Legislature(2001 - 2002)
04/23/2001 09:12 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 183
"An Act relating to public interest litigants and to attorney
fees; and amending Rule 82, Alaska Rules of Civil Procedure."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Donley shared that identical legislation had passed the
Senate the previous legislature. He testified the legislation
broadens Civil Rule 82 to include public interest litigants, with
special provisions added for more flexibility.
Co-Chair Donley told the Committee the Alaska courts have the
authority to adopt rules that regulate how the courts operate.
Civil Rule 82, he said, establishes that prevailing parties are
compensated for their court costs and attorney fees in a lawsuit.
He pointed out Alaska is the only state with such a provision, and
that the federal government does not have such a provision either.
Co-Chair Donley detailed the provisions of Civil Rule 82, which
establishes a percentage schedule for compensation. This schedule,
he stated, is based upon the amount of paperwork involved and
whether or not the case goes to trial. He noted that the full
attorney fees are not provided under this rule, but again stressed
that all other courts provide no compensation. He suggested
prevailing parties "have other ways of making up that difference"
between the amount compensated and the actual cost.
Co-Chair Donley remarked that the public policy is to fairly and
fully compensate "people who are damaged," with recovery of
attorney fees providing this compensation. He stressed the Civil
Rules are adopted by the court rather than by a vote of the people
or by elected representatives.
Co-Chair Donley continued that over time, the court adopted an
additional public policy, based on court decisions called the
Public Interest Litigants Doctrine. This policy, he said, indicates
that when the court feels a party brought a lawsuit on a matter
that the court considers to be in the public interest, the court
could order compensation in an amount greater than what would be
awarded under Civil Rule 82. He stated the reasoning is that public
interest litigants were providing a public service by bringing a
lawsuit in instances of misinterpretation of a law or a
constitutional provision and that litigant should be "rewarded" by
not having to pay for the cost of bringing forth the lawsuit.
Co-Chair Donley noted that the court ruled the calculated attorney
fees should be "reasonable." He asserted this is because "some
rather active groups", such as the "radical environmental
community", have attorneys on staff earning $20 to $40 per hour on
salary, and that the group, upon winning a case, presents an
invoice claiming fees of $200 per hour. He said this is because
outside counsel would have charged the higher rate if the group
chose that route in obtaining legal representation. As a result, he
said, some courts try to control public interest litigant's fees so
the compensation is no more than the actual cost of bringing the
lawsuit. However, he asserted, other courts, including those in
Alaska, "have been prone to award what it might have cost" if the
attorneys were in the private sector. This, he said has led public
interest litigation to become "a growth industry for attorneys and
for certain professional public interest litigant groups" because a
profit is made off of the compensation system. He charged this is
"undermining the whole public policy involved in the first place."
Co-Chair Donley continued that until the past few years, courts
would apportion the attorney fees based only on those portions of
the lawsuit where the plaintiff prevailed. He cited this as a
mitigating factor against "abuses in this process." He gave a
scenario of a lawsuit brought by a public interest litigant
containing ten claims, of which nine were dismissed or defeated,
and one prevailed. He explained in this instance the court would
only award attorney fees and costs apportioned on the one
prevailing claim.
Co-Chair Donley informed that this practice changed with the 1998
Supreme Court ruling on Dansereau vs. Ulmer in which the court
ruled that damages would not be apportioned, but rather attorney
fees would be awarded for all claims brought in a lawsuit whether
they prevailed or not. He called this "a bizarre twist of legal
analysis" that "escalated" the costs to the state by awarding
compensation to the public interest litigants "astronomically". He
alleged this has resulted in multiple baseless claims being added
to a lawsuit containing one meritorious claim for the purpose of
obtaining greater compensation. He compared this to a lottery since
victory for one claim provides compensation for all of the claims.
He asserted this is a "bonanza in the making" for lawyers and
"radical special interest groups" and is a "terrible, terrible
public policy call by the state Supreme Court." "It's just plain
dumb. It encourages people to file frivolous claims or claims that
aren't very meritorious," he stressed. This, he said, costs the
state money both in defending against the unmeritorious claims and
paying the public litigant interest to bring forth those same
claims.
Co-Chair Donley remarked this is the reason for the Senate Finance
Committee sponsoring this legislation to return the compensation
procedure to that exercised prior to the Dansereau case. He
explained the resolution dictates that attorney fees pertaining to
public interest litigants are "generally" governed under Civil Rule
82.
Co-Chair Donley pointed out that while the court has decided that a
prevailing public litigant is entitled to 100 percent compensation,
a prevailing party who is the innocent victim of a violent crime
only receives a portion of court fees incurred in bringing a
lawsuit against the perpetrator of that crime, as stipulated under
Civil Rule 82. He asked, "Why in the world would a court ever do
that? Why would you discriminate against innocent Alaskan victims
of violent crimes in favor of special political interests, and to
do so in such an unreasonable way."
Co-Chair Donley stated the answer is found in statements contained
in the Dansereau decision indicating the court wants parties to
bring public interest litigation to allow the court to "inject
their legal views onto the system because they bemoan the fact that
'gosh if somebody doesn't bring a lawsuit, we don't get to say what
we think is right.'" He continued, "It's the only logical possible
reason a court would create such a bizarre legal interpretation and
bizarre justification" for the disparity in compensation formulas.
Co-Chair Donley returned to explaining the resolution. He showed
that it allows the court to award higher compensation of attorney
fees in instances where the court finds the circumstances
"exceptional". This, he surmised, adopts a public policy dictating,
"We shouldn't discriminate in favor of special political interests
to the expense of injured Alaskans and innocent victims." He noted
the intent that the court should apportion compensation only for
those claims the public interest litigant won, but that it could
award compensation for claims lost, if the court finds exceptional
circumstances.
Co-Chair Donley anticipated testimony that will allege apportioning
compensation only to the prevailing claims in a lawsuit would be
difficult and therefore should not be required of the court. He
countered, "courts have been doing that [apportioning compensation]
for a hundred years" and that Alaska courts have been doing this
for the period between the inception of Rule 82 and the Dansereau
ruling. He pointed out that the safety clause is added for those
instances where the court is unable to discern costs of the
prevailing claims from the non-prevailing claims.
Co-Chair Donley concluded, "the Dansereau case is simply
indefensible from a public policy point of view, a basic fairness
point of view, and from a fiscal responsibility point of view and
needs to be overturned," which this legislation would do. He
reiterated the Dansereau decision is "that terrible opinion by our
Supreme Court that's an abrogation of law in the United States of
America."
Co-Chair Kelly commented that Co-Chair Donley's explanation of this
legislation was the best he has heard given for any legislation.
Co-Chair Kelly asked if the court, citing a case as "under
exceptional circumstances," awards actual costs or if the court
could determine an arbitrary amount.
Co-Chair Donley replied the legislation stipulates Civil Rule 82 as
the standard for determining compensation awards. He qualified that
the courts "have allowed themselves to deviate from Rule 82 on
their own also," and the courts would retain that flexibility under
this resolution when it found justifiable circumstances. As an
example, he noted that organizations with in-house attorneys and
subsequent lower attorney costs could still be compensated in the
amount that outside counsel would have cost.
Senator Wilken thanked Co-Chair Donley for explaining the
legislation. He looked forward to hearing the other side of the
argument, saying that Co-Chair Donley's was concise in his
analysis.
Senator Wilken referenced a March 19, 2001 memorandum to Co-Chair
Donley from his staff, Bill Church regarding Department of Law
Public Interest Litigant Payments, [Copy on file] citing the
average annual cost to the state for public interest litigation as
$468,234. He asked if this figure includes the Department of Law
costs of defending the state against the lawsuits.
Co-Chair Donley replied it does not and explained that the figures
shown in the memorandum are only for attorney fees and costs to the
litigants as ordered by the court.
WEV SHEA, Attorney, testified via teleconference from Anchorage
about practicing law in Alaska since 1977 and prior to that serving
in the US Navy as a pilot for five years. He stated he is the
attorney that Co-Chair Donley spoke of with regard to the Dansereau
case. He took issue with Co-Chair Kelly remarks on the quality of
explanation given for this resolution and Senator Wilken's
commendation on the explanation of the law. Mr. Shea asserted that
Co-Chair Donley is not a trial lawyer and is idealistic.
Mr. Shea explained Civil Rule 82 saying it normally awards a
portion of attorney fees to the prevailing party in litigation but
not costs, which are addressed in Civil Rule 79. He responded to
Co-Chair Donley's statement that Alaska has the only courts in the
country with such a rule and that the federal courts have no such
rule. Mr. Shea informed that he served as US Attorney for the
District of Alaska from 1990-1993 and that there are "numerous"
federal rules that "not only award total attorney fees," but award
damages in civil litigation as well.
Mr. Shea gave the history of the Dansereau lawsuit he brought on
behalf of ten voters challenging the 1994 gubernatorial election.
He charged the practices in this election were "corrupt". He shared
that current law requires legal challenges to an election must be
brought forth within ten days of an election's certification. He
spoke to the complexity of the suit, detailing the three components
of the case, the first being inconsistencies at the polling places
and in special voting locations, such as in Prudhoe Bay. The second
component he recounted was the mailing to 10,000 Doyon Native
Corporation shareholders offering a chance to win $10,000 for those
members who vote for Democratic Candidate Tony Knowles. He stated
the Fairbanks Native Association, Tanana Chiefs Conference, and
Doyon, Limited sponsored this contest. He related the third
component regarding the North Slope Borough giving ten gallons of
gasoline, worth $27, to everyone in that borough who voted.
Mr. Shea told the Committee that when the Supreme Court ruled on
this litigation, Justice Eastaugh, on behalf of the court
determined that only the contest mailing cause of the three causes
of action was viable. Therefore, he said, the plaintiffs only
prevailed on one cause of action.
Co-Chair Kelly requested the witness speak to the legislation
before the Committee.
Mr. Shea agreed he would do so after explaining the case in
question as he deemed it pertains to the resolution.
Mr. Shea stated, "Contrary to Senator Donley, I know of no cases
where, if the work is done by an attorney at 20 or 40 bucks an
hour, and he submits that bill to the court, that the court somehow
allows him to bill out at $200 an hour. It just doesn't happen." He
qualified that he works solely on litigation and that he is not
trying to defend any lawyer who brings frivolous lawsuits but
stressed that an election contest suit is expensive. He stated
that he expended approximately $250,000 worth of services and
$50,000 in costs to the aforementioned case over two and one-half
years before the case was settled. He said this was because of the
importance of the issue of an improper election.
Mr. Shea expressed there should be a lot of interest in challenging
improper elections, although he surmised this bill is intended to
address environmental concerns. He warned that this is "destroying
the ability of the public to take action when the attorney general
refuses to take action."
Mr. Shea pointed out that of the $275,000 in costs and time he
invested in the Dansereau case, he received only $101,000 in
compensation. He noted the Department of Law had ten to 14
attorneys and four paralegals working in defense of the lawsuit.
Mr. Shea remarked the Dansereau case resulted in a change in Alaska
law making it "parallel" to federal law.
Mr. Shea challenged Co-Chair Donley's comparison of compensation
for paraplegic patients and characterization of all public interest
litigants as people only interested in getting money. Mr. Shea
admitted this could be true and should therefore be focused on. He
asked how it could be expected that attorneys would take on
election challenges cases without the ability to recover "a high
percentage of the fee."
Mr. Shea stated there is "strict criteria" used in determining a
public interest litigant, stressing that if the attorney has a
financial interest in the outcome of the lawsuit, that attorney
does not qualify. He suggested this addresses Co-Chair Donley's
concerns about the involvement of political action groups. He
explained that any political group that brings an action does have
an interest in the result, "monetary or otherwise".
SFC 01 # 82, Side B 10:04 AM
Mr. Shea asserted, "I am as conservative as anyone on this
Committee." He did not understand what this legislation was "trying
to attack" other than "environmental fundamentalists or radicals",
but warned that in the process "a basic fairness issue" is risked.
Mr. Shea expressed that Co-Chair Donley's "attack" on the Alaska
Supreme Court and Justice Eastaugh for writing the Dansereau
decision is "bizarre and unprofessional as counsel."
Senator Leman asked how much of the expended $275,000 attorney fees
and costs the witness would have recovered under the proposed
legislation.
Mr. Shea stated the existing scenario is what Co-Chair Donley
referred to. He asserted, "I was the attorney in Dansereau and he
was talking about how awful Dansereau was. Well, Senator Donley
doesn't know the facts."
Co-Chair Kelly interjected to ask the witness to address the
question.
Mr. Shea did not know the amount he would have recovered under the
stipulation in the legislation to calculate compensation based on
each claim in a lawsuit. He stated that it is difficult to divide
costs by the specific issues. He asserted that the majority of his
focus addressed the Doyon Native Corporation's "vote for Tony
Knowles, win $1,000" mailing. He explained this was a priority
because if affected 10,000 voters and "easily could have swung the
election", which he reminded was won on 536 votes.
Mr. Shea compared this to the 2000 presidential election in
Florida, noting the complexity of election-based litigation. He
reiterated that challenges to an election must be filed within ten
days of certification and this is not adequate time to create
frivolous claims.
Co-Chair Kelly clarified that he did not hear Co-Chair Donley
oppose the compensation outcome of the Dansereau case specifically,
but rather the precedent it set for future cases.
Mr. Shea disagreed.
Senator Wilken referred to the witness' mention of Civil Rule 82
fees and costs and the methods other states employ to address this
matter. Senator Wilken wanted to know if the witness found other
methods that he could recommend as a model.
Mr. Shea did not know how other states handle public interest
litigation. He cautioned, "you are in very difficult situation"
explaining the courts have determined that a public interest
litigant, in bringing an action, is essentially serving as a
private attorney general. He again stressed the point that a public
interest litigant could not have a financial interest in the
outcome of that litigation. He remarked that Co-Chair Donley's
comments focused on the assumption that the plaintiff has a
financial interest in the result.
Mr. Shea expressed his experience that attorneys who bring a public
interest suit do not do so to make money. He qualified that Co-
Chair Donley could have greater knowledge then he of environmental
groups that do have a vested interest in the outcome of the
lawsuits they pursue.
Mr. Shea stated that he did not see the problem as one with public
interest litigants bringing suit for profit. He said when he
brought the election suit, he was not even aware that he could
recoup fees. He suggested that if Co-Chair Donley did have such
knowledge, as an attorney, he should bring the matter to the Alaska
Bar Association.
AL SUNDQUIST, President, Alaska Chapter of Americans United for the
Separation of Church and State, testified via teleconference from
Anchorage in opposition to the legislation. He explained the
group's membership of thousands of churches and organizations
across the county and its mission to support the establishment
clause and the free exercise clause of the First Amendment of the
United States Constitution. He qualified he has limited knowledge
of the litigation process but that he opposed the placement of
"economic obstacles to the use of the courts by Alaskan citizens."
Co-Chair Donley responded to Mr. Shea's testimony saying the
witness misrepresented several things he had said. Co-Chair Donley
agreed that the witness was correct that other specific statutes in
both state and federal law address costs. He gave an example of a
federal law that provides triple damages if someone cuts down a
tree on another person's property.
Co-Chair Donley stated he was unaware that Mr. Shea was the
attorney in the Dansereau case. Co-Chair Donley considered the
claim that the plaintiff had only ten days to file a lawsuit
challenging the 1994 election, could be considered exceptional
circumstances, which this legislation provides special allowances.
However, he did not think the precedent set forth should have
become the public policy for all public interest litigant lawsuits.
Co-Chair Donley disagreed that there is a strict criteria for
determining a public interest litigant. He pointed out the court
found the Anchorage Daily News to be a public interest litigant in
one case. He remarked the "problem has become so bad" in federal
courts that the US Congress banned interest groups that receive
federal funding, from collecting attorney fees under the public
interest litigant doctrine. He noted this might have been recently
overturned by the court, but stressed the perception of the
situation was such that Congress did take action.
Co-Chair Donley stated Mr. Shea might not be aware of the problem
but that he has studied the Department of Law budget and the number
of court-ordered compensations by the state to political interest
groups. He assessed this to be a major budget item.
Co-Chair Donley gave examples of public interest litigant cases in
which the state was ordered to pay attorney fees, such as a suit
challenging campaign finance reform. He shared that he agreed with
the litigants in this case and disagreed with the Supreme Court
ruling against the plaintiff on all but one point. However, he did
not agree that the plaintiff should have been subsequently awarded
full compensation on all attorney fees.
Co-Chair Kelly was concerned with the use of the courts for setting
public policy. He expressed, "They have ruled in such a manner that
they think they are one of the arms of government to mold public
policy and to create public policy rather than to just decide on
it." He spoke of the lack of public participation in this method.
He surmised there is "disdain in the courts for the legislative
process."
Senator Olson asked Co-Chair Donley the Supreme Court vote on the
Dansereau case and whether the decision was unanimous.
Co-Chair Donley was unsure and said he would provide that
information.
Co-Chair Kelly asked how this legislation differs from the
legislation from the previous session.
Co-Chair Donley answered it is identical.
Co-Chair Kelly reminded that all members, with the exception of
Senator Olson, had heard this bill the previous session either in a
committee hearing, or on the Senate floor.
Co-Chair Donley reiterated the importance of the "safety valve"
giving the court discretion in exceptional circumstances.
Senator Ward offered a motion to move SB 183 from Committee with a
Department of Law zero fiscal note.
The bill MOVED from Committee without objection.
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