03/10/2003 01:03 PM House JUD
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
March 10, 2003
1:03 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative John Coghill
Representative Jim Holm
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 2
"An Act relating to the statute of limitations for certain civil
actions; and providing for an effective date."
- MOVED CSHB 2(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 83
"An Act adopting a version of the Revised Uniform Arbitration
Act; relating to the state's existing Uniform Arbitration Act;
amending Rules 3, 18, 19, 20, and 21, Alaska Rules of Civil
Procedure, Rule 601, Alaska Rules of Evidence, and Rule 402,
Alaska Rules of Appellate Procedure; and providing for an
effective date."
- HEARD AND HELD
HOUSE BILL NO. 114
"An Act relating to the issuance of a search warrant."
- BILL HEARING POSTPONED TO 3/12
PREVIOUS ACTION
BILL: HB 2
SHORT TITLE:CIVIL STATUTE OF LIMITATIONS/SEX OFFENSES
SPONSOR(S): REPRESENTATIVE(S)MEYER
Jrn-Date Jrn-Page Action
01/21/03 0030 (H) PREFILE RELEASED (1/10/03)
01/21/03 0030 (H) READ THE FIRST TIME -
REFERRALS
01/21/03 0030 (H) JUD, FIN
01/21/03 0030 (H) REFERRED TO JUDICIARY
03/10/03 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 83
SHORT TITLE:REVISED UNIFORM ARBITRATION ACT
SPONSOR(S): REPRESENTATIVE(S)BERKOWITZ
Jrn-Date Jrn-Page Action
02/07/03 0148 (H) READ THE FIRST TIME -
REFERRALS
02/07/03 0148 (H) JUD
02/07/03 0148 (H) REFERRED TO JUDICIARY
02/10/03 0174 (H) COSPONSOR(S): MOSES
03/07/03 (H) JUD AT 1:00 PM CAPITOL 120
03/07/03 (H) Meeting Postponed to 03/10/03
03/10/03 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE KEVIN MEYER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 2.
PAM FINLEY, Revisor of Statutes
Legislative Legal and Research Division
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 2, spoke as the
revisor of statutes.
REPRESENTATIVE ETHAN BERKOWITZ
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 83.
ARTHUR H. PETERSON, Commissioner
National Conference of Commissioners on Uniform State Laws
(NCCUSL)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 83.
MICHAEL L. LESSMEIER, Attorney at Law
Lessmeier & Winters; Lobbyist
for State Farm Insurance Company ("State Farm")
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 83 relayed a
concern with the bill.
ROBERT W. LANDAU, Attorney at Law
Arbitrator, Mediator and Hearing Officer
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 83.
FRANCIS J. PAVETTI, Chair
Revised Uniform Arbitration Act (RUAA) Drafting Committee
National Conference of Commissioners on Uniform State Laws
(NCCUSL)
New London, Connecticut
POSITION STATEMENT: Assisted with the presentation of HB 83.
ACTION NARRATIVE
TAPE 03-18, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:03 p.m. Representatives
McGuire, Holm, Samuels, and Gruenberg were present at the call
to order. Representatives Anderson, Coghill, and Gara arrived
as the meeting was in progress.
HB 2 - CIVIL STATUTE OF LIMITATIONS/SEX OFFENSES
Number 0041
CHAIR McGUIRE announced that the first order of business would
be HOUSE BILL NO. 2, "An Act relating to the statute of
limitations for certain civil actions; and providing for an
effective date."
REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, speaking
as the sponsor of HB 2, explained that HB 2 is simply a
[housekeeping measure] that would clean up some of the impacts
of an amendment to HB 210, which was passed during the 22nd
legislature. House Bill 2 clarifies which misdemeanors and
felonies involving sexual assault and sexual abuse of a minor
will have a three-year statute of limitations, and which will
have no statute of limitations at all. He informed the
committee that HB 210 originally would have dropped the statute
of limitations on felony sexual assault crimes and on [felony]
sexual abuse of a minor crimes. However, he added, there was an
amendment on the House floor to include all civil actions
[pertaining to these crimes] as well. In theory, this sounded
good, he remarked, but [there were unintended consequences]. He
pointed out that under HB 210, there is no definition of felony
sexual abuse of a minor and felony sexual assault was not
defined by reference to any particular sections in law.
Therefore, it was uncertain which felonies wouldn't fall under
the statute of limitations. Furthermore, the amendment to HB
210 didn't address misdemeanor sexual abuse and [misdemeanor]
sexual assault; the civil statute of limitations for those
misdemeanors automatically dropped to two years, which is the
[statute of limitation] for torts in general. The crimes that
were inadvertently changed to have a two-year statute of
limitation were misdemeanor sexual assault, misdemeanor sexual
abuse of a minor, incest, felony indecent exposure, and unlawful
exploitation of a minor. Prior to the floor amendment to HB
210, all of the aforementioned crimes had three-year statute of
limitations.
REPRESENTATIVE MEYER informed the committee that HB 2 also deals
with unlawful exploitation of a minor, which is a class B
felony. The intent is to include class B felonies with those
crimes that don't have a statute of limitations. He reiterated
that his intent is to make all misdemeanor sexual assault crimes
[and misdemeanor sexual abuse of a minor crimes] have a three-
year statute of limitations. Therefore, HB 2 has a retroactive
clause.
CHAIR McGUIRE asked if any cases that would have been covered by
HB 210 have occurred since that bill passed.
REPRESENTATIVE MEYER said he didn't know. However, he didn't
believe that there's a lot of civil action regarding sexual
assault cases and sexual abuse of a minor cases. He reiterated
the desire to have the unlimited statute of limitations in case
someone wanted to take action 20-30 years from now. He
explained that his focus is on the criminal side because with
DNA evidence, one can now prove something that happened 20-25
years ago.
Number 0459
PAM FINLEY, Revisor of Statutes, Legislative Legal and Research
Division, Legislative Affairs Agency, explained that she became
involved with this matter because last year the revisor's bill
proposed a slightly different fix to HB 210. However, it was
clear that the legislature wasn't comfortable with the
ramifications of that format and thus the fix has been
introduced as separate legislation - HB 2.
MS. FINLEY said that normally an amendment such as the one
adopted for HB 210 wouldn't be problematic. However, this area
of [law] is intertwined with other areas and thus this one
change had a ripple effect. For everything but the felony
sexual abuse of minor and felony sexual assault, the statute of
limitations on the civil side went from three years to two
years, which was an unintended [consequence of the amendment
made to HB 210]. Section 2 of HB 2 undoes the aforementioned,
and places unlawful exploitation of a minor into the no-statute-
of-limitations category. Section 3 is essentially a technical
amendment. She explained that the statute of limitations for
the crime of sexual abuse of a minor doesn't begin until the
minor turns 18 years old. For some cases, there are more rules
when the minor is under 16 years of age. Ms. Finley pointed out
that claims brought under AS 09.55.650 include things that no
longer have a statute of limitations. She turned to the
retroactivity section and relayed that generally, statute of
limitations are considered procedural matters and thus can be
changed retroactively. She offered her belief that this
retroactivity should be acceptable. However, since the Alaska
Supreme Court hasn't spoken on this matter yet, the language "to
the extent permitted by the constitution" is included.
Number 0712
REPRESENTATIVE GRUENBERG recalled from his prior time in the
legislature that there was a policy against inserting phrases
beginning with "Notwithstanding other provisions of law". He
inquired as to why that language is now being used. He said,
"It's always notwithstanding everything else; you can put that
in every single clause."
MS. FINLEY expressed the hope that such language isn't used in
every single clause because then there would be dueling
"Notwithstanding" clauses, which she understood to be the point
Representative Gruenberg was raising.
REPRESENTATIVE GRUENBERG recommended eliminating the
aforementioned language from [Sections 1 and 2] because it is
clear [without the language].
MS. FINLEY informed the committee that the "Notwithstanding" in
Section 1 was the result of the floor amendment [to HB 210].
Therefore, when Section 2 was drafted it duplicated the language
in Section 1. Ms. Finley said that she didn't believe it would
be a problem to eliminate the "Notwithstanding" language from
Section 1 and 2.
Number 0840
REPRESENTATIVE GRUENBERG turned to the retroactivity provision,
and remarked that it is necessary because without it, there may
be some causes of action that may have been extinguished.
MS. FINLEY agreed.
REPRESENTATIVE GRUENBERG directed attention to the language, "To
the extent permitted by the state and federal constitutions" on
page 2, line 24. He asked if that is tautological and always
the case.
MS. FINLEY agreed that it's always the case. However, that
language was included to indicate that there may be some
retroactive applications that are valid and some that aren't and
the intent is to preserve those that are [valid].
REPRESENTATIVE GRUENBERG asked whether [the language] is really
necessary. Wouldn't a court simply interpret it that way?
MS. FINLEY said the [language was included] in order to clarify
the intent. In further response to Representative Gruenberg,
Ms. Finley explained that all retroactive legislation is
immediately effective. Without an immediate effective date, the
legislation would be retroactive but wouldn't be retroactive
until 90 days out.
REPRESENTATIVE GRUENBERG said he wasn't sure that logically that
follows. When the laws become effective and it's retroactive,
it means that one can't file a lawsuit for 90 days. As a matter
of policy, Representative Gruenberg said, he has a problem with
making things retroactive.
MS. FINLEY informed the committee that the drafting manual
specifies that for retroactive legislation, [the drafter] should
try to use an immediate effective date.
CHAIR McGUIRE referred to a memorandum from Mike Ford, Attorney,
Legislative Legal and Research Services, that was drafted on
another matter. That memorandum addressed retroactivity by
specifying, "The modern view appears to be that retroactive
enactments of the legislature will be upheld against a due
process challenge if the legislation is rationally related to a
legitimate government purpose."
MS. FINLEY relayed her belief that the immediate effective date
for the retroactive clause is necessary in order to have things
happen as quickly as possible. She informed the committee of
the ARCO Alaska, Inc. v. State, 824 P.2d 708 (Alaska 1992) case
in which the effective date failed, but the courts still upheld
the retroactivity clause.
CHAIR McGUIRE again referred to Mr. Ford's memorandum and
pointed out that it specifies that passage of retroactivity
serves as an immediate effective date upon passage.
Number 1134
REPRESENTATIVE GRUENBERG made a motion to adopt Conceptual
Amendment 1, to remove the "Notwithstanding" clauses from
Sections 1 and 2 on page 1, lines 6 and 13.
REPRESENTATIVE GARA asked if Ms. Finley feels that the
legislation as written needs to be changed in order to
accomplish its purpose.
MS. FINLEY answered that keeping the "Notwithstanding" language
doesn't do any harm. However, she said she also didn't believe
that there would be a great deal of harm in eliminating the
"Notwithstanding" language because the courts will always take
the specific statute over the general statute.
REPRESENTATIVE GRUENBERG interjected to say that it had been a
policy to not use such language unless necessary.
CHAIR McGUIRE noted that were no objections to Conceptual
Amendment 1. Therefore, Conceptual Amendment 1 was adopted.
Number 1219
REPRESENTATIVE GRUENBERG moved to report HB 2, as amended, out
of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
2(JUD) was reported from the House Judiciary Standing Committee.
HB 83 - REVISED UNIFORM ARBITRATION ACT
Number 1243
CHAIR McGUIRE announced that the final order of business would
be HOUSE BILL NO. 83, "An Act adopting a version of the Revised
Uniform Arbitration Act; relating to the state's existing
Uniform Arbitration Act; amending Rules 3, 18, 19, 20, and 21,
Alaska Rules of Civil Procedure, Rule 601, Alaska Rules of
Evidence, and Rule 402, Alaska Rules of Appellate Procedure; and
providing for an effective date."
Number 1272
REPRESENTATIVE ETHAN BERKOWITZ, Alaska State Legislature,
Sponsor, remarked that although HB 83 is a long bill, it is a
simple one. He went on to say:
In 1925 the federal government put forward the Federal
Arbitration Act [FAA], which enshrined the concept
that people could arbitrate. It used to be somewhat
suspect in common law that people could go to a third
party to help resolve some of the their disputes. And
in 1955 the Uniform Arbitration Act [UAA] was
promulgated and eventually adopted by ... 49 of the
states; Alaska adopted it in 1968. And that set forth
some of the parameters and some of the ways in which
arbitration can come to exist. Well, as is inevitably
the case with laws, as ... people use them and
practice with them, some deficiencies appeared - some
"change needs" became obvious - and in the year 2000,
the Revised Uniform Arbitration Act [RUAA] was drafted
by the folks that make [the] uniform rules that are
supposed to apply across the states.
What this bill is, is the Revised Uniform Arbitration
Act. It incorporates the thoughts of many people
across the country and many Alaskans. In fact, today,
the chair of the RUAA, the Revised Uniform Arbitration
Act, Mr. Francis Pavetti, is available to testify, as
are ... an Alaskan member of the committee, Mr. Art
Peterson; in your file you'll see a letter from
another member, Mr. Grant Callow; and Mr. Bob Landau
is also apparently available to testify on the
subject. What this does, what the 2000 RUAA does, as
opposed to the 1955 Uniform Arbitration Act, [is that]
there's five new areas that it ... fleshes out, and
there's eight areas where it revises it. They're
fairly simple. I'm not the expert in it. I'm merely
the shepherd here. I would encourage you, as you have
questions, I can answer some of them, but you do have
some national experts available to address this
subject matter.
REPRESENTATIVE BERKOWITZ, in response to questions, relayed that
HB 83 does not repeal the UAA; instead, if HB 83 passes, both
the UAA and the RUAA [will be in effect].
Number 1436
ARTHUR H. PETERSON, Commissioner, National Conference of
Commissioners on Uniform State Laws (NCCUSL), after noting that
he is an attorney currently practicing with the Juneau law firm
of Dillon & Findley, PC, relayed that he would be speaking as an
NCCUSL commissioner for Alaska. He stated his support of HB 83,
adding that the Alaska delegation to the NCCUSL has reviewed the
RUAA and was present at the NCCUSL's annual meeting at which the
RUAA was promulgated/adopted. "We supported it then, and we
support now," he remarked. He explained that the RUAA addresses
a number of "updating features," areas of arbitration that
haven't been addressed in the past but that need to be. It
resolves issues that have arisen through the arbitration process
and any subsequent litigation. "It takes care of a number of
problems; smoothes things out; makes arbitration more available;
tries to resolve some federal-state issues, and generally makes
arbitration, as an alternative to litigation, easier and better.
MR. PETERSON, as background, offered that the NCCUSL, which
drafted the RUAA, is an organization that is approximately 108
years old, and that Alaska has been a member of the NCCUSL since
1913 and has been a beneficiary of approximately 65-70 uniform
Acts - or revised versions of those Acts - promulgated by the
NCCUSL. "So, we've been a major contributor and a major
beneficiary of the NCCUSL," he added, noting that the NCCUSL has
produced the Uniform Commercial Code, which governs virtually
all commercial activities throughout the U.S.; the Uniform
Probate Code, which Alaska has enacted; and many other uniform
Acts pertaining to issues for which uniformity among the states
is desirable.
Number 1600
MICHAEL L. LESSMEIER, Attorney at Law, Lessmeier & Winters;
Lobbyist for State Farm Insurance Company ("State Farm"),
relayed that he has a concern regarding proposed Sec.
09.43.330(b) and (c), found on page 3 of HB 83. He said that
upon reading this language, it seems that the issue of who
decides whether there is an agreement to arbitrate is unclear.
Subsection (b) says that the court shall decide, which is the
way it is under existing law and, he opined, is the way it
should be. Subsection (c) refers to "a condition precedent to
arbitrability" and "whether a contract containing a valid
agreement to arbitrate is enforceable". He said that it seems
as though there is a conflict over this issue, adding that if
the purpose of HB 83 is to prevent litigation and make
arbitration easier, then this issue should be resolved.
Number 1701
ROBERT W. LANDAU, Attorney at Law; Arbitrator, Mediator and
Hearing Officer, after remarking that he has not been involved
in drafting the RUAA, said that issues of substantive
arbitrability, which means whether or not an issue should even
be before an arbitrator, have generally been handled by the
court. In contrast, issues of procedural arbitrability - which
have to do with the timeliness of a request for arbitration or
other types of procedural objections in arbitration - are
normally handled by an arbitrator. He said that arbitration has
proven to be a very fair and cost effective alternative to going
to court; it is an alternative that is increasingly being used
as the courts become more expensive and time consuming. He went
on to say:
The State of Alaska has long had a strong public
policy favoring arbitration of disputes, and, in fact,
we've had a number of Alaska Supreme Court decisions
recognizing arbitration as a good way to resolve
disputes out of court, and in general the courts have
been very deferential to the awards made by
arbitrators. I'm here to give you my standpoint as a
practicing arbitrator, and, in general, I welcome the
[terms] of the revised Act. I think the revised Act
provides a clearer and more detailed procedural
framework for handling arbitration cases without
making the process too legalistic. And, in addition,
the revised Act gives the parties and arbitrators some
additional tools to make arbitration a more efficient
process and at the same time protect against what's
been called "trial by surprise."
In many arbitrations, the first time the parties meet
with the arbitrator is at the hearing itself, and
there's very little in the way of prehearing process.
And what this revised Act tries to do is allow for
some methods of prehearing procedure so that the
hearing process is not so much of a surprise to any
party. Some of the tools that are provided under the
revised Act include such things as: preliminary
conferences with the arbitrator; discovery and
exchange of information between the parties; and the
ability to make dispositive motions in appropriate
cases and avoid the need for having a hearing
altogether.
Number 1881
MR. LANDAU concluded:
And the final point I would make is that the Revised
Uniform Arbitration Act is consistent with the
arbitration rules of some of the leading private
arbitration organizations such as the American
Arbitration Association, which has endorsed the
revised Act. And I won't go through the many
professional organizations that support it, but it is
a useful device for those of us that practice in this
field. It will make arbitration fairer, more
efficient, and more useful to parties with or without
lawyers. And so for those reasons I support ... House
Bill 83, and I urge the committee to approve it.
REPRESENTATIVE GRUENBERG relayed that he is presently before the
Alaska Supreme Court in a fee arbitration case involving his law
firm, and, as a result, he's had recent experience in the Alaska
Superior Court with the present UAA as it relates to the "fee
arb" provision, which is a rule in the Alaska Bar Association
rules allowing clients to "fee arb" if they have a controversy
over the amounts charged. He went on to say:
So I'm quite familiar ... [with] how ... the present
Act works. I'm looking particularly at a couple of
sections that we have dealt with in court. ... There
are some differences between the current sections
involving getting what's called confirmation of the
award - ... the arbitrator makes an award and then you
have to go to court to get your judgment, and they'll
normally confirm the award unless you either get it
vacated or modified - and we're looking in the bill at
pages 12 and 13 ... , and in ... [AS 09.43.120 and AS
09.43.130] of the current [statute] which is going to
be supplanted by this, ultimately. And what I'm
wondering ... is, I see there are a number of
differences between the current Act and revised Act in
those particular sections, which are the sections that
... the court concerns itself with.
REPRESENTATIVE GRUENBERG asked that, at some point, someone
address those differences, in particular, as well as the other
differences between the UAA and the RUAA.
Number 2015
FRANCIS J. PAVETTI, Chair, Revised Uniform Arbitration Act
(RUAA) Drafting Committee, National Conference of Commissioners
on Uniform State Laws (NCCUSL), in response, after noting that
he is not familiar with Alaska's statute specifically, said that
the UAA, which was approved by the NCCUSL in 1956, and the RUAA
are essentially the same. He mentioned that there is a
provision in the RUAA that requires arbitrators to disclose any
conflicting interests or relationships, and a provision
pertaining to evident partiality. Elaborating on that last
point, he said:
We make a distinction as to evident partiality by an
arbitrator appointed as a neutral arbitrator. And we
have distinguished there because party arbitrators are
a ... somewhat common practice whereby each party
appoints a party arbitrator to appoint a neutral
arbitrator. And we've only made this evident
partiality section apply to neutral arbitrators
because, in most cases, [from] all that we have heard
and all that I know about arbitration, party
arbitrators do communicate with their parties and do
have some degree of partiality because they're
appointed by them, and it's really the neutral
arbitrator who is the final determiner. So, that's
the only difference that I know of, is that
clarification as to evident partiality we find in
neutral arbitrators.
REPRESENTATIVE GRUENBERG said that he's noticed approximately
three or four differences. He read from AS 09.43.120, which in
part says: "the court shall vacate an award if ... (2) there
was evident partiality by an arbitrator appointed as a neutral
...." He then read from HB 83, page 12, lines 16-17: "evident
partiality by an arbitrator appointed as a neutral arbitrator.
Therefore, he surmised, the only change is the second use of the
word "arbitrator". According to his understanding, he remarked,
the term "neutral" used as a noun, rather than as an adjective,
is a little broader. He asked why the term "neutral arbitrator"
was not used in the original language.
MR. PAVETTI said that the reason it was not used is because the
Act itself made no distinction between neutral arbitrators and
party arbitrators, adding that "you really have to go back to
... Section 12" of the UAA, in which failure to disclose a
conflict creates a presumption of evident partiality. "So, to
that extent, the distinction comes into play because ... the
feeling is that an award should not be vacated because a party
arbitrator was ... partial," he remarked.
Number 2209
REPRESENTATIVE GRUENBERG, referring to AS 09.43.120 and page 12
of HB 83, lines 19-20, remarked that the former reads,
"misconduct prejudicing the rights of a party", whereas the
latter reads, "misconduct by an arbitrator prejudicing the
rights of a party". He observed that in criminal cases, "you
can have misconduct by a party or by a counsel for a party that
would vitiate - or void - the proceedings." He relayed that his
concern is that only misconduct by an arbitrator could cause
vacation of the award. He opined that it is possible for a
party to so disrupt the proceedings that they could be corrupted
in the legal sense. He remarked that he preferred the language
that just said "misconduct" versus "misconduct by an
arbitrator".
MR. PAVETTI remarked that the latter wording, in the RUAA, is
not a change from the language in the UAA.
REPRESENTATIVE GRUENBERG surmised, then, that perhaps the
current language in AS 09.43.120 is a result of changes made by
the legislature in adopting the UAA.
REPRESENTATIVE BERKOWITZ suggested that Representative
Gruenberg's concern is addressed by the language on page 12,
lines 13-14, which reads, "the award was procured by corruption,
fraud, or other undue means". After acknowledging that the
evolution of legislation can be critical [for] interpretations
by subsequent courts, Representative Berkowitz pointed out that
a fairly exhaustive 2002 Alaska Law Review article included in
members' packets - titled "Is the Revised Uniform Arbitration
Act a Good Fit For Alaska?" - addresses many of the issues being
raised.
TAPE 03-18, SIDE B
Number 2381
MR. PAVETTI remarked that the UAA of 1956 tracked, pretty much,
the language of the FAA, which was enacted by Congress in 1925.
In the FAA, he noted, it refers to how the arbitrators are
guilty of misconduct in refusing to postpone the hearing on
sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy, or of any other
misbehavior by which the rights of any party have been
prejudiced. He indicated that the NCCUSL simply tried to take
that language, since it related solely to the acts of the
arbitrator, and make it clearer.
REPRESENTATIVE GARA returned to the issue raised by Mr.
Lessmeier, and asked Representative Berkowitz whether that
particular language in HB 83 is the same language that is in the
current UAA.
REPRESENTATIVE BERKOWITZ replied that it is the same language.
He then paraphrased a portion of the commentary included in the
UAA, pages 15-16, that read:
Subsections (b) and (c) of Section 6 are intended to
incorporate the holdings of the vast majority of state
courts and the law that has developed under the FAA
that, in the absence of an agreement to the contrary,
issues of substantive arbitrability, i.e., whether a
dispute is encompassed by an agreement to arbitrate,
are for a court to decide and issues of procedural
arbitrability, i.e., whether prerequisites such as
time limits, notice, laches, estoppel, and other
conditions precedent to an obligation to arbitrate
have been met, are for the arbitrators to decide.
REPRESENTATIVE BERKOWITZ noted that this portion of the
commentary is accompanied by "a whole paragraph of citations,"
and that this language [that is of concern to Mr. Lessmeier] is
merely a restatement of existing law.
REPRESENTATIVE GRUENBERG, returning to the issue of grounds for
vacating the award, referred to page 12 of HB 83, lines 26-28,
which read, "(5) there was not an agreement to arbitrate, unless
the person participated in the arbitration proceeding without
raising the objection under AS 09.43.420(c) not later than the
beginning of the arbitration hearing". He noted that [current
AS 09.43.120(a)(5)] reads: "there was no arbitration agreement
and the issue was not adversely determined in proceedings under
AS 09.43.020 and the party did not participate in the
arbitration hearing without raising the objection". He asked
whether the additional wording of "not later than the beginning
of the arbitration hearing" is intended to prevent someone from
going through the process only to then ask for "a second bite of
the apple."
MR. PAVETTI indicated that that is correct.
Number 2227
REPRESENTATIVE GRUENBERG asked whether the provision now located
in AS 9.43.120(b) that reads, "The fact that the relief is such
that it could not or would not be granted by a court of law or
equity is not ground for vacating or refusing to confirm the
award", has been eliminated from HB 83.
MR. LESSMEIER observed that that provision is located on page 11
of HB 83, lines 25-29, in proposed Sec. 09.43.480(c).
REPRESENTATIVE GARA said:
The Uniform Arbitration Act [UAA] ... allows people to
agree to arbitrate. The one problem I have sometimes
with arbitration is that ... unsuspecting consumers
will sign a 50-page document, and somewhere on the
48th page - buried in small print - is an agreement to
arbitrate. And so the courts have always tussled with
whether or not to enforce these things that are buried
in the middle of ... 50-page contracts. So, ... as I
look through this revision of the Uniform Arbitration
Act, it doesn't really address that situation of
whether or not an agreement to arbitrate is
enforceable in those situations; ... in legal terms, I
guess, they're contracts of adhesion. ... The way I
read the Act, ... it doesn't address that situation at
all, and I'm comfortable with that, but I want to make
sure I didn't miss something. So, [is] the situation
of the enforceability of arbitration agreements - when
those agreements are contained in very large ... form
contracts - ... addressed anywhere in this revision?
MR. PAVETTI relayed that many of the drafters of the RUAA would
have liked to address that issue; however, under the doctrine of
federal preemption, according to the U.S. Supreme Court decision
in Doctor's Associates, Inc. v. Casarotto, a state's arbitration
statute cannot treat an arbitration agreement any differently
than any other kind of agreement. In other words, he added,
special rules cannot be made for the validity of an arbitration
agreement that don't apply to all other types of contracts or
agreements. In both [the RUAA] and the FAA, from which the
federal preemption doctrine emanates, there is a provision that
says an agreement to arbitrate is valid and irrevocable except
as provided for by law. Thus, because of federal preemption,
the issue raised by Representative Gara could not be addressed
via state statute, he remarked, adding that the only way to
address that issue would be to amend the FAA.
Number 2020
REPRESENTATIVE BERKOWITZ, to additionally address Representative
Gara's question, referred to page 367 of the aforementioned
Alaska Law Review article, and read from the following
paragraph:
Section 21 does give rise to concerns regarding
adhesion contracts in the context of arbitration
agreements between consumers and lenders, employers
and employees, and medical providers and subscribers.
The Drafting Committee chose to leave the issue of
adhesion contracts and unconscionability to developing
case law across the country. The Drafting Committee
noted that a large number of organizations have
developed "Due Process Protocols" to ensure procedural
and substantive fairness in employment, consumer, and
health care arbitrations.
MR. PAVETTI remarked that an important feature of the [RUAA] is
the great amount of party autonomy that it provides for. In
other words, he added, the RUAA is essentially a default Act,
and the parties are free to fashion their arbitration agreement
to suit their needs. He mentioned that Section 4 of the RUAA
contains extensive waiver provisions, noting that with regard to
the area of consumer protection, certain fundamental rights such
as the right to counsel and the right to move for "vacatory (ph)
confirmation" were preserved against the "nonwaiver rule."
REPRESENTATIVE COGHILL remarked that he did not know how anybody
could proceed through the arbitration system without the benefit
of counsel.
REPRESENTATIVE GRUENBERG directed members' attention to page 2,
lines 24-25, which pertains to waiver of an attorney by
employers and labor organizations in a labor arbitration, and
asked whether that means that "both have to do it, or that
either one can do it."
MR. PAVETTI said, "Either one can do it." He added that it is
pretty common in labor arbitrations for the shop steward to
represent the employee; thus this provision would be consistent
with longstanding practice.
Number 1807
MR. LESSMEIER reiterated his concern regarding proposed Sec.
09.43.330(b) and (c), remarking that the two subsections appear
to conflict. What is substantive and what is procedural is not
necessarily all that clear, he opined, noting that there has
been a lot of litigation over the years regarding this issue.
MR. PAVETTI pointed out that the language in those subsections
is part of existing law, and that there is a lot of case law
that supports the rule as stated in that provision. He noted
that this case law is included in the commentary section of the
UAA, which is available on the NCCUSL's web site. He relayed
that the purpose of including that specific language in the RUAA
is to clarify it and make people aware of it without them having
to go through a great deal of research.
CHAIR McGUIRE asked: Wouldn't it be clearer just to specify
that those decisions that the court will have power over will be
those that are substantive as opposed to those that are
procedural?
MR. PAVETTI opined that the present wording is clear. He
reiterated that there is a lot of case law to support it, adding
that it is not a novel concept.
REPRESENTATIVE GRUENBERG, turning to page 3, lines 6-7, remarked
that the question, as listed in proposed Sec. 09.43.330(b), of
"whether ... a controversy is subject to an agreement to
arbitrate" is definitely a substantive question, not a
procedural question. Turning then to lines 9-8 on page 3, in
proposed Sec. 09.43.330(c), he opined that the words, "whether a
contract containing a valid agreement to arbitrate is
enforceable" is also a substantive question, not a procedural
question. He added: "I don't think that we can say that the
distinction is entirely substantive; ... it appears, from what
you people are saying, that subsection (b), that everything the
court decides is substantive, but you cannot say that everything
the arbitrator decides is solely procedural."
Number 1581
REPRESENTATIVE BERKOWITZ said no, that that is not what his
understanding is. He elaborated:
Subsection (b) deals with the agreement to arbitrate.
Subsection (c) is the conditions precedent. ... I
realize that there are a number of issues that could
be raised with pretty much any section of this bill.
... There's 77 pages of the [UAA] which talk about,
... in essence, the procedural history that led the
... [NCCUSL] to come up with the language that they
chose. I'm merely here to present to the committee
what the ... [NCCUSL has] chosen, and I think that
there's a great deal of deference we ought to extend
them because they have a vast amount of expertise in
this subject.
REPRESENTATIVE GARA noted that in adopting the language that the
[NCCUSL] has put together, the [NCCUSL's] analysis of that
language is also being adopted.
MR. LESSMEIER, in response to a question, relayed that rather
than seeking a specific amendment to the language with which he
has concerns, he merely wanted to highlight the issue. He
opined that Representative Gruenberg "has hit the nail on the
head," adding that he did not see the necessity of including in
subsection (c) the phrase, "whether a contract containing a
valid agreement to arbitrate is enforceable", since it clearly
could be read as something substantive. He warned that there
would be litigation over this issue.
MR. PAVETTI posited that that phrase "limits the arbitrator's
function determining the condition precedent as having been
fulfilled." He mentioned that this second clause of subsection
(c) relates to the case of Prima Paint Corp. v. Flood & Conklin
Manufacturing Co., 388 U.S. 395 (1967), and suggested that
members read the commentary specific to that language provided
in the UAA.
The committee took an at-ease from 2:15 p.m. to 2:19 p.m.
CHAIR McGUIRE mentioned her intention to have staff provide
members with copies of the current UAA and the case law that's
been referenced. She relayed that Representative Berkowitz and
Mr. Lessmeier would be working together to address Mr.
Lessmeier's concern. She added, "It may be that we agree to
disagree, but I'd like to have that ... [issue] worked out"
before HB 83 goes to the House floor. She indicated that she
intended to have another hearing on HB 83 on [3/12/03].
Number 1355
REPRESENTATIVE BERKOWITZ said, "Madam Chair, I just want to be
clear that we're drawing a very narrow point of discussion here,
to this one particular section."
CHAIR McGUIRE acknowledged that point.
REPRESENTATIVE GARA requested that if an amendment to HB 83 is
forthcoming, that Mr. Pavetti review it.
CHAIR McGUIRE indicated agreement.
REPRESENTATIVE GRUENBERG, regarding the Prima Paint case, asked
Mr. Pavetti, "What was the holding on that?"
MR. PAVETTI said,
It involved what's called the "separability doctrine."
... The question was raised about an agreement
obtained by fraud. ... The court held that in order to
attack the arbitration agreement on the doctrine of
fraud, it would have [to] be shown that the fraud
related to the arbitration agreement itself and not
merely to the entire contract. That is, if the
contract were obtained by fraud, the arbitration
agreement would still stand, unless it could be shown
that the arbitration agreement portion of it was also
obtained by fraud.
REPRESENTATIVE GRUENBERG surmised, then, that it was really an
issue of relevance.
Mr. PAVETTI said yes, adding that it established the
separability doctrine. He noted that although there is a
minority opinion that disagrees, the second clause of subsection
(c) is intended to set forth the rule of the Prima Paint case.
CHAIR McGUIRE said that to her recollection of the Prima Paint
case, the argument, in addition to severability, relates to how
far "you're going to be ... punitive with respect to fraud, and
are you going to throw the whole thing out because you find that
the ... underlying contract was entered into with some degree of
fraud, are you going to throw out the arbitration portion of it
as well." She remarked that although there are cases supporting
the view that both aspects should be thrown out, there are cases
that support allowing the arbitration clause to stand alone.
REPRESENTATIVE BERKOWITZ said that in the interests of
"committee economy," he would be willing to strike [beginning on
line 9 of page 3] the phrase, "and whether a contract containing
a valid agreement to arbitrate is enforceable".
REPRESENTATIVE GRUENBERG expressed reluctance to do so.
REPRESENTATIVE GARA said that because he does not like the Prima
Paint rule, he has come to the conclusion that that phrase
should be deleted. He added:
The Prima Paint rule is a rule that says if you enter
into a fraudulent contract, the arbitration provision
still applies, and I don't think that's a good idea.
... I think that the courts that have taken the
contrary position - that says, if you've been
defrauded into a contract, then the arbitration
provision also shouldn't apply - I think are the right
line of authority.
Number 1079
REPRESENTATIVE GARA made a motion to delete from page 3, lines
9-10, the phrase, "and whether a contract containing a valid
agreement to arbitrate is enforceable".
MR. PAVETTI interjected to say that it is merely a policy
decision whether Alaska follows Prima Paint, noting that there
are a number of jurisdictions that have declined to do so.
Number 1012
CHAIR McGUIRE objected to Representative Gara's motion,
indicating that she would prefer to take the issue up at the
next hearing, after members have had a chance to review
additional materials. After thanking Mr. Peterson and the
NCCUSL for their work on this issue, she announced that HB 83
would be held over until [3/12/03].
ADJOURNMENT
Number 0910
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:29 p.m.
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