Legislature(2001 - 2002)
04/11/2001 01:07 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 86 - CIVIL LIABILITY FOR IMPROPER LITIGATION Number 0157 CHAIR ROKEBERG announced that the first order of business would be HOUSE BILL NO. 86, "An Act relating to civil liability for certain false or improper allegations in a civil pleading or for certain improper acts relating to a civil action." Number 0211 DALE ANDERSON, Staff to Representative Eldon Mulder, Alaska State Legislature, assisted with the presentation of HB 86. He explained that HB 86 has been effectively characterized by its long-established title as the "frivolous lawsuit prevention act"; it will prevent frivolous lawsuits by requiring parties to a lawsuit, and their attorneys, to be truthful and responsible in their pleadings. This bill discourages false statements and claims in litigation, and encourages responsibility by all parties and their attorneys. It requires more careful and focused preparation of pleadings. This bill creates, in statute, an obligation for litigants and attorneys to make reasonable efforts to ensure those claims have a reasonable basis in fact and are valid under existing law. If the claim is intentionally false, both the attorney and the party can be assessed damages. Currently, there is no effective way of holding parties responsible for frivolous pleadings or claims. Frivolous pleadings and claims increase the costs of litigation for all the parties involved, in addition to escalating the cost of our judicial system. MR. ANDERSON went on to say that HB 86 also provides that if a party makes an intentional false statement of material fact, the court shall dismiss the claim to which the false claim relates. Attorneys, as well as their clients, will be required to research their claims to ensure they are factually supported before filing a lawsuit. This bill will eliminate the "boilerplate" pleadings in lawsuits, and it encourages responsible and focused pleadings. Boilerplate pleadings include everything anyone could ever imagine could have happened, rather than focusing on those specific issues that actually did occur. [For the reader's benefit, please note that "boilerplate" is given a different meaning in Black's Law Dictionary.] Those extraneous pleadings are expensive for innocent parties to litigate and work through, and are most often thrown out [of court]. They simply cause one party, and the court system, to expend significant dollars to pare down to the real issues [of the case]. Number 0365 MR. ANDERSON also explained that many [lawsuits] are often less expensive to settle than to litigate, regardless of their merits. This bill does not affect suits filed in good faith; it will, however, deter those without merit. A system allowing deceit to be rewarded, because it is more costly to litigate than to capitulate, must be changed. This bill assigns financial liability to those who sign a civil pleading with the intention of asserting allegations and defenses that are false; to those who initiate or sign a civil pleading without first determining that it has a reasonable basis in fact and law; and to those who continue a claim or defense after determining the claim or defense does not have a reasonable basis in fact and law. He concluded by saying that the basic purpose of HB 86 is to preclude bad-faith litigation by providing meaningful sanctions likely to be enforced, if such conduct occurs, and at the same time to provide effective remedies to parties who are injured by such conduct. Those who are trying to tell the truth will have nothing to fear from this provision, since it would only apply if the trier of fact finds that a party has made an intentional false statement of material fact. REPRESENTATIVE BERKOWITZ said he recalled, as part of the tort reform debate, that there were some strong statements against punitive damages, and yet, he pointed out, one of the core values of HB 86 is a punitive motive to deter others from similar conduct. He asked how this fits in with tort reform's theme of avoiding punitive damages. Number 0553 REPRESENTATIVE ELDON MULDER, Alaska State Legislature, sponsor of HB 86, responded by mentioning that someone has said, "I don't mind punishing lawyers, especially those that don't represent the truth." REPRESENTATIVE BERKOWITZ noted that as part of tort reform, there were some settlement statistics that were supposed to be gathered. He asked whether Representative Mulder had a chance to review those statistics prior to creating HB 86. REPRESENTATIVE MULDER replied that he had not. REPRESENTATIVE BERKOWITZ asked whether anyone has any idea how pervasive the problem [of frivolous lawsuits] is. REPRESENTATIVE MULDER said he is not sure that the statistics referred to necessarily applied to HB 86. He suggested that tort reform is substantially a different issue from the one addressed by HB 86. He explained that his intentions are threefold. First, he wants to provide an additional level of comfort and confidence to the public so that people feel that they can go to court and have a fair hearing; he said he thinks it is an intimidating situation and that people don't currently feel that there is a "level playing field." Second, he said, he wants to diminish the opportunity for frivolous lawsuits and make it possible for folks who are truly innocent to stand up and declare their innocence. And his third goal, he said, is to enable individuals who are innocent to defend themselves and to have the opportunity to "be made whole." He suggested that currently if an individual defends himself/herself in court, that person cannot be made whole, notwithstanding attorneys' claims that there is opportunity to be made whole. The reality is, he added, if a person defends himself/herself rigorously under the law today, it costs a lot of money, and the chances are that the person cannot be made whole through this process. REPRESENTATIVE BERKOWITZ asked whether Representative Mulder had given any thought to Civil Rule 11 [of the Alaska Rules of Civil Procedure], which read in part: The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless expense in the cost of litigation. REPRESENTATIVE BERKOWITZ asked whether Representative Mulder wasn't already, in essence, trying to put suspenders on a well- belted pair of pants. REPRESENTATIVE MULDER opined that experience has shown that Civil Rule 11 has not been effective in deterring abuses. There has been considerable confusion as to, one, the circumstances that should trigger striking a pleading or motion, or taking disciplinary action; two, the standard of conduct expected of attorneys who sign pleadings and motions; and, three, the range of available and appropriate sanctions. Consequently [Civil Rule 11] has not been an effective tool, and he suggested that statistics will show that [Civil Rule 11] is very seldom used. Number 0800 REPRESENTATIVE BERKOWITZ indicated that this, too, is his point: the legislature would be passing a fairly substantial piece of legislation that's going to impact litigation, and yet there has been no evidence that it's needed, other than from anecdotes. REPRESENTATIVE MULDER offered that if there is no problem, then attorneys should not have any objections to being statutorily held to the standard that they are expected to not lie in court. REPRESENTATIVE BERKOWITZ countered that this is already the expectation. CHAIR ROKEBERG asked what Representative Berkowitz's knowledge is regarding the enforcement of [Civil Rule 11]. REPRESENTATIVE BERKOWITZ, after noting that he is not a civil attorney, said that to his knowledge, it is rarely used because most attorneys understand that their professional reputation [is dependent on not lying in court]. He added, "It's the same as in this body: you can only get away with stretching the truth so many times and then your professional life is over, and most attorneys are well aware of that, as with any profession." Further, he stated that there are existing sanctions for deliberately abusing the process. He added that he thinks this modification of the process works a lot of mischief. Number 0891 CHARLES E. COLE, Attorney, said that he had testified four years ago in opposition to a bill similar to HB 86, and wanted to include reference to that testimony as part of the record today. He said that during his prior testimony, he had spoken primarily about the effect of Civil Rule 11, and about the federal experience with the amendment of Civil Rule 11, which was designed to toughen up the standards imposed upon attorneys and the signing of pleadings and other documents. He had explained that the "toughening up" of Civil Rule 11 by that prior legislation caused trouble in the federal courts; it got to where "the tail was wagging the dog," and there was so much litigation over Civil Rule 11, as part and parcel of civil litigation, that "they" finally had to "junk" the standards and return to the "federal Rule 11." Mr. Cole, although he is former attorney general for the State of Alaska, noted that he is testifying today on behalf of himself, and his goal is to tell the committee about his experience in the practice of civil law, which goes back to when he started practicing civil law in the territorial courts in Alaska in 1954. He added that most of his experience is related to commercial litigation. MR. COLE said that he has talked to lawyers throughout the state, and they have not told him that there is a problem regarding [frivolous lawsuits]; by and large, the system works reasonably well, he added. Not only has he not heard complaints on this issue from lawyers, but he has not heard any complaints from judges in the state either. He opined that if the judicial system were experiencing a problem of specious pleadings, claims, or defenses, he would have heard about it. MR. COLE offered the following example as a practical illustration of what he envisions would occur should HB 86 pass: Take an airplane accident on the North Slope - air taxi operator flying across the North Slope, four or five passengers in the airplane, en route from Barrow, say, to Prudhoe Bay. The engine starts running a little rough, pilot says, "Gee, what should I do?" Rather than land at Prudhoe Bay - the closest place - he says, "I think I'll try to go back to Barrow where there is maintenance." So he doesn't go to the nearest airport, which the rules say you ought to do. The engine quits on the way back to Barrow - people badly injured - goes to a lawyer. Lawyer for the plaintiffs investigates the case thoroughly and says, "Gee, I'll sue the pilot, I'll sue the air taxi operator, I'll sue Continental Motors for the engine. ... Took a look at those pistons - evidence of detonation - so I'll sue the piston manufacturer, and I'll sue Cessna too." Number 1140 And he takes a lot of time - maybe six months or so preparing the case, getting the facts together - files the complaint, serves Continental ... in Pennsylvania and serves Cessna in Wichita, serves the air taxi operator. Cessna sends the complaint to the insurance company and eventually gets the pleading. The insurance company calls the lawyer in Fairbanks and says, "Gee, we've got to file an answer to this complaint in 20 days - 15 days are up - can you represent us?" Lawyer says, "Sure, I'll represent you." "Well, protect us ... we've only got five days to answer." He says, "OK." He calls up the other lawyer and says, "Gee, I need a little extension of time; I just got this complaint, and I have to do something - answer it. Can't file a default to be taken." The plaintiffs lawyer says, "Look, I've been working on this case a long time, I'm getting personal with my clients, they're pushing me, I can't give you an extension of time." But, well, OK, he's a good guy, so he gives you 15-20 days. So then the lawyer looks at this bill and he says, "Gee, ... I can't sign that [pleading] before making reasonable inquiry and forming a reasonable belief in the existence of the facts upon which the claim - my defense - is based - can't deny negligence, can't deny anything was wrong with the design of the airplane until I make a reasonable inquiry into the facts." Well, you know how long it takes to make a reasonable inquiry into the facts of that airplane accident? Of the qualifications of the pilot, whether he was trained? Looking at that piston, and seeing what happened, and why that engine quit? I mean, you know, hey, the lawyer says, "You think I'm going to sign that, and put in an answer? I haven't made any reasonable inquiry in five days." Just won't do it. Can't do it. So he's in this position, Cessna's in [the] position, the insurance company [is] in the position, and he has to say, "Hey, you know, can't sign the civil pleading, and if I don't sign the civil pleading, we'll take ... a default judgment." So, you know, what happens under this bill? Number 1297 So he says, "Well, I'll tell you what I'll do, ... I'll get Cessna to indemnify me .... You think I'm going to file an answer and get sued for punitive damages? I haven't made any reasonable inquiry. I have to take discovery. I have to get the production to documents about the expert examination and teardown of that engine." That will take months and years, and that's [what] litigation and discovery and depositions is all about - for people to find out what really happened. That's what we do. ... This is how it works. So the lawyer gets the complaint from the insurance company, and he calls the lawyer and says, "Can you give me a few days to answer?" The lawyer's a good guy and they work together all the time, they deal with these problems, so he says, "Sure." So they file an answer. Then we have initial discovery under court rules: everybody has to give each other all the evidence they have - the photographs, the expert reports - and they exchange it under the court rules, and it works; everybody gets a pretty good sense of the case. If they want some more, well, let's do a little discovery, so they do discovery. Everybody starts finding about the case ... what the facts are, which maybe takes a year to get these expert reports, to take the depositions of the pilot, of the manufacturer, and so forth. And then the people say, "Humph, let's have a settlement conference. The court maybe will have a separate conference. If they're good lawyers - experienced lawyers - they'll sit down and say, "Look, I've taken a look at this stuff, and I think you have a liability case, you've got some damage." And they sit down and they settle these cases. And it works. And everybody knows when you put in an answer denying negligence -- who'd put in an answer admitting negligence when you first get the complaint? Would you want your lawyer to do that? Say, "Oh, I got sued for [an] automobile accident, ... and just either don't answer or admit negligence." Nobody does that. The insurance companies don't want that to happen. Number 1432 Now, let me just make the comment about "sign the civil complaint with the intention of asserting the allegations that are false." Well, you remember the Shadow .... We used to say, "You know what evil lurks in the heart of man? The Shadow knows (and his girlfriend)." Well, this is open season on each other's lawyers. ... Each lawyer will ... wind up suing the other lawyer, and say, "You know, you [were] false when you signed that negligence complaint." And I'll say, "You were intentionally making false claims when you alleged negligence." And pretty soon, you get these lawyers suing each other for all this malicious stuff. And you know who pays? I'll tell you who pays: it's the clients who pay. The last thing you people want - the last thing the public wants - in the judicial system and the resolution of disputes is lawyers suing lawyers. Lawyers who get it done - lawyers who do the best job for their clients - are the lawyers who are low-key, get along with the other lawyers, who are recognized as professionals, whose word is good, whose pleadings are good, research is good. We resolve those cases (not me, but those lawyers); that's why the system works. And I urge you: don't tinker with the system. It's working, and it's working well. REPRESENTATIVE JAMES said that Mr. Cole's testimony almost makes her point that there is a problem, and she mentioned that ordinary people are not aware of all the specifics illustrated by the example. She recounted that she has had the experience of having a lawyer and a defendant lie about her, and her only recourse was to sign an affidavit that said the claim wasn't true. She added that neither she nor the other party had any evidence either way; thus either side could have prevailed, which, she said, she didn't think was fair. She posited that the other party knew full well that they were making up a story. "What kind of a defense do I have in that case?" she asked. Number 1563 MR. COLE offered that the defense in such a situation is that "the system works." He said he has found, over the years, that juries do a good job; they get it about right. Once in a while, he acknowledged, it goes wrong; the system's not perfect, but the system really works. The juries get it right and the judges do a good job, and sometimes there are bad results, but the case gets to the supreme court and it corrects the egregious errors. He said he can't say that the system is perfect, but he opined that it is a great system. REPRESENTATIVE JAMES, expressing her belief that in her particular case, the claim was contrived to make the opposing party's case, asked whether Mr. Cole condones that type of behavior. MR. COLE said, "Of course not." He then added that his experience has been that so often it's not just all on one side. It's the plaintiff claiming the defendant is a liar, and the defendant claiming the plaintiff is a liar. He said he hears all the time, "They lied." The solution, he posited, is to let the system work its magic. REPRESENTATIVE JAMES offered that although the system is the best we have, it has room for improvement. Number 1647 CHAIR ROKEBERG called an at-ease from 1:35 p.m. to 1:36 p.m., during which time he turned the gavel over to Representative James. REPRESENTATIVE BERKOWITZ noted that Mr. Cole's hypothetical example puts the defendants at a huge disadvantage if HB 86 were to pass, because the defendants wouldn't have the time to do the investigation necessary. And although he acknowledged that a lot of small businesses had sent in testimony in favor of HB 86, he said it would seem to him to be counterintuitive for them; they'd be in a bad position. MR. COLE affirmed that from his perspective, HB 86 gives a great advantage to the plaintiff because before the complaint has been filed, the plaintiff has had the advantage of having, in some ways, almost an infinite period of time (aside from the statute of limitations) in which to prepare the case. Then the summons is served, and the answer has to be filed within 20 days. In the face of HB 86, he opined, the defense lawyer would be unable to sign an [answer] because he/she knows nothing about the case; there has been no opportunity to investigate. MR. COLE commented that this is just an example of the problem with HB 86 in a personal injury case, and he suggested the committee consider a case wherein a subcontractor sues a general contractor for canceling the contract for nonperformance. He offered that no default could be alleged in such a case until the site is examined, and he added that this can sometimes involve reading 5,000 pages of daily reports, and it may take two years before getting a good sense of what happened on the job. He opined that no lawyer who is concerned about legal liability is going to file an appropriate answer in those circumstances in the face of HB 86. In such a situation involving contractors and subcontractors, the timelines are not sufficient; this sort of system won't work, he predicted. He added that the insurance companies and the defendants who are small-business owners will be the people who are going to "pay the piper" if HB 86 passes, not the plaintiff's lawyer. REPRESENTATIVE BERKOWITZ said, "We know that there's bad apples out there. What happens to those bad apples?" What can be done under existing statute and existing court rules to people who are perpetrating frauds on the court and doing things that "we" don't like, such as telling lies, he asked. MR. COLE responded that there is [Civil Rule 11]. He then posed the question, "Does it work effectively?" And he answered that in his view, it works pretty well. He suggested that letting the system work is the only viable solution to "the bad apple." He remarked that he has seen insurance-defense answers that have 12 affirmative defenses, and that he is exasperated [by] "'Failure to state a claim on which relief can be granted,' when you follow the official form for notice pleading that's right in the federal rules." He added, "It takes me time to cut it out, so ... I just ignore it and say, 'Oh well, that'll go away' - as it really does." He again advocated for just allowing the [current] system to work. Number 1874 REPRESENTATIVE BERKOWITZ argued that it seems to him that there would be a tort claim against someone who lied and ran up costs, and that there are possible criminal charges that can [be filed]. MR. COLE countered that he had a client tell him the other day, "We should stop this stuff; we should file perjury charges against this state bureaucrat because he lied about that." Mr. Cole said he told his client to forget it; it's not going to happen. He opined that it would be nice to get district attorneys to prosecute every perjurer for perjury, but he intimated that it cannot be done. REPRESENTATIVE BERKOWITZ observed that the charge of perjury is available. MR. COLE agreed that the charge is available. REPRESENTATIVE JAMES again noted that Mr. Cole is simply making her point [in favor of HB 86]. She referred to Mr. Cole's first example. She said although it appears that the situation is in favor of the plaintiffs, the plaintiffs don't know whether the charges they have made are true, any more than the defense knows. She surmised, then, that in this example the plaintiffs' [attorney] would be just as guilty [of specious claims] as the defense attorney would be in denying them without proper investigation. MR. COLE responded that economics take care of these types of situations. He opined that the plaintiff's lawyers are not going to spend all the time and money needed to prepare the case if they do not think they have a good case and will be able to recover costs. He added that attorneys generally work on a contingent fee basis, and that they are not served well by filing specious claims because they lose their time and money. He offered that insurance companies ought to be tougher and not settle cases if they don't think the claims are good; insurance companies shouldn't pay off claimants just to keep from paying the cost of defense. He posited that this solution would go further towards stopping frivolous lawsuits than any changes to statute could accomplish. REPRESENTATIVE JAMES countered that many defendants are not insurance companies; they're just small-business people who end up settling specious claims because they cannot afford the time and money, or interruption in their lives, to fight the claims. She opined that this is the purpose behind HB 86 - to stop the kinds of specious claims that are filed simply in the hopes that the defendants will not have the time or money to argue the claims, and will thus settle. MR. COLE observed that the plaintiff has the burden of that litigation too - it's not free for them either. He pointed out that the economics [of the situation] works its magic on both sides of the fence. Number 2010 GERALD BROOKMAN testified via teleconference, and noted that he is not an attorney. The only lawsuit he has ever been a party to was a small claims action that he brought against another party who had built a driveway across some property that Mr. Brookman owned; he prevailed. This statement was by way of explaining that prior to today, he had never heard of Civil Rule 11. He said that HB 86 might seem reasonable on the face of it, but when he reads terms in it such as "reasonable inquiry and forming a reasonable belief", he said it seems to him that the word "reasonable" is very subjective. He suggested that if HB 86 is going to pass out of committee, then on [page 1, line 10, and other locations in HB 86] "good faith" should be substituted for "reasonable". He finalized his comments by saying, "It just seems to me that this bill doesn't pass the smell test; I think you ought and take it out to a crossroads and bury it with a stake through its heart at midnight." Number 2124 WEVLEY W. SHEA, Attorney, testified via teleconference and noted that he had spoken in opposition to a similar bill (HB 42) last year. He mentioned that he had written a detailed letter to Senator Taylor on this issue last year as well. He indicated that he agreed with Mr. Cole's comments that the system works very well as it is. He added that under the [Alaska Rules of Professional Conduct] Section 3.1 deals with meritorious claims and contentions, and 3.3 deals with candor towards the court. He offered that when used by the court, [Civil Rule 11] sanctions are very effective. MR. SHEA said that he primarily represents small businesses owners, and has done extensive public interest litigation relating to voter fraud. He reiterated his belief that the current system works very well. He reported that he has not seen any indication of the problems alluded to by the sponsor of HB 86. Although there might be occasions when overzealous, inexperienced counsel make mistakes, overall he did not see frivolous litigation taking place. He commented that he is currently working on a case of racial discrimination, and he opined that the system will work even for this situation, which he characterized as having bizarre circumstances. MR. SHEA remarked that HB 86 merely duplicates what is currently in place, adding that he thinks it will increase litigation. He suggested that the goal of emphasizing professionalism within the legal system can be accomplished in a way that is not compounded by lawyers suing lawyers. REPRESENTATIVE BERKOWITZ, for clarification, asked whether Mr. Shea thinks that HB 86 will increase the costs of litigation, particularly for small businesses. MR. SHEA affirmed he did think this. He added that although HB 86 might not necessarily give an advantage to the plaintiff's lawyers, it certainly presents a disadvantage to lawyers who do insurance defense work. He explained that according to his knowledge, when experienced, plaintiff's personal-injury lawyers take cases, they evaluate the cases very thoroughly; he opined that all HB 86 does is compound the situation. REPRESENTATIVE BERKOWITZ asked what kind of sanctions could be imposed on an attorney who violate the [Alaska Rules of Professional Conduct]. Number 2344 MR. SHEA reported that sanctions can be both publicly and privately assessed and can consist of fees, suspension, or disbarment from practice; he noted that word gets out quickly when someone intentionally misrepresents the facts or is not straightforward. He added that he has not seen any situations of fraudulent pleadings or intentional misrepresentations to the court, even though he has been practicing law in Alaska for well over 20 years. He remarked that under the current system, the court addresses any instances of overreaching by counsel, and he has no problem bringing such instances to the attention of the court or the Alaska Bar Association. REPRESENTATIVE JAMES remarked that HB 86 appears to her to be aimed at the plaintiff and not the defendant. She then asked Mr. Shea whether he believed that in many situations, plaintiffs have to manufacture a case in order to initially file and are assuming that something is a certain way without definite knowledge. MR. SHEA said no, he did not think that plaintiffs' attorneys try to manufacture or create anything. Notwithstanding Representative James's description of her bad experience, he explained that when an experienced plaintiff's attorney is approached for a case, he/she evaluates each case totally, from both a financial point of view and a factual point of view, and if a case isn't any good, he/she will say so. In his own practice, he noted, he only takes about one case out of every ten potential cases that come to him; these are very complex cases, sometimes involving civil RICO [Racketeer Influenced and Corrupt Organizations Act] charges or claims against the State of Alaska, and he spends hours with each potential client (free of charge), evaluating the information to determine whether there is a chance of winning the case. TAPE 01-62, SIDE B Number 2480 MR. SHEA mentioned that in the public-interest litigation cases he was involved in regarding the 1994 election, the State of Alaska, in its defense, had ten attorneys and four paralegals. He added that anybody bringing litigation against an insurance company or other major entity is faced with an uphill battle. He commented that in order to simply evaluate such cases, he asks for $30,000 upfront; he said he does not take cases on a contingency fee basis or pro bono. He reiterated that experienced plaintiff's lawyers look at cases really hard before proceeding. REPRESENTATIVE JAMES, referring to Mr. Cole's first example regarding the airplane accident, pointed out that the plaintiff, in expanding the claims to include all the different entities, had to be simply assuming fault. MR. SHEA suggested that Representative James misunderstood the point Mr. Cole was attempting to make with that example. Mr. Shea offered that Mr. Cole was saying that there is a statute of limitations of one or two years - whatever is within the contract - in which the plaintiff's lawyer has to evaluate the possible causes of the accident from that first overview as best as he/she can, to determine all the possible litigants, because once notice is given to the parties, other parties cannot be brought in later if the statute [of limitations] has run. He again reiterated that the system works really well as it is, and that it would be bad to tinker with it. Number 2309 BRUCE BOOKMAN, Attorney, testified via teleconference. By way of background, he said he has been in Alaska since 1967 and has been working for the last 20 as a defense attorney in a large interstate firm. He stated that he is familiar with attorney discipline; he served on the [Alaska Commission on Judicial Conduct (ACJC)] - for four years - and the disciplinary committee of the [Alaska Bar Association (ABA)], and has occasionally done plaintiffs' legal malpractice suits and defended grievances. He added that he is also the president of the Alaska chapter of the American Board of Trial Advocates, which is a group of experienced trial lawyers with both defense lawyer and plaintiff lawyer representation. He announced that he is very much against HB 86, and that he agrees with the previous comments to that effect. MR. BOOKMAN remarked that there are a lot of standards in place already, as well as remedies for people who are injured in the judicial system itself. There are the [Alaska Rules of Professional Conduct], Civil Rule 11, and criminal statutes (it has always been a felony to commit perjury); hence there is no need to set further standards of honesty, he opined. He said he understood the committee's concern that these remedies aren't often used, but he offered that there are a lot of reasons for that, and that simply adding more remedies isn't going to change the fact that the remedies aren't often used. He explained that one of the reasons the remedies aren't often used is that the cases are vary rarely "black and white." It's not so easy to find out who is telling the truth and who isn't, he added. Number 2240 MR. BOOKMAN recounted that when he was a young public defender, he was convinced, in every single case he tried, that at least one of the prosecution witnesses was lying, and usually he thought it was the police who were lying. He posited that young prosecuting lawyers probably also think that all defense witnesses are lying. He explained that this is a common perception held by young, inexperienced litigators, particularly when they get committed to the cause of the client. He added, "And yet, the whole system is set up to sort that out, and, to a judge, it's not so clear, and to a jury it's not so clear; both sides think the other side is lying, and that's really what the whole procedure is aimed at trying to decide." MR. BOOKMAN reported that he recently served as an arbitrator in an uninsured motorist claim. The plaintiff was hurt; she testified that she had whiplash and that she couldn't get up off the couch all summer long because of that whiplash. The defendant's lawyer pointed out that the plaintiff had told the doctor that it hurt when she did any gardening or went dancing. The plaintiff still claimed that she couldn't get off the couch. Mr. Bookman said that as an arbitrator (and as primarily a defense lawyer), he thought that the plaintiff was lying, but the other two arbitrators did not think that at all; they thought she was kind of exaggerating and that what she really meant was that it hurt a lot, and they were quite sympathetic. "We just differed," he added, and explained that "you" don't want to have a whole lawsuit turn on this; that's what lawsuits are about - people have different opinions. MR. BOOKMAN, to present a further example, said that he once had a large product-manufacturing case wherein his client testified that he couldn't recall ever testing a particular product. However, the other lawyer presented a deposition from this same client on an unrelated case related to the same product from a couple of years earlier; the client at that time had stated, "Gee, I'll never forget the time we tested that product." The other lawyer then claimed that Mr. Bookman's client had committed perjury. Mr. Bookman, taking into account that recollections change as time passes, noted that he could not tell whether his client had committed perjury since, in this example, a couple of years had gone by between the two cases; he added that he did not want the lawsuit to hinge on this collateral fact. Things are not very clear in lawsuits, he said, especially the bigger and more complicated ones. Number 2114 MR. BOOKMAN pointed out that in many of the large cases that he is familiar with, people in different departments of businesses have different perceptions about how the company operates - they remember things differently - and the recollections aren't going to agree, and it's not going to be clear. "You" don't want to make a whole lawsuit depend upon whether somebody believes that somebody else was actually intentionally telling a lie. Some people who are truly mistaken sound very sure of their testimony. He remarked that he also questions the materiality problem. What is going to be a material fact? What if somebody makes a statement, "Our document retention policy was that we threw away these documents," and somebody else from the company says, "Well, we saved our documents, so, I don't think there was a document retention policy." Is that a material fact, he asked, if there were documents that would have helped one side or another? MR. BOOKMAN said that it is pretty easy to say, "People shouldn't ... go to court and lie," but it is much more complicated than that. With regard to the effects of HB 86, he predicted that defense costs are going to go up, and that insurance company costs are going to go up, which will tend to push rates up. MR. BOOKMAN referred to language in HB 86 that says, "If the trier of fact determines that a party to a civil action intentionally made a false statement of a material fact in connection with the prosecution or defense of a civil action, the court shall dismiss the claim". He pointed out that the language does not stipulate when. As soon as possible, somebody is going to make that charge, and thus he envisions the case will be dismissed without ever getting to the merits of the case. He asserted that this will result in two lawsuits taking place at the same time. And if one of the clients is defended by an insurance company lawyer, he explained, and the claim is made that somebody in the defendant's party lied, the insurance company is not going to want to defend against that claim because, if true, it would be considered intentional misconduct and could be a violation of policy; therefore, the client may find himself/herself without counsel. Mr. Bookman concluded by observing that adoption of HB 86 will result in "an incredible mess." Number 2014 PAM LaBOLLE, President, Alaska State Chamber of Commerce, stated that her organization is in support of HB 86. She suggested that HB 86 is not directed at those who make honest errors or at ethical attorneys, and she acknowledged that most people in the legal profession are ethical. Rather, HB 86 is directed towards people who would use the system as a way of clouding an issue; those who would file a suit with the hope of forcing an out-of- court settlement from a defendant who cannot afford full litigation; or those who would intentionally use false allegations and/or charges to cause people to enter into, expand, or maintain litigation and incur extra costs. She opined that if [frivolous lawsuits] are, indeed, not a common problem, then adopting HB 86 shouldn't increase litigation costs. MS. LaBOLLE said that her organization feels that all it takes is just one person having to spend a great deal of time in court because someone lied simply to bring that person extra grief, [to justify adoption of HB 86]. She added that the issue is to ensure that professional people know that they cannot intentionally lie. If someone files a frivolous lawsuit to intentionally cause a loss, and the claims are not true, that person should be punished. REPRESENTATIVE JAMES asked if Ms. LaBolle had any specific examples to illustrate her points. MS. LaBOLLE replied that she did not; she explained that it is difficult to find people willing to divulge the circumstances surrounding a lawsuit because disclosure can sometimes set the stage for further legal problems. She implied that her organization supports HB 86 on a philosophical basis; lawyers who intentionally lie to further their efforts should be punished, she reiterated. REPRESENTATIVE BERKOWITZ questioned the fact that even though Ms. LaBolle did not have any specific examples of frivolous lawsuits, she is still not comfortable with the current standards in terms of criminal penalties, professional conduct rules, and civil penalties, all of which already exist. MS. LaBOLLE countered by questioning how bad a person's actions have to get before sanctions are placed on that person. She observed that there is a tendency to "not air the dirty laundry" until the actions get so bad that they cannot be ignored. Number 1740 REPRESENTATIVE BERKOWITZ reported that there was a headline in one of yesterday's newspapers about attorney discipline. He then stated that he is very concerned about driving up costs for small businesses, and he noted that all the testimony heard today predicts that adoption of HB 86 will do just that - drive up costs for small businesses. MS. LaBOLLE responded that it is likely to be the small business owner or individual who is in court in the first place, merely because someone brought a false charge, or because an attorney did not bother to find out the details of the case before bringing charges. She pointed out that small businesses incur costs in these situations already, and she added that her organization does not believe that HB 86 will drive up costs. REPRESENTATIVE BERKOWITZ asked Ms. LaBolle whether she has anything to substantiate this belief. MS. LaBOLLE said she did not, and added that the belief is based on common sense. REPRESENTATIVE BERKOWITZ asked, "Common to whom?" REPRESENTATIVE JAMES suggested common to everybody except attorneys. REPRESENTATIVE BERKOWITZ remarked, "Perhaps y'all ought not hire us, then." MS. LaBOLLE remarked that her comments were not, in any way, meant to sound negative or pejorative against the prior testifiers, most of whom are attorneys. REPRESENTATIVE JAMES turned the gavel back over to Chair Rokeberg, who had returned. Number 1605 STEPHEN CONN, Executive Director, Alaska Public Interest Research Group (AkPIRG), testified via teleconference and said that AkPIRG is a consumer advocacy group. He said he could assure the committee that his client group, which in part consists of the 1,000-plus membership of the Alaska Alliance of Injured Workers, perceives the problem to be a lack of access to the justice system - a lack of available legal representation. He added that his client group would further perceive HB 86 not as a frivolous lawsuit prevention Act, but, instead, as a bill that provides fodder for multiple lawsuits - often frivolous - and which will flood the court with litigation among attorneys while would-be clients stand outside of the process, watching. He remarked that he hopes the fiscal notes reflect the increase in judges and court bureaucracy that will be devoted exclusively to an attempt to employ the vague standards encompassed in HB 86. He opined that the proposed remedy is worse than the problem alluded to by proponents of HB 86. MR. CONN suggested that if there is a need to examine Civil Rule 11 more closely, then the legislature could simply provide that the [Alaska Judicial Council] do so, as was done during tort reform. In this way, any solution could be grounded in reality rather than in an ideological spat between some representatives of the chamber of commerce and the legal community. Those of "us" who are clients with real claims and real needs feel that they are being denied access to the system, he reiterated. He stated that HB 86, at worst, would chill due process, and, further, that it would perhaps discourage attorneys from representing this class of would-be consumers in the justice process because of the need to do further investigation to assure themselves that they are not going to be sued by other attorneys, or fall into a maze of lawsuits and counter lawsuits. MR. CONN, in conclusion, said that he certainly sympathizes with the sponsor of HB 86 and with the concerns of the business community about frivolous lawsuits. In examining HB 86, however, more as an academic rather than as a practitioner, and knowing full well that lack of representation is a pandemic problem for many consumers with real-life injuries and justice concerns, he opined that HB 86 does not pass the test. He encouraged the committee to "vote it down" and seek an alternative remedy to the perceived problem. Number 1361 JOHN SUDDOCH, Attorney, testified via teleconference and said he primarily does "plaintiff work" along with some "defense work." With regard to the topic of parties' lying, he explained that the committee should realize that if HB 86 passes, it will make Alaska a distinct jurisdiction because it will be the only jurisdiction that has such a law; Alaska will be the only jurisdiction in the Western world that would choose to turn the outcome of civil litigation - the search for the truth - into a search for whether somebody has lied on some particular matter (large or small), and then say that's "the whole shootin' match." Everything will turn not on the truth, but on whether somebody lied, and he offered that this is a sufficiently radical proposition that it has been adopted nowhere else in the Western world. MR. SUDDOCH cautioned the committee that before they adopt a provision of such breathtaking scope - such a breathtaking effect on the civil justice system, which is one of the jewels of Alaska constitutional law - they should really take a hard look at it. He then pointed out that for so radical a provision, there is virtually no framework provided as to how this would work procedurally in the real world. He submitted the following scenario as typical of how adoption of HB 86 would influence the process: A lawsuit will be filed. Now there is a new way to win this lawsuit. One way, of course, is to be correct on the facts - to be correct and have a just case. The other way that has now come about to win this lawsuit is to show that somebody is lying. So, as a lawyer, at least half of my focus now has to be dedicated not on finding the truth, but on finding a lie. And so what I do as counsel for the plaintiff is sit down with my plaintiff and I say, "You cannot lie. ... Swear to me you will not lie, I beg of you - because my financial future is now wrapped up in yours. I've spent a bunch of dough, and if you lie, it's all for naught." And so I have to control my one person. Number 1147 Perhaps during the deposition of my plaintiff, he says at one point, "I don't remember." Maybe he says that five or ten times. That becomes significant. Maybe later something will show that he ought to have remembered, and when he says, "I didn't remember," somebody could say, "Well, that was a lie." Now we proceed to depositions of the defendants - say there [are] three corporations that are defendants. Whereas, before, I might take one deposition as the plaintiff's lawyer, now there is an entirely new strategy for winning: it's finding a lie. So perhaps rather than taking one deposition of corporate witnesses, I take ten - ten of each. Now, ... instead of the three depositions, we've done thirty, and my goal, of course, is to find somebody in that corporation who is not very bright, not very emotionally stable, shoots from the hip, can be badgered, can be angered, whatever it takes to get that person out on limb and see if he will commit a lie. Because, after all, if he commits a lie, he hands me the lawsuit on a platter - a terrible, terrible vulnerability for a corporation and insurance company. How on earth could they control whether or not one particular executive goes around the bend and tells a lie in a deposition? And, of course, all might turn on that; millions of dollars might change hands on the circumstance of one executive having a bad day and telling untruths. Then we proceed to trial. Suppose that the parties have each said, "We identified 25 lies, each, in the depositions, and we want those to go to the jury." Well, the jury is the finder of fact. And then, say, during the trial, 25 different times somebody pops up and says, "Your Honor, that's a falsehood. I want that to go to the jury." So at the end of the case, there is final argument. Half the final argument is dedicated to who was lying and who was telling the truth on various points because every one of these allegations of lying is a potential landmine which decides the case. Number 1010 And then the case goes to the jury, and the jury instructions are ten pounds because the jury has to decide 50 different times whether somebody was telling the truth or was telling lie, and each of those could decide the case. Now, what is a lie as far as the jury is instructed? The jury is instructed, "You look at each of those allegations of lying, and if you find that it is just a tiny bit more probable that the assertion is not true - if it's a 51-to-49 likelihood that it's not true - then you must find that it was a lie," and the lawsuit will be over. And, of course, we don't know what happens if the jury finds that both sides have been lying; maybe they cancel out, or maybe if one side lies three and the other side lies two, ... on and on. So the jury decides the case, ultimately, if any of those 50 allegations of lying are found by three- fourths of the jury (we don't have a unanimous verdict, of course, in Alaska) to be 51-to-49 more probably a lie, the lawsuit is over. And then what happens? What is the insurance company [to] say to the corporation? The insurance company says, "We don't cover you .... You lost this lawsuit because of your intentional conduct; we don't cover you for that. You're uninsured; for that you're on your own." And the plaintiff says, "Oh, no, what do you mean, you're uninsured? We want you to be insured." And, so, there is a whole [other] series of insurance litigation that starts. And, of course, there's the constitutional litigation that ensues because part of this is obviously unconstitutional. How can you take from the plaintiff or a defendant vast sums of money in penalty for what might be, in the end, a very minor, scarcely material lie? We have the United States Supreme Court saying under [the] punitive damages context, "You can't punish a corporation $50 million for a barely minor incident; that's a violation of due process." Well, how can [you] punish a corporation $50 million for a minor lie by one of its executives? Or how can you take away from a catastrophically, maybe, paralyzed plaintiff? How can you take away his $10 million claim because he lied about whether he smoked marijuana or something like that? The Supreme Court would have to say that's a violation of due process; the penalty is so capricious and unrelated to the offense. Number 0851 MR. SUDDOCH, in conclusion, implored the committee to realize that HB 86 is not simply addressing "a minor mom-and-apple-pie" issue here. He stated, "This is the big one. And before you go down this road, I would suggest you listen to a vast range of people who know what they're talking about." REPRESENTATIVE JAMES remarked that she has listened to a lot of testimony, and that "they're" missing part of HB 86 [page 2, lines 7-13]: (b) If the trier of fact determines that a party to a civil action intentionally made a false statement of a material fact in connection with the prosecution or defense of a civil action, the court shall dismiss the claim or defense to which the false statement relates. If the civil action involves multiple claims or defenses and the false statement does not apply to all claims or defenses, the dismissal required under this subsection shall apply only to those claims or defenses to which the false statement directly relates. REPRESENTATIVE JAMES said that the last testifier had examples that did not relate to this at all; she added, "He said it was going to be kicked out if there is any lie told, and that's not true in this bill." REPRESENTATIVE BERKOWITZ said, "I take issue with that; I believe Mr. Suddoch went on at great length about how the trier of fact - that is the jury - would have to sit in a room and say, 'How many people told a lie, and which lies are worth more, what if both sides are lying?'" He offered that this testimony did discuss [subsection] (b), and that [subsection] (b) is, in fact, part of the problem. Number 0717 ALLAN E. TESCHE, Member, Anchorage Assembly, testified via teleconference and noted that his comments regarding HB 86 are on behalf of himself as a lawyer, not on behalf of any other entity, and that he has been a lawyer in Alaska for about 25 years. He remarked that the operative word on [page 1] line 6 appears to be "person"; he said that he did not know whether that includes people other than attorneys. The testimony thus far, he commented, seems to be directed at attorneys, and is presented by attorneys. He offered that "person" would also apply to "laypersons" who file and pursue litigation on their own, and he posited that this raises a number of questions. He acknowledged that there is a fairly sophisticated process for attorney discipline and supervision through the bar for knowing misrepresentation, and yet, in many respects there is very little that prevents or deters misrepresentation or lying on the part of pro se litigants. He suggested that this is a distinction that should be considered. MR. TESCHE expressed concern that HB 86 could be turned into a terrible weapon against people who exercise their right to access the court for redress, and he suggested that great caution is warranted. He noted that in his 25 years of experience as an attorney, he can only think of one possible instance in which another attorney has done something that might come within the purview of HB 86; but even that instance, he added, would require a couple of weeks of litigation to sort out. With respect to pro se litigants, he offered, there is the potential for more problems. He acknowledged, however, that on balance, he agrees with what others have stated: there does not appear to be a problem that is so serious that it warrants this kind of treatment. MR. TESCHE, in conclusion, commented that it may feel good to pass this kind of [legislation], and the legislature can then tell constituents, "By golly, we're working hard for you to make sure that we crack down on those lawyers, and we've cracked down on the lying in the judicial system." However, HB 86 doesn't do it in a way that would be effective. If legislators really feel that there is a problem that needs to be solved, he added, it could be handled much more narrowly by taking a look at Civil Rule 82. If the idea in Alaska is to deter litigation and at the same time make prevailing parties whole, legislators might want to look at appropriate ways of increasing recoveries under Civil Rule 82, so that the prevailing party - after a fair trial based on the merits of the case - could be reimbursed and be made whole. He opined that this would be a better solution to the problem - assuming that there really is a problem - rather than adopting HB 86. CHAIR ROKEBERG commented that he recognizes that there are substantial difficulties with HB 86, and he offered that the committee might want to take a different approach. [HB 86 was held over.]
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