03/27/1996 01:30 PM Senate JUD

       SB 272 SMALL CLAIMS CT JURISDICTION & PROCEDURE                       
                                                                               
 SENATOR TORGERSON, sponsor of SB 272, explained the purpose of the            
 bill is fourfold: it allows creditors without legal representation            
 in relatively small claims cases; it increases the maximum amount             
 of a claim from $5,000 to $10,000; it allows a motion to practice             
 in small claims court; and allows service for small claim cases on            
 defendants outside Alaska.  SB 272 amends existing statute so the             
 corporation can appear without an attorney in cases under $10,000,            
 and amends three court rules.  The legislation was introduced on              
 behalf of an attorney in his district.                                        
                                                                               
 Number 320                                                                    
                                                                               
 CHRIS CHRISTENSEN, general counsel to the judicial branch,                    
 discussed two primary components of SB 272.  It raises the                    
 jurisdictional limit of the small claims court from $5,000 to                 
 $10,000.  The Supreme Court opposes an increase of that magnitude             
 because although there has been no increase since 1986, the federal           
 CPI has only increased 32.8 percent since 1986.  That would equate            
 to $6,650 in 1996 dollars.  The Court System believes the change to           
 $10,000 will cause cases of much greater evidentiary complexity to            
 be placed before magistrates, and would prefer an incremental                 
 change, raising the current amount to $7,500.                                 
                                                                               
 SENATOR TAYLOR asked about the second component regarding attorneys           
 having to appear on behalf of creditors.                                      
                                                                               
 MR. CHRISTENSEN stated the Supreme Court has not yet reviewed that            
 portion of the bill, therefore he cannot state a position.  He                
 relayed comments from some district court judges who expressed                
 concern about how the proposed court rule changes will change the             
 nature of small claims court in ways that are detrimental to the              
 system as a whole.  The primary effect of SB 272 is to make it                
 easier and cheaper for collection agencies to engage in commercial            
 litigation.  Collection agencies attempt to collect money on behalf           
 of a third party.  Section 4 provides that collection agencies will           
 no longer have to use an attorney when they go into small claims              
 court on behalf of another business or individual.  The individual            
 judges who have commented worry that collection agencies are not              
 bound by the same set of ethical rules that licensed attorneys are            
 bound by.  Collection agencies have no prohibitions on conflict of            
 interest, no rules on candor with the court, no rules regarding               
 fairness to the other parties, no rules regarding communication               
 with the other party, and no rules with regard to the degree of               
 truthfulness they have to maintain.  The same judges are also                 
 concerned that Section 5 will make it easier for agencies and                 
 others who are familiar with the small claims process to take                 
 advantage of the lack of familiarity the defendant has with the               
 small claims process.  Section 5 allows the court to grant a                  
 decision based on a summary judgment motion which would almost                
 invariably be filed by the plaintiff.  Court rules require the                
 magistrate or clerks to assist the litigants in a small claims case           
 by providing legal advice to both sides.  If a plaintiff filed a              
 summary judgment motion, the judge would not be able to offer                 
 assistance to the defendant.  A defendant in such a case would                
 eventually take far more clerical time keeping defendants informed            
 and prepare documents.                                                        
                                                                               
 MR. CHRISTENSEN continued.  Section 6 will allow out-of-state                 
 service on defendants.  Presently, court rules only allow a small             
 claims plaintiff to serve an out-of-state defendant in                        
 landlord/tenant cases and in cases involving motor vehicles.  This            
 particular issue was visited by the Supreme Court Small Claims                
 Committee the last time the limit was changed.  The magistrates and           
 clerks in small rural courts are not trained and qualified in long            
 arm jurisdiction.  Current law excepts landlord/tenant cases and              
 motor vehicle cases because the plaintiff can serve the                       
 Commissioners of Commerce and Public Safety if the defendant is               
 out-of-state.                                                                 
                                                                               
 SENATOR ADAMS asked if the Court System used federal figures to               
 determine the CPI.  MR. CHRISTENSEN replied it did.                           
                                                                               
 SENATOR ADAMS asked if the figure would be higher than $6,650 if              
 the Alaska CPI was used.  MR. CHRISTENSEN answered he was under the           
 impression the federal figure for Anchorage was used.                         
                                                                               
 Number 400                                                                    
                                                                               
 SENATOR TAYLOR asked Senator Torgerson if he would object to a                
 limit of $7,500.  SENATOR TORGERSON indicated he did not.                     
                                                                               
 SENATOR ADAMS asked if the fiscal note would change if the limit              
 were placed at $7,500.  MR. CHRISTENSEN believed the figure would             
 be lower because the number of new cases would decrease, and would            
 be less complex since they would be of lower value.                           
                                                                              
 SENATOR TAYLOR felt the collection agencies should be held more              
 accountable and be required to hire a person with some legal talent           
 to represent them.  Regarding Section 6, he shared Mr.                        
 Christensen's concern that out-of-state cases are complex.                    
                                                                               
 SENATOR TAYLOR moved to delete Sections 4 and 6, and to change                
 every place that the bill reflects $10,000 to $7,500.  There being            
 no objection, the motion carried.                                             
                                                                               
 Number 445                                                                    
                                                                               
 AL TAMAGNI testified from Anchorage in support of SB 272.  The                
 court takes a narrow approach as to what is good for the court                
 which is not always what is good for the public.  People with small           
 automobile accident claims over $5,000 have no access to the court            
 system.  He would prefer to see the limit raised to $15,000 because           
 if you adjust the $5,000 for cost-of-living increases since 1986,             
 the amount would be $3,200.  SB 272 will open the doors of the                
 court to people who cannot get access now.  He recommended keeping            
 the limit at $7,500 but indexing it annually.                                 
                                                                               
 SENATOR TAYLOR noted he thought an incremental approach to be most            
 practical, and agreed with Mr. Tamagni that people's courts should            
 be expanded.                                                                  
                                                                               
 SENATOR MILLER moved SB 272 as amended out of committee with                  
 individual recommendations.  There being no objection, the motion             
 carried.