HB 13-SUCCESSOR LIABILITY FOR PRODUCT LIABILITY Number 2175 CHAIR ANDERSON announced that the next order of business would be HOUSE BILL NO. 13, "An Act declaring legislative intent to reject the continuity of enterprise exception to the doctrine of successor liability adopted in Savage Arms, Inc. v. Western Auto Supply, 18 P.3d 49 (Alaska 2001), as it relates to products liability; providing that a successor corporation or other business entity that acquires assets of a predecessor corporation or other business entity is subject to liability for harm to persons or property caused by a defective product sold or otherwise distributed commercially by the predecessor only if the acquisition is accompanied by an agreement for the successor to assume the liability, results from a fraudulent conveyance to escape liability for the debts or liabilities of the predecessor, constitutes a consolidation or merger with the predecessor, or results in the successor's becoming a continuation of the predecessor; defining 'business entity' that acquires assets to include a sole proprietorship; and applying this Act to the sale, lease, exchange, or other disposition of assets by a corporation, a limited liability company, a partnership, a limited liability partnership, a limited partnership, a sole proprietorship, or other business entity that occurs on or after the effective date of this Act." Number 2164 REPRESENTATIVE ROKEBERG, sponsor of HB 13, explained that legislation similar to this bill passed the legislature last year but was vetoed by the governor; the only controversial part of that bill was the retroactive application of legal language, but HB 13 does not contain that language. The bill sets forth the standard business succession liability for the purchase of a business and clarifies under what circumstances the new entity remains responsible for the liabilities of the former owner. He explained that the bill was referred to the committee because of its economic impact on commerce. It overturns an Alaska Supreme Court case that was inconsistent with [laws in] 48 other states. He said making Alaska's business laws consistent with other states' laws helps build a stable business environment. Number 2083 HEATHER NOBREGA, Staff to Representative Norman Rokeberg, Alaska State Legislature, explained that under HB 13, when a person purchases a company, the person is not liable for the company's previous mistakes and harm unless the person assumes those liabilities. The new owner can be held liable for the previous company's liabilities under four exceptions: (1) if the new owner assumes the liabilities; (2) if [the purchase] was a fraudulent attempt to avoid the liabilities; (3) if the purchase was a consolidation or merger and the new company wouldn't be harmed by assuming those liabilities; or (4) the new company is in fact a continuation of the same company. MS. NOBREGA noted that HB 13 relates to product liability, which hadn't been [litigated] in Alaska before 2001, when the Alaska Supreme Court made a decision on the law. She explained that the supreme court recognized two exceptions: the "mere continuation" of the business and the "continuity of enterprise," a newer doctrine that has been rejected by most of the jurisdictions that have looked at the issue. This bill rejects that doctrine ["continuity of enterprise"] and adopts the four general standards that are recognized by most courts in the nation. Number 2007 REPRESENTATIVE ROKEBERG mentioned that the "continuity of enterprise" theory has been rejected in the Restatement (Third) of Torts. He said HB 13 adopts the [more] widely accepted rule. He noted that the Alaska Supreme Court adopted this "continuity of enterprise" provision that has been specifically rejected by most other states. Representative Rokeberg reported that this court case, [Savage Arms, Inc. v. Western Auto Supply Co.] has been settled, and said retroactivity [is no longer an issue]. This bill is [prospective] so that Alaska's law is clear on the subject of product liability when a company is purchased. He explained that sometimes people who wish to file lawsuits against corporations over product liability go "shopping" [for a jurisdiction that has unusual] law. If Alaska had an unique [interpretation of this provision], people might use Alaskan courts to file these kinds of suits. He opined that businesses laws should be uniformly applied throughout the United States. CHAIR ANDERSON reminded the committee that the next referral is the House Judiciary Standing Committee, where detailed legal questions can be examined. Number 1900 REPRESENTATIVE DAHLSTROM moved to report HB 13 out of committee with individual recommendations and the accompanying fiscal note. There being no objection, HB 13 was reported from the House Labor and Commerce Standing Committee.