SB 76-REAL ESTATE BROKERS; LIABILITY  2:32:57 PM CHAIR MCGUIRE announced the consideration of SB 76."An Act relating to private actions and remedies against real estate licensees for licensee relationships, disclosures, and activity before January 1, 2005; and providing for an effective date." GENEVIEVE WOJTUSIK, Staff, Senator McGuire introduced SB 76 speaking to the following sponsor statement: [Original punctuation provided.] Under AS 08.88.396, a real estate licensee acting before January 1, 2005 was authorized to act as both a buyer's and a seller's representative, but only after the licensee informed both the buyer and the seller of his or her dual agency and obtained written consent from both. The statute, as originally enacted, did not specify remedies if a real estate licensee (or agent) violated its provisions. In 2003, the Alaska Legislature acted to correct the remedies-omission. The Legislature was concerned that without specifying its intent with respect to appropriate remedies in the case of a violation, a court might feel compelled to impose the potentially business-ending remedy of forfeiture of real-estate sales commissions. The Legislature was particularly concerned that this could occur in cases even where the plaintiffs had suffered no actual damages. In order to address this concern, the Legislature enacted House Bill 257, legislation that fixed this ambiguity by retroactively limiting the remedy for violations of AS 08.88.396 to actual damages. [House Bill] 257 passed the Legislature, was signed into law and has been found constitutional by the Alaska Supreme Court. Despite the enactment of House Bill 257, and despite the Alaska Supreme Court's determination that the law is constitutional, questions have arisen regarding the Legislature's intent in amending AS 08.88.396. Senate Bill 76 is intended to make clear the Legislature's intent when it amended AS 08.88.396 in 2003 by specifying and clarifying that the "actual damages" limitation of the 2003 amendment applies to all claims that are based upon or arise out of allegations of violations of AS 08.88.396. The clarification is necessarily retroactive because the Legislature enacted House Bill 29 in 2004 which, among other things, specified that AS 08.88.396 ceased to apply to real estate transactions as of January 1, 2005; and the Legislature desires to ensure that any claims pre-dating the 2005 effective date of House Bill 29 are appropriately subject to the intent of its 2003 enactment of House Bill 257. The retroactivity of the bill is constitutional, as provided in both U.S. Supreme Court and Alaska Supreme Court decisions.1 This bill preserves the right of purchasers of real estate to seek redress for actual damages under AS 08.88.396 while ensuring that the Legislature's intent that only actual damages be awarded is recognized by courts hearing cases arising within the relevant time periods. 2:35:00 PM JEFFRY PICKETT, Staff Counsel to the Senate Judiciary Committee, Anchorage, Alaska, proved the following sectional analysis: Section 1 amends the wording of AS 08.88.396(e) which, for real estate transactions that occurred before January 1, 2005, limits civil litigation and other remedies for the failure of a real estate licensee to comply with certain requirements concerning relationships with and disclosures to buyers and sellers. Section 2 provides that the bill applies to a real estate transaction that occurred on or before the bill's effective date, and to a court action related to such a transaction pending on the effective date of bill. Section 3 makes sec. 1 of the bill retroactive to January 1, 1991. Section 4 makes the bill effective immediately. MR. PICKETT deferred to Howard Trickey to provide the historical context so the committee could understand the need for the bill. 2:36:52 PM HOWARD TRICKEY, Attorney, Anchorage, Alaska, stated that he is representing Jack White Vista Real Estate and has for a number of years with regard to the issues that SB 76 seeks to clarify. He explained that when [AS 08.88.396] passed initially, it did not specify a remedy if a real estate licensee or agent violated the dual agency provisions of the statute. In 2003 the legislature addressed the remedies omission in House Bill 257, limiting the remedy for a technical violation to actual damages. The policy finding and decision was that the lack of a statutory remedy exposed the real estate industry to potentially ruinous class action claims. One case pending then, and still today, sought recovery in excess of $30 million for forfeiture of commissions for the entire period of the class. The real estate industry supported the bill then and SB 76 today because of the potential economic risk to the industry. MR. TRICKEY said that SB 76 would be retroactive. Two courts have ruled that forfeiture of commissions is not a remedy that is provided by contract and there is no vested right to forfeiture until judgment is entered. Therefore, it is a matter for the legislature to appropriately address as a matter of public policy. SB 76 seeks to clarify that the legislature intended in 2003 that actual damages would be the sole remedy for any claims arising out of alleged violation of the disclosure statute. He added that the disclosure forms and written consents were written by the multiple listing service. In all transactions the disclosures were made as required by statute. The problem was a matter of timing but the disclosures were made in time for people to withdraw from the transaction if they thought the disclosure affected the fairness of the transaction in any way. 2:42:12 PM SENATOR MICCICHE asked if it's common to pass legislation that is retroactive 24 years. CHAIR MCGUIRE replied it's not common but it has been done before, typically when it involves cases with liability. She said she was comfortable because the bill reaffirms the policy the legislature put in place initially using a common law principle. SENATOR MICCICHE asked about instances of gross negligence and if the exception allows for costs above actual damages that may be more ancillary. 2:45:39 PM MR. TRICKEY explained that this legislation does not affect a claim someone might bring for gross negligence and the damages that might be recovered from that cause of action. SB 76 simply limits the remedies for the statutory violations. SENATOR COGHILL questioned why the statutory provision has to be clarified because of the common law principle. MR. TRICKEY explained that the court recognized that the legislature intended damages for statutory violations to be limited to actual damages, and later circumvented the legislative intent saying that statutory violations could be presented as evidence of a breach of the common law duty of loyalty and disclosure. The legal case involves a windfall for the plaintiffs and their lawyers because nobody suffered any damages or actual harm. CHAIR MCGUIRE closed public testimony and solicited a motion. 2:48:48 PM SENATOR COGHILL motioned to report SB 76 from committee with individual recommendations and attached zero fiscal note. CHAIR MCGUIRE announced that without objection, SB 76 is reported from the Senate Judiciary Standing Committee.