Legislature(2001 - 2002)
05/06/2001 05:08 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
May 6, 2001
5:08 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Jeannette James
Representative John Coghill
Representative Kevin Meyer
Representative Ethan Berkowitz
Representative Albert Kookesh
MEMBERS ABSENT
Representative Scott Ogan, Vice Chair
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 161(FIN)
"An Act relating to the withholding of salary of justices,
judges, and magistrates; relating to prompt decisions by
justices, judges, and magistrates; relating to judicial
retention elections for judicial officers; and providing for an
effective date."
- MOVED HCS CSSB 161(JUD) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 176(L&C) am
"An Act prohibiting certain coercive activity by distributors;
relating to certain required distributor payments and purchases;
prohibiting distributors from requiring certain contract terms
as a condition for certain acts related to distributorship and
ancillary agreements; allowing dealers to bring certain court
actions against distributors for certain relief; and exempting
from the provisions of the Act franchises regulated by the
federal Petroleum Marketing Practices Act, situations regulated
by the Alaska gasoline products leasing act, and distributorship
agreements relating to motor vehicles required to be registered
under AS 28.10."
- MOVED HCS CSSB 176(JUD) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: SB 161
SHORT TITLE:TIMELY JUDICIAL DECISIONS/ JUDGES' PAY
SPONSOR(S): JUDICIARY
Jrn-Date Jrn-Page Action
03/23/01 0786 (S) READ THE FIRST TIME -
REFERRALS
03/23/01 0786 (S) JUD
04/04/01 (S) JUD AT 1:30 PM BELTZ 211
04/04/01 (S) -- Meeting Postponed to
4/5/01--
04/05/01 (S) JUD AT 1:30 PM BUTROVICH 205
04/05/01 (S) <Bill Held Over to 4/9/01> --
Meeting Canceled --
04/09/01 (S) JUD AT 4:35 PM BELTZ 211
04/09/01 (S) Heard & Held - Meeting
Postponed to after
Adjournment-
04/20/01 (S) JUD AT 1:30 PM BELTZ 211
04/20/01 (S) Moved CS(JUD) Out of
Committee
04/23/01 1212 (S) JUD RPT CS 2DP 1DNP 2NR NEW
TITLE
04/23/01 1213 (S) DP: TAYLOR, DONLEY; DNP:
ELLIS;
04/23/01 1213 (S) NR: COWDERY, THERRIAULT
04/23/01 1213 (S) FN1, FN2: (CRT)
04/23/01 1213 (S) FIN REFERRAL ADDED AFTER JUD
04/25/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/25/01 (S) Heard & Held
04/25/01 (S) MINUTE(FIN)
05/03/01 (S) FIN AT 6:30 PM SENATE FINANCE
532
05/03/01 (S) Moved CS(FIN) Out of
Committee -- Time Change --
05/04/01 1485 (S) FIN RPT CS 5DP 3NR NEW TITLE
05/04/01 1485 (S) DP: DONLEY, KELLY, GREEN,
LEMAN, WARD;
05/04/01 1485 (S) NR: HOFFMAN, OLSON, WILKEN
05/04/01 1485 (S) FN3: ZERO(CRT)
05/04/01 1493 (S) RULES TO 1ST SUP CALENDAR 4OR
5/4/01
05/04/01 1505 (S) READ THE SECOND TIME
05/04/01 1505 (S) FIN CS ADOPTED UNAN CONSENT
05/04/01 1505 (S) ADVANCED TO THIRD READING Y15
N5
05/04/01 1505 (S) READ THE THIRD TIME CSSB
161(FIN)
05/04/01 1506 (S) PASSED Y15 N5
05/04/01 1506 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
05/04/01 1506 (S) ELLIS NOTICE OF
RECONSIDERATION
05/04/01 (S) RLS AT 1:00 PM FAHRENKAMP 203
05/04/01 (S) -- Time Change --
05/04/01 (S) MINUTE(RLS)
05/05/01 1524 (S) RECON TAKEN UP - IN THIRD
READING
05/05/01 1524 (S) PASSED ON RECONSIDERATION Y16
N4
05/05/01 1524 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
05/05/01 1558 (S) TRANSMITTED TO (H)
05/05/01 1558 (S) VERSION: CSSB 161(FIN)
05/05/01 1571 (H) READ THE FIRST TIME -
REFERRALS
05/05/01 1571 (H) JUD
05/06/01 (H) JUD AT 3:00 PM CAPITOL 120
BILL: SB 176
SHORT TITLE:DISTRIBUTORSHIPS
SPONSOR(S): LABOR & COMMERCE BY REQUEST
Jrn-Date Jrn-Page Action
04/05/01 0956 (S) READ THE FIRST TIME -
REFERRALS
04/05/01 0957 (S) L&C, JUD, FIN
04/19/01 (S) L&C AT 1:30 PM BELTZ 211
04/19/01 (S) Heard & Held
MINUTE(L&C)
04/24/01 (S) L&C AT 1:30 PM BELTZ 211
04/24/01 (S) Moved CSSB 176(L&C) Out of
Committee
MINUTE(L&C)
04/25/01 1259 (S) L&C RPT CS 5DP SAME TITLE
04/25/01 1259 (S) DP: PHILLIPS, DAVIS,
AUSTERMAN, LEMAN,
04/25/01 1259 (S) TORGERSON
04/25/01 1259 (S) FN1: ZERO(CED)
04/25/01 (S) JUD AT 1:30 PM BELTZ 211
04/25/01 (S) Moved CS(L&C) Out of
Committee
04/26/01 1277 (S) JUD RPT CS(L&C) 4DP
04/26/01 1277 (S) DP: TAYLOR, THERRIAULT,
COWDERY, ELLIS
04/26/01 1277 (S) FN1: ZERO(CED)
04/28/01 1338 (S) FIN REFERRAL WAIVED REFERRED
TO RULES
05/01/01 1400 (S) RULES TO CALENDAR 5/1/01
05/01/01 1405 (S) READ THE SECOND TIME
05/01/01 1405 (S) L&C CS ADOPTED UNAN CONSENT
05/01/01 1405 (S) AM NO 1(TITLE AM) ADOPTED
UNAN CONSENT
05/01/01 1406 (S) ADVANCED TO THIRD READING
UNAN CONSENT
05/01/01 1406 (S) READ THIRD TIME CSSB
176(L&C)(TITLE AM)
05/01/01 1407 (S) PASSED Y19 N1
05/01/01 1407 (S) TAYLOR NOTICE OF
RECONSIDERATION
05/01/01 (S) RLS AT 12:15 PM FAHRENKAMP
203
05/01/01 (S) -- Time Change --
05/01/01 (S) MINUTE(RLS)
05/02/01 1447 (S) RECON TAKEN UP - IN THIRD
READING
05/02/01 1447 (S) RETURN TO SECOND FOR AM 2
UNAN CONSENT
05/02/01 1448 (S) AM NO 2 ADOPTED UNAN CONSENT
05/02/01 1448 (S) AUTOMATICALLY IN THIRD
READING
05/02/01 1448 (S) PASSED ON RECONSIDERATION Y18
N1 A1
05/02/01 1450 (S) TRANSMITTED TO (H)
05/02/01 1450 (S) VERSION: CSSB 176(L&C) AM
05/03/01 1501 (H) READ THE FIRST TIME -
REFERRALS
05/03/01 1501 (H) L&C, JUD
05/05/01 (H) JUD AT 1:00 PM CAPITOL 120
05/05/01 (H) <Bill Postponed>
05/05/01 (H) L&C AT 12:00 PM CAPITOL 17
05/05/01 (H) Moved HCS CSSB 176(L&C) Out
of Committee
05/05/01 (H) MINUTE(L&C)
05/06/01 1586 (H) L&C RPT FORTHCOMING HCS(L&C)
2DP 5NR
05/06/01 1586 (H) DP: CRAWFORD, HAYES; NR:
HALCRO, KOTT,
05/06/01 1586 (H) MEYER, ROKEBERG, MURKOWSKI
05/06/01 1586 (H) FN1: ZERO(CED)
05/06/01 1616 (H) RECEIVED HCS(L&C) NT
05/06/01 1616 (H) TITLE CHANGE PENDING HCR
05/06/01 (H) JUD AT 3:00 PM CAPITOL 120
WITNESS REGISTER
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 506
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of Senate Judiciary
Standing Committee, sponsor of SB 161.
CHRIS CHRISTENSEN, Deputy Administrative Director
Office of the Administrative Director
Alaska Court System
820 West 4th Avenue
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on SB 161.
JOHN HAXBY
Waukesha Alaska Corporation
PO Box 11098
Anchorage, Alaska 99511
POSITION STATEMENT: Testified on SB 176.
JANEECE HIGGINS, General Manager
Alaska Rubber & Supply, Inc.
5811 Old Seward Highway
Anchorage, Alaska 99518
POSITION STATEMENT: Testified on SB 176.
DEBORAH LUPOR
PO Box 771757
Eagle River, Alaska 99577
POSITION STATEMENT: Testified on SB 176.
ACTION NARRATIVE
TAPE 01-81, SIDE A
Number 0001
CHAIR NORMAN ROKEBERG called the House Judiciary Standing
Committee meeting to order at 5:08 p.m. Representatives
Rokeberg, James, Coghill, and Meyer were present at the call to
order. Representatives Berkowitz and Kookesh joined the meeting
as it was in progress.
SB 161 - TIMELY JUDICIAL DECISIONS/ JUDGES' PAY
CHAIR ROKEBERG announced the first order of business, CS FOR
SENATE BILL NO. 161(FIN), "An Act relating to the withholding of
salary of justices, judges, and magistrates; relating to prompt
decisions by justices, judges, and magistrates; relating to
judicial retention elections for judicial officers; and
providing for an effective date."
Number 0106
SENATOR DAVE DONLEY, Alaska State Legislature, came forth on
behalf of the Senate Judiciary Standing Committee, sponsor of SB
161. He stated that SB 161 updates and clarifies existing law
requiring judges to provide a salary warrant indicating they
don't have any decisions that have been pending for more than
six months. It also sets out state policy, in Section 1, for
the majority of cases to be decided within six months and for
appellate cases to be decided within six months of oral
argument.
SENATOR DONLEY reported that SB 161 also provides information to
be included in the voter's guide regarding any judicial officer
who was up for retention and failed to issue a salary warrant.
[Senate Bill 161] provides an annual report to the legislature
of how many cases had been pending more than the periods of time
that are set out in the policy as well as additional information
about the types of cases that are taking longer than the target
dates or times.
SENATOR DONLEY said SB 161 clarifies that information regarding
salary warrants of the judges is public information. In the
past, there was some difficulty with the Department of
Administration refusing to provide that information to the
[Alaska] Judicial Council, which is in charge of ranking and
reviewing the judges; without being able to get the information,
the judicial council had difficulty making a full analysis.
REPRESENTATIVE COGHILL asked Senator Donley for the rationale
behind the 2004 effective date.
SENATOR DONLEY responded that he thinks the effective date is a
holdover from the original bill, which had stricter guidelines
for appellate courts. The late effective date was there to give
the court more time to "gear up" and clear its docket.
Number 0386
REPRESENTATIVE JAMES asked Senator Donley what would happen if
the six months go by and the judges don't do what they are
supposed to do.
SENATOR DONLEY answered that existing law has been in place
since statehood whereby in order for judges to get their
paychecks, they must sign an affidavit saying they have had no
matter pending for more than six months. Whereas [SB 161]
provides some fine-tuning, it doesn't change that basic system.
REPRESENTATIVE JAMES asked whether many [judges] have not been
getting paid.
SENATOR DONLEY replied that most have been getting paid, because
most have been able to sign their affidavits. He stated that
there are instances when judges don't get paid and have to deal
with a backlog.
REPRESENTATIVE JAMES asked whether it is just a delay in their
paychecks.
SENATOR DONLEY answered in the affirmative. He said [the
judges] won't lose their money; once they catch up, they receive
their back pay.
Number 0537
REPRESENTATIVE JAMES asked whether [SB 161] allows for this to
be recorded in the election bulletin.
SENATOR DONLEY answered affirmatively. He said for the first
time, a state policy is adopted consistent with the goals of the
court system. Also, it is specified that if a judge hasn't been
able to fill out the affidavits and has violated the time
period, that information would be put before the voters in the
voter's guide. He added that the judge has the opportunity to
respond to that in the voter's guide.
REPRESENTATIVE JAMES asked whether there have been studies
regarding the costs to the people in court when a judge takes an
extended time to make a decision.
SENATOR DONLEY responded that most decisions in the appellate
courts have been accomplished in under a year. He thinks there
are about 20 cases currently before the supreme court that have
been there for more than a year; few cases have been there for
more than two years; and one case has been there for more than
three years since the final pleading. The court recognizes that
it is too long and is trying to live with the policy of getting
them done within a year.
CHAIR ROKEBERG asked where in the bill the one-year policy is
mentioned.
SENATOR DONLEY answered that it is on page 1, line 13, and
states "that virtually all appellate cases be decided within one
year following the date that the case is taken under
advisement".
Number 0730
CHAIR ROKEBERG asked whether it is reflected in the statute.
SENATOR DONLEY explained that the original bill did include a
one-year provision for appellate courts. The court strongly
objected and said it was unfair to hold individual justices
responsible for the collective inability of the appellate courts
to reach a final decision. Additionally, the courts said the
position of the court administration was that legislative
mandates, as far as judicial time decision periods, are
unconstitutional. While recognizing that the six-month [rule]
has worked well, they believe expanding it to include appellate
courts would foster litigation which would likely lead to a
decision that it was unconstitutional. Therefore, that has been
deleted [from the original bill] and policy guidelines and
reporting [back to the legislature] were inserted, which the
court system does not oppose.
CHAIR ROKEBERG asked whether the [final Senate version] reflects
a reaffirmation on the existing state statute and policy, and
clarifies it in relationship to a pamphlet and other reporting.
SENATOR DONLEY responded that that is a fair assessment. He
said it is consistent with existing policy and policy guidelines
that are being adopted by the supreme court, yet for the first
time this is made public information.
CHAIR ROKEBERG asked whether previously this information was not
open to the public.
SENATOR DONLEY responded that several years ago the Alaska
Judicial Council requested that the Department of Administration
provide information regarding judicial warrants, but the
department refused.
Number 0963
CHRIS CHRISTENSEN, Deputy Administrative Director, Office of the
Administrative Director, Alaska Court System, came forth and
stated that the purpose of this legislation is to encourage
timeliness and eliminate any unnecessary delay in judicial
decision-making. He said:
The chief justice and other members of the supreme
court share Senator Donley's concern. And as many of
you know, they have been taking many steps in the last
two years to address timeliness issues. Last year the
supreme court adopted very detailed time standards for
the trial courts.
"Time standard" is a quantifiable goal for the
delivery of court services to litigants. Different
time standards were adopted for different kinds of
cases. Our computer system is antiquated, but we hope
to start issuing quarterly reports on the achievement
of these time standards later this year. Last
October, we used federal funds to train all judges on
case management techniques. We have established a
mentoring program so that judges who are particularly
efficient can take new judges or less efficient judges
under their wings and teach them the tricks of the
trade.
As the chief justice told you during her State of the
Judiciary speech a few months ago, the supreme court
is also committed to shortening time in appellate
cases. About two weeks before this legislation was
introduced, the court adopted time standards for
appellate court cases and new procedures for flagging
and monitoring cases so that cases that are being
delayed don't languish.
I would note that this is very unusual. While it is
pretty common for supreme courts to adopt time
standards for the trial courts, it's almost unheard-of
for a court outside to adopt it for itself, but our
supreme court thinks this is important.
Judicial timeliness is an important issue to everybody
in this room. We've been actively taking steps to
address it [and] we're going to continue. Now, while
the court system did oppose the original version of
Senate Bill 161, the bill sponsor has done a great
deal of work on it during the committee process.
We're very appreciative of his interest in our
concerns, and we do not oppose the bill in its current
form.
The bill makes a statement of legislative intent that
we believe is a reasonable expression of the
legislature's will. In fact, it is very, very similar
to the standards which the supreme court has been
adopting. It does provide for some extra reporting
requirements on judicial timeliness, both for the
benefits of the electorate and for the benefit of the
legislature as it's working on the annual budget.
Number 1094
MR. CHRISTENSEN continued:
The issue of the six-month rule has come up. ... As
Senator Donley noted, the rule has been on the books
since 1959. Before any judge or magistrate - we have
99 judges and magistrates - can get a paycheck, every
two weeks they just sign this one affidavit that they
have nothing before them that's ready for a decision
to be made that has been languishing for more than six
months.
Because the supreme court and the court of appeals are
committees, the rule applies to the member who is
assigned the job of writing the majority opinion.
That opinion has to be out in six months; however, the
full opinion may not be released for some additional
length of time because it is subject to negotiation
and revision by the other majority members. After the
majority opinion is finished, and only then, can a
dissent be written. And then, typically once the
dissent is written, the majority opinion is redrafted
to answer the dissent.
Right now, we have about 20,000 state employees, and
the 99 judicial officers are the only ones who have
their paychecks withheld if they are behind on their
work.
Now, I work two hats. I'm the deputy director, an
administrator, and as an administrator I like the six-
month rule because it keeps the cases moving. As a
lawyer, on the other hand, and the person who serves
as a general counsel for the institution, I do believe
that the existing six-month rule is unconstitutional
and wouldn't survive a legal challenge. It [has] been
followed for 40 years as a matter of comity - comity
being respect for the reasonable wishes of a
coordinate branch government.
The legislature is the funding authority; the
legislature has expressed a desire that decisions be
made within six months; the legislature has generally
provided funding and resources adequate to get cases
resolved within six months; therefore, it would be
unreasonable not to respect the legislature's wishes.
Last fiscal year we had about 150,000 new cases filed
with the court system. During that fiscal year,
courts disposed of 150,000 existing cases; that's a
lot of cases. And during that year there were, I
believe, 25 occasions when a judge or magistrate could
not execute the affidavit and had their paycheck
withheld for some period of time, until they could
execute the affidavit. Twenty-five delays out of
150,000 cases under the performance measure that's
been set by the legislature is really a pretty good
record, but it's not perfect.
You might ask, "Why is the supreme court imposing new
time standards and training judges to be more
efficient?" And pretty simply, the six-month rule
applies to the period of time once a decision is ready
to be made. There's a whole period of time in a case
before [a] decision is ready to be made, when the
lawyers are spinning their wheels, conducting discover
[and] having hearings. ... We strongly believe that
through better case management techniques and riding
herd on the lawyers a little better, we can get that
period of time down as well.
Mr. Chairman, the basis for our view that the law
wouldn't survive a legal challenge is what's happened
in other states. There are about a half a dozen
states or so that have a similar law to our six-month
rule. It's been challenged three times - in
Wisconsin, Montana, and Nevada. Each time, the law
was thrown out for reasons which are directly
applicable under the Alaska constitution.
First, our constitution provides that a judge's
compensation shall not be diminished during the term
of office, except by a general reduction applicable to
all state employees. Now, Mr. Chairman, as you know,
money has a time value, and if you withhold a judge's
salary for a period of time, you have the effect of
diminishing it.
I think the record ... was set about 15 years ago by
an Anchorage judge; she was carrying an active
caseload of 800 cases, and she had one case that was
delayed beyond six months, ... and she had her
paycheck withheld for over four months. It is sort of
difficult to argue that that didn't have the effect of
diminishing her salary during the course of the year.
Number 1314
MR. CHRISTENSEN continued, stating:
Second, under our constitution the supreme court is
charged with administering the judicial branch, not
the legislature. The six-month rule is really sort of
a micromanagement that goes to the very heart of the
supreme court's authority to administer our branch.
It applies to the work of every judge, every day, in
every case.
Mr. Chairman, there is also a whole line of cases from
other states in which the legislature has timelines
for courts to conduct themselves ... but has not put
the penalty of withholding paychecks. There's about a
dozen of those cases and with almost unanimity - I
think with one exception - those cases hold that
legislatures can't set those timelines.
There is a rule of constitutional law that one branch
of government can't set a timeline for another branch
to carry a constitutional function. This rule is
generally invoked to protect the executive or the
legislature from court orders, but rules like this do
cut both ways.
Notwithstanding our belief that the current law is
probably unconstitutional, you've never heard us come
into the legislature and complain about it. And I
would suspect that none of you have ever been
approached by your local judge and heard complaints
about it. We do hear grumbling from time to time in
court administration, ... and our answer [is] always
the same: "If you don't like the law, file a lawsuit.
But until you file a lawsuit and get it thrown out,
get your cases done and get your affidavit in if you
want a paycheck."
Our goal, I think, is to make sure that circumstances
don't arise which would cause 1 of the 99 individual
judicial officers to decide to file a lawsuit to throw
out the six-month rule. In the states where it has
been thrown out, the lawsuits have always been brought
by individual judges who were unhappy that their check
was withheld, never by the supreme court or the court
system as an institution.
This bill in its current form eliminates all those
things which we believe might have resulted in a legal
challenge to the existing six-month rule.
CHAIR ROKEBERG asked whether [there could be a legal challenge]
if [judges] decide to do so based on constitutional issues.
Number 1440
MR. CHRISTENSEN responded that they could if they wanted to;
however, he suspects most won't because they believe they have
adequate resources.
REPRESENTATIVE BERKOWITZ asked whether the court system has the
authority to impose its own sanctions on its membership.
MR. CHRISTENSEN answered that Wisconsin threw its version of the
six-month rule out; the supreme court, in its opinion, struck
down the six-month rule but adopted a court rule that was very
similar.
REPRESENTATIVE JAMES remarked that she wishes [the committee]
would do that, because this language doesn't seem proper.
However, she agrees "they ought to pull us out of the fire" and
put in a court rule. She asked Mr. Christensen whether it will
be more effective to have information in the election bulletin.
MR. CHRISTENSEN responded that [the Alaska Court System] does
not oppose that. He said he could provide the list of the 25
times judges had their paychecks withheld last year; that has
always been a public record.
REPRESENTATIVE JAMES remarked that she is willing to support
that because she thinks it is important for people to know.
Number 1653
REPRESENTATIVE BERKOWITZ stated that it seems to him [the
legislature] is running afoul by requiring the court officers to
insert information about their salary warrants in the election
pamphlet.
CHAIR ROKEBERG said there could be a debate in terms of power,
which resides in the legislature, to establish election statutes
and how elections are conducted. He said that would even
strengthen the position.
REPRESENTATIVE BERKOWITZ asked whether [the legislature] would
require any publication, for example, of APOC (Alaska Public
Offices Commission) violations or ethics convictions in the
legislature.
REPRESENTATIVE JAMES responded that there is a difference
between putting it in the election pamphlet and putting it on
the ballot.
CHAIR ROKEBERG stated that according to correspondence from the
Alaska Judicial Council requesting the information in order to
perform their job, he thinks it is legitimate.
Number 1770
MR. CHRISTENSEN noted that Bill Cotton from the Alaska Judicial
Council has said he is going to put this on their web site along
with the other information.
REPRESENTATIVE BERKOWITZ, in reference to the election pamphlet,
stated that the judicial officers are bound by some strict
ethical requirements about what they can and can't say, in terms
of their ability to run elections. He asked whether it would be
permissible for a judicial officer who was required to put this
information in an election pamphlet to offer an explanation.
MR. CHRISTENSEN responded that he didn't know.
Number 1821
SENATOR DONLEY remarked that they do have the opportunity to
respond.
CHAIR ROKEBERG asked whether, if there is a charge made in
public during the course of the election, the judge has a right
to respond.
MR. CHRISTENSEN responded that once a campaign committee has
formed, a judge has the right to raise money and respond.
SENATOR DONLEY remarked that he thinks a judge has the right to
respond on his or her own.
MR. CHRISTENSEN stated that there is a very strict code of
judicial ethics that restricts a lot of what a judge is able to
say about a case that's pending or impending in any court of the
state. For example, if a judge has handled a case and there are
charges against him or her in that case, the judge can't
publicly make certain comments while it's still pending in the
supreme court.
CHAIR ROKEBERG remarked that if it were printed in the pamphlet
that [the judge] did not receive his or her warrants a certain
number of times, the judge should have the right to respond. He
asked whether it is because of "standing" issues that this
hasn't been challenged before.
Number 1930
MR. CHRISTENSEN responded that a judge would have standing to
challenge; so, probably, would the institution. However, he
didn't know whether a member of the public would have that
power. The only people who suffer any financial hardship are
the 99 judicial officers. Logically, they're the only ones who
would be willing to spend the money to be relieved of the
burden.
SENATOR DONLEY informed the committee that he is willing to take
advice from the court system as far as the effective date.
CHAIR ROKEBERG asked Mr. Christensen, "What's the burn rate on
your case backlog?"
MR. CHRISTENSEN answered that there is nothing mandatory about
the case backlog in [the bill].
CHAIR ROKEBERG asked whether this should be in effect for the
next election.
MR. CHRISTENSEN responded that since it's now more advisory than
mandatory, he believes it would be fine to start the beginning
of next year.
REPRESENTATIVE JAMES made a motion to adopt Amendment 1, on page
6, line 11 [to change the effective date to] January 1, 2002.
Number 2034
REPRESENTATIVE BERKOWITZ objected.
SENATOR DONLEY said he didn't have any objection to the date.
MR. CHRISTENSEN remarked that he wouldn't have any objection.
REPRESENTATIVE BERKOWITZ explained that his objection to the
bill is not because of its subject, but is based on his respect
for the separation of powers.
REPRESENTATIVE MEYER stated that the administration has said it
is OK with this date; if that weren't true, he would agree with
Representative Berkowitz.
REPRESENTATIVE BERKOWITZ remarked that he doesn't always agree
with the administration.
CHAIR ROKEBERG pointed out that it is not the administration but
the courts. He commented that he thinks if this bill merits
consideration by the legislature, it should be enforced for the
next election.
Number 2148
A roll call vote was taken. Representatives Coghill, Meyer,
James, and Rokeberg voted in favor of Amendment 1.
Representatives Berkowitz and Kookesh voted against it.
[Representative Ogan was absent.] Therefore, Amendment 1 was
adopted by a vote of 4-2.
Number 2155
REPRESENTATIVE JAMES moved to report CSSB 161(FIN), as amended,
out of committee with individual recommendations and the
accompanying zero fiscal note.
REPRESENTATIVE BERKOWITZ objected. He stated that he thinks
[the legislature] is violating the separation of powers by
compelling the judiciary to do something. He said he'd be
interested in hearing how this action is not a violation of the
separation of powers.
CHAIR ROKEBERG responded that the administration of the
elections is in purview of the legislature, which is the primary
reason [why this is not a violation of the separation of
powers]. He said he thinks the public has the right to know
this information.
REPRESENTATIVE BERKOWITZ remarked that he doesn't dispute that;
however, he is disputing that the legislature is compelling not
only information about elections, but that the court system and
the judicial officers must file affidavits. He said he thinks
it is an inappropriate intrusion of the legislature on matters
that should be left internally to the judiciary.
REPRESENTATIVE JAMES noted that this has been existing law since
statehood, and she doesn't think [the committee] should be
discussing that portion of it.
REPRESENTATIVE BERKOWITZ responded that there was an indication
that it is unconstitutional, and it is only for the sake of
comity that the courts have not pursued an objection.
Number 2248
A roll call vote was taken. Representatives Coghill, Meyer,
James, and Rokeberg voted in favor of moving CSSB 161(FIN), as
amended. Representatives Berkowitz and Kookesh voted against
it. [Representative Ogan was absent.] Therefore, HCS CSSB
161(JUD) was reported from the House Judiciary Standing
Committee.
SB 176 - DISTRIBUTORSHIPS
CHAIR ROKEBERG announced the final order of business, CS FOR
SENATE BILL NO. 176(L&C) am, "An Act prohibiting certain
coercive activity by distributors; relating to certain required
distributor payments and purchases; prohibiting distributors
from requiring certain contract terms as a condition for certain
acts related to distributorship and ancillary agreements;
allowing dealers to bring certain court actions against
distributors for certain relief; and exempting from the
provisions of the Act franchises regulated by the federal
Petroleum Marketing Practices Act, situations regulated by the
Alaska gasoline products leasing act, and distributorship
agreements relating to motor vehicles required to be registered
under AS 28.10." [Before the committee was HCS CSSB 176(L&C).]
Number 2282
JOHN HAXBY, Waukesha Alaska Corporation, came forth to discuss
SB 176. He told members the company was started in 1972 by his
father, and he himself has been operating the business since
1984. There are approximately 13 employees, and the main
business involves the sale and distribution of machinery for all
services throughout Alaska. He stated:
Over the last 30 years, we've been in relationships
with manufacturers. Relationships change over time,
and there are occasions where distributor agreements
are yanked without warning. In many cases this can
cause irreparable harm financially. Alaskan small
businesses see immediate losses in jobs and, in our
case, it has resulted in some $300,000 in unsold
inventory, which remains on our shelf.
Basically, what SB 176 does ... is it levels the legal
playing field in Alaska. Legal challenges are
extraordinarily expensive, and in most cases deep-
pocketed Outside manufacturers simply run you out of
money. Cases like this can and have easily run into
hundreds of thousands of dollars. ... In one
noticeable instance ... legal bills have exceeded $1
million and climbing, even in a case in which the
local Alaskan company has won in every court that's
south of the 9th Circuit. And in that particular
case, there are continuing appeals.
This bill also keeps manufacturers from forcing
unwanted or unordered inventory on Alaskan businesses.
It's not uncommon to be made part of quotas unknown to
yourselves, and [be] told, "Hey, you're going to take
this inventory because you're our distributor. Take
it or we're going to terminate you or we're not going
to have a relationship anymore."
The bill also allows for the orderly disposition of
inventory if a distributor agreement is in fact
yanked. It returns precious capital for that
inventory, which would be remaining at the time of
termination of the distributor agreement, to be
returned. The inventory would go back to the
manufacturer and there would be a repurchase by the
manufacturer of that inventory. This allows Alaskans
to take that capital and reinvest it in businesses
here in the state.
Number 2399
MR. HAXBY continued:
The bill also allows that in the event of a death of a
distributor or the death of a dealer that an orderly
and equitable return of inventory can be accomplished
quickly. It's especially important in these cases to
be able to have an orderly disposition of inventory
and/or the business, because many times the IRS
[Internal Revenue Service] comes in and they value the
business according to the past performance of the
business.
In the event that a distributorship is in fact yanked
- and the IRS comes and says, "We have a tax bill
because your business is valued at 'X' dollars," and
they assess a tax value - ... the value of the
business may in fact go to zero and ... the tax
liability remains with the estate of itself. So,
theoretically, it has the possibility to wipe out the
heirs after the death of a dealer.
I read through this committee substitute and I have
pretty much agreed with the way it is written at this
time, with the exception ... on page 6, ... line 11,
where it talks about distributor agreement [meaning] a
written agreement. In the original language ... three
other words [were] in there, which stated "expressed,
implied, [and] oral". And I think it's important to
note that oral agreements are, ... especially in
Alaska, relatively common.
TAPE 01-81, SIDE B
Number 2472
MR. HAXBY went on to say:
I'd like to ask for your support of this bill. I
think that it's good for Alaskan businesses. I think
it's good for Alaskan employees, and that it should
treat everyone in Alaska similar.
REPRESENTATIVE BERKOWITZ asked whether anyone with legal
expertise intended to testify.
CHAIR ROKEBERG answered no.
REPRESENTATIVE JAMES stated that she understands the conflict
between big businesses and the little businesses, and between
the supplier and the person who is having these distributors'
products on his or her shelves. She said she has a lot of
experience with this and wished this had been law on the books
when she was a bankruptcy trustee. Also, as an accountant, she
has seen people who have had a distributorship taken away, which
was disastrous. She stated that she thinks this is a good idea
to protect Alaskan businesses. She noted that she is concerned
whether having an in-state distributor will be a problem.
CHAIR ROKEBERG responded that [yesterday in the House Labor and
Commerce Standing Committee] the testimony was that many times
the manufacturers end up being distributors. He stated that he
had added [to the bill], "manufacturers with 50 or fewer
employees," which generally covers most manufacturers in Alaska.
REPRESENTATIVE JAMES said she has also worked with wholesalers
and knows they have rules and regulations about whether or not
their product is being properly displayed and managed. She
stated that she doesn't think that will affect people in Alaska,
and she doesn't think anything in the bill would be an unfair
trading practice.
Number 2285
JANEECE HIGGINS, General Manager, Alaska Rubber & Supply, Inc.,
testified via teleconference. She stated:
We had a signed dealer agreement in place ....
Regional sales [representatives] made oral changes to
that agreement with regard to volume discounts. For
15 years we followed the instructions of the sales
[representatives], and every month the paperwork was
filed, accepted, and discounts were applied to our
account.
The parent company sold the manufacturing plant and
the variances were noted. Because we had not followed
the original signed document procedures, they demanded
we repay all discounts, and when we refused we were
terminated as a dealer. Since the paperwork had been
mailed, the distributor also charged the owners and
previous general manager with RICO [Racketeer
Influenced and Corrupt Organizations Act] violations
and criminal charges. These were very serious
charges.
We have prevailed at every level, and the ruling by
the court provided that the oral changes made by the
sales representative and accepted for 15 years by the
distributor, in fact, became the new dealer agreement.
This case has been to the 9th Circuit, and we have
prevailed at that level as well. Oral agreements and
oral changes to existing agreements happen every day
of the business world, and I urge you to keep language
in this bill to cover that issue.
As a side note, we also have dealers to set up
throughout the state. We support them with inventory,
training, and technical data. This bill will affect
us from both sides of the distributor-dealer
agreement, and we feel it is fair.
CHAIR ROKEBERG asked Ms. Higgins for the name of the case in the
9th Circuit [Court of Appeals].
MS. HIGGINS responded that it was Aeroquip vs. Alaska Rubber &
Supply, Inc. and the partners were Don Adams, Drennon (ph)
Adams, Tom Moore (ph), and Alaska Interior Rubber. It is still
being appealed, and the legal bills are $1.2 million.
Furthermore, the 9th Circuit upheld the ruling of the lower
courts.
CHAIR ROKEBERG asked whether the 9th Circuit had remanded it to
Judge Singleton [of the U.S. District Court].
MS. HIGGINS answered in the affirmative.
CHAIR ROKEBERG asked whether the 9th Circuit talked about the
oral or the implied contracts.
MS. HIGGINS answered that that was the basis of the whole thing
being upheld.
Number 2101
DEBORAH LUPOR testified via teleconference. She stated:
This is an important concern. [For] many small
businesses, one of their major complaints is that
[they don't] have the time, the staff, or the
resources to respond to legal challenges. Whether
somebody slips and falls on the sidewalk and sues for
damages, or ... on the other side, the big guys decide
to yank a distributorship agreement, ... they just
don't have the resources to respond.
I want to mention that in talking to a number of
business owners, what I discovered is that yanking the
distributorship agreement has nothing to do with
performance in many, many cases. It has everything to
do with developing new markets. Or maybe a new
management comes in or maybe a big distributor is
trying to sign up somebody in Seattle, and the Seattle
guy goes, "Well, I will take your product only if I
get the Alaska market as well." And before you know
it, the Alaska business, who has trained employees and
built infrastructure and has come, in fact, to depend
on this product, ... is suddenly, with sometimes no
notice, sometimes 30 days, ... gone. And they're left
with inventory that here in the Municipality of
Anchorage they continue to pay inventory tax [on].
... I'm also very concerned about what happens when
the dealer dies and passes his estate on to family.
They're already dealing with a horrific loss, and then
to get stuck with huge IRS bills that may actually
leave them in the red with no business at all even to
pay that bill is beyond contemplation. I thank you
for hearing this bill [and] I urge you to pass it.
Number 1984
CHAIR ROKEBERG announced that [the committee] has received
suggestions for [three] amendments. He noted that they are
issues discussed the day before at the House Labor and Commerce
Standing Committee hearing. He offered the following
corrections: the first one should say page 3, line 22, instead
of [line] 16; the second one, page 3, line 26, instead of [line]
20; and the third one, page 6, line 11.
CHAIR ROKEBERG made a motion to adopt conceptual Amendment 1, on
page 3, line 22, to insert "without cause" following "terminates
a distributorship agreement". He explained that this is a
requirement that the distributor actually purchases the business
if there is a termination. He said this is whether it's willful
or not. With termination, there would be a statutory mandate to
terminate; however, it seems to him that there would have to be
a termination without cause. If there is a breach of contract
on the part of the dealer, the distributor shouldn't have to buy
the business if the dealer didn't meet his or her bargain.
MR. HAXBY remarked that he understands; however, when this had
been discussed with Legislative Legal [and Research Services]
new issues regarding what is "cause" were brought up. He said
that had to be taken out because they couldn't give every
definition for cause.
CHAIR ROKEBERG stated that it troubles him and asked, if there
is a termination because the dealer is not performing, whether
the distributor has to buy the dealer out.
MR. HAXBY responded that the value of the business would be
decimated.
CHAIR ROKEBERG asked whether the "crucible" of the marketplace
would take care of the valuation, which is why the House Labor
and Commerce Standing Committee deleted "good will".
MR. HAXBY concurred.
Number 1826
REPRESENTATIVE BERKOWITZ remarked that [the committee] is trying
to itemize what the harm is in Sections 1 and 2, and suggested
that the distributor be liable for damages incurred.
CHAIR ROKEBERG said he thinks that is difficult because of the
nature of the inventory and the assets in the inventory.
REPRESENTATIVE BERKOWITZ noted that the bill states, "the
distributor shall be liable for damages incurred".
CHAIR ROKEBERG replied that hopefully being more specific will
avoid litigation.
REPRESENTATIVE BERKOWITZ remarked that it seems if the
distributor chose to disregard any of these requirements, he or
she would go to court.
Number 1768
REPRESENTATIVE JAMES stated that she can support purchasing back
the inventory, since it is her experience that leftover
inventory is worth nothing. She added that she agrees with
Representative Berkowitz's statement that [the distributor]
should pay the damages; however, she thinks they need to pay at
least 85 percent of the cost of inventory.
CHAIR ROKEBERG informed Representative James that on page 2 that
is included under "Disposition of merchandise remaining upon
contract termination."
REPRESENTATIVE BERKOWITZ pointed out that AS 45.45.710 is the
buy-back provision, and AS 45.45.740 specifies other damages.
He stated that itemizing like this can also have the effect of
being exclusionary.
CHAIR ROKEBERG responded that it is not damages per se; it's the
valuation of the business.
REPRESENTATIVE BERKOWITZ replied that, for example, there could
be costs that have nothing to do with assets, good will, or
machinery; it could be the time the individual spent pursuing.
He suggested just saying [the distributors] are liable for
damages.
CHAIR ROKEBERG remarked that there is a "without cause
termination" and [the committee] wanted to narrow it.
Number 1640
MR. HAXBY suggested that the change not be made. Typically, he
said, in a business valuation there are all kinds of things that
are taken into account at that time. He said good will was
eliminated specifically because it was thought to be something
that was not definable. Most of the time, in a business
valuation, growth rates and growth curves of the business are
looked at. If it is gaining 25 percent year over year, then
that may have a multiple of earnings for one business. If it is
in decline, however, it would have a more limited valuation.
Rather than addressing damages, which are tough to define, a
methodology like this allows it to be accomplished more quickly.
REPRESENTATIVE JAMES remarked that good will can be measured;
people buy businesses, including good will.
CHAIR ROKEBERG agreed that it can be recognized; however, if
there is a termination with or without cause, the statute would
force the distributor to pay.
REPRESENTATIVE BERKOWITZ stated that it can't be done without
cause. He expressed that every agreement is governed by the
covenant of good faith and fair dealing.
CHAIR ROKEBERG responded that he thinks the contract has to be
respected here.
REPRESENTATIVE BERKOWITZ stated that a distributor can't just
cut somebody off without suffering consequences. When there is
a breach of the implied covenant, then the question arises as to
what the damages are. In most instances when there are disputes
between parties, the parties are allowed to "hammer out" the
differences amongst themselves. [The legislature] tries not to
mandate, through the legal system, specific results for
instances between types of parties. Here, [the legislature] is
trying to deal with a contract dispute, and should be careful
about prescribing a result.
CHAIR ROKEBERG remarked that he thinks [the committee] is trying
to narrow the issues.
Number 1499
REPRESENTATIVE JAMES stated that Chair Rokeberg is talking about
a small business in Alaska with a huge distributorship Outside,
and this small business has no opportunity to go to court. If
something is in state law, [the distributors] will change the
way they do business with Alaska.
CHAIR ROKEBERG agreed and said that is why [the committee] wants
to add machinery and assets into the bill.
MR. HAXBY noted that other states have laws similar to this.
REPRESENTATIVE BERKOWITZ remarked that this is what "tort
reform" was about. [The legislature] took away some "hammers"
from the small businessperson by limiting punitive damages.
Number 1416
CHAIR ROKEBERG withdrew conceptual Amendment 1.
[Amendment 2, which was not offered, would have amended page 3,
line 26; it read: "Insert the words 'good will,' following
'including'".]
CHAIR ROKEBERG made a motion to adopt Amendment 3, which read:
Page 6, Line [11]
Delete the words "a written agreement"
Insert the words "an agreement, whether expressed,
implied, oral, or written,"
[The foregoing was corrected regarding the change to line 11,
and would place the language following "'distributorship
agreement' means".]
REPRESENTATIVE BERKOWITZ suggested that it say "a valid
agreement".
CHAIR ROKEBERG offered that the amendment could read, "to be
consistent with a valid agreement that's enforced by UCC
[Uniform Commercial Code]".
REPRESENTATIVE BERKOWITZ stated, "within parameters."
CHAIR ROKEBERG remarked that he is concerned about that, given
the history of this case from Ms. Higgins.
REPRESENTATIVE BERKOWITZ responded that with her case there is
implied contract and there is detrimental reliance.
CHAIR ROKEBERG stated that there is some type of an addition to
the contract because of the implied actions of the parties.
Number 1335
REPRESENTATIVE MEYER stated that [the House Labor and Commerce
Standing Committee] spent a lot of time on this, and he was on
the opposite side from Chair Rokeberg. He noted that [the
committee] thought if a person were to go into business with a
large corporation, it should be in writing.
CHAIR ROKEBERG responded that according to the witness today,
this common business activity doesn't necessarily mean "you have
to go around and amend your contract every time you have a ...
long-term relationship."
REPRESENTATIVE MEYER said this is supposed to be written for
future events, and he thinks [the legislature] would want more
people to put their agreements in writing, rather than doing
them orally and by handshake.
REPRESENTATIVE JAMES stated:
You wouldn't get one because the salesman has the
right. He's on the grounds to make this agreement,
has the rationale, ... and is authorized to do it in
this particular case. And then he notifies that this
has been changed and this is happening. If that had
gone back to the place where they got the written
agreement, they'll never get one.
REPRESENTATIVE KOOKESH remarked that he doesn't have a problem
with [Chair Rokeberg's] valid agreement with the UCC.
Number 1222
REPRESENTATIVE COGHILL said [the committee] should study how the
UCC deals with contracting some of the oral agreements. He
suggested adding the expressed, implied, oral, [or written]
language.
REPRESENTATIVE MEYER objected to Amendment 3 [as written and
provided in committee packets].
CHAIR ROKEBERG remarked that he thinks this is the right way to
go, and is willing to go to UCC language.
REPRESENTATIVE BERKOWITZ asked, assuming Amendment 3 passes and
[the committee] finds that it crosses wires with the controlling
case law, whether [Chair Rokeberg] would help repair the problem
on the [House] floor.
CHAIR ROKEBERG answered that he would, but doesn't think [there
will be a problem].
REPRESENTATIVE MEYER stated that he thinks it is poor business
practice to not have an agreement in writing.
Number 0940
A roll call vote was taken. Representatives Berkowitz, Kookesh,
James, Coghill, and Rokeberg voted in favor of Amendment 3.
Representative Meyer voted against it. [Representative Ogan was
absent.] Therefore, Amendment 3 was adopted by a vote of 5-1.
Number 0925
REPRESENTATIVE JAMES moved to report HCS CSSB 176(L&C), as
amended, out of committee with individual recommendations and
the accompanying zero fiscal note. There being no objection,
HCS CSSB 176(JUD) was reported from the House Judiciary Standing
Committee.
ADJOURNMENT
Number 0902
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 6:35 p.m.
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