Legislature(1995 - 1996)
01/11/1996 01:30 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE January 11, 1996 1:30 p.m. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator John Torgerson, Vice-Chairman Senator Mike Miller Senator Jim Duncan Senator Judy Salo MEMBERS ABSENT None COMMITTEE CALENDAR SENATE BILL NO. 119 "An Act requiring conciliation panel review in a civil action against an architect, engineer, or land surveyor; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 119 - No previous action to record. WITNESS REGISTER Senator Loren Leman State Capitol Building Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of SB 119 Richard Ritter American Institute of Architects 800 Glacier Ave. Juneau, AK 99801 POSITION STATEMENT: Supported SB 119 Chris Christensen Alaska Court System 303 K Street Anchorage, AK 99501-2084 POSITION STATEMENT: Supported concept of SB 119 Mike Tauriainen P.O. Box 937 Soldotna, AK 99669 POSITION STATEMENT: Supported SB 119 Colin Maynard 1400 W. Benson, Suite 500 Anchorage, AK 99503 POSITION STATEMENT: Testified on SB 119 ACTION NARRATIVE TAPE 96-2, SIDE A Number 001 SB 119 MANDATORY MEDIATION/DESIGN PROF LAWSUITS CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting to order at 1:30 p.m. and announced SB 119 was up for consideration. He noted all members were present, except Senator Duncan, who arrived at 1:31 p.m. SENATOR LEMAN, sponsor of SB 119, explained the measure incorporates alternative dispute resolution into the process of settling disputes. It does not remove the ability of the aggrieved parties to seek judgment in court, but does allow the court to appoint a three-member conciliation panel consisting of a member of the design profession, an attorney, and a person involved in alternative dispute resolution. The panel would hear the case, through a more informal process, and render one of four judgments, specified in SB 119. One of the judgments would determine whether the case had merit, so that if it did not, it would be more likely that a judgment would be found against a party bringing a frivolous case to court. This concept is in place in seven states, and other states are considering similar legislation, to reduce the court system backlog, and to reduce costs associated with litigation. Number 052 SENATOR SALO asked if the purpose of the panel would be to decide whether the case merits court action or to actually recommend solutions to the disagreement. SENATOR LEMAN reiterated there are four conclusions the panel could reach, specified in SB 119. He reviewed those conclusions. He added other states have found that enactment of similar legislation has reduced the number of cases that are litigated. Number 088 SENATOR SALO questioned whether the panel would act as a legal advisory panel, deciding whether or not a case has merit, or whether it would have the latitude to determine whether reparative work should be done. SENATOR LEMAN answered that would depend on how the panel was set up. He explained it could make such a determination informally. Number 110 SENATOR KELLY clarified that if the parties do not agree to the panel's recommendation, either party can litigate, and the panel's decision would not be admissible in court, therefore the parties would be starting over. SENATOR LEMAN explained the panel would use a less formal procedure than what is required in a court case. SENATOR KELLY stated it would set out each party's position which would give the parties a better opportunity to determine the outcome of litigation. The panel's recommendation could act as a deterrent to further action by the unfavored party. Number 130 SENATOR LEMAN cited a case he was previously involved in. The case lacked merit from the onset, yet cost the parties hundreds of thousands of dollars and a substantial amount of time, before the jury determined the case lacked merit. Number 142 SENATOR TORGERSON questioned the magnitude of the problem. SENATOR LEMAN responded he did not have an actual number of claims being brought in Alaska, but estimated the number to be small. SENATOR TORGERSON asked if any other profession in the State of Alaska has a panel similar to the one in SB 119. SENATOR LEMAN stated SB 119 is patterned after legislation in other states. He added the medical profession may have a similar procedure, and both the medical and legal professions in other states have such procedures. Number 162 RICHARD RITTER, president of a Juneau architectural and design firm, and a representative of the Alaska Chapter of the American Institute of Architects, expressed his support of SB 119 for the following reasons. SB 119 would reduce the number of frivolous claims as well as reduce frivolous denial of liability by deterring a patently liable party from attempting to defend itself in court. The intent of the bill is to be fair to either potential. Secondly, in his experience with three or four cases over the past 15 years, the cases have cost tens of thousands of dollars to resolve, even though the cases never went to court. In one case involving the University of Alaska, the University's engineer determined his firm to be blameless, but the University's legal counsel recommended his firm be sued. His firm settled out of court to minimize legal costs. A conciliation panel would have discredited the claim initially. Number 206 MIKE TAURIAINEN, representing himself, testified in support of SB 119 because it provides a minimum encumbrance on the system with the net result of encouraging settlement without litigation. He added it should improve the professional liability insurance market and indirectly reduce the cost of services to residents and businesses. Number 293 MR. TAURIAINEN recommended the following changes to SB 119. On page 2, line 1, change the term "design professional" to "one person who is a licensed member of the defendant's profession." This change would allow, for example, a surveyor to make a decision regarding a surveying issue. On page 2, line 19, add the following sentence. "The decision shall include assignment of liability and any appropriate award of damages." This would allow the panel to set a definition of liability and appropriate damages. On page 3, line 14, after the word "panel," insert "and legal costs of the prevailing party".... That would require any party frivolously denying responsibility to pay those costs. On page 3, lines 22-24, a loophole exists for a design professional who is practicing outside his licensed area. He did not have any alternative language to offer. He added on page 3, line 27, the effective date should be changed to 1996. SENATOR SALO referred to Mr. Tauriainen's suggestion to give the panel considerably more authority than what is currently included in SB 119, and asked whether he foresees any downside to an increase in authority. MR. TAURIAINEN replied that an increase in authority would require more work of the panel, but could reduce the workload of the court. He noted the Hawaii statute has similar language. Number 304 COLIN MAYNARD, representing the Legislative Liaison Committee of the Alaska Professional Design Council, testified. He discussed several examples of frivolous lawsuits, including one in which a driver, with a blood alcohol content of twice the legal limit, ran several detour signs and crashed, and then sued the engineers who designed the detour. After five years, the driver settled for $35,000, however the engineer's firm paid $200,000 in legal fees. He stated SB 119 is based on the national model act. He was unsure about whether Mr. Tauriainen's suggestion to give the panel more authority would help the court system. Number 361 CHRIS CHRISTENSEN, general counsel to the Alaska Court System, stated the Court System supports the concept of alternative dispute resolution, however finds SB 119 to be more complex and expensive than necessary to achieve the desired result. He discussed the state costs associated with the use of a conciliatory panel, which could include per diem, court reporters, witness fees, record procurement, and travel to sites. SB 119 would essentially create a state-funded mini-trial which would add one additional lawyer to the court process. He added that currently, 90-95 percent of all civil cases are settled out of court. MR. CHRISTENSEN discussed other options for alternative dispute resolution which fall into three methods. The first requires the plaintiff's attorney to consult with a design professional prior to filing a lawsuit. The second method requires an affidavit from a design professional to be filed with the lawsuit. The third method establishes a dispute resolution screening panel similar to SB 119. The first two methods would not cost the state any money, but would require the plaintiff to hire an expert before filing a lawsuit. MR. CHRISTENSEN continued. SB 119 is a modification of the model act prepared by the American Consulting Engineers Council and is based on the Hawaii law. Unlike SB 119, the Hawaii law is drafted in a way that eliminates costs to the court system, and minimizes costs to its Department of Commerce. The design panels are appointed by the Hawaii Department of Commerce, the agency which regulates those professions. The parties are required to go to a panel before filing a lawsuit. The court system would prefer a similar system because it would take the court system out of the loop and perhaps eliminate cases before, as opposed to after, they are filed. MR. CHRISTENSEN referred to an analysis of the California law. Since enactment of the law, fewer lawsuits have been filed, more were dismissed, and costs have been insignificant. The California law requires a plaintiff's attorney to consult with a design professional prior to filing a lawsuit, and to file a certificate with the court verifying the consultation. The court system would prefer such a method to creating a state-funded advisory panel. Number 438 SENATOR KELLY asked if the plaintiff would pay the cost of the consultation with a design professional. MR. CHRISTENSEN replied that most design professionals who serve as expert witnesses do charge. SENATOR KELLY asked if such a system would develop a host of design professional witnesses that get paid to say a case has merit. MR. CHRISTENSEN responded there are professional witnesses in every discipline. SENATOR KELLY asked how that problem is avoided in California. MR. CHRISTENSEN stated that problem was not addressed in the analysis, but if an honest independent answer is provided by the consultant, a realistic evaluation of the case, and its merits, can be made. He added that plaintiffs' attorneys proceed on a contingency fee and would be unlikely to take a case that lacks merit. SENATOR KELLY stated that because of the number of significant questions raised about the approach set out in SB 119, costs to the state, and specific language recommendations, the bill would be held over to enable staff to work with the sponsor of the measure to draft a committee substitute. There being no further business before the committee, the meeting was adjourned at 2:04 p.m.