Legislature(1997 - 1998)
05/01/1997 01:07 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 31 - CIVIL LIABILITY FOR IMPROPER LITIGATION CHAIRMAN GREEN announced the first item of business was House Bill No. 31, "An Act relating to civil liability for certain false allegations or material misstatements of fact in a civil pleading or proceeding, for certain improper acts relating to signing a civil pleading, for certain improper acts relating to civil pleadings or proceedings, for making an intentional false statement of a material fact, for acting on a civil claim or defense without probable cause, or for acting for a purpose other than proper adjudication of a civil claim; amending Rules 13(e) and 82(b), Alaska Rules of Civil Procedure; and providing for an effective date." CHAIRMAN GREEN informed members that Mr. Cole would discuss his concerns. Other than that, however, HB 31 would be addressed in the scheduled order, following SB 39, SB 3 and SB 70. Number 0107 CHARLES E. COLE, Attorney at Law, testified via teleconference from Fairbanks, saying he objects to essentially every provision in the committee substitute for HB 31 (he did not specify which version he was addressing, but 0-LS0193\H, Ford, 4/29/97 was the most recent). MR. COLE referred to subsection (1), which says a person may not sign a civil complaint or other civil pleading that contains false allegations that are material to the claims asserted in the civil action with the intention of asserting allegations that are false. He stated his belief that this will wreak havoc with the judicial system, and he cited an example. An attorney signs a complaint alleging the defendant was negligent because he operated a motor vehicle in violation of the traffic laws. In the course of litigation, it turns out that the allegation was false. Obviously, the allegation of negligence is material. At the conclusion of the case, the prevailing party, in this case the defendant, has the right under subsection (c) to bring an action against the plaintiff's attorney for compensatory and punitive damages. Number 0266 MR. COLE said most assuredly, those claims will be made. The issue will then turn on whether the party signing the complaint did so with the intention of asserting false allegations. Mr. Cole believes it is subjective and will breed litigation. The prevailing party may easily make the claim against the attorney who signed the complaint, who will likely respond that he had a reasonable belief. The issue will be submitted to a jury, and who knows what the jury may find? MR. COLE said furthermore, before an attorney signs a complaint, this provision requires all sorts of protective measures against possible liability, which will run up the cost of litigation astronomically for both sides. For example, in the course of daily litigation, defendants sign pleadings which assert that plaintiffs failed to state a claim upon which relief may be granted or that plaintiffs are estopped to make this claim. Hundreds of pleadings are filed every day in Alaska. Subjecting attorneys to this risk of compensatory damages, for presumably the entire cost of the defense of the lawsuit, as well as for punitive damages, takes litigation in Alaska in the wrong direction. MR. COLE referred to subsection (2), which says a person may not "sign a civil pleading before making reasonable inquiry". He said that was a provision amended in the federal civil rules in 1983; the amendment provided that in the event of breach of a rule similar to this, the court shall enter sanctions against the party signing the complaint who violated the rule. Mr. Cole said that amendment was objected to by federal judges in the trial courts, judges in the courts of appeal, lawyers and law professors. MR. COLE said he had given Representative Cowdery 50 to 100 pages of law review articles pointing out problems which the federal courts had with a similar rule; After three or four years, objections had begun to be raised to that amendment, and in 1993 the rule was drastically revised. Whereas that rule only provided for sanctions against the offending party, this bill provides under subsection (c)(2) that compensatory damages may be sought against the party who signed the pleading. Mr. Cole believes if this is enacted, virtually every prevailing party will assert damages against the losing party, breeding more litigation. Attorneys will fight "like you cannot believe." Bills for those fights will be paid by clients, increasing exponentially the costs of litigation. MR. COLE referred to subsection (2)(b), which provides that if the jury, for example, finds that a party to a civil action has knowingly made a false statement of a material fact, the court shall enter judgment against the party making the false statement on the issue to which the false statement relates. Number 0630 MR. COLE said there is no definition of a material fact. He had been involved recently in litigation where many of the 500 "material facts" were represented by documents. In the course of discovery, witnesses are asked about events for which their memory may have faded but for which documents bearing their signatures may exist, refuting the recollection. The question for material facts is whether a deponent or party who testified made a false statement knowingly or erroneously. MR. COLE said the party in whose favor this bill acts will always claim a statement was knowingly false. Rather than the driving event being who should prevail under the pleadings of the allegations of the complaint and the defense, it would turn into a fight about who knowingly made a false statement. The easy way for a party to win the lawsuit would be to prove that one of 500 material fact statements was knowingly made false. This would snarl litigation and collateral issues no end, which happened when the federal rule was amended in 1983. For the foregoing reasons, Mr. Cole urged that the bill not be passed out of committee. Number 0786 CHAIRMAN GREEN advised members that they could ask questions, as Mr. Cole would not be available later, but there would be no debate. He noted that there were additional testifiers. He said there had been a significant amount of work in trying to come up with this committee substitute. He asked Mr. Cole about his testimony that in other areas where a similar law was enacted, there was significant litigation between attorneys. MR. COLE explained that the federal district courts found that the collateral issues were essentially corrupting the central issues in the litigation. Well-documented, it got so bad that the federal courts substantially amended that rule in 1993. That federal rule was much softer than this proposed legislation. Mr. Cole felt confident that were this enacted, the same would result. CHAIRMAN GREEN asked whether there was a way to ameliorate this, to help reduce litigation rather than create more. MR. COLE responded that there is a similar rule, Civil Rule 11 of the Alaska Rules of Civil Procedure, patterned on federal rule 11. The Alaska Supreme Court had considered adopting the 1983 amendment to the federal rules of civil procedure but wisely did not do so. Mr. Cole believes that the existing rule works well and that trial judges would agree. To him, the worst thing that can happen in litigation is when lawyers sue each other and make financial claims for sanctions and compensatory damages, let alone punitive damages. He concluded that more civility among lawyers should be brought to the litigation process, not less. Number 0970 REPRESENTATIVE JEANNETTE JAMES asked whether Mr. Cole was saying that he did not believe frivolous lawsuits are currently a problem. MR. COLE replied that when they took testimony in the Governor's tort reform committee, they did not hear from trial judges that they were faced with a substantial number of frivolous lawsuits, despite questioning them at length about it. Mr. Cole believes there are plenty of weapons in the civil rules now for trial judges to deal with lawsuits which they think are frivolous. For example, they could award full attorney fees or strike pleadings. Number 1035 REPRESENTATIVE JAMES asked: What about the idea that the judges don't see this because of frivolous lawsuits settled out of court? MR. COLE replied that the judges see all of those pleadings. His position is that parties have the right to settle and pay money for frivolous lawsuits; however, he does not advise doing so. He does not believe that many parties, let alone insurance companies, are "paying the ransom." He concluded, "If they are, we shouldn't be passing litigation ... to help their improvident judgments." Number 1079 REPRESENTATIVE ERIC CROFT said part (a) seems to put in statute what is already in Civil Rule 11, except that in the bill, one sues in a whole new action afterwards. In contrast, under Civil Rule 11, the claim that an action was frivolous would be made before the judge most familiar with the lawsuit and evidence. Representative Croft asked whether the main change in the bill would be throwing that into a new proceeding, with compensatory and punitive damages. MR. COLE answered that it gives rise to an entire set of claims. Under (c)(2), the offending party may be sued for compensatory and punitive damages. As he recalled the federal rule, there is a provision whereby if the receiving party to the complaint doesn't like it or feels there are claims that are frivolous or made without a basis, they give the other party a notice to that effect. This provides an opportunity to correct a potential offense without raising what Mr. Cole believes is a terrible possibility of being sued for compensatory and punitive damages. Number 1206 REPRESENTATIVE CON BUNDE said as a layman, he perhaps didn't have a correct perception of frivolous lawsuits; nevertheless, it was a concern of his and one reason that he had supported tort reform. He asked whether Mr. Cole believed the tort reform legislation recently passed would reduce the amount of frivolous litigation, thereby removing some of the concerns addressed by this bill. MR. COLE answered, "I think so." He hadn't seen the final version of that bill but recalled that there was a provision that a party could be sanctioned up to $10,000 for filing a frivolous lawsuit. REPRESENTATIVE BRIAN PORTER said that amount was $50,000. MR. COLE said at the least, the bill needs more study. It is "far too draconian" and will disrupt a system of litigation which he believes, by and large, is working pretty well. CHAIRMAN GREEN noted the period of silence after the final remark. He thanked Mr. Cole and concluded that portion of the hearing. (HB 31 was not heard again that day.)
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