Legislature(1997 - 1998)
02/10/1998 01:32 PM Senate L&C
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= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
February 10, 1998
1:32 p.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Jerry Mackie, Vice Chairman
Senator Tim Kelly
Senator Mike Miller
Senator Lyman Hoffman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 235
"An Act extending the termination date of the Board of Certified
Real Estate Appraisers."
- MOVED SB 235 OUT OF COMMITTEE
SENATE BILL NO. 198
"An Act relating to partnerships; amending Rules 25(c), 79, and 82,
Alaska Rules of Civil Procedure; and providing for an effective
date."
- HEARD AND HELD
SENATE BILL NO. 254
"An Act relating to levy, execution, garnishment, attachment, or
other remedy for the collection of debt as applied to a permanent
fund dividend."
- MOVED CSSB 254 (L&C) OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 235 - See Labor and Commerce Committee minutes dated 1/27/98.
SB 198 - No previous action to consider.
SB 254 - See Labor and Commerce minutes dated 1/29/98 and 2/5/98.
WITNESS REGISTER
Mr. Art Peterson, Commissioner
Uniform Law Commission
350 North Franklin
Juneau, AK 99801
POSITION STATEMENT: Supported SB 198.
Mr. John McCabe, Legal Counsel
National Conference of Commissioners and Uniform State Laws
Chicago, IL
(312) 915-0195
POSITION STATEMENT: Commented on SB 198.
Mr. Willis Kirkpatrick, Director
Division of Banking, Securities and Corporations
Department of Commerce and Economic Development
P.O. Box 110807
Juneau, AK 99811-0907
POSITION STATEMENT: Supported SB 198 with changes.
Mr. Mike Monagle, Supervisor
Records and Licensing
Division of Banking, Securities and Corporations
Department of Commerce and Economic Development
P.O. Box 110807
Juneau, AK 99811-0907
POSITION STATEMENT: Supported SB 198 with changes.
Ms. Nanci Jones, Director
Permanent Fund Division
P.O. Box 110460
Juneau, AK 99811-0460
POSITION STATEMENT: Supported SB 254.
Mr. Vince Usera, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Commented on SB 254.
ACTION NARRATIVE
TAPE 98-7, SIDE A
Number 001
SB 235 - BOARD OF CERTIFIED REAL ESTATE APPRAISERS
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee
meeting to order at 1:35 p.m. and announced SB 235 to be up for
consideration.
SENATOR MILLER moved SB 235 with individual recommendations and,
without objection the bill moved from committee.
SB 198 - UNIFORM PARTNERSHIP ACT
CHAIRMAN LEMAN announced SB 198 as the next order of business and
Art Peterson, Uniform Law Commissioner, to explain the bill.
MR. ART PETERSON, Uniform Law Commissioner, supported SB 198 and
said that Alaska is currently operating on the 1914 version of the
Uniform Partnership Act. MR. PETERSON said the major portion of
the bill deals with the 1994 revision by the Uniform Laws
Conference. He described the limited liability portion of the bill,
saying it was incorporated into the Uniform Partnership Act in
1996. Eighteen states have already enacted this revision; thirteen
included the limited liability provisions. He said Alaska has
already enacted some provisions relating to limited liability that
would be superseded by this bill. MR. PETERSON said the bill
contains 36 (of 42) pages devoted to this 80-year-old Act. He said
the other six pages cover the limited liability issue. He cited one
of the key elements of the bulk of this revision as changing the
concept of a partnership. The old version stressed collective
individuals, while the new version focuses on partnership as an
entity, which has numerous ramifications. MR. PETERSON assured the
committee this bill will not interfere with other concepts of
partnership that currently exist in statute.
MR. PETERSON concluded the committee could be comfortable in the
knowledge that this is dealing strictly with partnerships and
limited liability partnerships. This bill does not deal with any
other variety of business entity. He said if we do not update our
laws, Alaska will be severely disadvantaged in business. He
explained there were a few "polishing" changes that might need to
be dealt with before the bill moves from committee. He said these
changes are minor and include numbering differently, which would be
done to maintain consistency within the Alaska Statutes and
simplicity for interstate use. He said we would achieve a double
benefit by having both the substance and format uniform in style
with other states. He offered his help with any further work on
this piece of legislation.
MR. JOHN MCCABE, legal counsel for the National Conference of
Commissioners and Uniform State Laws, testified via teleconference
from Chicago.
CHAIRMAN LEMAN asked if case law should be addressed when adopting
an entirely new title.
MR. MCCABE replied that states have been acting under de facto
uniformity of law for the past 50 years and case law is virtually
interchangeable from state to state. He said this Act is a
distillation of the experience of other states dealing with
partnership.
MR. PETERSON said The Act will be easily adaptable to Alaska case
law. He concluded the Uniform Act revision is both conservative and
evolutionary, maintaining the same concept of a partnership
organization yet enhancing it's utility. He stated this would not
jeopardize case law in Alaska.
Number 302
CHAIRMAN LEMAN asked if the apportionment of fault previously
established in tort law would be inconsistent with this Act.
MR. PETERSON responded that it may be necessary to amend one
portion of the bill to recognize the existing statute.
MR. MCCABE said he thought this was an apples and oranges
situation. The real question is how damages are determined in a
personal injury action. He does not believe this Act would change
nor conflict with any law regarding apportionment of fault or
liability of a partnership. He illustrated this with an example
showing how liability might be apportioned in a personal injury
lawsuit against a partnership. He concluded that they are dealing
with something different.
MR. PETERSON asked how the revised Act's emphasis on partnership as
an entity would affect how the partners' liability interacts. MR.
MCCABE said the Act requires the assets of the partnership be first
in line to satisfy a judgement. These assets must be exhausted
before other assets could be sought. He said this is the basic
difference between the 1914 and 1996 Acts. MR. MCCABE said a
partner who pays a judgement in larger proportion than his
contribution to the partnership has the ability to seek
contribution from other partners. MR. PETERSON asked if it would be
necessary to amend section 306 (a) and MR. MCCABE replied it would
not be necessary and might only confuse the issue.
MR. MCCABE said 306 (a) is a very important part of the legislation
and could have critical impact on the nature of partnerships in
general and he cautioned that great care be taken in any change.
CHAIRMAN LEMAN thanked MR. MCCABE for his input and said that
details would be worked out while the bill is held in committee.
MR. MCCABE concluded that most of the changes proposed in this bill
stem from a change in the status of partners from an aggregate of
individuals to an entity and how that affects the nature of the
organization, the relationships between members, liabilities to
third persons, distribution of profits and losses, and the
termination of the entity. One of the relationships between
partners is fiduciary obligations in section 404. Others are
information rights (403) and (303) statement of authority. There
have always been things like fiduciary obligations within
partnerships and they have largely been common law in character.
The default rule in this act is that every partner is an agent for
the partnership, but there is the ability to limit the agency
authority of partners. That is done by filing a statement of
authority. This can be done more consistently when you have
entities than when you have an aggregate. This is very important
for things like real estate transactions.
One of the problems with the former aggregate notion is that every
partner not only has partnership interests, but also specific
interests in partnership property and because of that
characteristic, it was very hard to finance real estate
transactions. Because of the new entity status a partner only has
his partnership interest; he does not have a specific interest in
any specific property and has a right to distributions under the
partnership. A personal property interest becomes subject to a
partner's own specific creditors for his specific interest. This
act provides for a kind of attachment procedure called the charging
order which allow a partner's creditors to be able to get access to
his share of the interest without upsetting the partnership as an
entity.
MR. MCCABE said he hoped to give the Committee an overview of the
advances in this legislation which are very important in terms of
doing business in the current business environment. There are
things this bill does that were not done under the old 1914 act
like the conversion and merger provisions. There is an integrated
limited liability partnership consistent with RUPA. The most
important part about that is that it's a full liability shield.
The partnership entity has the liability and all of the vicarious
liability is essentially gone.
MR. WILLIS KIRKPATRICK, Director, Division of Banking, Securities
and Corporations, introduced Mr. Mike Monagle, Corporation
Supervisor, who would offer suggestions, not on the substance of
the bill, but on consistencies and efficiencies with their
Division's operation.
MR. MONAGLE, Records and Licensing Supervisor, said he was focusing
on the filing provisions. In 1996 the Legislature added Article 6
to the Partnership Act which created limited liability
partnerships. Article 9 (in particular starting on page 31) and
the uniform provisions, are not consistent with the original
Article 6 of the Liability Partnership Act. It lacks provisions
for what to do if a name is filed that's the same as one on file
already. He believed most of the filing provisions could be taken
from the existing LLP Section, Article 6, and be incorporated in
this bill. It would not change the substance of the bill at all,
but would make it more consistent with current filing practices.
Fiscal impacts of statements of authority, denial, disassociation,
dissolution for general partnerships to the agency are unknown.
According to business license records right now there are over
9,500 general partnerships with business licenses. Since the
partnership provision was added a year ago they have had less than
100 LLPs filed, so they didn't feel it appropriate to put in a
fiscal note with any impact. With 9,500 entities out there it's
hard to predict the impact the bill might have, if the entities all
decide on the same day to file. There would obviously have to be
some data base to track the statements and a record capture and
retention system to store and retrieve documents as they are filed.
CHAIRMAN LEMAN asked if they could all work together and resolve
the details.
MR. PETERSON said he thought the changes suggested by Mr. Monagle
should work very well.
SENATOR KELLY said that they had been trusting Mr. Peterson for
years on these types of bills dealing with Uniform Laws and he had
never had any of them bounce back.
CHAIRMAN LEMAN closed the public hearing and said he intended to
bring this back up on Tuesday after some further work and report it
then.
SB 254 - LEVY ON PERMANENT FUND DIVIDEND
CHAIRMAN LEMAN announced SB 254 to be up for consideration. He
said the Committee amended it last time over his objection to
reduce the amounts available to go to creditors from 100 percent
down to 70 percent and approved a conceptual amendment that dealt
with the garnishment fee.
TAPE 98-5, SIDE B
He said attorneys had drafted a memo explaining the problems of
equal protection if the fee is applied only to some claimants and
not to others. The committee substitute had been drafted to be
consistent with equal protection which might not be consistent with
Senator Kelly's intent when he made the motion.
SENATOR MACKIE moved to adopt the CSSB 254 71-b-Cooke 2/7/98.
There were no objections and it was so ordered.
SENATOR MACKIE asked if there was just a flat five percent fee
across the board.
CHAIRMAN LEMAN nodded yes.
SENATOR KELLY said as he understands it when a dividend check is
attached they have to send a certified letter to the person with a
return receipt to the person who made the application.
MS. NANCI JONES, Director, Permanent Fund Division, said they sent
letters.
SENATOR KELLY said he thought the $2 fee was outrageously low and
that the State was not covering the cost of postage on the 20
percent of Permanent Fund checks that are being garnished.
MS. JONES explained that not all letters are certified, just in
certain circumstances. If they are sending batch letters, they use
electronic tape. Sometimes they use certified postage when sending
correspondence to remote areas to make sure the person actually
gets it. For the most part they use the cheapest mail rate
possible which is the bulk rate.
SENATOR KELLY asked if they have to notify the applicant that the
check is being garnished.
MS. USERA said they do notify individuals in a separate letter.
SENATOR KELLY asked her to explain existing language that says,
"Upon receipt of a writ by certified mail, return receipt
requested, the Commissioner shall deliver that portion of a
dividend executed upon to the court along with the case and
number."
MR. VINCE USERA, Assistant Attorney General, answered that his
impression is that the requirement for certified mail is on a
request coming into the Commissioner for garnishment of the PFD.
The requirement for notification of the individual whose check is
being garnished is not necessarily by that same means.
SENATOR MACKIE said his concern with the five percent across the
board is that amount of money is not very much to any one
individual, but is a lot collectively. He appreciated the
amendment that was made to try and recover some of the costs. He
questioned Ms. Jones about her department's ability to investigate
fraudulent applications.
MS. JONES answered that they have an investigative unit which
investigates all reported fraud tips. They don't have the means to
do any statistical analysis.
Number 500
SENATOR MACKIE asked if they were able to handle investigating all
their tips.
MS. JONES said they were so far able to handle all of them.
Administratively they go after the fraud and assess the person and
start collection procedures. As far as criminal activity, they
don't have priority because of the small amounts of money involved.
Probably 95 percent of their cases are from tips; the others are
from inside computer edits.
SENATOR MACKIE asked if they were not getting cooperation from the
courts in actually prosecuting people who have illegally received
PFD checks.
MS. JONES replied that was right because the dollar amount involved
is usually not big enough. There is the occasional case for
$20,000 or some sophisticated fraud.
SENATOR MACKIE said to him it's theft from the people and the
State. He said they prosecute people for a lot less than stealing
$1,300.
MS. JONES said the district attorney's dockets are full and other
crimes like homicide take precedent.
SENATOR MACKIE asked her to send him a letter detailing her
frustrations in this area.
CHAIRMAN LEMAN said he would like to see a few high profile cases
advertised (in the news media) as a deterrent.
SENATOR MACKIE said he also thought it was incumbent upon the
legislature to provide them the resources to do that, too.
SENATOR LEMAN asked if there was a reward for the tipsters.
MS. JONES replied that there was no reward, just anonymity.
SENATOR MACKIE asked if she would include in her letter other ways
they could add to their information on fraudulent activities.
MS. JONES said they have been working with the Social Security
Administration to try and track valid social security numbers.
They started out with 10,000 incorrect social security numbers.
That number is now down to 1,200 which they are scrutinizing very
carefully. In a great number of cases it was a mistake and the IRS
had given them incorrect information, also.
MS. JONES asked if it was possible in section 3 to mention that the
five percent would actually be deposited to the Dividend Fund,
because now any unused money that is collected as the fee is put in
the pot and makes all of our dividends larger. This proposal
siphons it off into the general fund. So they actually lose money
with this bill even though what they currently get doesn't cover
their costs.
SENATOR MAKCIE asked what existing statute said about the $2.
MS. JONES explained that it is a program receipt and it's
nonexistant until it is collected. Now she has to estimate how
much in fees she will collect and that amount is appropriated to
them. If she doesn't pick up that amount, she doesn't get to use
that money.
Number 355
SENATOR KELLY said he was looking for a way to cover all agencies
costs, not just the Permanent Fund. He didn't mind them continuing
to receive the $2 fee per claim.
SENATOR KELLY asked if their operating money came from the general
fund or was it special Permanent Fund money.
MS. JONES replied that it's Permanent Fund money. Everything goes
back to the Fund and is recalculated. She asked how they wanted to
deposit the fee.
SENATOR MACKIE said he thought it would be through program
receipts.
SENATOR KELLY asked if the Division supported the bill.
MS. JONES said yes.
SENATOR MACKIE moved to pass CSSB 254 L&C from Committee with
individual recommendations. There were no objections and it was so
ordered.
CHAIRMAN LEMAN thanked everyone for their testimony and adjourned
the meeting at 2:47 p.m.
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