Legislature(1997 - 1998)
02/17/1997 01:03 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 119 - INCREASE SMALL CLAIMS JURISDICTION Number 0037 CHAIRMAN GREEN advised members they would be considering HB 119 - "An Act raising the limit on small claims actions to $10,000; and providing for an effective date." Vice Chairman Bunde arrived. CHAIRMAN GREEN invited Tom Manninen, staff to Representative Mark Hodgins, the prime sponsor of HB 119, to provide comments on the proposed legislation. TOM MANNENIN, Legislative Administrative Assistant to Representative Hodgins, provided an overview of HB 119. He said the proposed legislation would increase the small claims cap to $10,000, presently set at $5,000. Representative Hodgins felt the increase would more accurately represent the real dollar costs involved in small claims litigation. Number 0154 REPRESENTATIVE NORMAN ROKEBERG asked Mr. Mannenin when the small claims cap was last changed. MR. MANNENIN advised members the cap was changed to $5000 in 1986. Representative Jeannette James arrived. REPRESENTATIVE ROKEBERG asked what the inflation rate was over the past 11 years. MR. MANNENIN advised members the inflation rate was between 33.5 percent to 40 percent. REPRESENTATIVE ROKEBERG felt the number given might be accurate for the city of Anchorage. He felt that the United States' city average rate of inflation was possibly higher than 33.5 percent during that period of time. He stated that the rate of inflation, over an 11 year period, would account for a significant rationale for the increase in the small claims cap. REPRESENTATIVE CON BUNDE asked what kind of input they had received from the legal community regarding the increase in the small claims cap. MR. MANNENIN said they have not received much input from the legal community. He felt there could be some concern out there, but no one had expressed concern to Representative Hodgins. REPRESENTATIVE ETHAN BERKOWITZ responded to Representative Bunde's question. He advised members that usually small claims cases were too small to be of any financial value, or attraction, to attorneys. He said there are not many lawyers who become involved in small claims. REPRESENTATIVE BUNDE questioned whether the small claims process would become a more formal procedure because of the increase in the cap. CHAIRMAN GREEN advised members that Chris Christensen from the Alaska Court System would be providing testimony, via teleconference, and would address the fiscal note submitted by the court system. REPRESENTATIVE ROKEBERG asked Mr. Mannenin if he knew what the small claims caps were in other states. MR. MANNENIN advised members that he could not answer that question. Number 0445 REPRESENTATIVE JEANNETTE JAMES asked what the current filing fee was. CHAIRMAN GREEN responded that the current filing fee was $25.00, adding that the filing fee had not changed for some time. REPRESENTATIVE JAMES felt the filing fee ought to be increased as well. She advised members if a person hired an attorney to represent the case, they would be required to pay an up-front retainer fee, and by increasing the filing fee for those who handle their own small claims suits, it would provide more of a balance of the two instances. CHAIRMAN GREEN asked that Chris Christensen address the committee on the fiscal note. CHRIS CHRISTENSEN, General Counsel, Alaska Court System, pointed out that more bills affect the judiciary than other executive branch departments. Several hundred bills affecting the judiciary are introduced in each legislature. Mr. Christensen advised members that, as a general rule, the Alaska Supreme Court did not take a position in favor or against any piece of legislation. He noted that he would attempt to bring technical problems to the attention of the committee, and advise members of costs relating to proposed legislation. Mr. Christensen reiterated that the court would only take a position when it believes a bill would have a very significant impact on the internal operations of the branch. MR. CHRISTENSEN noted that he was making the disclaimer because he wanted the committee to know that the court does not take the position to oppose or support legislation lightly. However, Mr. Christensen advised members that the Alaska Court System did oppose the proposed legislation in its current form. MR. CHRISTENSEN explained that HB 119 doubled the jurisdictional limit of small claims actions from $5000 to $10,000. He advised members that the Alaska Supreme Court did not object to increasing the small claims jurisdiction, quite the contrary. Mr. Christensen pointed out that since the last increase in the small claims cap, which took place in 1986, the consumer price index (CPI), for Anchorage had increased by approximately 35 percent. That increase would reflect that the small claims jurisdiction should be at approximately $6900. MR. CHRISTENSEN pointed out that he had advised the legislature several times during the last few sessions that the court does not object to an increase above the inflation rate, possibly as high as $7500. At that point, the court would evaluate the consequences of the increase. The legislature could revisit the issue in another two years to determine whether the consequences were not too severe as a result of the initial increase and evaluate whether another increase, up to $10,000, would be appropriate at that time. MR. CHRISTENSEN advised members that the court system believed that a jump to $10,000, at this time, would have potential of imposing some very severe consequences on the court system. He felt there was a common misunderstanding about small claims court; most people think that because it is a simple, cheap court for the parties, it is also a simple, cheap court for the state. This understanding is not true. MR. CHRISTENSEN said small claims cases require far more clerical involvement than low value cases which proceed under formal rules in district court. He explained that the courts not only create and provide the parties with fill-in-the-blank forms, but they also assist parties in filling out the forms. Mr. Christensen pointed out that the court provides much more detailed procedural assistance in the conduct of a claim, as well as performing much of the procedural work for the parties such as serving documents on the opposing party. MR. CHRISTENSEN pointed out that the court system hires the best people they can get; however, he expected that it was quite possible that there would be many cases, in many locations, where the magistrate would not be able to handle the case because of its complexity. He noted that magistrates were normally not attorneys. MR. CHRISTENSEN said an additional problem was that the vast majority of those who file small claims actions never talk to a lawyer first. Whereas, the majority of those filing a suit in district court would first consult with an attorney. Many of those cases never see the courthouse because the lawyer was able to settle the case or explain to the person filing the suit why they would not have an arguable case. MR. CHRISTENSEN stated that the filing of small claims actions increased by 11 percent in 1996, but the resources to handle those cases did not increase. This results in the courts losing the ability to handle the cases in an expeditious manner and HB 119 would most likely increase that problem. MR. CHRISTENSEN further stated that small claims court is an essential element in the justice system. He explained that it provided a forum for people to resolve their disputes constructively and allows people to deal with small claims that could not be handled economically by an attorney. MR. CHRISTENSEN pointed out that there was a wide range of opinions on what that cap level should be. He noted that more than half the states, including states with a higher cost of living than Alaska such as Hawaii, place the limit of small claims jurisdiction at or below $3000, with only two states placing the limit above $5000. MR. CHRISTENSEN pointed out the fact that even though the crime rate decreased the previous year, more people were being prosecuted - presumably because more people were being caught. The increase in prosecution meant that the court system was falling behind. He noted that they have more work with no increase in resources. MR. CHRISTENSEN advised members that the court strongly believed that an increase in small claims jurisdiction to $10,000 would have a serious potential of creating a further imbalance within the system and causing some severe internal problems. MR. CHRISTENSEN pointed out that it was not just a question of the fiscal note. He noted that the fiscal note submitted by the court system only reflected an increase in clerical time. There were additional things that could not be reflected in the fiscal note, which was why the Alaska Supreme Court was concerned. Mr. Christensen explained that if the case load became substantially more complex, with many magistrates unable to handle those complex cases, injustice would result. He said this was not the kind of thing one could attach to a fiscal note. MR. CHRISTENSEN strongly urged the committee to consider an amendment to HB 119 which would place the small claims cap at $7500 and then revisit the issue in two years, after the court system had time to evaluate the consequences of an increase. Number 1255 CHAIRMAN GREEN asked Mr. Christensen to comment on what happened to the court system when the small claims limit was increased from $2000 to $5000. MR. CHRISTENSEN could not answer that, although he felt that they might be able to figure it out by looking through the annual reports. CHAIRMAN GREEN noted the court system was concerned over the doubling of the cap, and mentioned that the increase from $2000 to $5000 was a two and a half fold increase. MR. CHRISTENSEN advised members he had some statistics available. The statistics showed the age of pending cases in small claims court as of December 31, 1996. These were cases the court was attempting to get out as quickly as possible because that is what small claims court is all about. The median case in Anchorage was 300 days old and the average case 400 days old. In Ketchikan it was 450 days old. Mr. Christensen explained that the delays, in part, were the result of the 11 percent increase in case loads the previous year without any increase in resources. MR. CHRISTENSEN advised members that taking 300 days to get a small claims case resolved was wrong. If the state dramatically increases the jurisdictional limit, the number of days could extend further. He added that "justice delayed is justice denied," which he did not believe was the intent of the legislature. CHAIRMAN GREEN said the large difference between the median and the average would indicate a heavy end to the curve. Number 1417 REPRESENTATIVE JAMES asked how the fee, for filing a small claims suit, was established. MR. CHRISTENSEN said the Alaska Supreme Court had been given the authority to establish filing fees for various types of cases. The fee to file in small claims court is $25. Mr. Christensen pointed out the fee for small claims court was low because it was supposed to be the people's court, an inexpensive court where a lawyer is not needed. The court system did not want to the fee to serve to bar small claims. REPRESENTATIVE JAMES understood that small claims court was supposed to be inexpensive, but that did not mean it was not suppose to pay its own way. She proposed the establishment of a sliding scale in conjunction with the size of the claim. MR. CHRISTENSEN said the Alaska Supreme Court had always believed very strongly that small claims cases were not supposed to pay their own way. He stated that justice was one of the basic functions of state government. Providing a justice system was not something the state does because people want it or because it makes them feel good, but because the state has to provide it. Mr. Christensen noted that without a justice system there would not be much point in government. MR. CHRISTENSEN added that justice should be funded at the level needed, whether or not it actually paid its own way. He advised members that the legislature could enact a sliding scale fee and overturn the court rule if it chose to. Number 1651 REPRESENTATIVE BUNDE felt that possibly some of the small claims case load would diminish if there was some personal investment involved in achieving access to small claims court. He suggested that the application should pay for itself and did not see how a filing fee of $25 would cover all the court assistance procedures and paper work costs. Representative Bunde asked Mr. Christensen what the filing process cost the court system per claimant. MR. CHRISTENSEN expressed that it was low cost to the litigant, but not for the state. He explained, that although the court charges the $25 filing fee, the claimant could pick up the forms and receive free assistance from the clerks in completing the forms. Mr. Christensen pointed out that the Alaska Supreme Court did review filing fee rates every four or five years to make sure they are reasonable and does so by comparing the rate with other states. He added that filing fees in Alaska were not particularly low. He noted that the state would not want to impose a filing fee so high that it would make people feel they have been barred from justice. Number 1851 REPRESENTATIVE ROKEBERG asked that Mr. Christensen explain the jurisdiction of the district court, the small claims court and how they mesh. MR. CHRISTENSEN advised members that the district court had jurisdiction over civil claims up to $50,000 while the small claims court has jurisdiction up to $5000. He noted that the small claims court was also barred from hearing certain kinds of cases which the district court is allowed to hear. These cases include the ability to file a claim against the state, a claim involving equity, or certain types of tort actions such as; false arrest, false imprisonment, malicious prosecution, defamation or slander. Number 1920 MR. CHRISTENSEN advised members that there were actually two kinds of judges in a district court; district judges appointed by the governor who have the full district court jurisdiction, and magistrates who are hired by the court system who have limited district court jurisdiction. Magistrates can only hear infractions and small claims cases. Number 2074 REPRESENTATIVE BRIAN PORTER referenced the court's practice of serving process in small claims court and asked why the court chose to offer that service. MR. CHRISTENSEN advised members that the court charges the fee, fills out the paperwork and provides it to the process servers. He understood this was because the legislature had instructed the Alaska Supreme Court to make the rules simple and expeditious. He pointed out, in the distant past, this was one way to simplify the procedure. He added that the average citizen did not understand the service of process and, if that was done improperly, there would not be a case. REPRESENTATIVE ETHAN BERKOWITZ asked if the courts would have more problems, as a result of the increase in the small claims cap, with higher numbers of pro se litigants. MR. CHRISTENSEN said this would be one distinct problem the court system felt it would have as a result of HB 119. Pro se litigants were very expensive, difficult and time consuming to handle, but it was a duty of the court to handle those cases as a matter of public service. Mr. Christensen advised members that the court had over 8,000 small claims cases, which was close to 10 percent of the court's case load, and the court was already delaying those cases way beyond the point that they should have been resolved. Number 2212 REPRESENTATIVE BERKOWITZ expressed concern about the apparent gap for people seeking justice between $5000 and $50,000. He asked how many suits had been filed in district court between $5000 and $10,000 in 1996. MR. CHRISTENSEN could not answer that, although would attempt to get that statistic. He did not know if the court's computer system had the ability to produce that information. REPRESENTATIVE BERKOWITZ asked which two states had a small claims cap over $5000 and what their experience had been. MR. CHRISTENSEN advised members that the two states were Nevada and Tennessee, but he did not know what their experiences had been. REPRESENTATIVE BERKOWITZ asked Mr. Christensen if he could suggest any alternatives, in lieu of raising the cap to $10,000, that would provide more civil justice to a greater amount of people in the small claims court. MR. CHRISTENSEN advised members that would be something he would have to give some serious thought to. CHAIRMAN GREEN pointed out that the inflation rate had increased approximately 35 percent over the past 11 years and that rate would increase the present $5000 small claims cap to almost $7000. He asked Mr. Christensen if the court would support an increase to $7500, and then revisit the issue in a couple years. MR. CHRISTENSEN advised members the court system would support that. He explained that the court system was a strong supporter of small claims court and thinks it is essential, it increases justice. Mr. Christensen stated that the court system felt $7500 would be appropriate, the court system could evaluate the consequences with the issue being revisited in two years. He noted that if it was not causing the kinds of problems the court system felt might occur then it might be appropriate to raise the cap again at that time. Number 2320 REPRESENTATIVE ROKEBERG asked if HB 119 were amended to a $7500 small claims limit, if the fiscal note would be reduced. MR. CHRISTENSEN stated that this cap would reduce the fiscal note possibly by half because it would result in much less clerical work being provided by the court system. Number 2380 REPRESENTATIVE JAMES pointed out that the fiscal note was requesting funds for one more person, but with the existing backlog and delay in hearing small claims cases she felt an additional person was needed anyway. If that staff was located in Anchorage it would not help other areas of the state with their backlog problems. MR. CHRISTENSEN explained that the court could hire part-time people in several locations, attempt to move clerical work from one site to another, or use the funds to pay overtime in various locations. He noted that the court system had alerted the Judiciary Committees and the Finance Committees, over the past several years, that they would be seeing a large case load increase because of the increase of law enforcement officers in Anchorage, which the legislature did not fund. He referred to a discussion with clerk of court in Anchorage two weeks ago, who said that traffic tickets for the calendar year 1996 had increased by 8,000. Mr. Christensen pointed out that these tickets were not paid by mail, but tickets where people actually showed up in court. The Anchorage court system was falling dramatically behind because of the municipality's increased police force. TAPE 97-19, SIDE B Number 000 REPRESENTATIVE BUNDE felt that an increase in the small claims jurisdiction should increase the filing fee at the same rate. He asked that Mr. Christensen comment on that suggestion, and provide some ideas as to how to accomplish that. REPRESENTATIVE PORTER said, if there are 8,000 cases now and the jurisdiction is increased and we estimate that the case load would increase by half, increasing the filing fees from $25 to $50 would bring in another $100,000. Number 0042 MR. CHRISTENSEN pointed out that filing fees were set in the court rules. The legislature could instruct a legislative drafter to add a court rules change to the bill. Mr. Christensen thought the filing fee for district court was currently set at $60.00. He pointed out that the Alaska Court System did not get program receipts. All fees, fines and forfeitures accepted by the courts each year are turned over to the general fund, this amount was approximately $7 million in 1996. REPRESENTATIVE BERKOWITZ asked if the chairman would accept a motion to table HB 119 for the purpose of allowing Representative Croft, as a co-sponsor to the proposed legislation, to speak to the concerns expressed during the meeting. Number 0220 REPRESENTATIVE ROKEBERG felt the proposed legislation could be held over for further consideration, rather than tabled. REPRESENTATIVE PORTER had no objection to holding the bill for further consideration of an appropriate increase in the small claims cap, as well as an increase in filing fees for those types of cases. Number 0298 REPRESENTATIVE JAMES stated that the existing $25 filing fee had been in existence for a long period of time and felt it should increase along with the small claims cap. It was her desire that the bill be held in order to speak with the prime sponsor, Representative Hodgins, on those issues. She agreed with Representative Rokeberg that it would not be necessary to table the bill. REPRESENTATIVE BUNDE advised members that he would feel more comfortable if the small claims cap were increased to $7,500 in addition to increasing the filing fee. He felt the sponsor should be aware of it and comfortable with the suggestions presented by members of the House Judiciary Standing Committee. Number 0520 TOM MANNENIN noted that he would feel more comfortable with Representative Hodgins speaking for himself, but stated it did not seem reasonable to increase the cap to $7,500 this year and raise it again in a year or two. He said it would require a change in filing forms which would result in additional costs to the system. He felt, in the long run, it would cost the state more time, energy and effort. He said if we realize that this is a problem, accept it as such, change the cap one time, then everything would be done. CHAIRMAN GREEN felt it was a convincing argument and advised members he would hold the bill for further consideration and notice from the chair.