Alaska Tobacco
Control Alliance. Many health partners throughout Alaska are
working on the goals and objectives that ALA is pursuing in this
grant. Last June the ALA met and defined the goals and objectives
for this money.
Number 1447
MS. DELISA CULPEPPER, Chair of the Alaska Tobacco Control Alliance
(ATCA), explained that ATCA is a statewide alliance of non-profit
and governmental agencies that work toward reducing tobacco-related
disease in Alaska. ATCA is not a non-profit group and, therefore,
when the settlement money came through they were not able to accept
it. This is why ATCA organizations got together and chose ALA.
It was thought that ALA was the best non-profit organization to
implement the program. ATCA works with ALA in an advisory capacity
on an ongoing basis and is developing a comprehensive tobacco plan
for Alaska. That plan will delineate ideas of where ATCA thinks
things will need to go in the future and how to measure progress.
MS. CULPEPPER said that ATCA supports HB 37 and she urged committee
members to move the bill on today.
Number 1550
HB 239-UCC SECURED TRANSACTIONS
REPRESENTATIVE LISA MURKOWSKI, sponsor of HB 239, explained that
national commissioners have been working on a substantial re-write
of Article 9 of the Uniform Commercial Code Secure Transaction
(UCC) for about eight years. The re-write was done by some of the
greatest minds in the country. It has been accepted unanimously by
the commissioners, and HB 239 is an excellent document as far as
what has been done with the UCC. This version of Article 9 has
been distributed all over Alaska to the parties that will be
affected. The comments coming back have all been positive, and it
is felt that this re-write brings Alaska into the Twenty-First
century. HB 239 modernizes and updates the UCC and allows for a
centralized filing system without policy changes.
Number 1653
MR. JERRY KURTZ, a member of the Alaska delegation to the National
Conference of Commissioners on Uniform State Laws, said he has been
to every floor session of the national conference concerning HB 239
which covers Article 9. Article 9 is the most important part of
the Uniform Commercial Code; it has been adopted in every state in
its present form and it is fast being adopted in its proposed
revision. The balance has not been changed by the revision but
there are improvements that will save money and improve the flow of
commerce.
Number 1736
SENATOR DONLEY asked for an explanation of the changes in the
definition of "good faith."
MR. STEVEN WEISE, American Bar Association advisor to the Drafting
Committee of the UCC, said that the definition was changed from a
subjective definition to a definition that has a more "commercial
reasonableness component." The change means that even if a person
was acting honestly, if the action was so out-of-bounds of what is
fair, the action would not be considered to be done in good faith.
This same definition is in other articles of the UCC over the last
10 years.
SENATOR DONLEY asked how good faith affects the consumer.
MR. WEISE answered that it runs in all directions. All parties to
the transaction, consumer, secured party or non-consumer borrower,
are required to act in good faith in their performance and
enforcement of their rights under a security agreement or in
enforcing rights under Article 9.
SENATOR DONLEY said, "So you are going to enforce on consumers now,
even if they honestly believe their case is right--some commercial
standard that they might not know anything about?"
MR. WEISE answered that the primary purpose of it is that secured
lenders who are enforcing their rights have to act in good faith.
Their ability to contest what the lender has done would be
unaffected by that. The good faith standard was brought about
because of the concern over lenders not acting in good faith. It
puts some constraints on their performance of a contract or
enforcement of a contract.
CHAIRMAN TAYLOR asked Mr. Weise to give the committee a
hypothetical situation.
MR. WEISE replied if a lender was seeking to enforce its collateral
and honestly believed its method of enforcement was fair, but, when
viewed objectively from the outside it was way beyond the range -
for example the way notice was given to the borrower, the court
could say that the secured party had not conducted its activities
in a manner that complied with the requirement.
SENATOR DONLEY stated he is more concerned about the impact to the
borrower.
MR. WEISE maintained that this should not have much of an effect on
the borrower or consumer side of such transactions. None of the
case law comes up in the context of what the borrower has done but
the general notion is that the need to act in good faith applies to
all parties in the transaction. For example, a borrower should not
be able to hide or damage the collateral if the collateral has been
fairly obtained. Part of the tradeoff for the lending community in
accepting a tougher definition of good faith was that it apply in
all directions.
CHAIRMAN TAYLOR remarked that some years ago, a borrower had failed
to make the payments on a leased piece of logging equipment located
on the side of a hill. The lender had rights to retake the
equipment for default under the secured transaction, even though it
was a lease purchase agreement. The lender, however was denied
access to the road system that would allow him to take the piece of
equipment. Under the old definition, the borrower's right to deny
access could be exercised. He asked Mr. Weise if that right could
not be exercised under the new good faith standard.
MR. WEISE said that is a good example. It is the expectation that
it will be exceedingly rare where good faith will be an issue
concerning the borrower. He added that the entire discussion by
the UCC committee with regard to this issue revolved around the
conduct of the lender.
Number 2080
SENATOR DONLEY wondered how HB 239 will impact an ordinary consumer
buying ordinary consumer goods, for example, what types of things
a consumer will want to know.
MR. WEISE said there was extensive consideration given to consumer
interest and a number of provisions have been added for their
protection. For example, if a consumer were to default in their
secured obligation, they are entitled to special notice (more than
a commercial borrower will receive) at the time of a foreclosure,
a detailed accounting, etc. There are a string of pro-consumer
provisions in the revised Article 9 that are designed specifically
to give consumers more protection than they have under current law
and more protection than a commercial borrower would have under the
new law. A consumer task force, made up of representatives of
consumers' unions, legal aid groups from various states, banks and
automobile creditors, worked out a series of provisions that all
sides signed off on.
SENATOR DONLEY asked Mr. Weise if he had anything from consumer
groups endorsing HB 239.
MR. WEISE said he does not have anything in writing but at the very
last meeting of the drafting committee, the Chair asked each of the
sides to stand up publicly and state that they were in support of
the revision. He said he would fax a Law Review article written by
the Chair of that committee that reports that activity.
Number 2196
CHAIRMAN TAYLOR asked if the rewrite improves the defensive
position of consumers if their credit is transferred or sold to a
buyer "in due course."
MR. WEISE responded yes it has. The Federal Trade Commission (FTC)
has a holder in due course rule which requires that when a consumer
obligation is transferred, that the obligation contain a statement,
required by the FTC, saying that the buyer of the note is subject
to all defenses that the consumer would have had against the
original seller or lender. There is a provision in the new Article
9 that says if the FTC statement is not on the obligation, it will
be treated as if it were there. So, anyone who buys a consumer
obligation is subject to those defenses even if the person who
sells the obligation did not comply with the FTC rule.
Number 2350
MR. KURTZ said there was a concerted effort by car financiers to
change the balance of Article 9. There were battles over the early
draft of the bill because of the attempt to shift the balance. The
net result is that the balance has been shifted in the opposite
direction of what the car financiers wanted.
Tape 00-20, Side B
Number 000
MR. KURTZ continued. The consumer organizations, with whom they
had quite a bit of contact at the various annual meetings and
through correspondence, are comfortable with the end result.
MS. SHARON YOUNG, State Recorder's Office for the Department of
Natural Resources, said that HB 239 will make a drastic improvement
of the filing system in Alaska. HB 239 will streamline the system
and make it easier for the customer to use.
SENATOR DONLEY moved HB 259 from committee with individual
recommendations.
CHAIRMAN TAYLOR noted he would distribute the article from Mr.
Weise prior to moving the bill from committee. With no objection,
the motion carried.
Number 2270
HB 435-REVISOR'S BILL
CHAIRMAN TAYLOR asked if HB 435 makes any substantive changes to
law.
MS. PAMELA FINLEY, Division of Legal Services, Legislative Affairs
Agency, said the only change is Section 7 which allows banks to own
property in connection with negatively amortizing loans. Several
years ago the legislature passed a bill that allowed negatively
amortized loans, the problem was that if banks did not own the
property they could not amortize the loan. The policy has already
been made; Section 7 only cleans up the statutes to allow banks to
do what the legislature tried to get them to do.
SENATOR DONLEY asked if there is anything in HB 435 that repeals
statutes based on court decisions.
MS. FINLEY responded no.
SENATOR DONLEY moved HB 435 from committee with individual
recommendations. There being no objection, the motion carried.
There being no further business to come before the committee,
CHAIRMAN TAYLOR adjourned the meeting at 3:15 p.m.
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