02/20/2008 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB197 | |
| HB25 | |
| HB182 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 25 | TELECONFERENCED | |
| + | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 197 | ||
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
February 20, 2008
1:33 p.m.
MEMBERS PRESENT
Senator Hollis French, Chair
Senator Charlie Huggins, Vice Chair
Senator Lesil McGuire
Senator Bill Wielechowski
Senator Gene Therriault
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 197 am
"An Act relating to the issuance of shares of professional
corporations to a trust, to trusts, to trustees, to the removal
of a trustee, to the compensation of a trustee and a person
employed by a trustee, to a trustee's accepting or rejecting a
trusteeship, to co- trustees, to a vacancy in a trusteeship, to
the resignation of a trustee, to delivery of trust property by
former trustees, to the reimbursement of trustee expenses, to
the certification of a trust, to the suitability of a trustee,
to the place of administration of a trust, to a trustee's power
to appoint property to another trust, to a change of the
percentage of trust property to be considered principal, to the
determination of the value of a trust, and to a settlor's intent
when transferring property in trust; amending Rules 54 and 82,
Alaska Rules of Civil Procedure; and providing for an effective
date."
MOVED HB 197 am OUT OF COMMITTEE
HOUSE BILL NO. 25
"An Act relating to landowners' immunity for allowing use of
land without charge for a recreational activity; relating to
landowners' liability where landowner conduct involves gross
negligence or reckless or intentional misconduct; relating to
claims of adverse possession and prescriptive easements, or
similar claims; and providing for an effective date."
HEARD AND HELD
CS FOR HOUSE BILL NO. 182(JUD)
"An Act making the offering of certain promotional checks an
unfair or deceptive act or practice."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 197
SHORT TITLE: TRUSTS
SPONSOR(s): JUDICIARY
03/14/07 (H) READ THE FIRST TIME - REFERRALS
03/14/07 (H) JUD, FIN
04/04/07 (H) JUD AT 1:00 PM CAPITOL 120
04/04/07 (H) Moved Out of Committee
04/04/07 (H) MINUTE(JUD)
04/05/07 (H) JUD RPT 4DP 2NR
04/05/07 (H) DP: GRUENBERG, LYNN, HOLMES, RAMRAS
04/05/07 (H) NR: COGHILL, SAMUELS
04/05/07 (H) FIN REFERRAL REMOVED
04/05/07 (H) L&C REFERRAL ADDED AFTER JUD
04/20/07 (H) L&C AT 3:00 PM CAPITOL 17
04/20/07 (H) Scheduled But Not Heard
04/30/07 (H) L&C AT 3:00 PM CAPITOL 17
04/30/07 (H) Moved Out of Committee
04/30/07 (H) MINUTE(L&C)
05/02/07 (H) L&C RPT 3DP 3NR
05/02/07 (H) DP: GARDNER, RAMRAS, OLSON
05/02/07 (H) NR: LEDOUX, NEUMAN, GATTO
05/04/07 (H) TRANSMITTED TO (S)
05/04/07 (H) VERSION: HB 197 AM
05/07/07 (S) READ THE FIRST TIME - REFERRALS
05/07/07 (S) JUD
02/15/08 (S) JUD AT 1:30 PM BELTZ 211
02/15/08 (S) Heard & Held
02/15/08 (S) MINUTE(JUD)
BILL: HB 25
SHORT TITLE: RECREATIONAL LAND USE LIABILITY/ADV. POSS
SPONSOR(s): REPRESENTATIVE(s) SEATON, WILSON
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) RES, JUD
01/24/07 (H) RES AT 1:00 PM CAPITOL 124
01/24/07 (H) Moved Out of Committee
01/24/07 (H) MINUTE(RES)
01/25/07 (H) RES RPT 8DP
01/25/07 (H) DP: GUTTENBERG, EDGMON, SEATON,
KAWASAKI, WILSON, ROSES, JOHNSON, GATTO
01/31/07 (H) JUD AT 1:00 PM CAPITOL 120
01/31/07 (H) Heard & Held
01/31/07 (H) MINUTE(JUD)
02/01/07 (H) JUD AT 1:00 PM CAPITOL 120
02/01/07 (H) Heard & Held
02/01/07 (H) MINUTE(JUD)
02/05/07 (H) JUD AT 1:00 PM CAPITOL 120
02/05/07 (H) Moved Out of Committee
02/05/07 (H) MINUTE(JUD)
02/07/07 (H) JUD RPT 1DP 3NR
02/07/07 (H) DP: LYNN
02/07/07 (H) NR: GRUENBERG, HOLMES, SAMUELS
02/12/07 (H) TRANSMITTED TO (S)
02/12/07 (H) VERSION: HB 25
02/14/07 (S) READ THE FIRST TIME - REFERRALS
02/14/07 (S) RES, JUD
03/02/07 (S) RES AT 3:30 PM BUTROVICH 205
03/02/07 (S) Heard & Held
03/02/07 (S) MINUTE(RES)
04/02/07 (S) RES AT 3:30 PM BUTROVICH 205
04/02/07 (S) Moved HB 25 Out of Committee
04/02/07 (S) MINUTE(RES)
04/04/07 (S) RES RPT 2DP 4NR 1AM
04/04/07 (S) DP: HUGGINS, STEVENS
04/04/07 (S) NR: GREEN, MCGUIRE, STEDMAN, WAGONER
04/04/07 (S) AM: WIELECHOWSKI
02/20/08 (S) JUD AT 1:30 PM BELTZ 211
BILL: HB 182
SHORT TITLE: OFFERING PROMOTIONAL CHECKS
SPONSOR(s): REPRESENTATIVE(s) LYNN
03/07/07 (H) READ THE FIRST TIME - REFERRALS
03/07/07 (H) L&C, JUD
03/19/07 (H) L&C AT 3:00 PM CAPITOL 17
03/19/07 (H) Moved Out of Committee
03/19/07 (H) MINUTE(L&C)
03/21/07 (H) L&C RPT 7DP
03/21/07 (H) DP: GARDNER, LEDOUX, BUCH, NEUMAN,
GATTO, RAMRAS, OLSON
04/02/07 (H) JUD AT 1:00 PM CAPITOL 120
04/02/07 (H) Moved CSHB 182(JUD) Out of Committee
04/02/07 (H) MINUTE(JUD)
04/04/07 (H) JUD RPT CS(JUD) 6DP
04/04/07 (H) DP: GRUENBERG, LYNN, DAHLSTROM,
SAMUELS, HOLMES, RAMRAS
04/11/07 (H) TRANSMITTED TO (S)
04/11/07 (H) VERSION: CSHB 182(JUD)
04/13/07 (S) READ THE FIRST TIME - REFERRALS
04/13/07 (S) L&C, JUD
05/01/07 (S) L&C AT 1:30 PM BELTZ 211
05/01/07 (S) Moved CSHB 182(JUD) Out of Committee
05/01/07 (S) MINUTE(L&C)
05/02/07 (S) L&C RPT 4DP
05/02/07 (S) DP: ELLIS, BUNDE, DAVIS, STEVENS
02/20/08 (S) JUD AT 1:30 PM BELTZ 211
WITNESS REGISTER
JANE PIERSON, Staff
to Representative Ramras
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Represented the sponsor of HB 197.
REPRESENTATIVE PAUL SEATON
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Sponsor of HB 25
GEORGE SCHAAF, Executive Director
Trail Mix Inc
Juneau, AK
POSITION STATEMENT: Spoke in strong support of HB 25.
DAVE BRANN
Kachemak Nordic Ski Club
Homer, AK
POSITION STATEMENT: Spoke in strong support of HB 25.
LEAH JENKIN
Homer, AK
POSITION STATEMENT: Spoke in support of HB 25.
MICHAEL SCHNEIDER, Attorney at Law
Anchorage, AK
POSITION STATEMENT: Highlighted shortcomings in HB 25.
ROBERTA HIGHLAND
Homer, AK
POSITION STATEMENT: Spoke enthusiastically about HB 25.
PHILIP PAUL WAGONER, Attorney at Law
Anchorage, AK
POSITION STATEMENT: Echoed Mr. Schneider's concern with HB 25.
JACK MOSBY, former President
Alaska Trails
Anchorage, AK
POSITION STATEMENT: Spoke in support of HB 25
MIKE SICA, Aide
to Representative Lynn
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Introduced HB 182 on behalf of the sponsor.
MARIE DARLIN, Coordinator
AARP Capital City Task Force
Juneau, AK
POSITION STATEMENT: Spoke in support of HB 182.
DALE LEHMAN
Anchorage, AK
POSITION STATEMENT: Spoke in support of HB 182.
JULIA COSTER, Assistant Attorney General
Civil Division
Commercial/Fair Business Section
Department of Law (DOL)
Anchorage, AK
POSITION STATEMENT: Responded to questions and stated support
for SB 182.
ACTION NARRATIVE
CHAIR HOLLIS FRENCH called the Senate Judiciary Standing
Committee meeting to order at 1:33:43 PM. Present at the call to
order were Senators French, Huggins, and Wielechowski. Senators
Therriault and McGuire arrived shortly thereafter.
HB 197 am -TRUSTS
1:33:57 PM
CHAIR FRENCH announced the consideration of HB 197 am.
JANE PIERSON, Staff to Representative Ramras, said that HB 197
passed unanimously in the House and she'd like to see it move
from this committee.
CHAIR FRENCH noted that the bill was heard previously and public
comment was taken. Finding no further questions or comments, he
asked for the will of the committee.
1:34:52 PM
SENATOR WIELECHOWSKI motioned to report HB 197 from committee
with individual recommendations and attached fiscal note(s).
CHAIR FRENCH announced that without objection, HB 197 am is
moved from committee.
HB 25-RECREATIONAL LAND USE LIABILITY/ADV. POSS
1:35:19 PM
CHAIR FRENCH announced the consideration of HB 25.
REPRESENTATIVE PAUL SEATON, sponsor of HB 25, explained that the
bill encourages the expansion of recreational opportunities for
Alaskans by increasing liability protection for landowners who
allow free recreational use of their land. This is achieved by
raising the standard of care that a landowner owes for allowing
someone to use their land. The bill provides immunity from suit
unless there is gross negligence, intentional misconduct, or
reckless endangerment. HB 25 is consistent with practices in 45
other states.
REPRESENTATIVE SEATON said that the current simple negligence
liability standard applies to unimproved land. That generally
makes landowners uncomfortable and the result is that they're
more inclined to restrict access to their land. He clarified
that this bill does not address landowners who charge to use
their land and it does not apply to municipalities and other
governments. He highlighted letters and resolutions from diverse
groups and private citizens supporting HB 25.
1:37:04 PM
SENATOR THERRIAULT joined the meeting.
SENATOR HUGGINS asked how airstrips are treated.
REPRESENTATIVE SEATON explained that current law says that for
abandoned airstrips and unimproved land the standard for the
private landowner is gross negligence, intentional misconduct,
or reckless endangerment.
SENATOR HUGGINS asked about the hypothetical scenario where he
allows free use of a snow machine track on his property.
REPRESENTATIVE SEATON explained that as long as you aren't
charging and you aren't grossly negligent you aren't liable. But
if you were to put up a cable across the trail and someone were
to get hurt as a result, that would be intentional misconduct
and you'd be liable. But if someone is accidentally hurt while
using the snow machine track or getting ready to use the track,
the gross negligence standard would apply.
1:41:30 PM
SENATOR HUGGINS asked if he could subsequently deny access to
that hypothetical snow machine track.
REPRESENTATIVE SEATON said he could. He added that the bill
specifically protects landowners from adverse possession or
prescriptive easement claims by someone using the property for
free for recreation.
1:44:08 PM
SENATOR HUGGINS asked if this affects traditional trails running
through private property.
REPRESENTATIVE SEATON replied this wouldn't change the aspect of
traditional trails, but it is important to separate recreational
use from access. This bill doesn't address the situation where
someone is using a road on private property to gain access to a
recreational area.
CHAIR FRENCH referred to the scenario Senator Huggins posed and
said should this bill pass the landowner who allows access would
have a legal problem only if they are guilty of gross
negligence. But once a no trespassing sign is posted, the
standard of care reverts to negligence. Essentially the standard
reverts to what the law is now. He asked if that scenario had
been discussed and if he agrees.
1:46:54 PM
REPRESENTATIVE SEATON replied that was discussed and it's a
different scenario if someone is criminally trespassing by
disregarding the no trespassing signs. "You're thrown into a
whole different series of obligations when you have criminal
trespass." This bill allows free recreational access as compared
to someone trespassing.
CHAIR FRENCH restated that if this becomes law the standard of
care becomes gross negligence, but the standard of care if
access is denied is negligence.
REPRESENTATIVE SEATON highlighted AS 09.65.200, which is
immunity for unimproved land. "So if it's unimproved land the
standard is already gross negligence." This involves improved
land. It becomes difficult because there are conflicting
statutes. For example the standard for abandoned runways is
gross negligence. And if you're allowing someone to use your
private airstrip it's gross negligence for take offs and
landings, but it's a question with regard to walking to and from
the plane. If the land is unimproved the standard is gross
negligence, but if you've mowed the grass, set a snow machine
track, or it you're too close to a barn then the standard is
simple negligence. It's confusing for the public and it's
difficult for the property owner to know if somebody could get a
proscriptive easement if they let someone use their land. This
gives the landowner confidence that he or she can help provide
recreation in Alaska. "Gross negligence comes down to choices,"
he said.
1:50:07 PM
CHAIR FRENCH consulted Blacks Law Dictionary about the
difference between negligence and gross negligence so that the
committee has in mind the consequences of this bill. He read the
following:
Negligence. The omission to do something which a
reasonable man, guided by those ordinary
considerations which ordinarily regulate human
affairs, would do, or the doing of something which a
reasonable and prudent man would not do.
Negligence is the failure to use such care as a
reasonably prudent and careful person would use under
similar circumstances; it is the doing of some act
which a person of ordinary prudence would not have
done under similar circumstances or failure to do what
a person of ordinary prudence would have done under
similar circumstances.
Gross negligence. The intentional failure to perform a
manifest duty in reckless disregard of the
consequences as affecting the life or property of
another.
It is materially more want of care than constitutes
simple inadvertence. It is an act or omission
respecting legal duty of an aggravated character as
distinguished from a mere failure to exercise ordinary
care. It amounts to indifference to present legal duty
and to utter forgetfulness of legal obligations so far
as other persons may be affected. …
CHAIR FRENCH opened public testimony.
1:52:32 PM
GEORGE SCHAAF, Executive Director, Trail Mix Inc, spoke in
strong support of HB 25. Trail Mix is a local non-profit trails
organization that was created in part to address complicated
landownership problems. He explained that Southeast Alaska has
lots of trails and recreational facilities that may begin on
public land but any given trail may cross back and forth from
federal land, to state parks land, to city land, and to private
land. Because no one was interested in maintaining 20 percent of
a trail, Trail Mix came along to coordinate trail building and
planning efforts in the Juneau community and borough. He said he
believes that HB 25 is a well-considered measure that protects
the interests of landowners and recreational hikers.
MR. SCHAAF reiterated that landownership issues in Southeast
Alaska are complicated given the terrain and the amount of
public land that's there. In Juneau three trails in particular
will be affected by this bill. The trails going up Perseverance
Basin and Mount Juneau cross private land owned by the Keen
family. They've been fantastic supporters of trails and grant
public access, but liability has always been an issue. This bill
will go a long way in alleviating some of their concerns.
Another trail at Tee Harbor has recently led to some tension
among community members because the trail access crosses a
corner of private land. Potentially that trail will be rerouted
at significant expense because the property owner is afraid of
liability. This bill will help address that issue, he said. On
behalf of the 350 members of Trail Mix, he restated support for
HB 25. This will go a long way toward supporting outdoor
recreation and the benefits that provides the community.
SENATOR WIELECHOWSKI asked if he's aware of anyone who has been
sued for this.
MR. SCHAAF said not in Juneau but the concern is out there.
Folks in this community have been very trusting and have wanted
to maintain open access to recreational areas. You never know
what will happen in the future, he added.
1:56:51 PM
DAVE BRANN, Kachemak Nordic Ski Club reported that he's worked
on recreational trails in the Homer area for about 25 years. A
long-standing concern has been trails that cross a variety of
properties including private, borough, state, and Native. In
fact, potential trail access across private property has been
limited because of liability concerns. People in the Homer area
have been generous in allowing trail use on their property but
there is increasing concern about liability. On behalf of the
Kachemak Nordic Ski Club he stated strong support for HB 25. He
added that he allows free recreational use of his property and
he finds existing statutes to be very confusing; a lot of people
don't know what is and isn't allowed.
1:58:44 PM
LEAH JENKIN, Homer resident said she owns 10 acres near an
equestrian center and ball parks and the state built an access
road through part of her property. Although she supports both
facilities, she's worried about liability. "When we're talking
about children and horses, a landowner needs all the protection
they can get." She urged the committee to pass HB 25.
2:00:37 PM
MICHAEL SCHNEIDER, Attorney at Law, reported that he's lived in
Anchorage since 1975. He said his testimony is based on two
assumptions. The first is that this bill was heard by the Senate
Resources Committee last session. Second, he assumes that the
committee received a copy of his 3/16/07 letter to
Representative Seaton addressing his concerns about the bill.
CHAIR FRENCH told him that both assumptions are correct.
MR. SCHNEIDER said he takes issue with the overriding premise of
the bill because there's no way that folks who are interested in
public access and trail use can figure out whether a landowner
has or has not given permission to use their land. They can't
check at the recorders office, for example, because nobody has
to do anything official to obtain the immunity status set forth
in the bill. His letter suggests a way around that problem so
that there would never be any doubt about whether or not a given
property is open for public use and the owner is thus entitled
to immunity.
2:03:30 PM
MR. SCHNEIDER suggested that the bill encourages fraud and
perjury by property owners who may be sued in the face of a
death or serious injury. Hypothetically the insurance agent will
inform the property owner that barring gross negligence, he or
she will be immune from suit if the property is open to free
recreational use. He surmised that that that defense will be
asserted 100 percent of the time even though the property may be
open for recreational use less than 100 percent of the time.
MR. SCHNEIDER observed that there seems to be a foregone
conclusion that if someone engages in a specific conduct, such
as pulling a cable across a trail, that amounts to grossly
negligent conduct. But whether or not the particular conduct is
grossly negligent will be a jury question in virtually every
case. Also, he does not agree with the sponsor's statement that
the bill is of no benefit to someone who charges for use of
their land. Anybody after the fact can divert funds toward
hazard remediation and claim the benefit of this loosely worded
legislation, he said. Furthermore the term "land" includes a lot
of things - including machinery, which would make it difficult
to prove liability. It would provide broad immunity under
circumstances where the public is receiving nothing tangible in
exchange.
MR. SCHNEIDER offered his view that from a public policy
standpoint the sponsor's intent is a good idea, but the bill
needs many things fixed or it's a give away of constituents'
rights for virtually nothing in return.
2:07:02 PM
ROBERTA HIGHLAND, Homer stated strong support for HB 25. She
agrees with Mr. Schneider that it's important to get things
right, but she can't imagine that the 45 states that have this
law haven't already addressed every potential legal issue. In
her view the litigation-happy standard in this country
negatively affects quality of life. She'd like attitudes and
laws to change such that personal responsibility is given back
to the individual. HB 25 begins that process. She explained that
she and her husband welcome non-motorized use on the trails on
their land and this bill would relieve their concerns about
litigation. Trails are an important part in the enjoyment of
life.
2:09:11 PM
PHILIP PAUL WAGONER, Attorney at Law and Anchorage property
owner, said he concurs with Mr. Schneider. He recognizes the
good will intent of the bill but it provides such blanket
immunity to persons that engage in culpable conduct that it will
ultimately shift the responsibility for that conduct to the
coffers of the state. He gave examples of several cases where he
represented people who were severely injured by cables that were
strung across trails. The way the bill is written if any
landowner directly or indirectly allows free recreational
activity, then it's blanket immunity even if they stretch a
cable across a trail. It's also a situation where a landowner
could allow a select group to engage in recreational activity
without charge and then stretch a cable across the trail for the
general public. He expressed the view that the bill really needs
to be reworked. "It's always problematic when laws are passed
that infringe on constitutional rights" We sometimes forget the
fact that the writers of the U.S. and Alaska constitutions
granted a right to a jury trial as it existed in common law.
That means if someone puts up a dangerous obstacle on developed
or undeveloped land they're liable and the resulting harm is
shifted to their coffers and not to the victim or the public. He
asked the committee to send the bill back for fine-tuning so its
purposes can be achieved without providing blanket immunity to
people who engage in conduct that will cause serious harm.
2:13:11 PM
CHAIR FRENCH asked if he had reviewed Mr. Schneider's March 16,
2007 letter.
MR. WAGONER said he had and he concurs with his comments. He
understands the good intent but it's dangerous to grant
immunity. "As sure as we're all here on this Earth today, if
this bill is passed in its present form, somebody's going to get
seriously hurt due to culpable conduct and the person is going
to escape and … their insurance company is going to escape and
the ultimate harm is going to be left to the victim and or the
public coffers."
2:13:51 PM
SENATOR McGUIRE joined the meeting.
2:14:13 PM
JACK MOSBY, former President, Alaska Trails, relayed that this
statewide non-profit group was formed to enhance Alaska trail
experiences by supporting sustainable trails through advocacy
and education. He's aware that liability is a continuing issue
with projects in Anchorage, MatSu Valley, and Fairbanks. It
sounds as thought it's an issue in other places in the state as
well. He reiterated the group's continuing support for HB 25.
CHAIR FRENCH asked if he's aware of any lawsuits that hinged on
allowing or not allowing access - instances where innocent
homeowners have been dragged into a legal dispute because of
accidents on trails.
MR. MOSBY replied he's not aware of any such cases.
CHAIR FRENCH stated his intention to hold the bill for a
subsequent hearing.
2:16:17 PM
REPRESENTATIVE SEATON distributed two documents to respond to
the issues Mr. Schneider raised in his letter. One discusses
gross negligence and associated case law. The second is an
opinion from legislative legal services about the hypothetical
circumstance where a landowner strings a cable on their property
that results in the decapitation of a person who is using the
property for recreational purposes. He also highlighted that
this bill removes the ambiguity between improved land and land
that is mowed or a hayfield close to a building. Under current
Alaska statute the standard for unimproved lands is gross
negligence, but unless protected by HB 25 the hayfield could be
considered improved land which has the simple negligence
liability standard.
CHAIR FRENCH said the committee would look closely at the
documents. [HB 25 was held for a subsequent hearing.]
CSHB 182(JUD)-OFFERING PROMOTIONAL CHECKS
2:18:42 PM
CHAIR FRENCH announced the consideration of HB 182. Before the
committee was CSHB 182(JUD).
MIKE SICA, Aide to Representative Lynn read the following into
the record on behalf of the sponsor. [Original punctuation
provided.]
HB 182 is a small, one-page bill, about small dollar
checks that cause big headaches for Alaska consumers.
The checks are maybe for only three or four dollars
and, according to the Department of Law, the checks
are sent to thousands of businesses and individuals
throughout our state.
The good news? The checks are legitimate. The bad
news? The checks are "legitimate." In actuality,
cashing one of these checks can amount to an
unintended contract. Hundreds of Alaskans cash these
little checks, only to find themselves obligated by
contract for products and services they don't want and
never needed.
Let me give you one example. In 2006, the Alaska
Department of Law announced a settlement with a
California-based company that sent Alaskans what
appeared to be rebates from local yellow page
companies. Not so. Endorsement of a check for $3.49
was actually a contract for $179 in advertising
services - which they didn't want and didn't need.
Consumers, who thought they were getting a very small
windfall, got a much larger downfall. That's because
they didn't see the tiny, fine print, disclosure on
the back of the check. Or, if they did see it, they
didn't have a magnifying glass. And when the checks
are endorsed, consumers end up getting billed - and
sometimes hounded - by collection agencies, which can
damage their credit rating.
The Consumer Protection Unit of the Alaska Department
of Law considers these promotional checks to be a
classic example of deceptive acts or practices - and
believe that prohibiting these kinds of checks is the
only effective method of preventing these unintended
contracts, and subsequent charges, from occurring.
HB 182 makes these kinds of promotional checks an
unfair or deceptive act or practice, and makes it an
automatic violation of Consumer Protection laws.
Under this bill, companies that violate the law are
subject to a civil penalty of a minimum of $1,000 per
violation, and a maximum of $25,000 per violation.
Representative Lynn said he is honored that the Alaska
Department of Law let him know about these deceptive
checks, and he agrees with the department that HB182
is high priority consumer protection legislation.
2:21:55 PM
MR. SICA relayed that the sponsor and his chief of staff
received promotional checks but they didn't cash them. During
testimony in the other body a state lawmaker admitted to having
been fooled.
2:22:50 PM
SENATOR McGUIRE admitted that two years ago she endorsed and
deposited a $9.95 check from Citibank under the assumption that
she was redeeming points. She learned that she had enrolled
herself in a driver protection program that carried an ongoing
monthly fee of $29.95. It took a full two months and a lot of
headache to get out of the program. This could be devastating to
seniors in particular. She questioned why this doesn't violate
the interstate commerce clause.
MR. SICA replied the companies operate in Alaska so goods don't
cross the boarder. He deferred to the Department of Law for
further explanation. Small businesses, churches and schools
receive these checks and often they're just endorsed and
deposited so this protects more than just consumers. It also
sends a good message to the business community that it doesn't
have to compete with these people that cross that boundary.
2:25:06 PM
MARIE DARLIN, Coordinator, AARP Capital City Task Force
expressed support for HB 182 and noted that a letter from AARP
is in the packet. Older people are often the target of practices
such as this. This would be one more tool for the offices of the
attorney general and consumer protection to battle these scams.
2:27:01 PM
DALE LEHMAN, representing himself said he doesn't generally
believe it's government's role to protect people from making
stupid decisions, but he does urge the committee to pass HB 182.
He relayed that he is usually diligent about disregarding free
offers of any kind. Despite that and the fact that he's a
retired economics professor who lectures about consumer scams,
he deposited what appeared to be a free $10 check from a credit
card company that he'd done business with for years. Last year
all his credit cards were stolen so he canceled the cards and
subsequently began to examine his bills. The first one he looked
at had a line item for $39.99 from TLGHMPRT. After some research
he learned that the state attorney general's office and 16 other
states had reached a settlement with his credit card company for
these allegedly deceptive practices. He's embarrassed to admit
that he paid $39.99 for 18 months. He was fooled but this
company had to go far out of the way to do this. "This is not an
accidental thing that occurred." He never received any material
about what the National Home Protection Alliance is. "To this
day I really have no idea what services they provide." The
ultimate irony was that the only automatic payment that was
passed on to his new credit card was TLGHMPRT.
2:30:30 PM
MR. LEHMAN said HB 182 would do two constructive things. First,
it would make the attorney general's job easier in prosecuting
these sorts of cases because it would be an illegal practice.
Second, it would encourage businesses to compete by offering
better services rather than spending resources to fool consumers
in ever more subtle ways.
2:32:56 PM
JULIA COSTER, Assistant Attorney General, Civil Division,
Commercial/Fair Business Section, Department of Law (DOL)
testified in support of SB 182. She agreed with Mr. Sica that
these promotional checks have been a problem for individual and
business consumers in the state. SB 182 is an attempt to fix
that problem. Her office has received numerous complaints and
has interviewed numerous consumers that have received and cashed
these checks reasonably believing them to be a rebate or reward.
They have no idea that by cashing the check they have entered
into a contract to purchase goods or services. Oftentimes
endorsing the check unknowingly authorizes monthly charges to
the consumer's checking account, credit card, or telephone bill
to pay for the goods or services. Many consumers unwittingly pay
the charges for months until something brings it to their
attention or until they are contacted by the consumer protection
office.
MS. COSTER said her office has initiated a number of
investigations several of which have resulted in prosecutions
and settlement under the Alaska Consumer Protection Act. A
recent case was a coordinated multi-state investigation that
resulted in a settlement agreement that prohibited the use of
promotional checks in 34 states. Another case resulted in a
settlement for less than a total prohibition. Rather than
dealing with this issue on a piecemeal basis through litigation,
HB 182 deals with the problem on a more universal level. It
makes the use of promotional checks from Alaska an unfair or
deceptive practice under the Alaska Consumer Protection Act.
"This means that the use of the check is an automatic violation
of the Act." Making the promotional checks an unfair, deceptive
act or practice puts the check marketers on notice. Hopefully
this will stop the use of these checks in the state and it will
make enforcement easier in the future.
2:37:39 PM
CHAIR FRENCH asked her to respond to the interstate commerce
question.
MS. COSTER explained that the interstate commerce clause uses a
balancing test that looks at whether or not the burden on
commerce outweighs the benefit to the state or its interest. It
wouldn't be difficult to make a strong argument that the conduct
- the use of these promotional checks - is deceptive and that
outweighs any interest a person would have in continuing to use
such checks.
SENATOR WIELECHOWSKI asked if there are any preemption issues.
MS. COSTER replied she isn't aware of any federal law that
addresses the use of these checks.
CHAIR FRENCH referred to a question and answer interview between
some member of the DOL and the bill sponsor. He highlighted the
final question and answer, which asks why DOL considers this
bill a high priority. The DOL answer is that many hundreds of
Alaskan consumers have been harmed by the use of these
promotional checks. He asked if it can be verified that it's up
in the hundreds.
MS. COSTER replied, Absolutely. Many hundreds of Alaska
consumers have cashed these checks and unknowingly or
unwillingly paid because they were subject to coercive
collection tactics.
SENATOR WIELECHOWSKI asked if Alaska has been involved in any
class action lawsuits to stop this activity.
MS. COSTER replied she's unaware of private class action suits
but the State of Alaska has been involved in three multi-state
cases that were brought by state attorneys general offices. They
may be considered class action in that they involve more than
one state.
2:41:03 PM
CHAIR FRENCH referred to the bill packet and noted that in April
2006 the DOL Civil Division announced a $500,000 settlement with
Yellow Pages Inc. for having offered these checks in the state.
MS. COSTER added that that's the most recent settlement.
2:41:47 PM
SENATOR McGUIRE suggested the DOL look into the situation at
Citibank as well. She surmised that consumers are accustomed to
getting rebates and rewards as part of the incentive package
with their credit cards. She relayed that she was enrolled in
the Driver Edge Protection program that supposedly added $29.95
extra coverage on her vehicle. She never new exactly what it was
and didn't receive any information about it. "So add that to
your list," she said.
MS. COSTER agreed to do so.
2:42:46 PM
MR. SICA told the committee that he appreciates that getting a
bill passed is a long process and he believes that checks and
balances are important. Although the bill moved along very well
last year, he has to admit that during the Interim he worried
about all the people who would be getting and signing these
checks.
CHAIR FRENCH said HB 182 seems to be a very good bill and he
intends to bring it back soon and take action on it.
There being no further business to come before the committee,
Chair French adjourned the meeting at 2:43:29 PM.
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