Legislature(1999 - 2000)
05/15/1999 12:27 PM Senate JUD
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HB 82-IMMUNITY:CLAIMS ARISING FROM Y2K PROBLEMS
CHAIRMAN TAYLOR thanked Representative Rokeberg for working with
his staff in creating a new committee substitute.
REPRESENTATIVE NORM ROKEBERG, sponsor of HB 82, explained the bill
as follows. The proposed committee substitute provides limited
immunity against claims arising out of the Y2K date change. The
bill is patterned after S.96, introduced in Congress by Senator
John McCane. The committee substitute excludes all personal injury
and wrongful death claims on page 4, subsection (e). It further
removes the mediation provision. The House version had three steps
to resolution: the first was mediation. The bill still contains
the curative aspects because attempting to cure a problem before
litigating is a sensible approach. The proposed committee
substitute also changes the standard under which the cause of
action is a contract [indiscernible] and it provides limited
immunity for those businesses that take the steps on page 3.
Subsection (1) acts as a template by outlining six fundamental
steps to creating a compliance program. Subsection (2) is a catch-
all clause that sets reasonable care standards. The original
version of the bill contained due diligence standards. He said
that language on page 4, subsection (e) means that a Y2K provision
of a contract must be enforceable on the contract; it would seem
disingenuous to use a Y2K defense to defend oneself against an
agreement to perform a Y2K related fix. He recommended the
committee adopt a conceptual amendment to page 4, line 21, to add
"year 2000 date change" after "a" and before "provision."
Number 513
SENATOR ELLIS questioned, asked what happens to actions worth less
than $25,000 according to language on page 5, section 4.
REPRESENTATIVE ROKEBERG said those actions would have to be
individually litigated.
SENATOR ELLIS stated that gives class action protection to cases of
larger amounts only.
CHAIRMAN TAYLOR noted he shares Senator Ellis' concern.
SENATOR ELLIS moved to adopt the Senate Judiciary Committee
substitute as the working document of the committee. There being
no objection, the motion carried.
SENATOR ELLIS asked the sponsor to respond to the concern he
expressed about no protection for the little guy.
REPRESENTATIVE ROKEBERG stated the threshold was lowered on the
House side from $50,000 to $25,000 for that reason. He noted the
intent was to prevent a class action suit from being filed unless
a major problem occurred. He added that this provision was
requested by the State Chamber of Commerce.
SENATOR HALFORD asked if the application of this limitation depends
on meeting all other conditions set out in the bill, or whether the
limitation is applicable in regard to Y2K damages regardless of the
other conditions of the bill.
REPRESENTATIVE ROKEBERG said the limitation would apply regardless
of the other conditions because the limitation applies to the
formation of a class action by the opponent.
CHAIRMAN TAYLOR disagreed because the standards specifically
require the damaged party to write a letter, send notice to the
business, and give the business an opportunity to fix the problem.
He thought those businesses, who might have a claim against another
business, would have to have incurred $25,000 in damages before
they could form a class action suit.
MR. ROKEBERG said his understanding is that they would have to meet
that criteria in the formation of the class action only. The
defense provided in the bill will not provide for a class action
alone.
Number 564
CHAIRMAN TAYLOR maintained the standards that have to be met to
fulfill the prerequisites to bring the claim remain the same,
regardless of whether there is one claimant or 200. Those standards
might be met by writing one letter instead of 200 on behalf of the
entire class but the standards would have to be met to become a
member of the class qualifying to bring suit around the exemptions.
REPRESENTATIVE ROKEBERG said he understands it to mean a business
would have to have damages exceeding $25,000 to become a member of
a class action.
CHAIRMAN TAYLOR indicated that is the way the law currently reads.
He maintained that Senator Ellis's question is whether a business
with a claim below $25,000 will be prevented from joining a class
action suit.
REPRESENTATIVE ROKEBERG said the answer is yes.
SENATOR HALFORD said the effect of that is separate from the effect
of the other provisions of the bill that require all kinds of
protections.
REPRESENTATIVE ROKEBERG explained the other steps must be taken but
they are not relevant to the formation of a class action.
Number 568
SENATOR ELLIS commented the easiest way to address his concern is
to eliminate Section 4 altogether.
REPRESENTATIVE ROKEBERG said the intent is to prevent an attorney
from "running around, getting a bunch of people together to file a
cause of action so that you get a legal fee if there was minor
damages." He noted under that scenario, a substantial action could
be filed if 100,000 people lost power for one day. He added HB 82
is a business protection bill, not a consumer protection bill. The
intent is to minimize the effect on the business community and to
ensure that it meets the standards.
TAPE 99-36, SIDE B
CHAIRMAN TAYLOR expressed concern that the bill amends a strict
court rule about how a class action can occur. He noted the general
concern with class action suits comprised of "those similarly
situated" is that the defendant cannot be reimbursed for attorney's
fees if he/she wins because the plaintiff is nameless, however if
HB 82 refers to primitive contracts, a clearly definable class
exists. He said customers of an electric utility have a contract
with the utility and could file a class action suit if they were
without power for 24 hours and their economic losses were $25,000
each. If they do file a class action suit they are identifiable,
and they are responsible for attorney's fees if they lose. He
noted HB 82 only applies to people with a contractual relationship
with a business.
REPRESENTATIVE ROKEBERG commented the thrust of the bill shifted
from an individual member of a class to an aggregate amount, unless
the totality of damages were a significant amount which would
negate the need to form a class.
CHAIRMAN TAYLOR said class actions sometimes consist of small
groups of 15 or 20 people.
Number 557
REPRESENTATIVE ROKEBERG repeated the thrust of the bill is to
encourage people to fix the problem rather than to put their
resources into litigation. He believes it is the Legislature's
responsibility to set the hurdles that one must jump over before
filing a class action. He thought eliminating that section would
be irresponsible because the purpose of the legislation is to avoid
litigation. He suggested placing a hurdle on the class aggregate
amount, perhaps $250,000.
CHAIRMAN TAYLOR suggested requiring the class to have an aggregate
claim in excess of $25,000.
REPRESENTATIVE ROKEBERG questioned whether one could get a class
together and pay a legal fee for that amount.
CHAIRMAN TAYLOR said one benefit is that using the aggregate amount
would avoid the two-thirds vote on the Senate floor necessary for
a court rule change. He repeated at this point, with the changes
made to the bill, it will apply to a primitive contract group which
is definable so if the defendant wins, he/she will be able to
recover attorney's fees.
REPRESENTATIVE ROKEBERG said he is not pleased with deleting
Section 4 but he will defer to the committee's judgement. He noted
he would be more comfortable adopting the amendment discussed
earlier.
Number 490
SENATOR ELLIS asked if the bills that limit liability for the state
and municipalities could be combined with HB 82, and whether
Chairman Taylor planned to hold a hearing on those bills.
CHAIRMAN TAYLOR said he was curious about whether the bills
interrelate, and if so, why three separate bills were introduced.
REPRESENTATIVE ROKEBERG replied the Governor introduced HB 57.
Many of the changes to HB 82 were added to HB 57, however the issue
of the level of immunity to be granted to the state vis a vis the
municipal governments remains. He believed HB 57 is now similar to
HB 82 in that both the state and the municipalities have to prove
a level of due diligence. He said it might be feasible at this
juncture to combine the bills but he would prefer to keep them
separate as it would take a substantial redrafting effort.
SENATOR ELLIS asked Chairman Taylor to bring HB 57 before the
committee for a hearing.
Number 462
CHAIRMAN TAYLOR said the difficulty with combining the bills is
that the Legislature does not want to pass legislation that is a
disincentive to action; the state immunity bill covers everything.
Personal injury and wrongful death have been removed from HB 82.
He noted that everyone agrees that people and businesses will be
hurt by Y2K, the question is should government entities assume no
liability. The bottom line is that the same amount of people will
get hurt but they will be told that they can't get help from
anyone.
SENATOR ELLIS again requested that HB 57 be scheduled for a hearing
in committee.
Number 432
REPRESENTATIVE ROKEBERG pointed out that the Legislature has been
assured by the private sector infrastructure companies in Alaska
that they will be in compliance. He said the biggest concern about
Y2K is our perceived threat of a problem. If people start hoarding
things in the fourth quarter of 1999, normal buying habits will be
disrupted and affect the first quarter of 2000.
CHAIRMAN TAYLOR noted the likelihood of getting a quorum before the
Senate floor session was not good. He recessed the meeting subject
to the call of the Chair.
TAPE 99-37, SIDE A
CHAIRMAN TAYLOR reconvened the Senate Judiciary Committee meeting.
SENATOR ELLIS suggested changing the $25,000 floor to an aggregate
claim of $150,000.
REPRESENTATIVE ROKEBERG said he would agree to making the shift
from the individual amount to an aggregate amount but he would
prefer to set the limit at $250,000 because he envisions a large
number of people being affected.
CHAIRMAN TAYLOR suggested the following language change on page 4,
line 3: replace the language after the word "unless" with, "the
aggregate claim of all members of the class for economic loss
exceeds $150,000."
REPRESENTATIVE ROKEBERG repeated he disagrees with the amount. He
noted the same change will need to be made to lines 11 and 12 on
page 5.
CHAIRMAN TAYLOR suggested changing lines 11 and 12 on page 5 by
striking the word "each" and inserting "the aggregate claim of all
members of the class for economic loss," and striking the word
"that" and inserting "exceeds $150,000."
REPRESENTATIVE ROKEBERG suggested inserting "year 2000 date change"
after "a" and before "provision" on line 21, page 4. He noted the
drafter felt that language to be redundant but he believes it
clarifies the provision for the average person reading it.
CHAIRMAN TAYLOR thought a change was also necessary on line 15. A
civil action may not proceed to trial until the person bringing the
action provides written notice to the business that describes the
failure of the electronic computing device. He asked how the
victim gets the information until the discovery process occurs.
REPRESENTATIVE ROKEBERG said that is a cure provision to give the
business a chance to fix the problem before a lawsuit is filed.
CHAIRMAN TAYLOR agreed once the letter is written, the business
must be given time to fix the problem, but he asked how an injured
party would know what caused the problem to occur in the first
place.
REPRESENTATIVE ROKEBERG replied the business would have to
troubleshoot to find the problem. He suggested changing the word
"failure" to "problem with."
CHAIRMAN TAYLOR asked how a person in Sleetmute, whose package did
not arrive on time and was told by the carrier that the cause was
a Y2K problem down the line, would know what to do.
REPRESENTATIVE ROKEBERG stated manufacturers are exempt from the
bill. The bill will apply to the computer consultant who should
have fixed a computer code.
Number 192
CHAIRMAN TAYLOR repeated that requiring the victimized business
owner to notify the computer consultant of what the consultant's
problem was is probably beyond the capacity of most injured
parties.
REPRESENTATIVE ROKEBERG said there should be demonstrable and
empirical evidence of failure.
CHAIRMAN TAYLOR clarified that he is concerned about a third party
experiencing a problem with a business and not knowing where the
problem is.
REPRESENTATIVE ROKEBERG suggested modifying that provision with the
phrase, "under the appropriate circumstances."
CHAIRMAN TAYLOR repeated his suggestion to add the following words
to line 15: "provides, if able to do so, written notice to the
business."
REPRESENTATIVE ROKEBERG suggested a conceptual amendment that
reads, "if able to do so or if circumstances provide."
CHAIRMAN TAYLOR suggested requiring the victim to describe the
damages rather than the failure of the computing device, and to
give the business to opportunity to fix the problem.
Number 283
REPRESENTATIVE ROKEBERG said the intent is to put the responsible
party on notice that a failure of a computing device occurred, not
to require the victimized party to describe the root cause of the
problem. He said he would agree to a conceptual amendment to
clarify the intent.
SENATOR ELLIS so moved.
The committee took a recess until 5:12 p.m.
Number 329
SENATOR ELLIS moved to amend (Amendment 1) page 4, lines 3 and 4,
to read, "unless the aggregate claim of all members of the class
for economic loss exceeds $150,000" and to amend page 5, Section 4,
lines 11 and 12 to read, "to the year 2000 date change, that the
aggregate claim of all members of the class for economic loss
exceeds $150,000."
There being no objection, Amendment 1 was adopted.
SENATOR ELLIS moved Amendment 2, to insert on page 4, line 21,
after the words, "a provision of this section that conflicts with
a" the words "year 2000 date change."
There being no objection, Amendment 2 was adopted.
Number 369
CHAIRMAN TAYLOR moved to amend (Amendment 3) line 14, page 4, to
insert the words, ", if appropriate," and to change line 15, to
read, "provide, if able to do, written notice to the business that
describes the failure of the mechanism which contains an electronic
computing device arising from the year 2000 date change;"
There being no objection, Amendment 3 was adopted.
SENATOR ELLIS moved SCSHB 82(JUD) as amended from committee with
individual recommendations. There being no objection, the motion
carried.
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