CSHB 56(L&C)-UNFAIR TRADE PRACTICES ATTY FEES/COSTS  REPRESENTATIVE LES GARA, sponsor of HB 56, told members that this legislation has been around for awhile and originated with legislation co-sponsored by Senator Dyson and Representative Croft in 1997. He advised that Alaska has the smallest consumer protection department of any state. That section was comprised of a staff of about 10 people in the attorney general's office and is now comprised of three half-time attorneys and one investigator. In the mid-1990s, he and others looked at ways to bolster consumer protection in Alaska without costing the state money and the group came up with the approach in HB 56. The legislation will fund consumer protection, in part, by charging the people who engage in bad behavior. He explained that the prevailing party in a lawsuit is entitled to Rule 82 fees and costs, which amounts to about 20 percent of attorney fees and a small portion of costs. He said what the government has done, as a matter of public policy in areas that are historically under funded, is to fund enforcement costs in those areas by charging the people who engage in the bad conduct. He noted the guts of HB 56, on page 1, lines 5-9, say if the attorney general's office prevails in a consumer case, the party that engaged in the bad conduct should reimburse the state's reasonable attorney fees and costs of the investigation. The federal government uses that approach in federal anti-trust and hazardous waste cases. He said the consumer protection cases the attorney general's office gets run the gamut. He believes that if HB 56 passes, consumer protection cases will become a revenue generator, possibly justifying more staff. SENATOR OGAN characterized HB 56 as a "we tax the bad guy and pass the savings on to you" bill. CHAIR SEEKINS asked what the defendant would get if he prevailed. REPRESENTATIVE GARA said Rule 82 would apply. CHAIR SEEKINS asked why the defendant wouldn't have the same right [for full reimbursement] as the state. REPRESENTATIVE GARA said that could be done but doing so would require a fiscal note. He indicated that from an enforcement aspect, these cases, which involve very bad conduct, are not being resolved. The policy argument is that when the state loses a case, it is not because the state committed fraud. However, a defendant who loses a case did so because of fraudulent behavior. Therefore, the state should not be penalized as harshly as a defendant when it loses. He said if the state filed a bad faith case, court rules would allow the other party to get full fees reimbursed by the state. He said he does not believe the legislature wants to open up the state's purse to reimburse full attorney's fees anytime the state doesn't win, because its conduct is not as bad as the conduct of someone who committed fraud. He acknowledged that is a policy call for the legislature to make. CHAIR SEEKINS noted that several years ago, a consumer protection assistant attorney general went on huge fishing expeditions with Alaska Sales and Service. He does not believe the company was ever convicted of anything. He asked had the company been charged with 20 counts and then settled on one count, whether the state would be reimbursed for a costly investigation. REPRESENTATIVE GARA said it would not. He explained: In a settlement it would work like the marketplace. I mean you, as Alaska Sales and Service, would say - you know, you got us on one claim. The other 19 are bogus. If we go to trial, the court's not going to give you the cost of an investigation for those 19 bogus claims so you can keep fighting us and you keep running up your bill, it's just going to cost you. So, I don't think that would make its way into the settlement. The state could ask for it but the guy at Alaska Sales and Service is going to say no way, not a chance. CHAIR SEEKINS agreed that many of the cases brought by the attorney general's office regarding consumer protection are very egregious but he has a natural aversion to saying what's good for the goose isn't good for the gander. He wondered about the risk faced by a defendant taking a case to court compared to the state's risk. REPRESENTATIVE GARA said that is a fair concern. CHAIR SEEKINS asked about Rule 82. TAPE 04-50, SIDE B  REPRESENTATIVE GARA said Rule 82 is "20 percent of fair and reasonable. It is a schedule but it's partial..." CHAIR SEEKINS asked if the only exception occurs if the court rules that a case was frivolous. REPRESENTATIVE GARA said that is correct - reimbursement is at 100 percent if a case is ruled to be frivolous; anything else is reimbursed at 10 to 20 percent of what is considered to be fair and reasonable. CHAIR SEEKINS asked if the court often determines that a person spent more than a reasonable amount. REPRESENTATIVE GARA said it does. He noted that the bill says a person gets reimbursed for full, reasonable attorney fees so that if those fees are unreasonable, they don't get any reimbursement. That is to prevent the attorney general's office from padding its bill. CHAIR SEEKINS asked who determines what is reasonable. REPRESENTATIVE GARA said the judge does. SENATOR FRENCH moved CSHB 56(L&C) from committee with its attached indeterminate fiscal note. CHAIR SEEKINS noted that Senator Dyson wanted to testify on the bill. SENATOR FRED DYSON told members that the attorney fee provision was part of his and Representative Croft's original bill but the House Judiciary Committee stripped it out. The bill went forward with the part that allows private attorneys to capture their costs if they are successful. He clarified: It was kind of a new deal for me and it was, in fact, the very circumstance where Representative Gara and I began a relationship and we ran into lots of situations where people were being taken advantage of. We had guys that were going to resurface your driveway, and we had the blue tarp roofing company from Mat-Su that were taking advantage of folks and the state didn't have the horsepower to do it and a private attorney couldn't afford to do it because there wasn't a way for him to recapture his costs and [indisc.] a few hundred, a few thousand bucks, and I've had more than once, and probably a half-dozen times in the ensuing six or seven years, somebody's come up and said hey, what you guys did really worked because now we've got people who can afford to go after these bunko artists that are out there and nail them. So I'm really pleased to have Representative Gara come along and picking up the pieces that got knocked out of this original piece of legislation. So it really tickles me and I think it will work.... CHAIR SEEKINS repeated his only concern is the possibility of a "scoundrel" assistant attorney general in that division. He noted an overzealous assistant attorney general can also do a lot of damage to the business community and the public trust. SENATOR FRENCH repeated his motion to move CSHB 56(L&C) from committee. With no objection, the motion carried. CHAIR SEEKINS announced an at-ease from 6:00 to 6:05 p.m.