HB 82-IMMUNITY:CLAIMS ARISING FROM Y2K PROBLEMS CHAIRMAN TAYLOR thanked Representative Rokeberg for working with his staff in creating a new committee substitute. REPRESENTATIVE NORM ROKEBERG, sponsor of HB 82, explained the bill as follows. The proposed committee substitute provides limited immunity against claims arising out of the Y2K date change. The bill is patterned after S.96, introduced in Congress by Senator John McCane. The committee substitute excludes all personal injury and wrongful death claims on page 4, subsection (e). It further removes the mediation provision. The House version had three steps to resolution: the first was mediation. The bill still contains the curative aspects because attempting to cure a problem before litigating is a sensible approach. The proposed committee substitute also changes the standard under which the cause of action is a contract [indiscernible] and it provides limited immunity for those businesses that take the steps on page 3. Subsection (1) acts as a template by outlining six fundamental steps to creating a compliance program. Subsection (2) is a catch- all clause that sets reasonable care standards. The original version of the bill contained due diligence standards. He said that language on page 4, subsection (e) means that a Y2K provision of a contract must be enforceable on the contract; it would seem disingenuous to use a Y2K defense to defend oneself against an agreement to perform a Y2K related fix. He recommended the committee adopt a conceptual amendment to page 4, line 21, to add "year 2000 date change" after "a" and before "provision." Number 513 SENATOR ELLIS questioned, asked what happens to actions worth less than $25,000 according to language on page 5, section 4. REPRESENTATIVE ROKEBERG said those actions would have to be individually litigated. SENATOR ELLIS stated that gives class action protection to cases of larger amounts only. CHAIRMAN TAYLOR noted he shares Senator Ellis' concern. SENATOR ELLIS moved to adopt the Senate Judiciary Committee substitute as the working document of the committee. There being no objection, the motion carried. SENATOR ELLIS asked the sponsor to respond to the concern he expressed about no protection for the little guy. REPRESENTATIVE ROKEBERG stated the threshold was lowered on the House side from $50,000 to $25,000 for that reason. He noted the intent was to prevent a class action suit from being filed unless a major problem occurred. He added that this provision was requested by the State Chamber of Commerce. SENATOR HALFORD asked if the application of this limitation depends on meeting all other conditions set out in the bill, or whether the limitation is applicable in regard to Y2K damages regardless of the other conditions of the bill. REPRESENTATIVE ROKEBERG said the limitation would apply regardless of the other conditions because the limitation applies to the formation of a class action by the opponent. CHAIRMAN TAYLOR disagreed because the standards specifically require the damaged party to write a letter, send notice to the business, and give the business an opportunity to fix the problem. He thought those businesses, who might have a claim against another business, would have to have incurred $25,000 in damages before they could form a class action suit. MR. ROKEBERG said his understanding is that they would have to meet that criteria in the formation of the class action only. The defense provided in the bill will not provide for a class action alone. Number 564 CHAIRMAN TAYLOR maintained the standards that have to be met to fulfill the prerequisites to bring the claim remain the same, regardless of whether there is one claimant or 200. Those standards might be met by writing one letter instead of 200 on behalf of the entire class but the standards would have to be met to become a member of the class qualifying to bring suit around the exemptions. REPRESENTATIVE ROKEBERG said he understands it to mean a business would have to have damages exceeding $25,000 to become a member of a class action. CHAIRMAN TAYLOR indicated that is the way the law currently reads. He maintained that Senator Ellis's question is whether a business with a claim below $25,000 will be prevented from joining a class action suit. REPRESENTATIVE ROKEBERG said the answer is yes. SENATOR HALFORD said the effect of that is separate from the effect of the other provisions of the bill that require all kinds of protections. REPRESENTATIVE ROKEBERG explained the other steps must be taken but they are not relevant to the formation of a class action. Number 568 SENATOR ELLIS commented the easiest way to address his concern is to eliminate Section 4 altogether. REPRESENTATIVE ROKEBERG said the intent is to prevent an attorney from "running around, getting a bunch of people together to file a cause of action so that you get a legal fee if there was minor damages." He noted under that scenario, a substantial action could be filed if 100,000 people lost power for one day. He added HB 82 is a business protection bill, not a consumer protection bill. The intent is to minimize the effect on the business community and to ensure that it meets the standards. TAPE 99-36, SIDE B CHAIRMAN TAYLOR expressed concern that the bill amends a strict court rule about how a class action can occur. He noted the general concern with class action suits comprised of "those similarly situated" is that the defendant cannot be reimbursed for attorney's fees if he/she wins because the plaintiff is nameless, however if HB 82 refers to primitive contracts, a clearly definable class exists. He said customers of an electric utility have a contract with the utility and could file a class action suit if they were without power for 24 hours and their economic losses were $25,000 each. If they do file a class action suit they are identifiable, and they are responsible for attorney's fees if they lose. He noted HB 82 only applies to people with a contractual relationship with a business. REPRESENTATIVE ROKEBERG commented the thrust of the bill shifted from an individual member of a class to an aggregate amount, unless the totality of damages were a significant amount which would negate the need to form a class. CHAIRMAN TAYLOR said class actions sometimes consist of small groups of 15 or 20 people. Number 557 REPRESENTATIVE ROKEBERG repeated the thrust of the bill is to encourage people to fix the problem rather than to put their resources into litigation. He believes it is the Legislature's responsibility to set the hurdles that one must jump over before filing a class action. He thought eliminating that section would be irresponsible because the purpose of the legislation is to avoid litigation. He suggested placing a hurdle on the class aggregate amount, perhaps $250,000. CHAIRMAN TAYLOR suggested requiring the class to have an aggregate claim in excess of $25,000. REPRESENTATIVE ROKEBERG questioned whether one could get a class together and pay a legal fee for that amount. CHAIRMAN TAYLOR said one benefit is that using the aggregate amount would avoid the two-thirds vote on the Senate floor necessary for a court rule change. He repeated at this point, with the changes made to the bill, it will apply to a primitive contract group which is definable so if the defendant wins, he/she will be able to recover attorney's fees. REPRESENTATIVE ROKEBERG said he is not pleased with deleting Section 4 but he will defer to the committee's judgement. He noted he would be more comfortable adopting the amendment discussed earlier. Number 490 SENATOR ELLIS asked if the bills that limit liability for the state and municipalities could be combined with HB 82, and whether Chairman Taylor planned to hold a hearing on those bills. CHAIRMAN TAYLOR said he was curious about whether the bills interrelate, and if so, why three separate bills were introduced. REPRESENTATIVE ROKEBERG replied the Governor introduced HB 57. Many of the changes to HB 82 were added to HB 57, however the issue of the level of immunity to be granted to the state vis a vis the municipal governments remains. He believed HB 57 is now similar to HB 82 in that both the state and the municipalities have to prove a level of due diligence. He said it might be feasible at this juncture to combine the bills but he would prefer to keep them separate as it would take a substantial redrafting effort. SENATOR ELLIS asked Chairman Taylor to bring HB 57 before the committee for a hearing. Number 462 CHAIRMAN TAYLOR said the difficulty with combining the bills is that the Legislature does not want to pass legislation that is a disincentive to action; the state immunity bill covers everything. Personal injury and wrongful death have been removed from HB 82. He noted that everyone agrees that people and businesses will be hurt by Y2K, the question is should government entities assume no liability. The bottom line is that the same amount of people will get hurt but they will be told that they can't get help from anyone. SENATOR ELLIS again requested that HB 57 be scheduled for a hearing in committee. Number 432 REPRESENTATIVE ROKEBERG pointed out that the Legislature has been assured by the private sector infrastructure companies in Alaska that they will be in compliance. He said the biggest concern about Y2K is our perceived threat of a problem. If people start hoarding things in the fourth quarter of 1999, normal buying habits will be disrupted and affect the first quarter of 2000. CHAIRMAN TAYLOR noted the likelihood of getting a quorum before the Senate floor session was not good. He recessed the meeting subject to the call of the Chair. TAPE 99-37, SIDE A CHAIRMAN TAYLOR reconvened the Senate Judiciary Committee meeting. SENATOR ELLIS suggested changing the $25,000 floor to an aggregate claim of $150,000. REPRESENTATIVE ROKEBERG said he would agree to making the shift from the individual amount to an aggregate amount but he would prefer to set the limit at $250,000 because he envisions a large number of people being affected. CHAIRMAN TAYLOR suggested the following language change on page 4, line 3: replace the language after the word "unless" with, "the aggregate claim of all members of the class for economic loss exceeds $150,000." REPRESENTATIVE ROKEBERG repeated he disagrees with the amount. He noted the same change will need to be made to lines 11 and 12 on page 5. CHAIRMAN TAYLOR suggested changing lines 11 and 12 on page 5 by striking the word "each" and inserting "the aggregate claim of all members of the class for economic loss," and striking the word "that" and inserting "exceeds $150,000." REPRESENTATIVE ROKEBERG suggested inserting "year 2000 date change" after "a" and before "provision" on line 21, page 4. He noted the drafter felt that language to be redundant but he believes it clarifies the provision for the average person reading it. CHAIRMAN TAYLOR thought a change was also necessary on line 15. A civil action may not proceed to trial until the person bringing the action provides written notice to the business that describes the failure of the electronic computing device. He asked how the victim gets the information until the discovery process occurs. REPRESENTATIVE ROKEBERG said that is a cure provision to give the business a chance to fix the problem before a lawsuit is filed. CHAIRMAN TAYLOR agreed once the letter is written, the business must be given time to fix the problem, but he asked how an injured party would know what caused the problem to occur in the first place. REPRESENTATIVE ROKEBERG replied the business would have to troubleshoot to find the problem. He suggested changing the word "failure" to "problem with." CHAIRMAN TAYLOR asked how a person in Sleetmute, whose package did not arrive on time and was told by the carrier that the cause was a Y2K problem down the line, would know what to do. REPRESENTATIVE ROKEBERG stated manufacturers are exempt from the bill. The bill will apply to the computer consultant who should have fixed a computer code. Number 192 CHAIRMAN TAYLOR repeated that requiring the victimized business owner to notify the computer consultant of what the consultant's problem was is probably beyond the capacity of most injured parties. REPRESENTATIVE ROKEBERG said there should be demonstrable and empirical evidence of failure. CHAIRMAN TAYLOR clarified that he is concerned about a third party experiencing a problem with a business and not knowing where the problem is. REPRESENTATIVE ROKEBERG suggested modifying that provision with the phrase, "under the appropriate circumstances." CHAIRMAN TAYLOR repeated his suggestion to add the following words to line 15: "provides, if able to do so, written notice to the business." REPRESENTATIVE ROKEBERG suggested a conceptual amendment that reads, "if able to do so or if circumstances provide." CHAIRMAN TAYLOR suggested requiring the victim to describe the damages rather than the failure of the computing device, and to give the business to opportunity to fix the problem. Number 283 REPRESENTATIVE ROKEBERG said the intent is to put the responsible party on notice that a failure of a computing device occurred, not to require the victimized party to describe the root cause of the problem. He said he would agree to a conceptual amendment to clarify the intent. SENATOR ELLIS so moved. The committee took a recess until 5:12 p.m. Number 329 SENATOR ELLIS moved to amend (Amendment 1) page 4, lines 3 and 4, to read, "unless the aggregate claim of all members of the class for economic loss exceeds $150,000" and to amend page 5, Section 4, lines 11 and 12 to read, "to the year 2000 date change, that the aggregate claim of all members of the class for economic loss exceeds $150,000." There being no objection, Amendment 1 was adopted. SENATOR ELLIS moved Amendment 2, to insert on page 4, line 21, after the words, "a provision of this section that conflicts with a" the words "year 2000 date change." There being no objection, Amendment 2 was adopted. Number 369 CHAIRMAN TAYLOR moved to amend (Amendment 3) line 14, page 4, to insert the words, ", if appropriate," and to change line 15, to read, "provide, if able to do, written notice to the business that describes the failure of the mechanism which contains an electronic computing device arising from the year 2000 date change;" There being no objection, Amendment 3 was adopted. SENATOR ELLIS moved SCSHB 82(JUD) as amended from committee with individual recommendations. There being no objection, the motion carried.