Legislature(1999 - 2000)

03/24/1999 01:06 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 82 - IMMUNITY:  CLAIMS ARISING FROM Y2K PROBLEMS                                                                             
                                                                                                                                
CHAIRMAN KOTT announced the next order of business is HB 82, "An                                                                
Act relating to immunity for certain claims arising out of or in                                                                
connection with the year 2000 date change; and providing for an                                                                 
effective date."                                                                                                                
                                                                                                                                
CHAIRMAN KOTT indicated that CSHB 82(L&C) is before the committee                                                               
(1-LS0398\I).                                                                                                                   
                                                                                                                                
Number 2265                                                                                                                     
                                                                                                                                
JANET SEITZ, Legislative Assistant to Representative Norm Rokeberg,                                                             
Alaska State Legislature, stated HB 82 provides immunity for                                                                    
Alaskan businesses for certain claims arising out of connection                                                                 
with the year 2000 (Y2K) date change.  A lot of money will be                                                                   
spent, not only on addressing the problem, but on lawsuits and                                                                  
Alaskan businesses are no exception to this exposure.  House Bill                                                               
82 says that as-long-as a business goes through certain steps it                                                                
will maintain an action.  This immunity will assist in encouraging                                                              
small businesses to continue or begin to address the Y2K situation.                                                             
                                                                                                                                
Number 2310                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Representative Rokeberg what is a "smart                                                                    
building."                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG replied it is a building that is wired and                                                              
computerized.  The fire systems and alarms are integrated into a                                                                
black box type of computer system.                                                                                              
                                                                                                                                
Number 2386                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG noted that in the bill packet is a copy of                                                              
S.96 and letters of support from a few organizations.  He also has                                                              
a series of amendments.                                                                                                         
                                                                                                                                
TAPE 99-18, SIDE B                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG continued.  He explained the bill.  It sets                                                             
up the methodology of asserting a defense by indicating that a                                                                  
business is not liable for damages arising from the millennium bug.                                                             
Section 1(a)(1)(A) - (F) delineates a list of steps to prepare a                                                                
plan of due diligence.  The way it is drafted indicates that a                                                                  
business would have to do every one of the steps.  It is his                                                                    
contention that it should be amendment to show an example rather                                                                
than a requirement.  Section 1(a)(2) provides a more generic                                                                    
defense.  Therefore, there are two different patterns of                                                                        
reasonableness of what a business has to do.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated that Section 1(b)(1)                                                                     
indicates a business that develops or manufactures software and                                                                 
hardware cannot assert a defense.  A retailer in a chain would not                                                              
be held to the same standards, however, that a hardware or software                                                             
developer would be.                                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated that Section 1 (b)(2)                                                                    
indicates that a defense may not be asserted based on a contract.                                                               
He has an amendment that removes the word "contract" and inserts                                                                
the words "express warranty".  If somebody has warranted by                                                                     
contract to fix a Y2K problem and they don't, they can't assert                                                                 
this defense.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated that Section 1(c) indicates                                                              
that a class action suit can only be for damages of economic loss                                                               
in excess of $50,000.  He suggested that the committee members                                                                  
discuss the figure; it was a recommendation by the Alaska State                                                                 
Chamber of Commerce.  It may be appropriate to raise it to                                                                      
$100,000, for example.  The federal bill has a million dollar                                                                   
threshold.                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated that Section 1(d) indicates                                                              
that if there is a civil action the damages would be limited to                                                                 
economic losses only, unless fraud was committed.  In the event of                                                              
fraud, it would revert to the rules of standard common law and the                                                              
rules of the court.  Section 1(d)(2) provides that before an action                                                             
can begin there has to be a curative state.  In other words, there                                                              
has to be a cure provision, mediation then remediation before                                                                   
full-blown litigation.  Section 1(e)(3) defines the phrase "year                                                                
2000 date change".  He has an amendment to change that.                                                                         
                                                                                                                                
Number 0260                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked Representative Rokeberg to address                                                                
the changes to Section 1(a)(1)(A) - (F) that he briefly mentioned.                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG replied he has an amendment to create a                                                                 
substantial efforts standard rather than to require the actual                                                                  
implementation of each element in the bill [(A) - (F)].  The                                                                    
elements then become examples of efforts.                                                                                       
                                                                                                                                
CHAIRMAN KOTT said that is nothing more than an either-or                                                                       
situation.  The "or" seems to be inclusive of "either" because                                                                  
Section 1(a)(2) talks about due diligence.                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG stated there is a choice here because of                                                                
the language "or".  It could be left alone.  He has an amendment to                                                             
change the second standard as well.                                                                                             
                                                                                                                                
Number 0344                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI said the issue of a list was discussed in                                                              
the House Labor and Commerce Standing Committee.  The conventional                                                              
wisdom of the committee at the time was to try and include some                                                                 
structure while still making it clear that there might be other                                                                 
criteria to look to given a standard within an industry.  The                                                                   
language isn't perfect in the committee substitute, but the                                                                     
amendment gets it closer.                                                                                                       
                                                                                                                                
Number 0445                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT closed the meeting to public testimony.                                                                           
                                                                                                                                
Number 0568                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved Amendment 1.  It reads as follows:                                                                
                                                                                                                                
     Page 3:                                                                                                                    
                                                                                                                                
          Delete lines 24-27                                                                                                    
                                                                                                                                
          Insert:  (3)  "year 2000 date change" includes processing                                                             
          date or time data from, into and between calendar year                                                                
          1999 and calendar year 2000, and leap year calculations;                                                              
          in this paragraph, "processing" includes calculating,                                                                 
          comparing, sequencing, displaying and storing."                                                                       
                                                                                                                                
CHAIRMAN KOTT objected for discussion purposes.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG stated Amendment 1 changes the definition                                                               
of the phrase "year 2000 date change" to start on or about July 1,                                                              
1999 and to extend through the entire year 2000 when these problems                                                             
are expected to crop up.  Since there is controversy about when the                                                             
next century will start - 2000 or 2001 - it is appropriate to adopt                                                             
the amendment for clarification.                                                                                                
                                                                                                                                
CHAIRMAN KOTT removed his objection.  There being no further                                                                    
objection, it was so moved.                                                                                                     
                                                                                                                                
Number 0627                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved Amendment 2 (1-LS0398\I.3, Ford,                                                                  
3/22/99).  It reads as follows:                                                                                                 
                                                                                                                                
     Page 2, line 27:                                                                                                           
                                                                                                                                
          Delete "a contract"                                                                                                   
          Insert "an express warranty"                                                                                          
                                                                                                                                
REPRESENTATIVE CROFT objected.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG stated Amendment 2 is quite an important                                                                
element in the entire bill.  According to correspondence with                                                                   
attorneys, if an action can't be asserted based on a contract then                                                              
it would obviate the entire need for the bill.  If there is a                                                                   
contractual obligation to fix a Y2K bug that is not delivered,                                                                  
there should be a proper course of action to take.                                                                              
                                                                                                                                
Number 0712                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked whether there can be interference                                                                 
with the right to contract.                                                                                                     
                                                                                                                                
Number 0756                                                                                                                     
                                                                                                                                
MIKE FORD, Attorney, Legislative Legal Counsel, Legislative Legal                                                               
and Research Services, Legislative Affairs Agency, stated he                                                                    
doesn't feel that there is a constitutional problem including this                                                              
provision.  As it is written now, it won't allow someone to use                                                                 
this defense if there is a warranty built in.  That doesn't                                                                     
necessarily rewrite the contract.  It simply provides that in those                                                             
situations this defense is not available.  It reinforces the                                                                    
contract itself.  The federal bill is broader.  It says that the                                                                
contract provision has to be relied on.                                                                                         
                                                                                                                                
Number 0802                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said the selection of the word "express                                                                 
warranty" was his idea after consulting with Mr. Ford.                                                                          
                                                                                                                                
Number 0815                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT stated it should say, "if a contract has                                                                   
already been negotiated that deals with this, then it should be                                                                 
left to them to handle it."  The word "contract" may be too broad,                                                              
but the word "express warranty" may be too narrow.  He wondered                                                                 
what the federal law says.                                                                                                      
                                                                                                                                
MR. FORD referred the committee members to SECTION 4, "APPLICATION                                                              
OF ACT", in the federal bill.  It reads as follows:                                                                             
                                                                                                                                
     (a)  GENERAL RULE.-This Act applies to any Y2K action                                                                      
     brought in a State or Federal court after February 22,                                                                     
     1999.                                                                                                                      
                                                                                                                                
     (b)  NO NEW CAUSE OF ACTION CREATED.-Nothing in this Act                                                                   
     creates a new cause of action under Federal or State law.                                                                  
                                                                                                                                
     (c)  ACTIONS FOR PERSONAL INJURY OR WRONGFUL DEATH                                                                         
     EXCLUDED.-This Act does not apply to a claim for personal                                                                  
     injury or for wrongful death.                                                                                              
                                                                                                                                
     (d)  WRITTEN CONTRACT CONTROLS.-The provisions of this                                                                     
     Act do not supersede a valid, enforceable written                                                                          
     contract between a plaintiff and a defendant in a Y2K                                                                      
     action.                                                                                                                    
                                                                                                                                
     (e)  PREEMPTION OF STATE LAW.-This Act supersedes State                                                                    
     law to the extent that it establishes a rule of law                                                                        
     applicable to a Y2K action that is inconsistent with                                                                       
     State law.                                                                                                                 
                                                                                                                                
Number 0916                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said it comes closer.  He asked Representative                                                             
Rokeberg whether he would object to using the phrase, "The                                                                      
provisions of this Act do not supersede a valid, enforceable                                                                    
written contract between a plaintiff and a defendant in a Y2K                                                                   
action."                                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG replied he is concerned because is says "in                                                             
a Y2K action."  Are we talking about a contract to deliver a                                                                    
commodity and then asserting a Y2K defense for the failure to                                                                   
deliver, or are we talking about something that relates to a Y2K                                                                
contractual fix?  He doesn't like the language.                                                                                 
                                                                                                                                
Number 0979                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said:  "I mean.  We're only talking about in                                                               
(a) a specific Y2K thing so, part (b) says, 'The defense in (a) may                                                             
not be asserted', and if you said in (2) to supersede the                                                                       
provisions of a valid, enforceable written contract, it sounds                                                                  
broad, but it's only applying to (a).  The thing in (a) is pretty                                                               
well-defined already.  So, you just say (a)--(a) doesn't apply and                                                              
(a) only applies in these certain Y2K areas anyway.  It wouldn't                                                                
apply to supersede a valid, enforceable written...I don't know why                                                              
particularly written either, but it wouldn't supersede a valid,                                                                 
enforceable contract."                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG referred to SECTION 201, "CONTRACTS                                                                     
ENFORCED", of the federal bill.  It reads as follows:                                                                           
                                                                                                                                
     In any Y2K action, any written term or condition of a                                                                      
     valid and enforceable contract between the plaintiff and                                                                   
     the defendant, including limitations or exclusions of                                                                      
     liability and disclaimer of warranty, is fully                                                                             
     enforceable, unless the court determines that the                                                                          
     contract as a whole is unenforceable.  If the contract is                                                                  
     silent with respect to any matter, the interpretation of                                                                   
     the contract with respect to that matter shall be                                                                          
     determined by applicable law in force at the time the                                                                      
     contract was executed.                                                                                                     
                                                                                                                                
Number 1065                                                                                                                     
                                                                                                                                
MR. FORD said he has not had time to analyze this version of the                                                                
federal bill, but there are several provisions that seem to                                                                     
overlap.  This section is sort of the same thing as the application                                                             
section.  It could be the federal style.                                                                                        
                                                                                                                                
Number 1118                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked whether the state would be preempted                                                              
if the federal bill remains broad.  Section 4(e) of the federal                                                                 
bills says it supersedes state law.                                                                                             
                                                                                                                                
MR. FORD replied the federal law would control because of that                                                                  
provision.  It, of course, depends on the final version of the                                                                  
federal bill.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG said there are certain elements that are                                                                
not preempted that allow for statewide control, such as certain                                                                 
thresholds for class action.  They don't completely overlap.  The                                                               
committee members need to discuss whether they want express                                                                     
warranty to relate to a Y2K type of phenomenon, or whether they                                                                 
want it to relate to a universal contract.  That's the issue.  The                                                              
federal law says in Y2K actions.  Does that have to do with                                                                     
hardware, software, etc., or does that have to do with the chain of                                                             
transactions based on a contract?  In other words, a commodity that                                                             
is transferred from a vender to a vendee, such as a widget.                                                                     
                                                                                                                                
Number 1252                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI said the federal bill defines Y2K action                                                               
as, "To provide civil action commencing in federal or state court                                                               
in which the plaintiff's alleged harm or injury resulted directly                                                               
or indirectly from an actual or potential Y2K failure or a claim or                                                             
defense of a defendant is related directly or indirectly to a                                                                   
natural or potential Y2K failure."                                                                                              
                                                                                                                                
Number 1276                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said the federal bill also allows for a                                                                 
defense of reasonable efforts - SECTION 202, "DEFENSES".  That is                                                               
slightly different than this bill.                                                                                              
                                                                                                                                
Number 1291                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said HB 82 with Amendment 1 defines the                                                                    
state's terms carefully.  He suggested modifying the language to                                                                
say, "The defense in (a) of this section may not be asserted to                                                                 
contradict the provisions of a valid, enforceable contract" [page                                                               
2, line 19].  It sounds broad, but it is tied to the defense in                                                                 
Section 1 (a).                                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG said Representative Croft's suggestion has                                                              
to do with the widget scenario and not the vender-to-vendee                                                                     
scenario.  Does it specifically have to do with hardware/software                                                               
or a typical contractual relationship?  By saying it is a general                                                               
contractual relationship, it is an enforceable contract.  The                                                                   
language in this bill prohibits the use of a defense, while the                                                                 
federal bill allows the use of a defense.                                                                                       
                                                                                                                                
Number 1414                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said the defense only applies to a Y2K date                                                                
change concerning the failure of an electronic computer device.  It                                                             
can't be used to contradict a contract that says it will fix a Y2K                                                              
problem.  It only applies to Section 1(a) which is narrowly                                                                     
defined.                                                                                                                        
                                                                                                                                
Number 1458                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked whether extending an effort to a list of                                                             
litanies would create a potential problem that could be solved much                                                             
easier with a simple statement like Representative Croft suggested.                                                             
A list would inevitably leave something out.  Every year the lists                                                              
in statute get amended.  "It seems to me that the less we depend on                                                             
lists and the more we depend on intent, the better off we're gonna                                                              
be."                                                                                                                            
                                                                                                                                
Number 1510                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said the point is being missed.  The                                                                    
defense in Section 1(a) can't be used in terms of a contractual                                                                 
action, if Section 1(b)(2) is not modified.  The issue is between                                                               
a Y2K hardware/software thing versus a widget.  There is a                                                                      
distinction.                                                                                                                    
                                                                                                                                
Number 1568                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said the distinction is between saying                                                                     
contract in general and a valid, enforceable contract in a Y2K                                                                  
action.  There would be a big loophole if it said, "based on                                                                    
contract none of this applied, and it can't be used to modify the                                                               
terms of a contract."  He agrees it needs to be amendment, but he's                                                             
not sure of the "express warranty" language.  He suggested language                                                             
that says, "somewhere along the lines that it can't be used to                                                                  
contradict what the parties have agreed to."  "You can still get it                                                             
for an action based on contract, as long as it doesn't modify what                                                              
they agreed to."                                                                                                                
                                                                                                                                
Number 1625                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said he agrees with that, but he is                                                                     
concerned about it becoming too ambiguous.  He suggested relying on                                                             
Mr. Ford to come up with language.                                                                                              
                                                                                                                                
Number 1633                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA said everything that Representative                                                                     
Rokeberg has said regarding contracts can be turned around and                                                                  
applied to express warranties.  "I think what you want is to say                                                                
that if they got the exact, written contract on this topic, you                                                                 
know, and they've thought about it ahead of time how they're gonna                                                              
work it out, then you don't want to interfere with that contract.                                                               
They've already thought about it."                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG said he is talking about the terms of a                                                                 
contract that deals with Y2K.                                                                                                   
                                                                                                                                
REPRESENTATIVE KERTTULA said a contract would be dealt with                                                                     
expressly, but it's not just an express warranty.                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG said a defense should be able to be used                                                                
for a widget, but not if there is an agreement to fix it for a Y2K                                                              
problem.  That's the distinction.  He suggest the language, "an                                                                 
express Y2K warranty".  This is the crux of the whole bill.                                                                     
                                                                                                                                
Number 1730                                                                                                                     
                                                                                                                                
MR. FORD said it would be helpful to pull Section 1(b)(2) out of                                                                
the provision and to put a separate subsection that embodies                                                                    
similar language to the federal bill.  It would be clearer and                                                                  
there wouldn't be a hang up on whether it's a defense, claim or                                                                 
counterclaim.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. Ford whether he means warranties                                                              
of Y2K activities or widgets.                                                                                                   
                                                                                                                                
MR. FORD replied he's talking about the provisions in a Y2K action.                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. Ford whether a Y2K action is a                                                                
fact-pattern for the defense or is it something that is talked                                                                  
about in a contract.                                                                                                            
                                                                                                                                
MR. FORD replied, if it isn't contained in a contract, it wouldn't                                                              
be an action based on a contract.                                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG said that's like putting in an action based                                                             
on express Y2K warranty.                                                                                                        
                                                                                                                                
MR. FORD said it's all fruit, just different kinds.  "We started                                                                
out with a provision that says, if it's a contract--if it's based                                                               
on a contract, you don't get this defense.  If your claim is based                                                              
on some provision in the contract, you don't get this defense.  You                                                             
have to rely on your contract.  The amendment we have before you,                                                               
actually narrows that a bit to express warranty.  Express warranty                                                              
is something in a contract.  Now, what the federal government has                                                               
done here is simply say, well, we're not going to talk about                                                                    
express warranty, we're going to talk about any provision of the                                                                
contract that is rendered unenforceable.  If it's a valid,                                                                      
enforceable contract, that's what you rely on which again is, I                                                                 
think, the same thing you want to do."                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG said, but the defense can't be asserted in                                                              
the draft of the federal bill.                                                                                                  
                                                                                                                                
MR. FORD said the contracts have to be relied on.                                                                               
                                                                                                                                
CHAIRMAN KOTT laid aside Amendment 2.                                                                                           
                                                                                                                                
Number 1960                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved Amendment 3.  It reads as follows:                                                                
                                                                                                                                
     Page 1, lines 12-13                                                                                                        
                                                                                                                                
          Delete "the following efforts to avoid the damages                                                                    
          claimed in the civil action:"                                                                                         
                                                                                                                                
          Insert "substantial efforts to avoid the damages claimed                                                              
          in the civil action, such as"                                                                                         
                                                                                                                                
     Page 1, line 14:                                                                                                           
                                                                                                                                
          Delete "inventory"                                                                                                    
          Insert "inventorying"                                                                                                 
                                                                                                                                
     Page 2, line 2:                                                                                                            
                                                                                                                                
          Delete "identify"                                                                                                     
          Insert "identifying"                                                                                                  
                                                                                                                                
     Page 2, line 4:                                                                                                            
                                                                                                                                
          Delete "identify"                                                                                                     
          Insert "identifying"                                                                                                  
                                                                                                                                
     Page 2, line 6:                                                                                                            
                                                                                                                                
          Delete "prepare"                                                                                                      
          Insert "preparing"                                                                                                    
                                                                                                                                
     Page 2, line 9:                                                                                                            
                                                                                                                                
          Delete "comply with industry regulations or requirements"                                                             
          Insert "complying with generally accepted practices of a                                                              
          business sector"                                                                                                      
                                                                                                                                
     Page 2, line 12:                                                                                                           
                                                                                                                                
          Delete "develop"                                                                                                      
          Insert "developing"                                                                                                   
                                                                                                                                
CHAIRMAN KOTT objected.                                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG said Amendment 3 removes the necessity to                                                               
require every step in provision (A)-(F) before proving reasonable                                                               
efforts.  It also modifies the industry regulations and/or                                                                      
requirements.  There is concern because there really aren't any                                                                 
industry standards in this field.                                                                                               
                                                                                                                                
CHAIRMAN KOTT asked Representative Rokeberg whether he said that                                                                
there are no general accepted standards.                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG replied, according to testimony from Scott                                                              
Thorsson (ph), there may be some in the banking industries and                                                                  
certain other areas, but they are rare.                                                                                         
                                                                                                                                
Number 2211                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Mr. Ford whether there is a substantial                                                                     
difference between "generally accepted practices" and "generally                                                                
accepted standards."                                                                                                            
                                                                                                                                
MR. FORD replied some areas do have written standards, but from                                                                 
what he's heard they are just practices in this area.  Yes, there                                                               
could be a difference between a practice and a standard.                                                                        
                                                                                                                                
Number 2256                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT stated the bill sets up two different paths to                                                             
know whether a business has done the right thing.  One is a list                                                                
and the other is an exercise of general care.  There is the word                                                                
"or" on page 2, line 13.  He likes the dichotomy; they are proper                                                               
options.  To generalize both of them does away with some of that                                                                
balance.                                                                                                                        
                                                                                                                                
Number 2394                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG appreciates Representative Croft's                                                                      
argument.  He has been vacillating back and forth between those two                                                             
things.  The language is disjunctive.  He suggested taking up                                                                   
Amendment 4 as well because it changes the general standard a                                                                   
little bit.  That might help when talking about both of the                                                                     
approaches.                                                                                                                     
                                                                                                                                
TAPE 99-19, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT noted it is unusual to talk about another amendment                                                               
when there is a motion on the floor, but in light of the high                                                                   
confusion he ruled in favor of the request.                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG explained Amendment 4.  It reads as                                                                     
follows:                                                                                                                        
                                                                                                                                
     Page 2, lines 14-6:                                                                                                        
                                                                                                                                
          Delete ", by following generally accepted standards of                                                                
          care and effort in the business activity in which the                                                                 
          business was engaged, exercised due diligence and"                                                                    
                                                                                                                                
          Insert "used"                                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG further stated he has a letter that                                                                     
indicates Section 1 (a)(2) sets up three separate standards:  an                                                                
industry standard of care, a due diligence standard, and a                                                                      
reasonable care standard.  There should only be one.  It's nice to                                                              
use the word "due diligence", but the reasonable care standard is                                                               
the appropriate one.  It provides for the general reasonable care                                                               
efforts in order to assert the defense.  It would be up to the                                                                  
courts to decide what is and isn't reasonable when asserting the                                                                
defense.  If Amendment 4 is adopted then Representative Croft's                                                                 
argument is even stronger.                                                                                                      
                                                                                                                                
Number 0184                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT stated is makes sense to simplify or make                                                                  
Section 1(a)(2) more generic.  He wouldn't object to adopting                                                                   
Amendment 4 and tabling Amendment 3.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG asked Mr. Ford whether his analysis is                                                                  
correct.                                                                                                                        
                                                                                                                                
MR. FORD replied he is concerned about getting closer to having                                                                 
standards that are different but substantially closer.  "If you                                                                 
left the first amendment out and left (1) the same, then you have                                                               
a specific laundry list which someone could follow and say, 'hey,                                                               
I do what you told me to do, I can use the defense.'  If they                                                                   
didn't follow that list and you adopted the second amendment which                                                              
changes paragraph (2) then you still have that which is to say,                                                                 
'but, I didn't follow your list but I used reasonable care.'"  It                                                               
is the best of both worlds.                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said he prefers that and thinks that is the                                                             
way to go.                                                                                                                      
                                                                                                                                
Number 0278                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG made a motion to amend Amendment 3 to                                                                   
retain the change to Page 2, line 9 and to delete everything else.                                                              
There being no objection, it was so moved.  It now reads as                                                                     
follows:                                                                                                                        
                                                                                                                                
     Page 2, line 9:                                                                                                            
                                                                                                                                
          Delete "comply with industry regulations or requirements"                                                             
                                                                                                                                
          Insert "complying with generally accepted practices of a                                                              
          business sector"                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG called the question on Amendment 3, as                                                                  
amended.                                                                                                                        
                                                                                                                                
Number 0435                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA referred to Amendment 4 and asked how broad                                                             
of a change is it.                                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG replied it is going from three different                                                                
standards to one.                                                                                                               
                                                                                                                                
REPRESENTATIVE KERTTULA asked whether reasonable care encompasses                                                               
the others.                                                                                                                     
                                                                                                                                
MR. FORD said he doesn't see a difference between due diligence and                                                             
reasonable care.  It says the same thing twice which is always                                                                  
confusing because the court would assume that it means something                                                                
different.                                                                                                                      
                                                                                                                                
REPRESENTATIVE KERTTULA said she feels uncomfortable lessening the                                                              
standard.                                                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG agrees with Representative Kerttula.  It                                                                
also troubles him, but three different standards would allow the                                                                
courts to confuse the issue even more.                                                                                          
                                                                                                                                
REPRESENTATIVE KERTTULA said she assumes that due diligence is                                                                  
within reasonable care.                                                                                                         
                                                                                                                                
Number 0612                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked whether there is any merit in                                                                    
defining some parameters within reasonable care.                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG replied they are in Section 1(a)(1).  He                                                                
wants to leave Section 1(a)(2) in for a didactic kind of                                                                        
instructional thing.                                                                                                            
                                                                                                                                
REPRESENTATIVE MURKOWSKI said (A) - (F) is limiting.  What happens                                                              
if there is a (G).                                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG replied (G) is Section 1(a)(2).                                                                         
                                                                                                                                
REPRESENTATIVE MURKOWSKI replied the bill says reasonable care is                                                               
(A) - (F).                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG said a business could deviate from (A) -                                                                
(F) and use Section 1(a)(2).  That's the reason for having it.                                                                  
                                                                                                                                
REPRESENTATIVE MURKOWSKI said, "I just don't want to get locked                                                                 
into those."                                                                                                                    
                                                                                                                                
Number 0642                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked why would there be a deviation.                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG replied a small business doesn't always                                                                 
have a contingency plan.                                                                                                        
                                                                                                                                
Number 0671                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said Section 1 (a)(1) is reasonable care, but                                                              
it's not all that could be reasonable.  "I mean, so, it is one                                                                  
avenue that we're gonna sanctify as enough, but I don't think the                                                               
record should be that you always have to do that or there wouldn't                                                              
be any need for (2).  (1) is enough.  Other things may be enough,                                                               
other lesser...other things.  But, it's in the 'or'.  If other                                                                  
things were necessary, you could comply with (1) and still get away                                                             
with..."                                                                                                                        
                                                                                                                                
Number 0722                                                                                                                     
                                                                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG wondered whether defining due diligence in                                                              
Section 1(a)(2) as those things found in the list, but not                                                                      
necessarily those things or other things, would be tighter than                                                                 
reasonable standard.  He's not sure whether that is the direction                                                               
the committee wants to go.                                                                                                      
                                                                                                                                
CHAIRMAN KOTT noted there is a motion on the floor to adopt                                                                     
Amendment 3, as amended.  There being no objection, it was so                                                                   
moved.                                                                                                                          
                                                                                                                                
Number 0785                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved Amendment 4.  There being no                                                                      
objection, it was so moved.                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT withdrew Amendment 5.                                                                                      
                                                                                                                                
Number 0850                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT moved Amendment 6.  It reads as follows:                                                                   
                                                                                                                                
     Page 3, lines 5 & 6                                                                                                        
                                                                                                                                
          Delete "(1) damages may be awarded for economic losses                                                                
          only unless the business against whom the action is                                                                   
          brought committed fraud;"                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG objected.                                                                                               
                                                                                                                                
REPRESENTATIVE CROFT explained Amendment 6 deletes the limitation                                                               
on the categories of damage that can be recovered.  A lot of this                                                               
legislation is tied together with good definitions and holds                                                                    
together a logical relationship to Y2K acts, except for Section                                                                 
1(d)(1).  He doesn't see the reason for a general category of                                                                   
non-economic damages which has already been capped in tort reform                                                               
laws.  It seems like an arbitrary provision for something that has                                                              
already been capped in a more general way.  "Y2K may cause--this is                                                             
the classic one that will get us trapped in unintended                                                                          
consequences.  I don't know all the other consequences of this, in                                                              
my onion, arbitrary provision.  We have caps out there that'll                                                                  
apply to this.  But, to say Y2K by its characteristic means no                                                                  
other--none of these other categories of loss.  I don't see the                                                                 
relationship.  And, I'd let the other caps that we already have in                                                              
general tort reform law apply."                                                                                                 
                                                                                                                                
Number 0984                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said the federal bill takes a different                                                                 
approach.  It provides for tort claims with limitations.  It takes                                                              
a broader look and categorizes contract law, tort law and class                                                                 
action.  It sets a limit on all of those.  He chose not to be as                                                                
expansive.  "I think that the idea here is that the limitation to                                                               
economic loss is one that the whole circumstance of this situation                                                              
whether it's a Y2K issue does not merit any advantages.  Who are                                                                
you trying to punish?  Unless, you're trying to punish a                                                                        
noncompliant kind of guy that sat on his hands.  Why are we just                                                                
not suing for economic losses but--other than damages?  That--that                                                              
becomes, I think, the real issue here."  The reason for the bill is                                                             
to minimize vexatious type of litigation intended to merely enrich                                                              
a litigator.  The resources need to be put into solving the                                                                     
problem, not litigation.  He doesn't want to create a tort claim                                                                
because of an unusual fact-pattern, but he wants to limit the type                                                              
of economic losses recovered.  It's not his intention to entirely                                                               
preclude a tort claim because there is probably some scenario were                                                              
it would be worth it which is why he included the language "fraud".                                                             
                                                                                                                                
Number 1203                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT said the reason the federal legislation gets                                                               
through the different caps is because there is no general federal                                                               
tort reform.  "They don't have them if they don't put them in                                                                   
there.  We already have them and we don't need them in here, I                                                                  
believe."  There are unintended consequences with a blanket                                                                     
description.  "If I'm the building manager and Otis Elevator                                                                    
Company sends me a note, we've got this Y2K, here's the embedded                                                                
chip to replace it with, we're providing it for you for free, if                                                                
you don't do this they will fall to the ground and kill people.                                                                 
And, they send me five letters with five chips to do this and I                                                                 
don't, you could get punitive damages there when--when somebody                                                                 
dies on the elevator, and you should.  If--if--if--if the same                                                                  
situation happens with an embedded chip in a medical devise and I                                                               
ignore it as a hospital, I mean, the problem is you can create                                                                  
situations where this--it's appropriate to have these.  And, you                                                                
said the whole point was to get rid of vexatious and frivolous                                                                  
litigation, I mean.  This doesn't do anything about vexatious or                                                                
frivolous litigation, in fact, it hits the meritorious claim, the                                                               
odd, weird, possibly extremely meritorious claim.  We have in other                                                             
areas made these other general caps and--and they aren't in the                                                                 
federal law so if federal law wants 'em they have to put 'em in for                                                             
a specific thing.  We--we don't have to.  We have that luxury that                                                              
we've made that difficult public policy decision on how we should                                                               
cap punitive and non-economics.  And, to just take 'em out here, I                                                              
don't see the point.  It doesn't address frivolous litigation.  It                                                              
does greatly impact--eliminate certain weird, but possible cause of                                                             
actions in very extreme cases and it's in an area where we've                                                                   
already declared a cap and the feds haven't."                                                                                   
                                                                                                                                
Number 1322                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said TITLE III of the federal bill says, "A                                                             
party to a Y2K action making a tort claim may not recover damages                                                               
for economic loss unless--...".  There is a very good argument for                                                              
a limitation, but this doesn't delete tort theory or wrongful                                                                   
deaths and egregious types of harm.  He just doesn't want to open                                                               
the door to unlimited, punitive damages.  On the other hand, a case                                                             
could be made for medical equipment and maybe there needs to be a                                                               
distinction.                                                                                                                    
                                                                                                                                
Number 1384                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA stated there could be willful misconduct,                                                               
extreme recklessness, or death and there wouldn't be any economic                                                               
loss.  They shouldn't be foreclosed on.  She agrees with                                                                        
Representative Croft.  The restrictions are already there.                                                                      
                                                                                                                                
Number 1419                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked Representative Croft to remove his motion in                                                                
order for him to take action on putting the bill in a subcommittee.                                                             
                                                                                                                                
Number 1438                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT removed Amendment 6.                                                                                       
                                                                                                                                
CHAIRMAN KOTT assigned the bill to a subcommittee consisting of                                                                 
Representatives Murkowski, Rokeberg and Croft.  He charged the                                                                  
subcommittee with looking at Amendments 2 and 6, and any other                                                                  
ancillary issues that arise.                                                                                                    
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects