Legislature(2011 - 2012)CAPITOL 120
03/21/2011 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB168 | |
| HB6 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 168 | TELECONFERENCED | |
| + | HB 6 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 168 - INJUNCTION SECURITY: INDUSTRIAL OPERATION
1:08:06 PM
CHAIR GATTO announced that the first order of business would be
HOUSE BILL NO. 168, "An Act requiring the amount of the security
given by a party seeking an injunction or order vacating or
staying the operation of a permit affecting an industrial
operation to include an amount for the payment of wages and
benefits for employees and payments to contractors and
subcontractors that may be lost if the industrial operation is
wrongfully enjoined."
1:08:31 PM
REPRESENTATIVE ERIC FEIGE, Alaska State Legislature, sponsor,
offered his understanding that there have been several cases
over the years that were later dismissed in which the courts
[initially] issued an injunction against an entity engaged in
resource extraction or construction, with the result being [an
unnecessary] delay in that entity's project. House Bill 168
would ensure that a party take some risk in bringing suit
against such a project. He offered his belief that under
current law, there is no risk to bringing a frivolous lawsuit.
Referring to the sectional analysis included in members'
packets, he noted that it says in part that HB 168 won't
prohibit a party that is wrongly enjoined from other relief, or
otherwise limit the amount that a party may recover in the
action. House Bill 168 is accompanied by zero fiscal notes, and
members' packets include an article from High Country News
titled "'Firebrand ways'" indicating that injunctions are being
used to stop projects, as well as a 2011 report by the Alaska
Minerals Commission highlighting the need for litigation reform
- including requiring security bonds of those initiating legal
actions - and information regarding a similar Montana law. He
added that research thus far indicates that that law, enacted in
1995, has yet to be used, surmising that this means that it is
having its intended effect of limiting frivolous lawsuits.
REPRESENTATIVE KELLER mentioned that he is a co-sponsor of
HB 168.
REPRESENTATIVE FEIGE, in response to a question, indicated that
the bill would only apply [in situations where a party seeks a
restraining order, preliminary injunction, or order vacating or
staying the operation of a permit that affects an industrial
operation].
1:14:32 PM
SCOTT THORSON, expressing approval with the legislature for
addressing this issue, offered his belief that it's far too easy
for someone to bring a lawsuit to stop a resource development
project that has already been issued a permit by the state or
the federal government, resulting in extra costs - in terms of
time and money - being incurred by contractors, employees, and
vendors. In conclusion, he relayed that he is in full support
of HB 168.
REPRESENTATIVE FEIGE, in response to questions, explained that
the concept of HB 168 was something that he'd come up with on
his own, and that the bill was drafted before he'd become aware
of the aforementioned similar Montana law and was therefore not
modeled on it, and that he is unaware of any court
interpretations or legal opinions pertaining to the construction
or constitutionality of that Montana law. He confirmed that in
addition to [costs and damages that may be suffered by an
industrial operation, the security bond authorized by HB 168
could also include payments to contractors and subcontractors,
and employee wages and benefits]. In response to further
questions, he explained that the reach of the bill, and
determinations regarding which costs to include in the security
bond, would be made by the courts, adding that "the objective
with [HB 168] is ... not to change a court rule," and that he
doesn't believe that a court rule change would be necessitated
by adoption of the bill's proposed statute.
REPRESENTATIVE GRUENBERG noted that the bill drafter had relayed
to him his understanding that [Rule 65(c) of the Alaska Rules of
Civil Procedure] applies to temporary restraining orders and
preliminary injunctions, but not additionally to permanent
injunctions regarding orders vacating or staying the operation
of a permit that affects an industrial operation.
REPRESENTATIVE FEIGE, in response to further comments, mentioned
that research he's conducted indicates that HB 168 neither
conflicts with [Rule 65(c)] nor constitutes a court rule change.
1:25:54 PM
TINA KOBAYASHI, Chief Assistant Attorney General - Statewide
Section Supervisor, Oil, Gas & Mining Section, Civil Division
(Juneau), Department of Law (DOL), offered her understanding
that under the wording of [the bill], when setting the amount of
the security bond, the court may take into account the potential
damages that might be suffered by the industrial operation if it
is wrongfully enjoined or restrained, and that the intent of
bill is to not change the court's discretion in determining the
appropriate amount of the security bond.
REPRESENTATIVE GRUENBERG noted that Rule 65(c) says in part:
(c) Security. No restraining order or preliminary
injunction shall issue except upon the giving of
security by the applicant, in such sum as the court
deems proper, for the payment of such costs and
damages as may be incurred or suffered by any party
who is found to have been wrongfully enjoined or
restrained.
REPRESENTATIVE GRUENBERG asked whether there have been any court
cases wherein a security bond required under Rule 65(c) has
included an amount for the payment of wages and benefits for
employees and payment to contractors and subcontractors.
MS. KOBAYASHI said she is not aware of any such cases or any
cases wherein that issue was even raised.
REPRESENTATIVE GRUENBERG questioned whether HB 168 could be
construed to be affecting the public interest such that
application of Rule 24(c) of the Alaska Rules of Civil Procedure
would be necessitated should the bill be challenged on
constitutional grounds. Rule 24(c) says in part:
When the constitutionality of a state statute
affecting the public interest is drawn in question in
any action to which the state or an officer, agency,
or employee thereof is not a party, the court shall
notify the Attorney General of Alaska of such fact,
and the state shall be permitted to intervene in the
action.
MS. KOBAYASHI indicated that in such a situation, application of
that court rule would be necessitated.
REPRESENTATIVE HOLMES asked whether the bill would apply in
situations involving the operation of a federal permit.
MS. KOBAYASHI offered her belief that in such situations,
federal law would apply instead of HB 168.
REPRESENTATIVE HOLMES asked whether the bill would apply in
situations involving the operation of a permit issued by a local
government.
MS. KOBAYASHI offered her belief that it would.
REPRESENTATIVE GRUENBERG raised the questions of whether the
bill is intended to also address industrial operations owned by
a governmental agency, and of whether, if so, the proposed
security bond could then include the payment of wages and
benefits for government employees.
1:37:18 PM
TOM CRAFFORD, Director, Office of Project Management &
Permitting, Department of Natural Resources (DNR), expressed
concern that the bill might impact the various regulatory
programs that the state either has obtained or is obtaining
primacy for from the federal government, such as [the Surface
Mining Control and Reclamation Act of 1977 (SMCRA) programs, the
National Pollutant Discharge Elimination System (NPDES) permit
program, and the Congestion Mitigation and Air Quality
Improvement (CMAQ) Program]. Generally, when such programs are
assumed from their associated federal agencies, it's with the
understanding that the state's laws are at least as protective
as the federal laws, and so the concern centers on the fact that
those federal agencies could perhaps find that HB 168 results in
state laws that are not as stringent as required. Therefore, he
opined, consideration should be given to how the bill might
affect the state's assumption of the aforementioned federal
regulatory programs.
1:42:27 PM
LYNN TOMICH KENT, Director, Division of Water, Department of
Environmental Conservation (DEC), in response to a question,
explained that if a permit is stayed, then the industrial
operation's activity that would purportedly cause damage to an
area wouldn't actually occur during the extent of that stay.
REPRESENTATIVE FEIGE additionally offered his belief that HB 168
won't prevent a party from seeking a restraining order,
preliminary injunction, or order vacating or staying the
operation of a permit that affects an industrial operation, but
would instead simply increase the party's risk in bringing an
action by requiring a security bond, a bond which could at least
partially mitigate a wrongfully-enjoined industrial operation's
losses. He added that should the party bringing the action
prevail, it is his intention that that security bond would be
returned.
CHAIR GATTO noted, though, that even a prevailing party would be
out the cost of obtaining the bond.
REPRESENTATIVE GRUENBERG asked whether there were any mechanisms
that would allow a party bringing a successful action to recoup
that cost or any other costs.
REPRESENTATIVE FEIGE ventured that it would be the court which
would be in the best position to ensure that the financial
interests of all the parties are protected, and to address
frivolous claims. And, again, it would be up to the court to
determine the appropriate amount of the security bond; this
judicial discretion should ensure that even a small party with a
potentially-legitimate claim isn't precluded from bringing an
action. In response to another question, Representative Feige
reiterated that the bill would only apply [in situations where a
party seeks a restraining order, preliminary injunction, or
order vacating or staying the operation of a permit that affects
an industrial operation].
1:50:01 PM
REPRESENTATIVE HOLMES noted that the term, "industrial
operation" is defined in the bill as including a construction,
energy, or timber activity, and oil, gas, and mineral
exploration, development, and production. She characterized the
term, "construction" as perhaps being overly broad, appearing to
allow the bill to apply to any construction activity, including
a neighbor's home-renovation project, for example.
REPRESENTATIVE FEIGE said he is not expecting the bill to be
used by individuals to stop the activities of other individuals
- other private property owners - but acknowledged that perhaps
an amendment excluding residential construction activities might
be in order.
REPRESENTATIVE HOLMES observed that the potential costs and
damages of some industrial operations could potentially be so
high as to preclude a party from obtaining a security bond in
that amount.
REPRESENTATIVE FEIGE acknowledged that point, but noted that
industrial operations, whether large or small, if wrongfully
enjoined, could incur substantial costs and suffer substantial
damages as a result of a stay based on a frivolous claim.
Again, it would be up to the court to determine what the amount
of the proposed security bond should be, and the court wouldn't
have to set the bond so high that it results in the party being
unable to obtain it. There should be some kind of risk placed
on the plaintiff in order to "weed out" frivolous lawsuits, he
opined, since even when frivolous, they are still lawsuits and
can still result in costs and damages being incurred and
suffered as the result of a stay, with serious implications for
the state's economy. In response to comments, he surmised that
the court, too, has a role in determining which claims have
potential merit.
CHAIR GATTO reiterated Representative Holmes's point regarding
large security bonds.
REPRESENTATIVE THOMPSON, too, observed that as currently
written, the bill could apply in situations involving
residential construction projects.
CHAIR GATTO questioned how a forfeited security bond would be
distributed to an industrial operation and its contractors,
subcontractors, and employees when it is found to have been
wrongfully enjoined or restrained.
REPRESENTATIVE FEIGE indicated his belief that it would be up to
the court to handle that distribution.
1:58:18 PM
REPRESENTATIVE GRUENBERG pointed out that the phrase,
"wrongfully enjoined or restrained" as used in both the bill and
Rule 65(c) signifies only that the party bringing the action
hasn't prevailed, and not necessarily that its assertions were
frivolous. He questioned whether the sponsor is intending for
the bill to only be applied in situations where the party's
assertions are found to be frivolous.
REPRESENTATIVE FEIGE indicated a preference for the proposed
security bond to be forfeited in any situation wherein the party
bringing the action doesn't prevail regardless that its
assertions weren't frivolous. In response to comments and a
question regarding the definition of the term, "industrial
operation", he suggested that the bill be amended to exclude
certain types of residential construction activities, though
exactly which types to exclude would be up to the committee to
determine.
REPRESENTATIVE KELLER pointed out that as currently written, the
bill would apply to any construction activity that requires a
permit.
REPRESENTATIVE LYNN suggested limiting the bill to just
activities involving the development of the state's natural
resources, offering his understanding that the bill is only
meant to address frivolous lawsuits filed with the intention of
stopping resource development.
REPRESENTATIVE FEIGE indicated that he doesn't intend for the
bill to apply to "some of the smaller level of activities," but
rather only to projects requiring a permit, even residential
construction projects. In response to further comments and
questions, he acknowledged that the committee could choose to
somewhat limit the scope of the bill as it relates to
residential construction activities.
CHAIR GATTO relayed that HB 168 would be held over.