HB 57 - STATE & MUNI IMMUNITY FOR Y2K CHAIRMAN KOTT announced the next order of business is HB 57, "An Act relating to immunity for certain claims against the state, a municipality, or agents, officers, or employees of either, arising out of or in connection with the year 2000 date change; and providing for an effective date." Number 0830 REPRESENTATIVE JAMES made a motion to rescind the action of passing HB 57 from the committee earlier. There being no objection, it was so moved. Number 0847 REPRESENTATIVE JAMES made a motion to adopt the committee substitute for HB 57, 1-GH1005\D. There being no objection, it was so moved. Number 0886 CORY WINCHELL, Administrative Assistant to Representative Pete Kott, Alaska State Legislature, noted that the word "not" was not included on page 3, lines 8-10. As a result, the immunity described in this section would apply if clear and convincing evidence is shown. Originally, the committee wanted to show that the immunity would not apply if clear and convincing evidence is shown. CHAIRMAN KOTT noted that is what "some" of the committee members wanted to show. Number 0960 GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation Section, Civil Division, Department of Law, testified via teleconference from Anchorage. She stated, if the intent is to make this an immunity to avoid a lawsuit, a definition of the phrase, "good faith efforts", would be appropriate. Number 1018 REPRESENTATIVE GREEN asked Ms. Voigtlander whether simply establishing a definition would remove the problem of going through a trial for a factual determination. MS. VOIGTLANDER replied it would help if it was crafted in a way that there wouldn't be an issue of fitting the conduct within the definition. The problem is getting everybody to "read off the same page" in terms of the facts and what they mean. It is more often the case that a trial judge is unable to resolve any factual issues and, therefore, it has to go to trial to be resolved. Number 1084 REPRESENTATIVE GREEN asked Ms. Voigtlander, even with a definition, whether the state would still have to go through the riggers of a trial each time something like this came up to determine whether there were good faith efforts. MS. VOIGTLANDER replied findings would be made at the trial court level, presumably the superior court level. And, under the laws of the state one superior court does not have to follow another superior court's findings or rulings if the parties are not the same. Superior court is bound only be appellate case law as controlling. In addition, depending on the claim the facts might change. Number 1185 CHAIRMAN KOTT announced there are three amendments and labeled them as "Amendment 6", "Amendment 7", and "Amendment 8". Number 1292 REPRESENTATIVE ROKEBERG spoke to Amendment 6 before adopting it. It reads as follows: Page 3, lines 8-10: Delete "The immunity described in this subsection applies only if the affected party shows by clear and convincing evidence that the state did not use good faith efforts to avoid the failure that caused the damages in the civil action." REPRESENTATIVE ROKEBERG explained Amendment 6 fundamentally takes away the defense of the state against any year 2000 (Y2K) action. This bill doesn't have the criteria as set out in HB 82, and without that language it does severe harm to the intent of the bill and the desire of the Administration to have immunity for the state. The amendment may leave the municipal governments below the state level still liable, however. Number 1458 MS. VOIGTLANDER asked whether there is a parallel change to AS 09.65.070. CHAIRMAN KOTT AND REPRESENTATIVE ROKEBERG replied no simultaneously. REPRESENTATIVE ROKEBERG said he's not sure where it would fit into AS 09.65.070 precisely. Number 1497 REPRESENTATIVE CROFT stated, if Representative Rokeberg is trying to make a distinction between the state and municipality, then there would need to be a technical change on page 4 for it to make sense. REPRESENTATIVE ROKEBERG said that is a separate issue, and suggested discussing each one separately. REPRESENTATIVE CROFT said it would be easier to clean up the language then debate it. Amendment 8 would get the bill to where the committee intended it to be. Number 1595 REPRESENTATIVE GREEN said either one of the amendments would still have the problem of good faith efforts. The state or a municipality would still be subject to a full trial each time an issue came up. It and would open it up for lawyers to have a "good time." Number 1650 REPRESENTATIVE ROKEBERG said the state justifiably deserves immunity because it is making good faith efforts to try to resolve the problem. He cannot say that, however, for the local level governments. If blanket immunity is granted to them, there is no incentive to take corrective actions. "Therefore, if you wish to have the standard where there is the right to claim, it should not be against the state, but it should be against the local level government where they should have--should have to prove their good faith effort to do this. Whereas, we already know the state is already doing a good faith effort. And, if they're not, that's the legislature's fault for not giving them enough money." Number 1750 REPRESENTATIVE GREEN retracted his comments on Amendment 6. He misread it. Number 1778 REPRESENTATIVE ROKEBERG made a motion to move Amendment 6 (1-GH1005\D.1, Ford, 3/23/99). REPRESENTATIVE CROFT objected. It comes back to the fundamental issue of what it takes to get action. In this society, it takes responsibility to get action, and the state is absolving itself of responsibility here. The reason for getting action is because of the potential liability. Mr. Poe [Commissioner, Department of Administration] testified that the money he has used came from the Risk Management Fund. If there is no risk, he could not have used that money. It is the risk of somebody holding the state responsible for its actions that caused the state to act responsibly. The efforts that the state has made so far have met the good faith standard, but there are still eight months to go, and this is a license to stop. He predicts that the state's efforts will not be as substantial with this amendment. Number 1944 REPRESENTATIVE MURKOWSKI said she wishes that there is a way to define the phrase, "good faith efforts", as the committee is trying to do in HB 82. Number 2048 REPRESENTATIVE KERTTULA said that deleting this section opens up the dilemma of intentional misconduct. If that is the way the committee goes then she has other amendments that will be necessary to protect against things like that. Number 2076 REPRESENTATIVE JAMES she has a problem hearing that efforts will be stopped because of immunity. If the legislature wasn't in control and there wasn't interest from the Administration, that might be fair to say. However, there ought to be immunity in this case because she believes that the state is making a good faith effort, otherwise "you have to go to court to show why you should." It's the going to court that is expensive and she wants to avoid that. Number 2156 REPRESENTATIVE GREEN asked whether there is the possibility of handling this administratively rather than going to court over and over again. CHAIRMAN KOTT replied there is always that possibility, but it might happen too often. REPRESENTATIVE GREEN replied it would have to be a rare case, but at least "you wouldn't be subjecting yourself to constant court actions." CHAIRMAN KOTT called for a roll call vote. Representatives Green, Rokeberg, James and Kott voted in favor of the motion. Representatives Murkowski, Croft and Kerttula voted against the motion. The motion passed by a vote of 4-3. Number 2270 REPRESENTATIVE ROKEBERG made a motion to move Amendment 7 (1-LG1005\D.2, Ford, 3/24/99). It reads as follows: Page 1, line 3, following "change;": Insert "amending Rule 23, Alaska Rules of Civil Procedure;" Page 3, following line 10: Insert a new subsection to read: "(b) A civil action brought against the state, or against an agent, officer, or employee of the state, for damages arising from the year 2000 date change and not precluded by (a) of this section may not be brought as a class action unless each member of the class has a claim for economic loss that exceeds $50,000." Reletter the following subsections accordingly. Page 5, following line 16: Insert a new bill section to read: (f) A civil action brought a municipality or against an agent, officer, or employee of the a municipality, for damages arising from the year 2000 date change and not precluded by (d)(7) of this section may not be brought as a class action unless each member of the class has a claim for economic loss that exceeds $50,000." Renumber the following bill sections accordingly. Page 5, lines 17-18: Delete "09.65.070(e)(4) and 09.65.070(e)(5)" Insert "09.65.070(e)(4), 09.65.070(e)(5), and 09.65.070(f)" Page 5, following line 18: Insert a new bill section to read: "* Sec. 7. AS 09.65.255(b), enacted by sec. 2 of this Act, and AS 09.65.070(f), enacted by sec. 5 of this Act, have the effect of amending Rule 23, Alaska Rules of Civil Procedure, by requiring, in certain class actions relating to the year 2000 date change, that each member of the class have a claim for economic loss that exceeds $50,000." Renumber the following bill sections accordingly. REPRESENTATIVE CROFT objected. REPRESENTATIVE ROKEBERG explained Amendment 7 says that, if there is any civil action taken against the state or a municipality, economic losses would have to exceed $50,000 for a class action. The idea is to limit vexatious litigation for relatively minor amounts of money. It is similar to language in the private sector Y2K bill. He noted that this doesn't preclude a class action. Number 2425 REPRESENTATIVE CROFT stated he is not sure whether the amendment to Page 3 is needed at all since the state now has complete immunity. The amendment to Page 5 is poor public policy. It mirrors only one section of the private sector Y2K bill... TAPE 99-23, SIDE A Number 0001 REPRESENTATIVE ROKEBERG said Representative Croft may have a point. REPRESENTATIVE ROKEBERG made a motion to amend Amendment 7 to delete lines 3-8 of the amendment [Page 3, following line 10:]. Number 0084 REPRESENTATIVE MURKOWSKI noted that she has a copy of HB 82 and it is basically the same provision. REPRESENTATIVE ROKEBERG said the issue on amending Amendment 7 is that if there is blanket immunity for the state a provision for a class action limitation is not needed. It is redundant. CHAIRMAN KOTT agreed. REPRESENTATIVE CROFT noted it is a good amendment to Amendment 7; it just doesn't go far enough. CHAIRMAN KOTT asked whether there is any objection to the motion to amend Amendment 7. There being none, it was so moved. REPRESENTATIVE JAMES asked Representative Rokeberg to explain the changes to Page 5, lines 17-18 of Amendment 7, as amended. REPRESENTATIVE ROKEBERG replied it has to deal with the automatic repealers. Number 0284 CHAIRMAN KOTT asked Representative Rokeberg to explain the changes to Page 5, following line 18 of Amendment 7, as amended. REPRESENTATIVE ROKEBERG replied it is a court rule change reflected in the change to the title. Number 0456 REPRESENTATIVE CROFT said, "If we're going to mirror...Now that we've modified it--if we're going to mirror the provisions of the private immunity bill, Y2K immunity bill, in this respect, then it seems to me that we ought to in the respective liability...That if we took a fair amount of care to list a way that you could--steps that you could take to get out of liability, or more general if you wanted that. And, we took a fair amount of this committee's time trying to craft that just right. And, if it's 'good for the goose, it should be good for the gander.' So, if we're gonna treat private entities with that level of immunity, a schedule of immunity or an option for a margin of error, I wouldn't have any objection to this mirroring provision, if we then go ahead and put the same sort of language from the private into the governmental. If we're not going to, and staff is passing around the new version of HB 82 that has that language, if we're not going to put that level or that description of that specificity of liability than I'm will object to this. Not knowing, what the committee's wish is, I'll maintain this objection. If we had some sense that we were trying--gonna mirror what we're doing--asking the private sector to do, that would be something different." Number 0564 REPRESENTATIVE ROKEBERG said he doesn't have an objection to that conceptually. He objects to cleaning up the Governor's bill. He can't find fault with Representative Croft's logic. CHAIRMAN KOTT asked Representative Rokeberg to withdrawal his motion on Amendment 7, as amended, for public testimony. It is the intent to hold the bill over to clean it up. Number 0651 KEVIN SMITH, Risk Manager, Alaska Municipal League, Joint Insurance Association, Incorporated, testified in Juneau. As Representative Croft pointed out, "What's sauce for the goose is sauce for the gander." He feels that all the arguments applied towards Amendment 6 for the state could be extended to municipalities. Public resources would be more wisely spent solving the problem as opposed to being spent on a defense to court. There are a whole bunch more targets in the municipal arena than the state arena. As a result, the problems are larger in terms of a defense. He encouraged the committee members to consider applying the same standards to the municipalities. Number 0724 REPRESENTATIVE ROKEBERG said the reason for the distinction and concern is for the municipalities that haven't undertaken compliance programs. He agrees with Mr. Smith in terms of avoiding litigation and focusing on compliance. He thinks that the committee's intention of setting up a defense for good faith standards would be available to those governments that take the actions. He is concerned because he knows what the state is doing, but he doesn't know what every municipal government is doing in the state. Number 0786 MR. SMITH said the incentive is the same for the local government leaders as it is for the legislators which is being responsible to constituents. There is an incentive for the governments to do what they are suppose to without having to be driven by the court system. He wondered whether showing a demonstration of the efforts being taken would go towards helping to apply Amendment 6 to municipalities. Number 0826 REPRESENTATIVE ROKEBERG said the (indisc.--coughing) is looking at setting up a definition of "good faith efforts" in the bill. Therefore, each municipal government would have to meet that standard in order to assert a defense. He thinks that is the fair way to do it. The committee and legislature do not know what each local government is doing or not doing. He said, "Mr. Smith you can't warrant to this committee that every municipal government or school district in the state is doing the right thing right now. Can you?" MR. SMITH replied naturally he cannot do that. But, by the same token, even if a good faith standard is written out there would still be a question of fact before a trial incurring defense costs which takes public dollars - dollars that could be used to replace municipal assistance and revenue sharing, for example. Number 0907 REPRESENTATIVE ROKEBERG said in HB 82 there are other forms of remediation. In regards to Mr. Smith's comments on municipal assistance and revenue sharing being held up, he would be happy to apply Amendment 6 to municipalities. It's up to the committee. He's happy either way. Number 0928 CHAIRMAN KOTT indicated the bill will be held over and hopefully taken up again tomorrow [April 8, 1999].