Legislature(1999 - 2000)

03/21/2000 02:00 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                                                                                
                                                                                                                                
HOUSE FINANCE COMMITTEE                                                                                                         
March 21, 2000                                                                                                                  
2:00 P.M.                                                                                                                       
                                                                                                                                
TAPE HFC 00 - 75, Side 1.                                                                                                       
TAPE HFC 00 - 75, Side 2.                                                                                                       
TAPE HFC 00 - 76, Side 1.                                                                                                       
TAPE HFC 00 - 76, Side 2.                                                                                                       
TAPE HFC 00 - 77, Side 1.                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 2:00 P.M.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Therriault   Representative Foster                                                                                     
Co-Chair Mulder    Representative Grussendorf                                                                                   
Representative Austerman  Representative Moses                                                                                  
Representative Bunde   Representative Phillips                                                                                  
Representative J. Davies  Representative Williams                                                                               
Representative G. Davis                                                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Mike Tibbles, Staff, Representative Gene Therriault; Bob                                                                        
Mintz, Self, Anchorage; Pamela LaBolle, President, Alaska                                                                       
State Chamber of Commerce, Juneau; Senator Robin Taylor; Jim                                                                    
Pound, Staff, Senator Robin Taylor; Carol Carroll, Director,                                                                    
Division of Administrative Services, Department of Natural                                                                      
Resources; Steven Daugherty, Assistant Attorney General,                                                                        
Department of Law; Susan Cox, Assistant Attorney General,                                                                       
Department of Law; Ken Freeman, Executive Director, Resource                                                                    
Development Council (RDC), Anchorage; Michael Lessmier,                                                                         
Attorney, State Farm Insurance, Juneau; Jon Tillinghast,                                                                        
Attorney, SEALASKA Corporation, Counsel to Resource                                                                             
Development Council, Juneau; Wendy Redman, Vice President,                                                                      
Statewide Programs, University of Alaska, Fairbanks.                                                                            
                                                                                                                                
TESTIFIED VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Janice Adair, Director, Division of Environmental Health,                                                                       
Department of Environmental Conservation; Karen Cowert,                                                                         
General Manager, Alaska Support Industry Alliance,                                                                              
Anchorage; Dick Myllius, Resource Assessment Development                                                                        
Section of Land, Mine and Water, Department of Natural                                                                          
Resources.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 42 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; amending Rule 82(b), Alaska Rules of Civil                                                                              
Procedure; and providing for an effective date.                                                                                 
                                                                                                                                
 CS HB 42 (FIN) was reported out of Committee with                                                                              
a "no recommendation" and with new fiscal notes by                                                                              
the Department of Law and the Alaska Court System.                                                                              
HB 239 An Act relating to the Uniform Commercial Code;                                                                          
relating to secured transactions; amending Rule                                                                                 
79, Alaska Rules of Civil Procedure; and providing                                                                              
for an effective date.                                                                                                          
                                                                                                                                
  HB 239 was POSTPONED for hearing until 3/22/00.                                                                               
HB 361 An Act relating to charges for state services;                                                                           
requiring that fees levied by resource agencies                                                                                 
for designated regulatory services be based on the                                                                              
actual and reasonable direct cost of providing the                                                                              
services, except in the case of certain negotiated                                                                              
or fixed fees; relating to negotiated or fixed                                                                                  
fees of resource agencies; relating to invoices                                                                                 
for designated regulatory services; establishing a                                                                              
petition process regarding fees charged by                                                                                      
resource agencies for regulatory services; and                                                                                  
providing for an effective date.                                                                                                
                                                                                                                                
HB 361 was HEARD and HELD in Committee for further                                                                              
consideration.                                                                                                                  
HB 428 An Act relating to interest on child support                                                                             
overpayments that are disbursed to the obligor.                                                                                 
                                                                                                                                
  HB 428 was POSTPONED for hearing until 3/23/00.                                                                               
SB 7 An Act relating to the University of Alaska and                                                                            
university land, and authorizing the University of                                                                              
Alaska to select additional state land.                                                                                         
                                                                                                                                
HCS CS SB 7 (FIIN) was reported out of Committee                                                                                
with a "do pass" recommendation and with new                                                                                    
fiscal notes by the Department of Natural                                                                                       
Resources, Department of Fish and Game and the                                                                                  
University of Alaska.                                                                                                           
HOUSE BILL NO. 42                                                                                                               
                                                                                                                                
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; amending Rule                                                                         
82(b), Alaska Rules of Civil Procedure; and providing                                                                           
for an effective date.                                                                                                          
                                                                                                                                
ROBERT MINTZ, SELF, ANCHORAGE, stated that HB 42 would                                                                          
prevent frivolous lawsuits by requiring parties to a lawsuit                                                                    
and their attorneys to be truthful and responsible in their                                                                     
pleadings.  The bill discourages false statements and claims                                                                    
in litigation and encourages responsibility by all parties                                                                      
and their attorneys.  He added that it would require more                                                                       
careful and focused preparation of pleadings.                                                                                   
                                                                                                                                
This bill creates an obligation, in statute, for litigants                                                                      
and attorneys to make reasonable efforts to assure 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 the judicial                                                                     
system.                                                                                                                         
                                                                                                                                
Mr. Mintz commented that HB 42 would require attorneys, as                                                                      
well as their clients, to research their claims to assure                                                                       
they are factually supported before filing a lawsuit.  The                                                                      
bill will eliminate "boiler plate" pleadings in lawsuits and                                                                    
encourages responsible and focused pleadings.  "Boiler                                                                          
plate" pleadings include everything that "anyone could ever                                                                     
imagine could have happened" rather than focusing on                                                                            
specific issues that actually did occur.  Those extraneous                                                                      
pleadings are expensive for innocent parties to litigate and                                                                    
most often are thrown out.  They cause one party, and the                                                                       
court system, to expend significant dollars to pare down to                                                                     
real issues.                                                                                                                    
                                                                                                                                
Mr. Mintz continued that many suits are often less expensive                                                                    
to settle than to litigate, regardless of their merit.  The                                                                     
bill does not affect suits filed in good faith.  It would                                                                       
deter those without merit.  A system that allows deceit to                                                                      
be rewarded must be changed.                                                                                                    
                                                                                                                                
Mr. Mintz noted that the bill would assign financial                                                                            
liability to those whom:                                                                                                        
                                                                                                                                
? Intentionally advance a civil pleading containing a false                                                                     
allegation  of material fact;                                                                                                   
? File a lawsuit, first determining that it has a                                                                               
reasonable basis in fact or law;                                                                                                
? Use claims or cross claims to cloud an issue;                                                                                 
? File unsuccessful claims on the hope of finding someone                                                                       
willing to settle rather than spending the money to                                                                             
litigate the suit; and                                                                                                          
? Sign a civil pleading before making reasonable inquiry to                                                                     
determine if it is well grounded in fact and warranted by                                                                       
existing law.                                                                                                                   
                                                                                                                                
Mr. Mintz concluded that the basic purpose of HB 42 is to                                                                       
give injured parties effective remedies for bad faith civil                                                                     
litigation.  The bill will only apply to the person lying                                                                       
and that if the facts find a party has made an intentional,                                                                     
false statement of material fact.                                                                                               
                                                                                                                                
Co-Chair Mulder asked Mr. Mintz to explain the procedure                                                                        
established in HB 42.  Mr. Mintz first explained that Civil                                                                     
Rule 11 is the current procedure.  These are rules of                                                                           
procedure that are promulgated by the Supreme Court.  The                                                                       
focus of HB 42 is different from that.  It does not impinge                                                                     
upon the Supreme Court's rule making power.  It creates                                                                         
duties that are owed by people who engage in litigation to                                                                      
other people who are engaged in litigation.  It will create                                                                     
duties of truthfulness.  Civil Rule 11 is discretionary and                                                                     
allows the judge to fashion a remedy in certain                                                                                 
circumstances.                                                                                                                  
                                                                                                                                
Co-Chair Mulder asked Mr. Mintz to explain how the process                                                                      
would function.  Mr. Mintz replied that the legislation                                                                         
would create two remedies.  The first, under Section A,                                                                         
would require the offended party to notify that party that                                                                      
lied. The bill is designed to self correct the system.  He                                                                      
hoped that it could be corrected during the course of                                                                           
litigation.  If not and person who lied was the successful                                                                      
party in the litigation, then subsequently, the person that                                                                     
prevailed could bring a separate action to recover their                                                                        
full costs.                                                                                                                     
                                                                                                                                
Mr. Mintz explained that in the context of an affirmative                                                                       
lie, it would be one of the two ways in which HB 42 could                                                                       
occur.  The other way is during the course of litigation,                                                                       
and there was a jury instruction, and if it was found that                                                                      
someone lied and the lie was material to a particular issue                                                                     
then that person would lose on that issue.  There is an                                                                         
exception to that in cases where public policy is involved.                                                                     
There, the judge could use monetary damages against the                                                                         
liar.                                                                                                                           
                                                                                                                                
Representative J. Davies asked if this discussion was aimed                                                                     
at Page 2, Subsection (b), Lines 8-12.  Mr. Mintz stated                                                                        
that the reference was to Subsection (c), Lines 15-21, which                                                                    
applied to Subsection (b).  Representative J. Davies                                                                            
requested clarification that in the case of someone offering                                                                    
an intentional lie or misstatement of fact, that the                                                                            
underlining claim would get dismissed.  He referenced an                                                                        
occurrence in a child support case.  Co-Chair Mulder stated                                                                     
that those cases are excluded from these actions.  All the                                                                      
excluded type cases are listed on Page 3, Lines 15-20.                                                                          
                                                                                                                                
Representative J. Davies countered that the same principle                                                                      
would apply to other civil cases.  A case is decided on                                                                         
whether or not there is an intentional falsehood.  He                                                                           
understands that there could be a penalty attached, but to                                                                      
decide the underlining truth of the case on that basis would                                                                    
be an over-reaction.                                                                                                            
                                                                                                                                
Co-Chair Mulder stated that after 8 years of working this                                                                       
legislation through the House Judiciary Committee,                                                                              
Subsection (C) had been added to address these concerns.                                                                        
Mr. Mintz stated that Subsection (C) addresses situations                                                                       
where more than just liar's interest is at stake.  He added                                                                     
that through Subsection (B), the court is only required to                                                                      
dismiss the claim or defense to which the false statement                                                                       
relates and not the entire case.  All would not be lost.                                                                        
                                                                                                                                
Representative J. Davies advised that this legislation is an                                                                    
"over reaction".  He did not understand why the whole                                                                           
determination would be decided on one issue.  He believed                                                                       
that information would presumably come out in trial.                                                                            
                                                                                                                                
Co-Chair Mulder responded from the extent that it is                                                                            
material fact, is the center point from which the case was                                                                      
determined, and that those persons must be held responsible                                                                     
for their actions.  Representative J. Davies interjected                                                                        
that Civil Rule 11 does address that point.  Co-Chair Mulder                                                                    
commented that it does not do it effectively.  He indicated                                                                     
that this is a policy statement.  Co-Chair Mulder emphasized                                                                    
that the legislation would elevate the level of conduct                                                                         
expected when going to court.  He questioned if that would                                                                      
be justified.                                                                                                                   
                                                                                                                                
Mr. Mintz enumerated his personal experience in a case. He                                                                      
stated that many of the claims made against him were                                                                            
frivolous during a time that he was Chairman of Alaska                                                                          
Housing Finance Corporation (AHFC).  The defense case cost                                                                      
the State over $200 thousand dollars.  He emphasized that it                                                                    
was a grievous waste of money and there was no way there                                                                        
could be any recourse.  HB 42 resulted from that experience.                                                                    
                                                                                                                                
Co-Chair Mulder made a change to the work draft, 1-LS0246\K,                                                                    
Ford, 3/21/00,[Copy on File], Page 2, Line 17, after                                                                            
"another" insert "person or" and make the same change to                                                                        
Line 18.                                                                                                                        
                                                                                                                                
Vice Chair Bunde MOVED to adopt the work draft version K                                                                        
with the above mentioned changes, as the version of the bill                                                                    
before the Committee.  There being NO OBJECTION, it was                                                                         
adopted.                                                                                                                        
                                                                                                                                
Vice Chair Bunde asked what would happen if someone lied and                                                                    
prevailed.  He inquired how the statutes on perjury would                                                                       
interrelate with this legislation.  Mr. Mintz replied that                                                                      
perjury is criminal.  The bill only applies to a civil                                                                          
context. He agreed that a criminal case is held to a higher                                                                     
standard than a civil case.  Mr. Mintz stated that the bill                                                                     
is a "step in the right direction, but does not fix all the                                                                     
problems out there".                                                                                                            
                                                                                                                                
Representative Williams asked if the legislation applied to                                                                     
lying under oath.  Mr. Mintz explained that the bill                                                                            
addresses more than lying under oath.  It applies to                                                                            
statements which you know are false.  It also applies to                                                                        
motions and affidavits that are filed in court.                                                                                 
                                                                                                                                
Representative J. Davies asked if the legislation would                                                                         
apply to cases where a statement had been omitted                                                                               
intentionally.  Mr. Mintz replied that it would apply                                                                           
equally to denials, which are known to be false, and is                                                                         
meant to apply to both sides.   Representative J. Davies                                                                        
pointed out that the party would have to lose the case.                                                                         
                                                                                                                                
Co-Chair Mulder interjected that "this is a two edge sword".                                                                    
It should focus the discussion more on the points of                                                                            
difference.  Representative J. Davies inquired where that                                                                       
reference was indicated in the legislation.  Mr. Mintz                                                                          
commented that if what you claim is true and it is denied,                                                                      
it would be covered in this legislation.                                                                                        
                                                                                                                                
Representative Phillips added that making a false statement                                                                     
could encompass an omission of fact because not including                                                                       
all the facts is in of itself, a false statement.                                                                               
                                                                                                                                
KAREN COWERT, (TESTIFIED VIA TELECONFERENCE), GENERAL                                                                           
MANAGER, ALASKA SUPPORT INDUSTRY ALLIANCE (THE ALLIANCE),                                                                       
ANCHORAGE, stated that the Alliance has served as the                                                                           
statewide non-profit trade organization for businesses which                                                                    
provide products and services to the oil and gas industry.                                                                      
                                                                                                                                
Ms. Cowert noted that House Bill 42 would require litigating                                                                    
parties to research their claims to assure accuracy, or pay                                                                     
the consequence of suing without just cause.  The Alliance                                                                      
supports such measures.                                                                                                         
                                                                                                                                
She commented that Alaska has suffered significant economic                                                                     
losses as a few individuals successfully circumvent public                                                                      
processes through litigation.  It seems that nearly every                                                                       
proposal or plan to develop the State's natural resources or                                                                    
to enhance its infrastructure is met with a lawsuit,                                                                            
regardless of whether there are reasonable grounds to sue.                                                                      
She noted that the Alliance believes that many such legal                                                                       
actions only serve to delay developments that are important                                                                     
to Alaskans' quality of life and economic well being.                                                                           
                                                                                                                                
Ms. Cowart pointed out that HB 42 would create an                                                                               
obligation, in statute, for litigants and attorneys to make                                                                     
reasonable efforts to ensure their claims have a factual                                                                        
bearing before filing a lawsuit.  The bill would also make                                                                      
those that filed a frivolous suit responsible for assessed                                                                      
damages.  Furthermore, the bill will assign financial                                                                           
liability to those who cloud the issue with false or                                                                            
misleading claims, in hopes of finding a party willing to                                                                       
settle rather than spend dollars to litigate.                                                                                   
                                                                                                                                
She noted that the Alliance believes that each party in a                                                                       
lawsuit has a responsibility to present factual and                                                                             
legitimate information.  A system that allows deceit to be                                                                      
awarded is not right.                                                                                                           
                                                                                                                                
PAMELA LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE,                                                                    
JUNEAU, testified in support of the proposed legislation.                                                                       
She stated that the legislation proposes a basic premise                                                                        
needed to address that intentional lying should not prevail.                                                                    
She concurred that there needs to be a way to punish people                                                                     
who base a case on an intentional lie.                                                                                          
                                                                                                                                
Representative Grussendorf observed that in many situations,                                                                    
the truth is a "fine line".  Co-Chair Mulder pointed out                                                                        
that there is a standard established in the legislation                                                                         
emphasizing "reasonable" and that it would address that                                                                         
concern.                                                                                                                        
                                                                                                                                
MICHAEL LESSMIER, ATTORNEY, STATE FARM INSURANCE, JUNEAU,                                                                       
stated that State Farm Insurance supports the proposed                                                                          
legislation as it sets forth a minimal standard that people                                                                     
need to go through before they undertake a lawsuit.  It                                                                         
clarifies that one makes sure that the case has a reasonable                                                                    
basis in fact and in law.  If it does not, the bill states                                                                      
that you can not continue.  He clarified that those are                                                                         
protections which have not been present.  Additionally, the                                                                     
bill establishes a "truth provision", which applies only to                                                                     
a party that intentionally makes a false statement of                                                                           
material fact.  Nothing in the bill is intended to address                                                                      
the situation where witnesses have a ligitiment difference                                                                      
of opinion. It is designed to address conduct by a party                                                                        
which does not meet a reasonable standard of investigation.                                                                     
He stated that the proposed legislation is "preventative and                                                                    
curative" in the sense that it will cure a wrong that has                                                                       
been done.                                                                                                                      
                                                                                                                                
In response to Co-Chair Mulder, Mr. Lessmier explained that                                                                     
contained in Section (A), Subsection 2, clarifies that as                                                                       
long as there is a reasonable inquiry, and you form a                                                                           
reasonable belief in the existence of facts from which the                                                                      
claim or defense is made you are protected.  You could be                                                                       
sued only if you don't meet this minimal standard and you                                                                       
fail to respond to the notice and correct your action in 21                                                                     
days, and then you lost the case.  On the issue in question,                                                                    
the notice provision is designed to be self-corrective.  As                                                                     
long as there is a reasonable basis in law and fact, the                                                                        
legislation will not hurt you.  The legislation is not                                                                          
designed to second- guess anything.                                                                                             
                                                                                                                                
Representative J. Davies stated that if it were an obvious                                                                      
case where someone was lying and it was obvious that it was                                                                     
done intentionally, then everyone would agree that person                                                                       
should be punished.  He added, however, that he had problems                                                                    
with the logic.  "Life is often messy" and there will always                                                                    
be "gray" areas where it is difficult to tell the intent of                                                                     
a person and where the law applies.  It is not always easy                                                                      
to read the statutes to determine if the law applies. That                                                                      
is why cases go to court so to determine if the law applies.                                                                    
He believed that the legislation could prevent cases from                                                                       
forming because of "fear" or "worry" that their view in                                                                         
relation to how the law applies might be determined to be                                                                       
incorrect and they then they would be stuck. Representative                                                                     
J. Davies voiced additional concern with the penalty, which                                                                     
would dismiss the claim because someone might have                                                                              
intentionally lied about it.                                                                                                    
                                                                                                                                
Mr. Lessmier asked the Committee to consider who are we                                                                         
really trying to protect.  Is it the person who makes a                                                                         
false statement of fact for purposes of material gain.  He                                                                      
believed that should be discouraged and that the victim                                                                         
should be protected.  He emphasized that was the fundamental                                                                    
issue of the provision, as it applies only to a party who                                                                       
intentionally makes false statements of fact.  The people                                                                       
that need to be protected are the ones that are innocent                                                                        
victims of that conduct.  Representative J. Davies stated                                                                       
that if nine out of ten facts were true, and that the person                                                                    
was guilty under nine assertions but under the tenth one                                                                        
they were not guilty, what would happen.  He stressed that                                                                      
it would not be about protecting some innocent victim, but                                                                      
rather, they were guilty but allowed to "skate" because                                                                         
someone lied under one assertion.                                                                                               
                                                                                                                                
Mr. Lessmier stated that in a real life situation, the jury                                                                     
would probably not find that the one fact would be                                                                              
sufficiently "material" in terms of the context of the                                                                          
claim.   That one fact would probably be viewed as                                                                              
insignificant.  The legislation requires that it be                                                                             
intentional, false and material.  He emphasized that is                                                                         
important.  The message that the legislation is sending is                                                                      
that people found to fit this conduct are going to be few                                                                       
because the standard is high.                                                                                                   
                                                                                                                                
Mr. Lessmier expressed that nothing in the bill is designed                                                                     
for a situation where someone takes a position based on                                                                         
research and thought which is wrong.  All that it states is                                                                     
that you have a "reasonable basis in law".  It does not say                                                                     
you have to win.  Representative J. Davies asked that cite.                                                                     
Mr. Lessmier referenced two provisions, 2(a)(b), which                                                                          
indicates "reasonable inquiry and forming a reasonable                                                                          
belief".  The next provision that is important stipulates                                                                       
that nothing is designed from preventing someone from                                                                           
arguing in good faith that the law should be changed or                                                                         
extended.  This would not apply to someone using the minimal                                                                    
standard with some research and thought.                                                                                        
                                                                                                                                
Co-Chair Mulder asked who the bill designed to protect. If a                                                                    
person tells the truth, the bill would protect them.  He                                                                        
stressed that it would be difficult to argue on behalf of                                                                       
someone that is not telling the truth.  Representative J.                                                                       
Davies reiterated that if the world was black and white, he                                                                     
would agree with Co-Chair Mulder.  However, it is not so.                                                                       
The proposed legislation could have a "chilling effect" on                                                                      
those people who do not have a lot of resources and are up                                                                      
against corporations that do and are sophisticated.                                                                             
                                                                                                                                
Co-Chair Mulder asserted that the world is black and white                                                                      
in relationship to truth and fact. The truth is not gray.                                                                       
If you were the one being taken to court, you would have to                                                                     
prove why the other person believed that what you said was                                                                      
untrue.  He emphasized that this is a balancing act.                                                                            
                                                                                                                                
(TAPE CHANGE, HFC 00 - 75, Side 2)                                                                                              
                                                                                                                                
Representative Grussendorf asked how the Department of Law                                                                      
would operate under the proposed legislation.                                                                                   
                                                                                                                                
SUSAN COX, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,                                                                       
stated that the Department recognizes that "things are not                                                                      
always black and white".  While the bill is not directed at                                                                     
addressing the legitimate differences of opinions between                                                                       
opponents in civil litigation, it does raise the possibility                                                                    
that if parties do not agree, in either case, the loser                                                                         
looses, and that if the winner does not recover their full                                                                      
compensation, they will then take the next step of pursuing                                                                     
the second loss against that party for whatever they did not                                                                    
get the first time around.  She pointed out the focus on the                                                                    
aspect of "intentional lying" addressed in (A)-2 of the                                                                         
bill.  However, (A)-3 provides that a cause of action will                                                                      
arise if a person participates in a continuation of claim                                                                       
after a person discovers that the claim or defensive is not                                                                     
supported by a reasonable basis or valid under applicable                                                                       
law.                                                                                                                            
                                                                                                                                
Ms. Cox could foresee situations, in which, after the "dust                                                                     
settles", the argument is made that the looser has lost.                                                                        
The law did not apply or the facts did not appear as they                                                                       
were portrayed to be.  They would loose. She foresaw the                                                                        
provision of (A)-3 to be more of an "open door" than the                                                                        
intentional lying.  Ms. Cox added that is why the Department                                                                    
has submitted a fiscal note.                                                                                                    
                                                                                                                                
Representative Grussendorf voiced concern that the issue                                                                        
does not get in the way of the defense of the original case.                                                                    
He looked at the amount of time that the case could consume                                                                     
and how discouraging that could become.  He recommended more                                                                    
funding for Alaska Legal Services.                                                                                              
                                                                                                                                
Ms. Cox noted that because of the procedure in the bill, in                                                                     
order to invoke the cases of action, someone would have to                                                                      
give notice to the opposing party that they should take                                                                         
corrective action.  She noted that corrective action could                                                                      
cause liability prospects.                                                                                                      
                                                                                                                                
Co-Chair Mulder suggested that as a lawyer, it would be                                                                         
prudent to provide reasonable inquiry to establish whether                                                                      
your client is telling the truth.  Ms. Cox replied that is                                                                      
true but pointed out to the reference to (A)-3, which states                                                                    
that if the attorney continues to litigate the case,                                                                            
maintaining a claim or defense that is not supported by a                                                                       
reasonable basis applicable by current law, does not mean                                                                       
that the attorney would not get sued.  She stressed that                                                                        
there would be another layer of intrigue.  If it is a                                                                           
complicated case, it could result in a situation where                                                                          
competing experts and the reasonableness of facts would be                                                                      
an issue.  She emphasized that this legislation is going to                                                                     
cost money.                                                                                                                     
                                                                                                                                
Representative Grussendorf stated that the bill would                                                                           
protect the attorney who is supposedly telling the truth.                                                                       
However, the witness would be out of the protection area.                                                                       
                                                                                                                                
Mr. Lessmier explained that Subsection (B)&(C) do not apply                                                                     
to the witness.  He objected to the comment that the                                                                            
legislation would create more litigation.  He suggested                                                                         
contrasting what is currently in the system.  What exists                                                                       
now is "nothing".  If someone is faced with an allegation                                                                       
that is frivolous or untrue, there is no protection.  The                                                                       
cost can be high.  The proposed legislation provides                                                                            
something "in between".  It requires a notice to correct the                                                                    
action.  If the action is corrected, there will be no                                                                           
opportunity for a second suite.  If the party does not win,                                                                     
they do not receive a second chance. Actual attorney fees                                                                       
and cost would have to be paid by the loosing party to any                                                                      
action created by the bill.  Mr. Lessmier stated there are                                                                      
incentives for this to be "self curing and protective" to                                                                       
the person that is subject to these claims.                                                                                     
                                                                                                                                
Representative J. Davies asked if the statement that "there                                                                     
is nothing to defend against" is a true statement.  Ms. Cox                                                                     
responded that could be "called into place".  Civil Rule 11                                                                     
could be used as a possibility for a sanctioning attorney                                                                       
who is involved in failing to make an inquiry.  It is not                                                                       
frequently invoked.                                                                                                             
                                                                                                                                
Ms. Cox noted that Rule 82 provides for partial attorney fee                                                                    
recovery to prevailing parties and actually includes a                                                                          
formula for how much the winner gets.  There are eight                                                                          
factors, which allow the Courts to deviate from that                                                                            
formula.  Some of the subsections in Rule 86 allow for                                                                          
increasing the fee award for certain stipulations including                                                                     
bad faith conduct.                                                                                                              
                                                                                                                                
Civil Rule 56 provides for the standard for granting summary                                                                    
judgement in the State and has a penalty in 56(G) which                                                                         
states that if it appears to the satisfaction of the Court,                                                                     
many of the affidavits presented in support of judgement                                                                        
motion are presented in bad faith, for the purpose of delay,                                                                    
the court can then order the party, reasonable expenses and                                                                     
include reasonable fees.  There are civil causes of action                                                                      
in common law for abusive process and malicious prosecution,                                                                    
which are more difficult to prove than what currently exists                                                                    
in legislation.                                                                                                                 
                                                                                                                                
Co-Chair Mulder asked what was wrong with the current                                                                           
system.  Mr. Lessmier responded that the difficulties with                                                                      
Civil Rule 11 are remedies that are rarely invoked by a                                                                         
judge.  Remedy under Rule 82 requires a person to litigate                                                                      
until the end.  And then with that, one could only receive a                                                                    
portion of the costs and attorney fees.  There is no                                                                            
mechanism for self-correction in the current law.                                                                               
                                                                                                                                
Representative J. Davies asked about the category of                                                                            
perjury.  Additionally, if the case is clearly frivolous,                                                                       
and not based in law, he asked if the judge had the right to                                                                    
dismiss the case.  Mr. Lessmier commented that even if a                                                                        
perjury case were aggressively prosecuted, it still would                                                                       
not protect the people that are victims of this conduct. It                                                                     
would not apply until after the fact.  He did not believe                                                                       
that the Department of Law often uses their resources to                                                                        
prosecute these types of cases.  Additionally, there is a                                                                       
standard for judges in ruling on motions for summary and                                                                        
judgement.  The work of the court in those situations is to                                                                     
look at the facts in the light most favorably to the other                                                                      
side. The court will not weigh whether one person is telling                                                                    
the truth or not.  The court assumes if person signs an                                                                         
affidavit, the case will not be dismissed. He emphasized                                                                        
that it is rare for a court to make a finding that a case if                                                                    
frivolous.                                                                                                                      
                                                                                                                                
Ms. Cox disagreed, noting that if there is a dispute of                                                                         
fact, a summary of judgement will not be granted.  If                                                                           
someone is putting forth-false information, the court will                                                                      
not weigh the credibility of the respective witnesses.                                                                          
However, if the case is not founded in the law, it is common                                                                    
to be able to get dismissal, which does occur frequently.                                                                       
Mr. Lessmier agreed that if it is not founded or based in                                                                       
the law, that the courts will dismiss those cases.                                                                              
                                                                                                                                
Representative G. Davis referenced the number of perjury                                                                        
cases that have been tried.  He asked if there should have                                                                      
been more.  Mr. Lessmier replied that in the 1st Judicial                                                                       
District, he did not know of a perjury case being tried.                                                                        
                                                                                                                                
Representative G. Davis asked if the judge could make that                                                                      
determination and then would it be appealable.  Ms. Cox                                                                         
responded that there are two considerations in that.  Rule                                                                      
82, which is the civil rule that allows the winner to                                                                           
recover part of their attorney's fees from the looser is the                                                                    
area which states that "bad faith conduct" on the part of a                                                                     
looser "enhances the award the winner gets". That would be                                                                      
the court's call and it is appealable including the award of                                                                    
fees.   Mr. Lessmier clarified that it is appeallable only                                                                      
under an abuse of discretion standard, which is difficult to                                                                    
meet.                                                                                                                           
                                                                                                                                
Representative J. Davies requested that Senator Taylor                                                                          
testify on the proposed legislation.                                                                                            
                                                                                                                                
SENATOR ROBIN TAYLOR commented that there is "no good side"                                                                     
to the legislation.  He noted that in his own experience as                                                                     
a judge and attorney, he has seen as much bad faith claims                                                                      
by people representing insurance carriers.  Many more than                                                                      
those people litigating on behalf of victims.  "The                                                                             
insurance companies are not victims".  They end up paying                                                                       
victims.  There is no incentive for a private practitioner                                                                      
that is handling a case on a contingency fee because "all                                                                       
that it will do, is to further delay his case". The faster                                                                      
the case can be gotten to trail is the quicker he will get                                                                      
his own money back because he is the one paying for the cost                                                                    
of the case.  Senator Taylor reiterated that there would be                                                                     
no incentive to delay the case.  Bringing additional claims                                                                     
to the ability for settlement or leverage could enhance the                                                                     
case.                                                                                                                           
                                                                                                                                
Senator Taylor added that on the defense side, there is no                                                                      
impediment for defense council to throw everything they can                                                                     
at case and make motions on each aspect of it. He emphasized                                                                    
it will happen.  On the two sides of litigation, there first                                                                    
is the attorney that will be paid for all their time. Even                                                                      
after they loose the motion, they are still going to get                                                                        
paid.  They have no accountability what so ever.  On the                                                                        
other side of that issue, there are people who are paying                                                                       
their own money to litigate cases on behalf of injured                                                                          
parties.  He questioned how to balance the two.  He asked                                                                       
how to put more backbone into the judiciary system. Senator                                                                     
Taylor stated that there are all types of remedies, which a                                                                     
judge has at their disposal to curtain the types of                                                                             
activities that the bill is trying to touch.  He added that                                                                     
the bill is well motivated, however, with the "huge,                                                                            
economic disparity" between the benefits flowing from one                                                                       
side to another, the disparity must be first balanced. He                                                                       
agreed that one side would be placed at a disadvantage.                                                                         
                                                                                                                                
Senator Taylor advised that all the testimony in favor of                                                                       
this bill would come from the insurance industry.  Co-Chair                                                                     
Mulder disagreed, noting the letters of support contained in                                                                    
member's packets.                                                                                                               
                                                                                                                                
Senator Taylor countered that he was referring to                                                                               
professionals. Co-Chair Mulder interjected that these are                                                                       
"real people" and he stressed that there is no way that they                                                                    
can be made "whole".  Senator Taylor suggested that is why                                                                      
Rule 82 needs to be changed.  If that rule was changed,                                                                         
those people could be made whole.  When it comes to                                                                             
professionals within the law, the people that will be seen                                                                      
are coming from the insurance industry.  He emphasized that                                                                     
private practitioners will not testify in support of this                                                                       
legislation.  He stressed that this bill is a lawyer's                                                                          
dream.  If you have a client big enough that can afford to                                                                      
litigate on every issue, they not only get to litigate on                                                                       
that case, but with notice they can litigate on many other                                                                      
cases which that attorney prevailed on.  He provided a                                                                          
hypothetical situation of going over the speed limit.  What                                                                     
is the truth of `over the speed limit".  Each person could                                                                      
bring in witnesses regarding that fact and your speed.  The                                                                     
jury of twelve people has to determine that information.  He                                                                    
reiterated that fact is determined by the jury and                                                                              
determined by the preponderance of the evidence.  The                                                                           
evidence could trigger a whole series of additional                                                                             
litigation.                                                                                                                     
                                                                                                                                
Senator Taylor agreed that a way to correct the complication                                                                    
should be attempted.  However, he believed that we should do                                                                    
more to strengthen the methods of remedies within law to                                                                        
address the vexatious case.  The manner that has been                                                                           
established in the proposed legislation creates an economic                                                                     
distortion that occurs in real life that can not be                                                                             
accounted for in the bill.                                                                                                      
                                                                                                                                
Co-Chair Mulder disagreed, stating that there is no means                                                                       
for the common person to adequately defend himself when it                                                                      
is cheaper to settle out of court.  The insurance company                                                                       
will tell them that.  "There is no way to be made whole"                                                                        
with the cost of attorney fees and everything else.  Senator                                                                    
Taylor interjected that until Rule 82 is changed; nothing                                                                       
will be made whole.  He concluded that the system could use                                                                     
some adjusting and he supported the effort but warned about                                                                     
the consequences.                                                                                                               
                                                                                                                                
Mr. Mintz responded that the multiplicity of litigation                                                                         
issue has come up a few times. In truth, it will not be                                                                         
known without evidence and without trying something new to                                                                      
see how it works.  He believed that HB 42 would work as it                                                                      
changes the paradigm that we are used to living with in                                                                         
connection with litigation.  He did not think that after HB
42 passes that someone would be as easy or as quick to file                                                                     
lawsuit to assert a marginal claim.  The goal of the                                                                            
legislation is to raise the bar and make it so that the                                                                         
marginal claims fall out of the system and only the                                                                             
substantial claims move forward.                                                                                                
                                                                                                                                
Mr. Mintz stated that when HB 42 action is filed, you would                                                                     
have to be clear that there is no basis for the suit that                                                                       
you successfully prevailed in.  When filed, you are exposing                                                                    
yourself to the actual costs and attorneys fees.  It would                                                                      
not be an action that would be taken lightly or done on a                                                                       
marginal case.  He added that the cases where it has cost a                                                                     
lot of money to defend the claim, those are the cases where                                                                     
HB 42 action should be allowed.                                                                                                 
                                                                                                                                
Co-Chair Mulder asked why not "beef up Rule 82".  Mr. Mintz                                                                     
stated that the real reason is that it would take a two-                                                                        
thirds vote of the legislature to change a court rule and it                                                                    
only takes a simple majority to create a new cause of                                                                           
action.                                                                                                                         
                                                                                                                                
Representative Grussendorf commented that by the title of                                                                       
the bill, that would still be required.  Mr. Mintz replied                                                                      
that would occur only for the section that provides for                                                                         
actual costs and attorneys fees.  All the substantive                                                                           
provisions go into effect for the cause of action.  What                                                                        
would be lost without the two-thirds majority would be the                                                                      
actual cost and attorney fees.                                                                                                  
                                                                                                                                
Vice Chair Bunde MOVED to report CS HB 42 (FIN) out of                                                                          
Committee with individual recommendations and with the                                                                          
accompanying fiscal notes.  There being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CS HB 42 (FIN) was reported out of Committee with a "no                                                                         
recommendation" and with new fiscal notes by the Department                                                                     
of Law and the Alaska Court System.                                                                                             
                                                                                                                                
(TAPE CHANGE, HFC 00 - 76, Side 1)                                                                                              
SENATE BILL NO. 7                                                                                                               
                                                                                                                                
An Act relating to the University of Alaska and                                                                                 
university land, and authorizing the University of                                                                              
Alaska to select additional state land.                                                                                         
                                                                                                                                
Co-Chair Therriault MOVED to ADOPT Amendment #1, 1-                                                                             
LS0072\W.1, Luckhaupt, 3/21/00.  [Copy on File].                                                                                
Representative J. Davies OBJECTED for the purpose of                                                                            
discussion.                                                                                                                     
                                                                                                                                
MIKE TIBBLES, STAFF, REPRESENTATIVE GENE THERRIAULT,                                                                            
distributed language that would help clarify the amendment.                                                                     
[Copy on File].  He noted that there had been a question                                                                        
regarding when the land could be selected and explained it                                                                      
could be chosen if it was not being used.  The additional                                                                       
language speaks to the role of the municipality.  Co-Chair                                                                      
Therriault clarified that the University and the                                                                                
municipality would be on the same "footing".                                                                                    
                                                                                                                                
Representative J. Davies questioned the clause in the                                                                           
addendum that "the University may not select the land".                                                                         
                                                                                                                                
WENDY REDMAN, VICE PRESIDENT, STATEWIDE PROGRAMS, UNIVERSITY                                                                    
OF ALASKA, FAIRBANKS, recommended that a comma replace the                                                                      
semicolon.                                                                                                                      
                                                                                                                                
Representative J. Davies WITHDREW his OBJECTION to the                                                                          
amendment.  There being NO further OBJECTION, Amendment #1                                                                      
was adopted.                                                                                                                    
                                                                                                                                
Co-Chair Therriault WITHDREW Amendment #2, 1-LS0072\W.2,                                                                        
Luckhaupt, 3/21/00.  [Copy on File].                                                                                            
                                                                                                                                
Co-Chair Therriault MOVED to adopt Amendment #3, 1-                                                                             
LS0072\W.3, Luckhaupt, 3/21/00.  [Copy on File].  There                                                                         
being NO OBJECTION, Amendment #3 was adopted.                                                                                   
                                                                                                                                
Representative J. Davies stated that Amendment #2 would                                                                         
"fix" the logic of Subsection M.  He suggested that the                                                                         
language in that section does not make sense without the                                                                        
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Therriault requested Ms. Redman to explain that                                                                        
language.  Ms. Redman replied that the language that exists                                                                     
in the draft bill W.2, all conveyances of land come to the                                                                      
University with the existing easement rights-of-way. Ms.                                                                        
Redman noted that the University is interested in receiving                                                                     
reasonable protection.                                                                                                          
                                                                                                                                
Vice Chair Bunde speculated that if the amendment were                                                                          
offered, it would put pressure on the Commissioner of the                                                                       
Department of Natural Resources to speed up easements on the                                                                    
right-of-ways.                                                                                                                  
                                                                                                                                
Representative J. Davies requested to modify Amendment #2 by                                                                    
placing it in the positive.  On Line 3, delete "may not                                                                         
conveying" and insert "when conveying"; Line 4, delete                                                                          
"reserves" and insert "shall reserve".                                                                                          
                                                                                                                                
JIM POUND, STAFF, SENATOR ROBIN TAYLOR, noted that language                                                                     
would work well.                                                                                                                
                                                                                                                                
Representative J. Davies MOVED to adopt the amended                                                                             
Amendment #2.  There being NO OBJECTION, it was adopted.                                                                        
                                                                                                                                
Representative J. Davies MOVED to adopt an amendment on Page                                                                    
12, Line 19, deleting "may" and inserting "shall".  Co-Chair                                                                    
Therriault OBJECTED.                                                                                                            
                                                                                                                                
Representative J. Davies explained that the change would                                                                        
illustrate the concept of the University "demonstration                                                                         
forest".  He thought that using "may" would leave a                                                                             
possibility that nothing would happen.  If "shall" is used,                                                                     
it is guaranteed that there will be action.                                                                                     
                                                                                                                                
Co-Chair Mulder asked if Representative J. Davies believed                                                                      
that the demonstration forest would make money for the                                                                          
University.  Representative J. Davies stated it would.  Ms.                                                                     
Redman argued that she did not know. She believed that the                                                                      
primary purpose of a demonstration forest would not be to                                                                       
maximize income but to act as laboratory for forestry                                                                           
practices.                                                                                                                      
                                                                                                                                
Co-Chair Mulder understood that the purpose of the bill was                                                                     
to attempt to make the University "whole" from possible                                                                         
income generated.  He voiced concern that it could become a                                                                     
"money looser" rather than a "money maker".  Representative                                                                     
J. Davies argued that there has been resistance to                                                                              
developing the forestlands.  He commented that Alaska has                                                                       
not moved into the modern age of how to manage forests.  He                                                                     
stressed the language change would allow more economic                                                                          
development.                                                                                                                    
                                                                                                                                
Vice Chair Bunde complained that "shall" would make for                                                                         
micro-management.  Co-Chair Therriault agreed.  Inclusion of                                                                    
"shall" indicates that the Legislature would like to see                                                                        
something happen on the land but are not mandating it.                                                                          
                                                                                                                                
Representative G. Davis pointed out that there are many                                                                         
"shalls" included in the same section of the bill.  He asked                                                                    
if there would be an opportunity for grants if the                                                                              
University had established the demonstration project.                                                                           
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:  Grussendorf, Moses, Phillips, J. Davies                                                                              
OPPOSED: Austerman, Bunde, G. Davis, Foster, Mulder,                                                                            
Therriault                                                                                                                      
                                                                                                                                
Representative Moses was not present for the vote.                                                                              
                                                                                                                                
The MOTION FAILED (4-6).                                                                                                        
                                                                                                                                
Ms. Redman noted that the University's fiscal note should be                                                                    
in sink with Department of Natural Resources.  The                                                                              
University would be spending all non-general funds.                                                                             
                                                                                                                                
CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIVE                                                                             
SERVICES, DEPARTMENT OF NATURAL RESOURCES, interjected that                                                                     
the Department of Natural Resources will provide a revised                                                                      
fiscal note indicating interagency receipts.                                                                                    
                                                                                                                                
Representative J. Davies asked the assumption in making the                                                                     
additional increment of $600 thousand dollars.  Ms. Carroll                                                                     
replied that on bigger sections of land, the cost is less to                                                                    
survey. She emphasized that the Department will only be paid                                                                    
for the work that they do.                                                                                                      
                                                                                                                                
Representative J. Davies inquired if the legislation was                                                                        
approved, could an RPL be developed if there was a need.                                                                        
Co-Chair Therriault agreed, noting that it is important that                                                                    
the Legislature take a "guess" as to what it is going to be.                                                                    
                                                                                                                                
Co-Chair Therriault asked if the legislation were to come                                                                       
into law, how quickly would the University be incurring some                                                                    
of these costs.  Ms. Redman responded that the University                                                                       
would be able to be back the first year with some small                                                                         
sections of lands.  There has been discussion with some                                                                         
municipalities of undertaking some shared development.  She                                                                     
anticipated needing the full ten years for the amount of                                                                        
land.                                                                                                                           
                                                                                                                                
Co-Chair Therriault recommended that the amount should be                                                                       
estimated.  He questioned if there needed to be a change to                                                                     
the note.  Ms. Redman did not anticipate that, however asked                                                                    
to check with the University's financial division.                                                                              
                                                                                                                                
Co-Chair Therriault questioned why the dollar amount did not                                                                    
match with the Department.  Ms. Carroll noted that the note                                                                     
from the Department should reflect the "House Resources                                                                         
Committee" version of the bill.  Ms. Redman added that the                                                                      
corrected fiscal notes would be available tomorrow.                                                                             
                                                                                                                                
Ms. Redman commented that there was nothing in the bill that                                                                    
would require them to give money to the Department of Fish                                                                      
and Game.  Ms. Redman stated that the Commissioner of                                                                           
Department of Natural Resources in collaboration with the                                                                       
Commissioner of Department of Fish and Game would make that                                                                     
determination.                                                                                                                  
                                                                                                                                
Ms. Carroll asked for clarification whether it was                                                                              
anticipated that Department of Natural Resources would be                                                                       
collecting for the Department of Fish and Game.                                                                                 
                                                                                                                                
DICK MYLIUS, (TESTIFIED VIA TELECONFERENCE), RESOURCE                                                                           
ASSESSEMENT DEVELOPMENT SECTION of LAND, MINE AND WATER,                                                                        
DEPARTMENT OF NATURAL RESOUCRS, stated that the Department's                                                                    
fiscal note did not include Department of Fish and Game                                                                         
costs.   That Department would be reviewing selections from                                                                     
a wildlife point of view, which was not factored into the                                                                       
costs for the Department of Natural Resources.                                                                                  
                                                                                                                                
Co-Chair Therriault noted that the fiscal notes would be                                                                        
adjusted so that the dollar amount was in sink.                                                                                 
                                                                                                                                
Representative Austerman asked to change the Department of                                                                      
Fish and Game fiscal note to reflect interagency receipt                                                                        
money coming from the University.  Ms. Redman stated that                                                                       
the University would not be purchasing services from                                                                            
Department of Fish and Game.  Representative Austerman asked                                                                    
if the Department of Fish and Game fiscal note was                                                                              
erroneous.  Co-Chair Therriault stated that the Department                                                                      
of Fish and Game would be offering an opinion with                                                                              
dispositions of State lands.  Ms. Carroll believed that                                                                         
Department of Fish and Game's note was written in reference                                                                     
to Page 6, Lines 22-25.  She believed that it would create a                                                                    
lot of work.                                                                                                                    
                                                                                                                                
Representative Phillips suggested that the fiscal note be                                                                       
changed to interagency receipts to Department of Natural                                                                        
Resources rather than to the University.                                                                                        
                                                                                                                                
Representative Austerman stated that he did not want to see                                                                     
more work for the Department without funding.  Somewhere                                                                        
along the way, the Department will need to be paid.  Ms.                                                                        
Redman supported the idea presented by Representative                                                                           
Phillips.  She noted that she did not anticipate the                                                                            
Department of Fish and Game being impacted, however, the                                                                        
University would compensate that Department for the seal of                                                                     
approval on the lands.  She recommended that be incorporated                                                                    
through interagency receipts. Ms. Redman noted that the                                                                         
Department of Natural Resources fiscal note would be handled                                                                    
separately.                                                                                                                     
                                                                                                                                
Representative J. Davies MOVED to report HCS CS SB 7 (FIN)                                                                      
out of Committee with individual recommendations and with                                                                       
the attached fiscal notes.  There being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCS CS SB 7 (FIN) was reported out of Committee with a "do                                                                      
pass" recommendation and with new fiscal notes by the                                                                           
Department of Fish and Game, the University of Alaska and                                                                       
Department of Natural Resources.                                                                                                
HOUSE BILL NO. 361                                                                                                              
                                                                                                                                
An Act relating to charges for state services;                                                                                  
requiring that fees levied by resource agencies for                                                                             
designated regulatory services be based on the actual                                                                           
and reasonable direct cost of providing the services,                                                                           
except in the case of certain negotiated or fixed fees;                                                                         
relating to negotiated or fixed fees of resource                                                                                
agencies; relating to invoices for designated                                                                                   
regulatory services; establishing a petition process                                                                            
regarding fees charged by resource agencies for                                                                                 
regulatory services; and providing for an effective                                                                             
date.                                                                                                                           
                                                                                                                                
Representative Bunde MOVED to ADOPT the work draft for HB
361, #1-LS1299\I, Kurtz, 3/21/00. There being NO OBJECTION,                                                                     
it was adopted.                                                                                                                 
                                                                                                                                
MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT, provided an                                                                     
overview of the work draft.  He noted that there were a few                                                                     
items which did not make it into the draft.                                                                                     
                                                                                                                                
The first change would be to Page 2, Line 15, the language                                                                      
"Except as provided in AS 37.10.052(a)" was added.  He noted                                                                    
that the language would provide for an annual review to the                                                                     
Legislature about statutory changes.                                                                                            
                                                                                                                                
Representative J. Davies questioned if it should be required                                                                    
annually.  Mr. Tibbles stated that this is existing law and                                                                     
is an annual review required for all agencies.                                                                                  
                                                                                                                                
Mr. Tibbles continued, Page 3, provides a provision to limit                                                                    
the amount of the fix fee to $250.  There was an exception                                                                      
to the $250 dollar limit if it could be justified as an                                                                         
actual direct cost. The deletion was requested by the                                                                           
Department of Environmental Conservation.                                                                                       
                                                                                                                                
Language was added on the ends of Lines 3-7, which require a                                                                    
review of all fixed fees. On Page 3, Line 9, there was a                                                                        
deletion of the word "standard" for negotiated agreements.                                                                      
Language was modified on Lines 11 & 12 regarding negotiated                                                                     
agreements.  Page 3, Subsection c is new.  It is replacement                                                                    
of the petition process established in the statutes.                                                                            
                                                                                                                                
(TAPE CHANGE, HFC 00 - 76, Side 2)                                                                                              
                                                                                                                                
Co-Chair Therriault explained that the provision had been                                                                       
submitted by the Department of Environmental Conservation.                                                                      
                                                                                                                                
Representative J. Davies asked about Page 4, Line 3. Mr.                                                                        
Tibbles explained that the language was "held over" language                                                                    
from a procedure that required the regulatory process. The                                                                      
intent was that it be demonstrated why the Department would                                                                     
need to justify when they denied the act.                                                                                       
                                                                                                                                
Representative J. Davies questioned if there was distinction                                                                    
between "served upon" and "provides to".  Co-Chair                                                                              
Therriault pointed out that was a language change.                                                                              
                                                                                                                                
Mr. Tibbles addressed Page 4, Line 24, the "invoicing                                                                           
section", noting that the original bill required the                                                                            
Department to establish a uniform accounting system.  That                                                                      
would have been very expensive and that language was                                                                            
removed. The goal was to create an invoice that one could                                                                       
look at to determine if they were being billed for the                                                                          
actual service that they received.  In that section, there                                                                      
is a new provision which establishes that these requirements                                                                    
apply to negotiated agreements as well.  The language would                                                                     
give Department of Environmental Conservation and the                                                                           
permittee the option to negotiate different requirements for                                                                    
the invoicing.                                                                                                                  
                                                                                                                                
Mr. Tibbles noted that on Page 5, Lines 6 & 7, language was                                                                     
added "request that the resource agency review the invoice".                                                                    
That language was recommended by the Department of                                                                              
Environmental Conservation.  The first "stop review" would                                                                      
be with Department of Environmental Conservation.  If a                                                                         
person was not happy with that review, then they could go to                                                                    
the Office of Management and Budget (OMB).  On Page 5, Line                                                                     
17, the petition was removed for a single project fee. All                                                                      
that remains in that section is a petition for a                                                                                
modification of a new fixed fee.                                                                                                
                                                                                                                                
Mr. Tibbles referenced Page 6, Line 3, language "under the                                                                      
following" was added by a request from Department of Natural                                                                    
Resources.  The technical change modified the definition of                                                                     
direct costs in Subsection (3).  Page 3, Line 28, removes                                                                       
"notice" which will now allow the Department of                                                                                 
Environmental Conservation to charge the permittee for the                                                                      
cost of public notices.                                                                                                         
                                                                                                                                
Mr. Tibbles commented that on Page 7, Lines 15 - 17, another                                                                    
modification was made at the request of the Department of                                                                       
Natural Resources to the definition of "fee".  There was a                                                                      
concern that the Joint Pipeline Office would not be able to                                                                     
charge the full amount negotiated under their leases.  That                                                                     
was never the intent of the bill.  Additionally, Subsection                                                                     
(g) was removed at the request of the Department of Law and                                                                     
Department of Environmental Conservation.  Page 7, Line 20                                                                      
increases the multiplier for salary and benefits at the                                                                         
request of the Department of Environmental Conservation.                                                                        
                                                                                                                                
Mr. Tibbles explained that on Page 8, Subsection (10), the                                                                      
definition of "standard designated regulatory service"                                                                          
removed the inclusion list for small-scale mining. The                                                                          
agency wanted to be able to determine which activities were                                                                     
more complex.                                                                                                                   
                                                                                                                                
Representative Grussendorf observed that the Office of                                                                          
Management and Budget was included in the legislation. He                                                                       
commented that the Office of Management and Budget does not                                                                     
have the authority to develop regulations on the appeal                                                                         
process.  He questioned why no fiscal note had been included                                                                    
from that agency.                                                                                                               
                                                                                                                                
Co-Chair Therriault noted that the proposed legislation has                                                                     
"greatly" lessened OMB's participation. Mr. Tibbles added                                                                       
that there was a $176 thousand dollar fiscal note submitted                                                                     
at the last hearing from OMB.  He reiterated that the                                                                           
proposed legislation has reduced their involvement.                                                                             
                                                                                                                                
Co-Chair Therriault added that the bill would be held in                                                                        
Committee until the new fiscal notes were received.                                                                             
                                                                                                                                
Mr. Tibbles reviewed Amendment 1.  [Copy on File].  He noted                                                                    
that the amendment suggests striking the language "this                                                                         
determination upon request" and inserting "the fixed fees".                                                                     
                                                                                                                                
On Page 3, Line 22, after "services" new language was added,                                                                    
"at least one of which is a designated regulatory service".                                                                     
Representative J. Davies observed that if there was more                                                                        
than one agency involved then the Office of Management and                                                                      
Budget would become involved.  He believed those would be                                                                       
more complex issues.  Co-Chair Therriault pointed out that                                                                      
within the Governor's budget there is both OMB and the                                                                          
Division of Governmental Coordination (DGC). DGC would act                                                                      
as the coordinator of multi agency functions.  He believed                                                                      
that DGC would handle these issues given their coordination                                                                     
function.                                                                                                                       
                                                                                                                                
Representative Grussendorf questioned who would be                                                                              
responsible to collect the program receipts. Co-Chair                                                                           
Therriault explained that the unified fee would be a                                                                            
tabulation of the separate fee amounts.  The parts could                                                                        
then be tracked.                                                                                                                
                                                                                                                                
Mr. Tibbles explained that in Amendment #1, Page 4, Line 10,                                                                    
Subsection c(3) would be deleted and the following sections                                                                     
would be renumbered.  Page 4, Line 25, would insert "AS                                                                         
37.10.052(b) or (c)" and delete "AS 37.10.052(b)".  This                                                                        
language indicates the new petition for a single fee.  Page                                                                     
5, Line 14, would add language "and AS 37.10.052(d)". Mr.                                                                       
Tibbles explained that language would move some of the                                                                          
standards to a different section.                                                                                               
                                                                                                                                
Mr. Tibbles referenced Amendment #1, Page 7, Lines 22 & 26,                                                                     
stating that section was requested by the Department of                                                                         
Environmental Conservation.  He pointed out that language                                                                       
would address charges for plan approval.  The Department                                                                        
currently is charging for this service and did not want it                                                                      
excluded.                                                                                                                       
                                                                                                                                
Mr. Tibbles referenced Page 8, Line 7, of Amendment #1.                                                                         
That section of the bill addresses Department of                                                                                
Environmental Conservation's general fee authority for more                                                                     
than just the designated regulatory services.  Concern                                                                          
exists with the definition of direct costs used in, AS                                                                          
37.10.058, which did not apply to other items outside those                                                                     
services.  The amendment would insert "AS 37.10.056".                                                                           
                                                                                                                                
JANICE ADAIR, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,                                                                         
DIVISION OF ENVIRONMENTAL HEALTH, DEPARTMENT OF                                                                                 
ENVIRONMENTAL CONSERVATION, recommended that approval be                                                                        
added.  She noted that they were referring to "plan                                                                             
approval" as that is the issue for water and wastewater.                                                                        
                                                                                                                                
Representative J. Davies asked if there were other kinds of                                                                     
approval. Ms. Adair responded that they are all "plan                                                                           
approval" of one sort or another. She believed that it would                                                                    
be safer to use the broader term.                                                                                               
                                                                                                                                
Representative J. Davies asked if the Department was                                                                            
satisfied with the last change proposed in the amendment.                                                                       
Ms. Adair responded that if it does the effect indicated by                                                                     
Mr. Tibbles, the Department would support it.                                                                                   
                                                                                                                                
Representative J. Davies asked if Ms. Adair could recommend                                                                     
any additional changes to Amendment #1.  Ms. Adair responded                                                                    
that the Department intends to provide an amendment to                                                                          
address their remaining concerns.                                                                                               
                                                                                                                                
Co-Chair Therriault MOVED to ADOPT Amendment #1.  There                                                                         
being NO OBJECTION, Amendment #1 was adopted.                                                                                   
                                                                                                                                
KEN FREEMAN, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT CENTER                                                                    
(RDC), ANCHORAGE, commented that RDC is a statewide, member-                                                                    
funded, non-profit trade association. The organization's                                                                        
mission is to grow Alaska's economy through the responsible                                                                     
development of the state's natural resources. The membership                                                                    
includes individuals and leading companies from all of                                                                          
Alaska's basic industries, mining, oil and gas, fisheries,                                                                      
timber and tourism.                                                                                                             
                                                                                                                                
Mr. Freeman noted that in January 1999, RDC was tasked with                                                                     
building industry-wide consensus on legislation designed to                                                                     
deal with State agency permit fees. Sealaska Corporation had                                                                    
taken an earlier lead on the issue with a draft bill known                                                                      
as the "Permittee Bill of Rights." The concepts articulated                                                                     
in the "Permittee Bill of Rights" served as the starting                                                                        
point subsequent discussions.                                                                                                   
                                                                                                                                
Mr. Freeman commented that while industry recognizes its                                                                        
responsibility to pay for the services it receives, the                                                                         
issue of allocating program costs between the public and the                                                                    
regulated community remains unresolved. He noted that RDC                                                                       
applauds the Legislature for its past involvement in the                                                                        
issue, and appreciates having had the time to design a well                                                                     
crafted product.                                                                                                                
                                                                                                                                
Mr. Freeman advised that HB 361 would accomplish several                                                                        
important objectives:                                                                                                           
                                                                                                                                
? First, it requires the resource agencies to establish a                                                                       
schedule of fixed fees for relatively simple and                                                                                
repetitive regulatory activities. These fees must he                                                                            
based on the actual and reasonable direct cost of                                                                               
providing the service and cannot include additional                                                                             
charges such as program overhead. That change is                                                                                
important for two reasons. It will provide the regulated                                                                        
community with more predictability in determining the                                                                           
costs to permit an activity. Also, it would ensure the                                                                          
person requiring a designated regulatory service will                                                                           
only pay for the costs associated directly with                                                                                 
providing that service.                                                                                                         
? Secondly, recognizing that not all services provided by                                                                       
the resource agencies lend themselves to fixed fees, the                                                                        
bill directs the resource agencies to enter into                                                                                
negotiations with any person requiring a service to                                                                             
determine the costs of complex or controversial                                                                                 
permitting activities. In the event that negotiations                                                                           
are unsuccessful, the bill requires the agency to bill                                                                          
on a strict time and expenses basis for the work. That                                                                          
system will act as an incentive to both the agency and                                                                          
the permittee to conduct good-faith negotiations.                                                                               
? Third, the bill will provide the regulated community                                                                          
with flexibility through a petition process. Petitions                                                                          
may be used to request that the agency supplement its                                                                           
schedule of fixed fees, they may be used to create a                                                                            
fixed fee for an activity specific to a distinct                                                                                
economic sector, and they may be used to request a                                                                              
single project fee for an activity requiring multiple                                                                           
permits. This type of flexibility will make doing                                                                               
business in Alaska easier.                                                                                                      
? Fourth, the bill requires that any resource agency                                                                            
providing a designated regulatory service establish a                                                                           
uniform accounting system capable of producing an                                                                               
audible invoice. Services billed on a time and expenses                                                                         
basis will require monthly invoices. Some negotiated                                                                            
fees will also incorporate the use of invoices. This                                                                            
requirement makes the costs of providing regulatory                                                                             
services more transparent.                                                                                                      
? Lastly, in the interest of clarification, Mr. Freeman                                                                         
pointed out two additional details. First, the bill is                                                                          
written to encompass all of the resource agencies,                                                                              
Department of Natural Resources, Department of Fish and                                                                         
Game and Department of Environmental Conservation, on a                                                                         
program by program basis. Currently, the only programs                                                                          
included in the bill fall under Department of                                                                                   
Environmental Conservation.                                                                                                     
                                                                                                                                
Mr. Freeman concluded noting that the legislation is an                                                                         
appropriate step toward fulfilling Alaska's promise or being                                                                    
open and ready for business.                                                                                                    
                                                                                                                                
CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIIVE                                                                            
SERVICES, DEPARTMENT OF NATURAL RESOURCES, commented on                                                                         
Amendment #1, the change to Page 6, which would sufficiently                                                                    
addresses the concerns of the Department over large mine                                                                        
activities.                                                                                                                     
                                                                                                                                
Co-Chair Therriault asked about the fiscal note.  Ms.                                                                           
Carroll clarified that the note would be lowered to zero.                                                                       
                                                                                                                                
STEVEN DAUGHERTY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                                                                     
LAW, commented on some of the legal issues which exist in                                                                       
the bill.  He voiced concern with the issue of OMB's                                                                            
authority.  He commented that authority to adopt regulations                                                                    
or an explicit exemption from the Administrative Procedure                                                                      
Act (APA) is still needed for fee agreements and the appeal                                                                     
process.  Under Alaska law, if something effects more than                                                                      
one person, it must be adopted by regulation. The fee                                                                           
agreement, under the State's Administrative Procedure Act                                                                       
will be required to be in regulation.                                                                                           
                                                                                                                                
Mr. Daugherty added that in the same section, it is not                                                                         
clear whether those same fee agreements would be treated as                                                                     
a binding contract.  If they were, there would need to be a                                                                     
review provided by the Department of Law.  He emphasized                                                                        
that section needs to be clarified.  A change would need to                                                                     
be made on Page 3, and inserted on Page 4, Line 4, "a fee                                                                       
negotiated under this section is not subject to the                                                                             
Administrative Procedures Act".                                                                                                 
                                                                                                                                
Mr. Daugherty stated that there is a potential problem on                                                                       
Page 2, where a change was made to the definition of fees.                                                                      
He noted that Page 7, Line 13, defines fee.  He thought the                                                                     
language insinuated that other than pipeline right of way                                                                       
leases, other leases would be included.  He did not know the                                                                    
impact of that language and did not believe it was the                                                                          
intent of the provision.  Mr. Daugherty thought that concern                                                                    
could be addressed on Page 2, Line 10, inserting "fees                                                                          
associated with the sale of property".                                                                                          
                                                                                                                                
Mr. Daugherty noted another issue of concern was the                                                                            
interagency charges.  That section does not address the                                                                         
Department of Law's need to be able to charge for services.                                                                     
Under the new version, interagency charges are only                                                                             
recoverable as listed on Page 6, Line 25.  The Department of                                                                    
Law charges would not meet those requirements.                                                                                  
                                                                                                                                
(TAPE CHANGE, HFC 00 - 77, Side 1).                                                                                             
                                                                                                                                
Mr. Daugherty recognized that the proposed bill was greatly                                                                     
improved over the previous version.                                                                                             
                                                                                                                                
Ms. Adair voiced her appreciation to Mr. Tibbles for all his                                                                    
work.  She noted that Mr. Daughtery had indicated a concern                                                                     
of the Department of Environmental Conservation in                                                                              
clarifying that the provision regarding negotiations for                                                                        
fees are not subject to the APA.  She believed that a                                                                           
specific provision included could make that clear.                                                                              
                                                                                                                                
Ms. Adair indicated concern on Page 3, Line 5, in that the                                                                      
fee could be based on an estimated reasonable direct cost.                                                                      
At the end of the four years when the Department has to make                                                                    
the review, they will need to make changes based on the                                                                         
average actual costs.  The Department will still be required                                                                    
to do cost accounting for every person involved in the                                                                          
project.  The Department proposes that the flat fee continue                                                                    
to be based on the estimated average reasonable direct cost.                                                                    
Co-Chair Therriault interjected that if the first 4 years                                                                       
were based on the estimated, the information would already                                                                      
be available.  Ms. Adair explained that this would be a                                                                         
matter of detail.  Actual costs are much more detail                                                                            
oriented than the estimated average cost.                                                                                       
                                                                                                                                
Representative J. Davies asked Ms. Adair for suggested                                                                          
language to address that concern.  Ms. Adair would prefer to                                                                    
see Line 4, include "estimated average reasonable direct                                                                        
costs".  (Page number inaudible).  She added that would have                                                                    
a significant impact on the fiscal note.                                                                                        
                                                                                                                                
JON TILLINGHAST, ATTORNEY, SEALASKA CORPORATION, LEGAL                                                                          
COUNCIL TO RESOURCE DEVELOPMENT COUNCIL (RDC), JUNEAU,                                                                          
provided response to suggestions made by the Department of                                                                      
Law and Ms. Adair, Department of Environmental Conservation.                                                                    
He thought that most of the concerns could be addressed                                                                         
easily.    With respect to OMB and writing regulations, he                                                                      
stated that there would be two things for OMB to do.  One                                                                       
would be to hear appeals on specific invoices.  OMB's other                                                                     
authority would be to set a multi agency fixed fee that will                                                                    
have some longevity to it.  He suggested language to Page 4,                                                                    
between Lines 16 & 17, "no action by resource agency of the                                                                     
Office of Management and Budget under this subsection is                                                                        
subject to the Administrative Procedures Act".  He stated                                                                       
that would provide a "blanket" exemption for anything,                                                                          
anybody does under that subsection.  Mr. Daughtery agreed                                                                       
that would be sufficient.  Mr. Tillinghast stated that the                                                                      
actual coordinating role would be done by DGC, which is a                                                                       
subdivision of OMB.                                                                                                             
                                                                                                                                
In response to Mr. Daugherty's second concern, Mr.                                                                              
Tillinghast advised on Page 2, Line 10, it would be                                                                             
appropriate to state that it would not apply to sales on                                                                        
leased property.                                                                                                                
                                                                                                                                
Mr. Tillinghast advised that the remaining concerns would be                                                                    
more difficult to address as they enter into policy such as                                                                     
the Department of Law's concerns that their charges to the                                                                      
Department of Environmental Conservation would not be paid                                                                      
by the applicant because they include overhead.  The bill                                                                       
establishes one important public policy and that is that                                                                        
those expenses should not be charged to the applicant but                                                                       
instead spread to the entire public.  The purpose of the                                                                        
bill is to change if an agency is charging their overhead.                                                                      
                                                                                                                                
In response to concerns voiced by Ms. Adair, Mr. Tillinghast                                                                    
argued that if your estimates, after four years, differ from                                                                    
your actualized costs, then there is something wrong with                                                                       
the way you compute your estimates.                                                                                             
                                                                                                                                
Representative J. Davies countered that the point is not                                                                        
doing the actuals.  That data would not be available as it                                                                      
was billed and was based on the estimates.                                                                                      
                                                                                                                                
Representative Phillips pointed out that if there were                                                                          
dispute in what was being billed, those would be the                                                                            
accepted fees.  Co-Chair Therriault agreed with                                                                                 
Representative J. Davies that the first four years of                                                                           
billings are based on estimates.  The hours agreed to were                                                                      
based on estimates.                                                                                                             
                                                                                                                                
Mr. Tillinghast observed that even though the fee charged to                                                                    
the applicant will be based on an estimate, he thought that                                                                     
the Department would be doing a "reality check" of the                                                                          
actual records to guarantee that the charge was correct.  It                                                                    
is safe to assume that the acutal numbers will be available                                                                     
whether or not they are billed to the applicant.                                                                                
Representative J. Davies disagreed.  He stated that it would                                                                    
not be cost effective to keep track of all the actuals.                                                                         
                                                                                                                                
Mr. Tillinghast noted that on Page 5, Line 14, that                                                                             
subsection is the OMB review portion.  An invoice would be                                                                      
scrutinized under a standard and that standard appears in AS                                                                    
052, which is on Page 4, Lines 17-21.  The reason that                                                                          
Section D is referenced and not Section C, is because                                                                           
Section c is the multi agency OMB fee and Section (B) is the                                                                    
agreements.     The way that the bill is structured, OMB                                                                        
does not have any review authority in either instance.  By                                                                      
referencing an additional subsection, it would expand OMB's                                                                     
review authority.  Mr. Tillinghast and was surprised that                                                                       
OMB would advocate an expansion of authority.                                                                                   
                                                                                                                                
Co-Chair Therriault noted that final action on the bill                                                                         
would be HELD for further consideration and receipt of the                                                                      
final fiscal notes.                                                                                                             
                                                                                                                                
Representative G. Davis noted that the Department of Law had                                                                    
recommended a change to Page 7, Line 17, which would affect                                                                     
the Department of Natural Resources.  Ms. Carroll                                                                               
recommended waiting to make that change until the fiscal                                                                        
note had moved through the Division.                                                                                            
                                                                                                                                
HB 361 was HELD in Committee for further consideration.                                                                         
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 5:30 P.M.                                                                                              
                                                                                                                                
                                                                                                                                
H.F.C. 28 3/21/00 p.m.                                                                                                          

Document Name Date/Time Subjects