04/02/2003 03:18 PM House L&C

HB  13-SUCCESSOR LIABILITY FOR PRODUCT LIABILITY                                                                              
                                                                                                                                
Number 2175                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be HOUSE  BILL NO.  13, "An Act  declaring legislative  intent to                                                               
reject the continuity of enterprise  exception to the doctrine of                                                               
successor liability adopted in Savage  Arms, Inc. v. Western Auto                                                               
Supply,  18 P.3d  49 (Alaska  2001),  as it  relates to  products                                                               
liability;  providing  that  a  successor  corporation  or  other                                                               
business   entity  that   acquires   assets   of  a   predecessor                                                               
corporation or other business entity  is subject to liability for                                                               
harm to  persons or property  caused by a defective  product sold                                                               
or otherwise distributed commercially  by the predecessor only if                                                               
the acquisition is accompanied by  an agreement for the successor                                                               
to assume the liability, results  from a fraudulent conveyance to                                                               
escape   liability  for   the  debts   or   liabilities  of   the                                                               
predecessor,  constitutes  a  consolidation or  merger  with  the                                                               
predecessor,   or  results   in   the   successor's  becoming   a                                                               
continuation of the predecessor;  defining 'business entity' that                                                               
acquires assets  to include a  sole proprietorship;  and applying                                                               
this Act  to the sale,  lease, exchange, or other  disposition of                                                               
assets  by   a  corporation,  a  limited   liability  company,  a                                                               
partnership,   a  limited   liability   partnership,  a   limited                                                               
partnership,  a sole  proprietorship,  or  other business  entity                                                               
that occurs on or after the effective date of this Act."                                                                        
                                                                                                                                
Number 2164                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG,  sponsor  of   HB  13,  explained  that                                                               
legislation  similar to  this bill  passed  the legislature  last                                                               
year but was vetoed by  the governor; the only controversial part                                                               
of that bill  was the retroactive application  of legal language,                                                               
but HB  13 does not contain  that language.  The  bill sets forth                                                               
the standard business succession liability  for the purchase of a                                                               
business and  clarifies under what  circumstances the  new entity                                                               
remains responsible for the liabilities  of the former owner.  He                                                               
explained that the bill was  referred to the committee because of                                                               
its economic impact on commerce.   It overturns an Alaska Supreme                                                               
Court case that was inconsistent  with [laws in] 48 other states.                                                               
He  said  making Alaska's  business  laws  consistent with  other                                                               
states' laws helps build a stable business environment.                                                                         
                                                                                                                                
Number 2083                                                                                                                     
                                                                                                                                
HEATHER NOBREGA, Staff to  Representative Norman Rokeberg, Alaska                                                               
State  Legislature, explained  that under  HB 13,  when a  person                                                               
purchases a company,  the person is not liable  for the company's                                                               
previous  mistakes  and  harm unless  the  person  assumes  those                                                               
liabilities.  The  new owner can be held liable  for the previous                                                               
company's  liabilities under  four exceptions:   (1)  if the  new                                                               
owner  assumes  the liabilities;  (2)  if  [the purchase]  was  a                                                               
fraudulent attempt to avoid the  liabilities; (3) if the purchase                                                               
was a  consolidation or  merger and the  new company  wouldn't be                                                               
harmed by assuming  those liabilities; or (4) the  new company is                                                               
in fact a continuation of the same company.                                                                                     
                                                                                                                                
MS. NOBREGA noted that HB  13 relates to product liability, which                                                               
hadn't been  [litigated] in Alaska  before 2001, when  the Alaska                                                               
Supreme Court  made a decision  on the  law.  She  explained that                                                               
the  supreme   court  recognized  two  exceptions:     the  "mere                                                               
continuation"   of   the   business  and   the   "continuity   of                                                               
enterprise," a newer  doctrine that has been rejected  by most of                                                               
the  jurisdictions that  have looked  at  the issue.   This  bill                                                               
rejects  that doctrine  ["continuity of  enterprise"] and  adopts                                                               
the four general standards that  are recognized by most courts in                                                               
the nation.                                                                                                                     
                                                                                                                                
Number 2007                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   mentioned  that  the   "continuity  of                                                               
enterprise" theory  has been rejected in  the Restatement (Third)                                                             
of Torts.  He said HB  13 adopts the [more] widely accepted rule.                                                             
He noted that  the Alaska Supreme Court  adopted this "continuity                                                               
of enterprise"  provision that has been  specifically rejected by                                                               
most other  states.  Representative  Rokeberg reported  that this                                                               
court case,  [Savage Arms, Inc.  v. Western Auto Supply  Co.] has                                                             
been settled,  and said  retroactivity [is  no longer  an issue].                                                               
This bill is  [prospective] so that Alaska's law is  clear on the                                                               
subject of  product liability  when a company  is purchased.   He                                                               
explained  that  sometimes  people  who  wish  to  file  lawsuits                                                               
against corporations over product  liability go "shopping" [for a                                                               
jurisdiction  that has  unusual] law.   If  Alaska had  an unique                                                               
[interpretation  of this  provision],  people  might use  Alaskan                                                               
courts to file  these kinds of suits.  He  opined that businesses                                                               
laws should be uniformly applied throughout the United States.                                                                  
                                                                                                                                
CHAIR ANDERSON reminded  the committee that the  next referral is                                                               
the  House Judiciary  Standing  Committee,  where detailed  legal                                                               
questions can be examined.                                                                                                      
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
REPRESENTATIVE DAHLSTROM moved  to report HB 13  out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There being  no objection,  HB 13  was reported  from the                                                               
House Labor and Commerce Standing Committee.