ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
March 16, 2004
1:10 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative Jim Holm
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 487
"An Act relating to the detention of delinquent minors in
correctional facilities; relating to emergency detention of
minors for evaluation for involuntary admission for mental
health treatment; relating to detention of intoxicated minors
and minors incapacitated by alcohol or drugs; and providing for
an effective date."
- MOVED HB 487 OUT OF COMMITTEE
HOUSE BILL NO. 334
"An Act relating to unlawful exploitation of a minor."
- MOVED CSHB 334(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 472
"An Act relating to claims for personal injury or wrongful death
against health care providers; and providing for an effective
date."
- HEARD AND HELD
HOUSE BILL NO. 339
"An Act relating to negative option plans for sales, to charges
for goods or services after a trial period, and to acts that are
unlawful as unfair trade practices."
- HEARD AND HELD
HOUSE BILL NO. 468
"An Act relating to the amount of the bond required to stay
execution of a judgment in civil litigation involving a
signatory, a successor of a signatory, or an affiliate of a
signatory to the tobacco product Master Settlement Agreement
during an appeal; amending Rules 204 and 205, Alaska Rules of
Appellate Procedure; and providing for an effective date."
- MOVED CSHB 468(JUD) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 487
SHORT TITLE: DETENTION OF MINORS
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD, FIN
03/05/04 (H) JUD AT 1:00 PM CAPITOL 120
03/05/04 (H) -- Meeting Postponed to 3/16/04 --
03/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 334
SHORT TITLE: UNLAWFUL EXPLOITATION OF MINOR
SPONSOR(S): REPRESENTATIVE(S) MEYER
01/12/04 (H) PREFILE RELEASED 1/2/04
01/12/04 (H) READ THE FIRST TIME - REFERRALS
01/12/04 (H) JUD
01/30/04 (H) JUD AT 1:00 PM CAPITOL 120
01/30/04 (H) <Bill Hearing Postponed>
02/20/04 (H) JUD AT 1:00 PM CAPITOL 120
02/20/04 (H) Scheduled But Not Heard
02/23/04 (H) JUD AT 1:00 PM CAPITOL 120
02/23/04 (H) Heard & Held; Assigned to Subcommittee
02/23/04 (H) MINUTE(JUD)
03/01/04 (H) JUD AT 1:00 PM CAPITOL 120
03/01/04 (H) <Bill Hearing Postponed Wed. 3/3/04>
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
03/03/04 (H) Scheduled But Not Heard
03/05/04 (H) JUD AT 1:00 PM CAPITOL 120
03/05/04 (H) -- Meeting Postponed to 3/16/04 --
03/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 472
SHORT TITLE: CLAIMS AGAINST HEALTH CARE PROVIDERS
SPONSOR(S): REPRESENTATIVE(S) ANDERSON
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD
02/25/04 (H) JUD AT 1:00 PM CAPITOL 120
02/25/04 (H) Heard & Held
02/25/04 (H) MINUTE(JUD)
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
03/03/04 (H) Heard & Held
03/03/04 (H) MINUTE(JUD)
03/05/04 (H) JUD AT 1:00 PM CAPITOL 120
03/05/04 (H) -- Meeting Postponed to 3/16/04 --
03/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 339
SHORT TITLE: TRADE PRACTICES
SPONSOR(S): REPRESENTATIVE(S) MEYER
01/12/04 (H) PREFILE RELEASED 1/2/04
01/12/04 (H) READ THE FIRST TIME - REFERRALS
01/12/04 (H) L&C, JUD
02/02/04 (H) L&C AT 3:15 PM CAPITOL 17
02/02/04 (H) Moved CSHB 339(L&C) Out of Committee
02/02/04 (H) MINUTE(L&C)
02/05/04 (H) L&C RPT CS(L&C) NT 4DP 2NR 1AM
02/05/04 (H) DP: CRAWFORD, LYNN, DAHLSTROM,
02/05/04 (H) ANDERSON; NR: GATTO, ROKEBERG;
02/05/04 (H) AM: GUTTENBERG
03/05/04 (H) JUD AT 1:00 PM CAPITOL 120
03/05/04 (H) -- Meeting Postponed to 3/16/04 --
03/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 468
SHORT TITLE: APPEAL BONDS: TOBACCO SETTLEMENT PARTIES
SPONSOR(S): LABOR & COMMERCE
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD
03/01/04 (H) JUD AT 1:00 PM CAPITOL 120
03/01/04 (H) Heard & Held
03/01/04 (H) MINUTE(JUD)
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
03/03/04 (H) Heard & Held
03/03/04 (H) MINUTE(JUD)
03/05/04 (H) JUD AT 1:00 PM CAPITOL 120
03/05/04 (H) -- Meeting Postponed to 3/16/04 --
03/16/04 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
PATTY WARE, Director
Division of Juvenile Justice (DJJ)
Department of Health & Social Services (DHSS)
Juneau, Alaska
POSITION STATEMENT: Presented HB 487 on behalf of the
administration; discussed Section 2, subsection(e)(2), of the
proposed committee substitute (CS) for HB 334, Version H.
ALLEN STOREY, Lieutenant
Central Office
Division of Alaska State Troopers
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 487.
REPRESENTATIVE KEVIN MEYER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 334; sponsor of HB 339.
LINDA WILSON, Deputy Director
Public Defender Agency (PDA)
Department of Administration (DOA)
Anchorage, Alaska
POSITION STATEMENT: Expressed concern with [the proposed
committee substitute (CS) for HB 334, Version H].
SUZANNE CUNNINGHAM, Staff
to Representative Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 334, answered
questions.
PATRICK LUBY, Advocacy Director
AARP Alaska
Anchorage, Alaska
POSITION STATEMENT: Provided comments and suggestions during
discussion of HB 472, and spoke in opposition to the $250,000
limit proposed in the current version of the bill.
ROBERT B. FLINT, Attorney at Law
Hartig Rhodes Hoge & Lekisch
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
339 on behalf of the Direct Marketing Association and the
Magazine Publishers of America.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Assisted with the presentation of HB 339
and responded to questions.
ROBERT EVANS, Lobbyist
Phillip Morris USA, Inc.
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 468, answered
questions.
EMILY NENON, Alaska Advocacy Director
American Cancer Society (ACS)
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 468.
JENNIFER APP, Alaska Advocacy Director
American Heart Association
Anchorage, Alaska
POSITION STATEMENT: Expressed concern with HB 468.
ACTION NARRATIVE
TAPE 04-35, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:10 p.m. Representatives
McGuire, Holm, Samuels, Gara, and Gruenberg were present at the
call to order. Representatives Anderson and Ogg arrived as the
meeting was in progress.
HB 487 - DETENTION OF MINORS
Number 0163
CHAIR McGUIRE announced that the first order of business would
be HOUSE BILL NO. 487, "An Act relating to the detention of
delinquent minors in correctional facilities; relating to
emergency detention of minors for evaluation for involuntary
admission for mental health treatment; relating to detention of
intoxicated minors and minors incapacitated by alcohol or drugs;
and providing for an effective date."
Number 0179
PATTY WARE, Director, Division of Juvenile Justice (DJJ),
Department of Health & Social Services (DHSS), explained that HB
487 modifies the statutes pertaining to delinquency, alcohol,
and mental health so that state statute will be in compliance
with the federal requirements of the Juvenile Justice and
Delinquency Prevention Act (JJDPA), which prohibits the state
from holding in a locked facility, whether an adult facility or
a juvenile justice facility, kids who are only there by virtue
of a mental illness, a disability, or severe intoxication. She
went on to say:
I do want to emphasis that this does not impact the
state's ability to hold juvenile offenders
accountable, or to hold accused juvenile delinquents
in adult facilities in rural Alaska as necessary when
they're charged with a crime. The issue is that right
now, Alaska statutes allow us to hold, for certain
lengths of time, both juveniles and adults when
they're severely intoxicated or when they have a
mental illness - for purposes of their own protection
- but the federal rules require that we have state
statutes that [are] consistent with the federal
language. So we need to have this bill move forward
so that we can retain our existing federal dollars
that we receive from the Office of Juvenile Justice
and Delinquency Prevention [OJJDP].
We have prepared a one-page summary sheet for the
committee ... that will let you all know that we are
already ... grossly out of compliance with the federal
requirements. We are working hard to address that
issue, but in essence what you have before makes
statutory changes for Alaska statutes so that we're in
compliance with federal requirements. I guess I also
want to say that the federal changes took effect on
October 1 of 2003, and so we have already been, as a
state system, making the necessary changes so that
we're not holding "Title 47" juveniles in juvenile or
adult facilities. We're working closely with the
Department of Public Safety [DPS] and the [Alaska
State] Troopers so that as they identify high-need
areas, we can develop alternative for these kids.
Number 0314
MS. WARE added:
I also want to say to the committee that we already
have a wide array of alternatives across the state; we
have non-secure shelters in a variety of urban and
rural locations in Alaska. We are using these federal
funds, as well as some [general fund (GF)] dollars, to
expand those non-secure shelters so that ... we have
more appropriate placements for kids who are not
charged with a crime but who clearly have needs that
need to be addressed. So one example I would share
with you is that in Bethel, ... 25 percent of our
detention admissions in fiscal year [FY] 03 were made
up of "Title 47" holds, either alcohol or mental
health. We work closely with the [Yukon-Kuskokwim
Health Corporation (YKHC)] so that they would
basically reserve a couple of hospital beds to accept
those young people in, which is frankly more
appropriate anyway because then they can refer them to
appropriate behavioral health services as necessary.
I'd be happy to answer any questions.
CHAIR McGUIRE noted that the aforementioned summary sheet in
members' packets is dated 2/20/04.
REPRESENTATIVE HOLM asked what current costs are as compared to
the cost of complying with federal standards.
MS. WARE replied:
These are not, technically, new standards. The Act
has been around since 1974, [so] Alaska [has] been
struggling with these requirements for many years.
There will not be significant or, frankly, really,
additional cost to come into compliance because, in
practice, we've been working on this for many years.
In terms of the loss of the federal revenue, what you
would see is a reduction in alternatives for juveniles
that we currently fund with these dollars, including
... the non-secure shelters that we already have in
Fairbanks, Juneau, Kenai, Kodiak, Ketchikan, Valdez,
[and] Sitka, with about eight more due to come on line
within the next, roughly, six months.
Number 0577
MS. WARE, in response to a further question, said that of the
$700,000 in federal funds that the state is currently receiving
and that would be jeopardized by failing to comply with federal
standards, roughly $100,000 to $120,000 is spent on compliance-
monitoring activities, which verify that the department's data
is accurate and that it can do "site visits." The bulk of the
remaining money goes toward funding services in Alaska. She
added, "This is 'best practice'; it is important for ... Alaska
not to be incarcerating juveniles, in either adult or juvenile
facilities, when they haven't committed an offense."
REPRESENTATIVE HOLM asked what the state is proposing to do
differently in order to come into compliance with federal
requirements.
MS. WARE replied:
The changing of our ways has [consisted of] ...
intensive partnering with a number of ... nonprofit
... [and local and] state government agencies
including ... the [Alaska State] Troopers, [the]
Office of Children's Services within [the DHSS], as
well as [the] Division of Behavioral Health. The
expansion ... in Bethel is a very good example of a
very positive partnership, which has, in a very
positive way, impacted what was severe overcrowding in
the Bethel Youth Facility for almost a decade. Our
admissions and our overcrowding are significantly
reduced in addition to getting much improved services
for those kids. ... In Fairbanks, ... as a result of
both ... this federal change as well as a group effort
at the local level, ... there has been the addition of
some "detox beds" that will serve only juveniles; in
fact, I think it began this week.
So essentially this has kind of forced us to push the
dialog with existing providers in Anchorage that
includes both Providence [Alaska Medical Center], the
single point of entry, as well as [the Alaska
Psychiatric Institute (API)]. And, as I may not have
mentioned specifically enough, we are in the process
of the procurement piece for adding non-secure
shelters - we already signed the agreement in the
[Matanuska-Susitna ("Mat-Su")] valley, we're adding a
shelter in Anchorage, in Barrow, in Wrangell, in
Dillingham, Kotzebue, Emmonak, and Hooper Bay - and
we're making those decisions based on the high-need
areas. I mean I recognize that we don't have, quote,
"extra money" to fund services, but in essence we do
have to take the data that we have and plug the
dollars in where those high-need areas are, and we're
using input from [the DPS] to help us do that.
Number 0773
MS. WARE, in response to further questions, said that Fairbanks
has had a non-secure shelter for many years and that that
shelter will continue to operate, and indicated that the
aforementioned detox beds in Fairbanks are at the Ralph Purdue
Center and are being managed by the Fairbanks Native
Association's Behavioral Health Services. She then relayed that
the primary "needs" areas are not in urban Alaska; in urban
areas there are already alternatives to placing "Title 47"
juveniles in locked facilities. Therefore, the goal of this
legislation is to change Alaska statute to reflect the
department's current practice. Ms. Ware noted that the federal
requirements do allow states some level of violations per
100,000 population. In essence, the department recognizes that
there will always be some situations in rural Alaska wherein the
state does the best that it can but still has to use a locked
facility because it is the only place, the safest place, to hold
a "Title 47" juvenile, but the goal is to target funding towards
high-need communities such as Emmonak and Hooper Bay.
CHAIR McGUIRE asked how "grave disability" is defined.
MS. WARE indicated that there is a definition in AS 47.30, and
that she would provide its exact wording to the committee later.
In practice, however, if a law enforcement officer believes that
someone, through some level of disability, poses a threat to
himself/herself or others, is gravely disabled, and there is no
local evaluation facility, then state statute allows that person
to be put in an adult - or, in the DJJ's case, a juvenile -
facility until he/she can be transported to the nearest
appropriate evaluation facility.
CHAIR McGUIRE said she'd like to know the distinction between
grave disability and mental illness.
REPRESENTATIVE GRUENBERG indicated that he may have a conflict
because of his son, and asked to be excused from voting on this
issue.
Number 1045
CHAIR McGUIRE objected, indicating that should a vote be
required, Representative Gruenberg would be allowed to
participate.
MS. WARE, in response to questions from Representative Gara,
reiterated her earlier explanations regarding what current
practice consists of, what the bill does, what will change
because of the bill's passage, and how violations will be viewed
by the federal government.
REPRESENTATIVE GARA expressed alarm that the state has been in
the practice of locking up "Title 47" juveniles and is only
changing that practice because of the threat of losing federal
funding.
MS. WARE replied that the state has been working very hard to
change that practice and the federal government has been very
understanding of violations up to this point; now, however, the
federal government is requiring a higher level of compliance.
CHAIR McGUIRE, after looking through current statute, relayed
that the definition of "gravely disabled" can be found under AS
47.30.915, which says:
(7) "gravely disabled" means a condition in which
a person as a result of mental illness
(A) is in danger of physical harm arising from
such complete neglect of basic needs for food,
clothing, shelter, or personal safety as to render
serious accident, illness, or death highly probable if
care by another is not taken; or
(B) will, if not treated, suffer or continue to
suffer severe and abnormal mental, emotional, or
physical distress, and this distress is associated
with significant impairment of judgment, reason, or
behavior causing a substantial deterioration of the
person's previous ability to function independently;
CHAIR McGUIRE asked why, on page 2, line 26, the term "gravely
disabled" is used instead of simply saying, "those who are in
protective custody due to mental illness". She said that she is
trying to envision a circumstance wherein someone is gravely
disabled but not also mentally ill.
REPRESENTATIVE GRUENBERG noted that when the definition of
"gravely disabled" was initially adopted, it had been carefully
crafted for the purpose of filling a specific gap in the law.
He asked that this language not be changed in the bill.
MS. WARE offered to do some research on this issue and get back
to the committee.
REPRESENTATIVE SAMUELS said why it isn't acceptable to hold
juveniles in a locked facility for the crime of minor consuming.
MS. WARE said that because minor consuming is a "status
offense," meaning that someone is only charged by virtue of
his/her being a certain age, law enforcement is not allowed to
hold such an individual in a locked facility. Protective
custody pertains solely to the "Title 47" elements related to
severe intoxication, and is a judgment call on the part of law
enforcement.
Number 1476
ALLEN STOREY, Lieutenant, Central Office, Division of Alaska
State Troopers, Department of Public Safety (DPS), said that the
DPS supports HB 487 and is working with the DJJ in an effort to
comply with the federal requirements. He noted that although
some rural communities have had a bit of difficulty in complying
with the federal requirements, they are working diligently to
correct their situations. He opined that the provisions of the
federal requirements are workable, and relayed that the DJJ has
made a firm commitment to working with and training law
enforcement personnel across the state to ensure that there are
a minimum of violations.
CHAIR McGUIRE offered that the committee would like to see those
efforts continued and appreciates all the work done thus far.
REPRESENTATIVE GRUENBERG noted a typo on page 2, line 30: the
word "take" should be "taken".
CHAIR McGUIRE, after ascertaining that no one else wished to
speak on the bill, closed public testimony on HB 487.
Number 1612
REPRESENTATIVE GRUENBERG moved to report HB 487 out of committee
with individual recommendations [and the accompanying zero
fiscal notes]. There being no objection, HB 487 was reported
from the House Judiciary Standing Committee.
HB 334 - UNLAWFUL EXPLOITATION OF MINOR
Number 1615
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 334, "An Act relating to unlawful exploitation of
a minor."
Number 1671
REPRESENTATIVE SAMUELS, as chair of the subcommittee on HB 334,
informed the committee that the subcommittee attempted to craft
a way to separate the age distinction so that there would be a
three-year separation in age. However, that proved to be
problematic. Therefore, the subcommittee decided to exempt this
particular crime from the automatic waiver portion of the
statute. There was also discussion of Representative
Gruenberg's idea to make a second offense of distribution of
child pornography a class A felony.
CHAIR McGUIRE noted that the committee packet should contain the
subcommittee report from Representative Meyer dated March 4.
Number 1746
REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor,
thanked subcommittee members for their work, and relayed that
[stopping] the making of child pornography is a top priority.
He characterized [the product of the subcommittee] as a good
solution - a stair-step approach - to juvenile sexual
exploitation. He highlighted that sexual assault of a minor
would be an unclassified felony, sexual exploitation of a minor
would be a class A felony, a distribution offense would be a
class B felony - unless it's a second offense, and then it would
be a class A felony - and the actual possession [of child
pornography] would be a class C felony. Representative Meyer
mentioned discussions with Standing Together Against Rape (STAR)
and others who work in this area of the law that have relayed
that Alaska's laws are significantly less than those at the
federal level. The thought is that by increasing the penalties,
more federal funds could be obtained.
Number 1890
REPRESENTATIVE GRUENBERG moved to adopt the proposed committee
substitute (CS) for HB 334, Version 23-LS1246\H, Luckhaupt,
3/3/04, as the work draft. There being no objection, Version H
was before the committee.
REPRESENTATIVE GRUENBERG said that he didn't have a problem with
Version H, save Section 1. He posed a situation in which an 18-
year-old takes a photograph of a younger friend, and commented
that he didn't want that 18-year-old to face a class A felony
charge. He opined that such wouldn't be fair. He then turned
attention to the text of AS 11.41.436(a)(4), and noted that the
subcommittee report says that [an age distinction] is
inconsistent with [AS 11.41.436(a)(4)]. Therefore,
Representative Gruenberg suggested that if the intent is to make
something a class A felony in Section 1 of the legislation,
perhaps there should be a conforming amendment to [the
provision] dealing with sexual abuse of a minor. He recommended
saying "something similar to being 18 years of age or older and
to say if you're three years older than that, then that would be
a class A also so that they would be consistent." He reiterated
his concern with making a class A felon of an 18 year old who
takes a photograph of his or her girlfriend or boyfriend who is
a month younger. He said that he couldn't support that.
REPRESENTATIVE SAMUELS pointed out, however, that the state
would have to more forward in such a case; that is, someone from
the Department of Law would have to make a conscious decision to
move forward with the case and implement the statute. He said
he didn't know if the desire is to cover every contingency
covered for age discrepancies or if there is the desire to
provide the district attorney's office [discretion in this
area].
Number 2086
REPRESENTATIVE GARA said he couldn't believe that [the
committee] would pass a criminal statute that includes the
possible conviction of people that are not intended to be
convicted, and do so merely on the belief that the prosecution
might exercise the discretion not to convict those people
appropriately. He emphasized the need to ensure that when
criminal legislation is passed, it is as narrow as possible. He
further emphasized that he isn't willing to give the government
the ability to convict those [that the legislature] didn't
intend to be convicted. Therefore, he said he stood with
Representative Gruenberg on this matter.
CHAIR McGUIRE remarked that the difficulty arises because there
are all kinds of mediums, including photography, that can be
used to produce child pornography. She pointed out that the
statute is fairly clear with regard to the types of photographs
being discussed. However, one can't clearly address statutorily
the remote hypothetical that someone would be charged with a
crime at age 18 for taking a naked photograph of his or her 17-
year-old girlfriend or boyfriend because photography would then
have to be excluded. Chair McGuire observed that photography
may be one of the more obvious or common mediums since it's less
expensive to produce. She said that she didn't believe that the
[intent] is to create a huge net that would take in boyfriends
and girlfriends who take naked photographs of each other.
Rather, she posited, [intent] is that a heavy hand should be
taken when one unlawfully exploits a minor and creates,
produces, and sells child pornography.
REPRESENTATIVE GRUENBERG pointed out, however, that the language
of the statute is broader. He relayed that the subcommittee had
discussed [his concern] and he thought the subcommittee had
conceptually agreed to a three-year [proposal].
REPRESENTATIVE MEYER noted that that was correct.
REPRESENTATIVE GRUENBERG suggested that this could be figured
out in a day or so. He pointed out that this is the bill's
[only committee of referral]. He said he believes this is good
legislation that he would like to be able to support when it
reaches the House floor.
CHAIR McGUIRE related her position that it is highly unusual for
her to assign legislation to a subcommittee. However, she did
so with the understanding that there would be majority and
minority representation and that there would be ample time to
work through any problems. However, the result seems to be a
flawed committee report. She announced her inclination to move
the legislation out today and any amendments can be presented on
the House floor. However, she said she would take an at-ease
for Representative Gruenberg and Representative Meyer to discuss
whether the language should be narrowed.
The committee took an at-ease from 1:59 p.m. to 2:03 p.m.
Number 2313
CHAIR McGUIRE, referring to AS 11.41.455(a), opined that the
intent of producing has to be present, which, she added, isn't a
photograph of one's boyfriend or girlfriend.
REPRESENTATIVE GRUENBERG pointed out that AS 11.41.455(a) in
part says: "A person commits the crime of unlawful exploitation
of a minor if, in the state and with the intent of producing a
... photograph ... the person knowingly induces or employs a
child under 18 years of age". He noted that the language
"knowingly induces" could simply be asking the person under the
age of 18. He specified that the toughest possible case would
be one in which there is someone barely over 18 who asks someone
barely under 18 if he or she can take a [naked] photograph of
the other individual. He said he didn't have a problem with the
aforementioned being a class B felony as it is currently.
However, making it a class A felony is problematic.
CHAIR McGUIRE remarked that she respects the philosophical
differences on this matter, but offered her belief that the
committee has gone as far as it can on this issue.
TAPE 04-35, SIDE B
Number 2393
CHAIR McGUIRE turned to the issue of creating the elements of
the crime, and specified that one would want it be with the
intent of producing and with all the different mediums.
Furthermore, one would want it to be that it visually or orally
depicts the conduct listed in AS 11.41.455(a)(1)-(7), which is
very specific. She said that she sided with [Version H]. She
also announced that she wouldn't hold the bill over any further.
REPRESENTATIVE GRUENBERG specified that AS 11.41.455(a)(6)
refers to, "the lewd exhibition of the child's genitals", which
he said could simply be a nude photograph. He mentioned that
during the subcommittee meeting he wasn't aware that there was a
memorandum from Legislative Legal and Research Services, and he
said he still hasn't really seen it. The only thing the
subcommittee wasn't aware of when the subcommittee members made
a decision based upon age was the potential conflict with
another statute. Although he indicated he wasn't opposed to
creating a floor amendment, this would be a different type of
floor amendment. He suggested that members will be very
[skeptical] of doing anything to this legislation other than
"pressing the button." Therefore, Representative Gruenberg said
he didn't feel that he was being left with much of a remedy.
Furthermore, it's difficult politically to speak as he has on
this legislation, although it may avoid significant injustice
for some young person.
CHAIR McGUIRE said she respected what Representative Gruenberg
has to say, noting that she has allowed much latitude in order
to allow [the discussion] to be part of the record. She
indicated that [the record] factors into the interpretation.
She pointed out that the fax of the statutes from the Public
Defender Agency includes the statute relating to the unlawful
exploitation of a minor, which amounts to almost one page of
text. Furthermore, this statute goes into great detail with
regard to the legislature's intent, specifically under the
commentary section. She noted that [any member] has the ability
to prepare written commentary to be adopted with the
legislation. Moreover, she opined, the record has been
established. Chair McGuire stated that in increasing the
penalty to a class A felony relating to the unlawful
exploitation of a minor, it's not the committee's intent to
prosecute people in a boyfriend-girlfriend relationship for
taking [naked] photographs of each other as discussed earlier.
She reiterated that the record is clear that [this legislation
addresses a situation in which [the exploitation of the minor]
is intended for production and monetary gain. She again
highlighted the conduct specified in [AS 11.41.455], which makes
such actions deserving of a class A felony.
Number 2169
REPRESENTATIVE GRUENBERG asked if there would be any great harm
in holding this legislation over so that he could craft an
amendment to say what has been discussed with regard to the
intent of the legislation.
REPRESENTATIVE MEYER agreed that the intent isn't to [prosecute]
the individuals in the situation being discussed. Therefore,
attaching a letter of intent, whether it be in this committee or
on the House floor, would be fine, he said. However,
Representative Meyer expressed concern with an amendment as he
believes a letter of intent would be more appropriate. He
highlighted that [AS 11.41.455 includes language] specifying
"the person knowingly induces or employs a child under 18 years
of age to engage in, or photographs, films, records, or
televises ...". He recalled Anna Fairclough, Director of STAR,
relaying the difficulty of proving any of these sexual crimes.
Therefore, he surmised, [STAR] supports increasing the penalty
to a class A felony because once a conviction can finally be
obtained, the desire is to "put that person away" because [the
crime] is so blatant. Representative Meyer said that this is
why he isn't concerned about the aforementioned situation
regarding 18- and 17-year-olds.
REPRESENTATIVE GRUENBERG said that normally he would agree that
a letter of intent would be fine. However, this type of
criminal law [involves] superior court judges, prosecutors, and
defense attorneys across the state. As a practicing attorney in
trial, letters of intent are never used, and therefore it has to
be placed in statute, he said. Representative Gruenberg stated
that he wouldn't offer [any language] unless [the sponsor and
the chair] agree to it. He expressed the need to have a narrow
exception [in statute] so that those practicing in this area of
law would be apprised of it.
CHAIR McGUIRE remarked that she believes this matter is at an
impasse and back to the place where the committee was before the
subcommittee met. Chair McGuire announced, "We don't have the
ability to do the type of thing that you [Representative
Gruenberg] want to do."
Number 1959
LINDA WILSON, Deputy Director, Public Defender Agency (PDA),
Department of Administration (DOA), began by thanking
Representative Meyer for working with the subcommittee regarding
the concerns about the automatic waiver. Ms. Wilson said, "The
amended version, with the automatic waiver part, excluding those
kids from being automatically waived, is very helpful."
However, Ms. Wilson expressed serious concern with regard to a
situation in which an individual who is 18 years and one day old
taking a consensual [naked] photograph. The aforementioned is
producing a photograph; she emphasized that according to current
statute, producing the photograph doesn't have to be for a
commercial purpose or for sale. She added: "Just taking a
photo is producing a photograph; so there doesn't have to be any
intent to sell or to ... pass it around. So an 18-year-old ...
takes a picture of their 17-year-old ... [sexual partner] and
that's a class A felony, and that is very, very troubling." The
notion of just trusting the district attorneys and the
prosecutors to not prosecute such a situation is even more
disturbing, she said. Ms. Wilson recalled that the testimony
from the Division of Juvenile Justice was that most of the cases
under this title [AS 11.41.455] were kids taking photographs of
each other consensually. She said, "I don't think that you have
a huge problem of the unlawful exploitation of a minor are acts
under this particular statute [AS 11.41.455]." Ms. Wilson
opined that it's worth pursuing only the true pedophiles.
MS. WILSON turned to the commentary provided for [AS 11.41.455].
She informed the committee that when the statute was changed
back in [1983], the [legislature] deleted the language "for any
commercial purpose" and the age was changed from "under 16 years
of age" to "under 18 years of age". Therefore, Ms. Wilson
suggested that the [penalty] be a class A felony if the
[unlawful exploitation of a minor] is for a commercial purpose;
this would address Representative Gruenberg's concern with
regard to similarly aged kids [taking naked photographs of a
boyfriend or girlfriend] and not doing it for a commercial
purpose. Therefore, those [unlawfully exploiting a minor] for a
commercial purpose would be targeted while not including those
unintended to be included. She said a letter of intent offers
no protection against a prosecution. She offered to work with
the sponsor.
Number 1798
CHAIR McGUIRE remarked that [this legislation] merely increases
the penalty for the already existing law. Chair McGuire pointed
out that the legal memorandum mentioned that there is an equal
protection problem with a bifurcated age stipulation, and so the
choice was made not to revamp all of [existing law].
REPRESENTATIVE ANDERSON informed the committee that he had just
spoken with Legislative Legal and Research Services, and learned
that letters of intent can be adopted [in the committee] or on
the House floor, where the letter would be "somewhat ratified."
In statute, codification occurs whereby there is a notation that
specifies the existence and location of the letter of intent.
Therefore, he suggested that if he were an attorney representing
an individual who took photographs of his girlfriend and the
young man is being charged with a class A felony, he would turn
to the letter of intent, which he believes would rectify the
situation.
REPRESENTATIVE GRUENBERG suggested that an intent section could
be included in the legislation. He asked if the sponsor would
accept holding HB 334 [for that purpose].
REPRESENTATIVE MEYER said he would leave whether or not to hold
the legislation over up to the chair. However, he characterized
Representative Anderson's suggestion of adopting a letter of
intent on the House floor as a good idea.
REPRESENTATIVE GRUENBERG specified that he hasn't seen letters
of intent referenced in the notes [of the statute]. However, an
intent section in the legislation will appear in the notes [of
the statute] and would satisfy him. He maintained his belief
about the need to do this [in committee].
Number 1648
SUZANNE CUNNINGHAM, Staff to Representative Kevin Meyer, Alaska
State Legislature, related her belief that a letter of intent
from the committee would satisfy "the request of the sponsor."
REPRESENTATIVE GARA commented that this has been the most
frustrating meeting of the House Judiciary Standing Committee he
has attended. He said that speaking as an attorney who has
practiced law for over a decade, he believed that a letter of
intent isn't going to impact a case. The courts disregard
letters of intent because the rule of statutory construction
that the court has to follow is that if the law is clear, then
legislative history can't be looked at. Therefore, it's very
important that criminal statutes be crafted as narrow as
possible and so that it only applies to those intended. He went
on to say:
The moment we start drafting criminal statutes that
take in people who we don't want to prosecute, but
say, "Well, let's just trust the government and trust
that the government won't prosecute the people we
didn't want to prosecute even though we told them they
could prosecute them in the ... statute." The moment
we start doing that, we've crossed a line ... that I
don't ever want to cross.
REPRESENTATIVE GARA opined that this issue should be addressed
within the language of the legislation. When a criminal statute
is crafted, one can err two different ways. First, the statute
could be made too broad so that it applies to people to whom it
wasn't intended to apply. Second, the statute could be made too
narrow so that it applies to most of those intended, but not
everyone. Given those choices, Representative Gara offered his
belief that it's safer to write the legislation to address
essentially almost everyone desired. He said he didn't have a
problem making conduct being done for a commercial purpose a
class A felony, which would exclude the possibility of
prosecuting two kids [in the situation discussed earlier].
[Unlawful exploitation of a minor] for commercial purposes is
the worst, and any other [lesser] conduct would remain a class B
felony and the judge would retain the discretion to place an
individual in jail for up to 10 years.
REPRESENTATIVE MEYER interjected that the first offense for a
class B felony carries a penalty of one to four years.
Representative Meyer said he viewed an individual who entices a
child to the basement to disrobe, but not for commercial
purposes, as a class A felon.
REPRESENTATIVE GARA disagreed and offered his belief that it's a
class B felony. Although the normal sentence range is zero to
four years, aggravated offenses can result in one going to jail
for ten years for a class B felony.
REPRESENTATIVE GRUENBERG pointed out that the committee packet
includes [a spreadsheet] specifying class A and B felonies. He
informed the committee that a class B felony carries a penalty
of one to four years while a class A felony carries a five-year
penalty.
Number 1398
MS. WILSON specified that the sentencing range for a first-time
offense of class B felony is one to four years. The penalty for
a second-time offense of a class B felony starts at four years
and can reach up to ten years. However, she noted that there
could be aggravators in a nonpresumptive situation, which could
reach up to four years for a first-time offense and would
require some extensive factors to go beyond a four-year penalty
for a first-time offender. In further response to
Representative Gara, Ms. Wilson clarified that the sentencing
range is zero to ten years, but it would have to be a rare
situation for a first-time offender to be sentenced to ten
years.
Number 1363
PATTY WARE, Director, Division of Juvenile Justice (DJJ),
Department of Health & Social Services (DHSS), thanked the
sponsor and the subcommittee for making changes with regard to
the department's concerns pertaining to exempting this crime
from the automatic waiver provision within the delinquency
statutes. Ms. Ware turned to Section 2, subsection (e)(2), in
Version H of HB 334. She informed the committee that she
reviewed [DJJ's] database, which revealed that since 1991, 12
juveniles have been charged with distribution of child
pornography. She noted that none of those juveniles were
charged more than once. Therefore, there is no data to support
that [Section 2, subsection (e)(2)] would impact any juveniles.
CHAIR McGUIRE clarified that the presumptive sentencing only
takes place on a second offense.
REPRESENTATIVE GRUENBERG asked Ms. Wilson whether a letter of
intent or an intent section in the legislation would make an
impact in the [courtroom].
MS. WILSON said she agrees with Representative Gara that the
statute is controlling, and furthermore the letter of intent
won't be considered if it contradicts the language of statute.
With regard to Representative Gara's earlier suggestion to
insert "for a commercial purpose", she surmised that this would
get at the target group by adding another offense, "for a
commercial purpose", which would be raised to a class A felony.
REPRESENTATIVE GRUENBERG asked whether adding an intent section
to the legislation that would go in the uncodified language and
appear in the notes would have an impact in the [courtroom].
MS. WILSON said that she didn't know of anyone who ever looks
[at the uncodified language in the notes]. The attorneys tend
to look at what is in statute. Even if there is a reference, if
the language in the statute says one thing and [the intent] in
the legislation says another, the attorneys tend to follow the
statute.
Number 1130
REPRESENTATIVE SAMUELS remarked that a situation in which an
individual is making child pornography in his or her basement
just because he or she likes it seems worse than when the
purpose is to sell it. Although both are bad, adding the
"commercial" language doesn't really help, he opined.
MS. WILSON confirmed that the situation proposed by
Representative Samuels is a class B felony. However, [making
child pornography] for commercial purposes is even worse, she
opined, and thus she didn't believe elevating that to a class A
felony was inconsistent.
REPRESENTATIVE SAMUELS acknowledged that both situations are
equally bad.
CHAIR McGUIRE asked whether [unlawful exploitation of a minor]
was ever lower than a class B felony.
MS. WILSON said that she wasn't sure of the code or the
sentencing before the early 1980s, but she offered to research
that matter.
CHAIR McGUIRE announced that HB 334 would be set aside, to be
brought up later in the meeting.
The committee took an at-ease from 2:40 p.m. to 2:42 p.m.
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS
Number 0977
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 472, "An Act relating to claims for personal
injury or wrongful death against health care providers; and
providing for an effective date."
CHAIR McGUIRE announced that she would hold the vote on HB 472
until 3:00 p.m. when other members should be present. She then
turned to public testimony.
Number 0901
PATRICK LUBY, Advocacy Director, AARP Alaska, began by saying
that medical mistakes happen. Therefore, AARP Alaska believes
that this legislation should focus on error reduction rather
than damages. Furthermore, the tort system encourages providers
to cover up mistakes in order to avoid lawsuits rather than
reporting errors and learning how to prevent them. Mr. Luby
opined that someone who is hurt by a medical error is entitled
to fair compensation, but emphasized that it's more important to
ensure that errors are reported in order prevent future errors.
MR. LUBY, noting that older people with limited income potential
will receive less in economic damages than younger victims,
informed the committee that AARP believes $250,000 is too low
for noneconomic damages. He also informed the committee that
the Institute of Medicine (IOM) has proposed testing nonjudicial
no-fault alternatives to the tort system for medical errors. If
Alaska adopted one of the IOM's recommended alternatives, it
would foster fair compensation and error reduction, which should
be the real goal of consumer-oriented reform, he opined. Under
the IOM approach, compensation would be based on "avoidability"
of error rather than negligence, and there would be preset
schedules for compensation with reasonable limits that may help
stabilize malpractice premiums. Mr. Luby relayed that the IOM
believes that mandating the reporting of errors would help
experts find systemwide [solutions] and improve patient safety.
Mr. Luby encouraged the committee to review adopting some of the
IOM's recommendations.
Number 0743
REPRESENTATIVE ANDERSON noted that Mr. Luby has experience with
California's model, and asked Mr. Luby his opinion of it.
MR. LUBY commented that what works well is dependent upon the
perspective. He relayed that the AARP takes the consumer's
perspective, although reducing the number of errors would be in
the best interest of all concerned.
REPRESENTATIVE ANDERSON mentioned that he expected the
legislation to move from committee today, but said he wanted to
talk further with Mr. Luby.
REPRESENTATIVE GARA relayed his sense that this legislation is
going to move before anyone has time to consider IOM's proposal.
Therefore, he inquired as to AARP's position if the legislation
is left with the $250,000 noneconomic damages cap.
MR. LUBY reiterated that the $250,000 noneconomic damages cap is
too low, as is the current $400,000. Therefore, AARP would
oppose the legislation. He reiterated the need for legislators
to review the IOM recommendations and whether any can be
incorporated into statute.
The committee took an at-ease from 2:45 p.m. to 3:20 p.m.
[Tape ends early; no testimony is missing.]
TAPE 04-36, SIDE A
Number 0001
CHAIR McGUIRE announced that HB 472 would be set aside briefly
and be brought up later in the meeting.
HB 334 - UNLAWFUL EXPLOITATION OF MINOR
Number 0066
CHAIR McGUIRE announced that the committee would return
attention to HOUSE BILL NO. 334, "An Act relating to unlawful
exploitation of a minor."
Number 0077
REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor of
HB 334, announced that the differences between Representative
Gruenberg and himself are close to being resolved. Therefore,
he said he believes it will be a matter of intent language or a
simple amendment to illustrate that the legislation doesn't
intend to increase the penalty to a class A felony in cases of
young people having consensual sex and taking pictures of each
other. Representative Meyer requested that the committee report
the legislation from committee and allow he and Representative
Gruenberg to continue to work on this before it reaches the
House floor.
Number 0140
REPRESENTATIVE GRUENBERG moved to report the proposed CS for HB
334, Version 23-LS1246\H, Luckhaupt, 3/3/04, out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, CSHB 334(JUD) was reported
from the House Judiciary Standing Committee.
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS
Number 0191
CHAIR McGUIRE announced that the committee would return
attention to HOUSE BILL NO. 472, "An Act relating to claims for
personal injury or wrongful death against health care providers;
and providing for an effective date."
REPRESENTATIVE ANDERSON, speaking as the sponsor of HB 472,
recalled that at the last meeting there were two amendments that
he was considering [one of which was offered as Amendment 1 and
then withdrawn on 3/3/04]. He announced that at this time he
wouldn't offer either amendment because he supports HB 472 as it
is.
CHAIR McGUIRE, in response to Representative Gruenberg, reminded
the committee that the original version of HB 472 was before the
committee.
REPRESENTATIVE GARA recalled testimony from insurance company
[representatives] regarding whether malpractice settlements have
increased or decreased over the years. He noted that he'd
provided the committee with the [Alaska State Medical Board's]
record of all malpractice settlements and verdicts, which, he
opined, illustrates that the settlements and verdicts radically
change from year to year because these are statistically
irrelevant samplings. Of the claims in 2003, the average
settlement was about $341,000 while in 1991 it was $380,000.
Representative Gara said that he didn't believe that there is
any evidence which establishes that verdicts have increased in
recent years. He also noted that he'd provided the committee
with [the Alaska State Medical Board's] case by case [analysis]
of each settlement and verdict over the last 15 years, and with
information from Legislative Legal and Research Services
regarding the number of physicians in Alaska. He pointed out
that although there has been growth, the number of physicians in
Alaska remains inadequate.
Number 0488
REPRESENTATIVE GARA recalled debate over California's $250,000
cap and mentioned that he provided the committee with a document
from the Foundation for Taxpayer & Consumer Rights [entitled,
"Five Dangerous Myths About California's Medical Malpractice
Restrictions"]. Representative Gara related that in 1975
Medical Injury Compensation Reform Act (MICRA) was enacted in
California and was subsequently litigated until 1986 when the
California Supreme Court upheld the $250,000 cap. He
highlighted that in 1986, [medical] malpractice premiums didn't
decrease but, in fact, increased. In 1988 California voters
passed a proposition specifying that there shall be a reduction
in premiums paid and it gave the insurance commissioner the
right to reject rate increase applications and the right to
lower insurance rates. From 1988 on, California experienced
[medical malpractice insurance] rate reductions. Representative
Gara opined that the proposition reduced the rates in
California.
REPRESENTATIVE GARA turned attention to the Legislative Legal
and Research Services memorandum [dated March 16, 2004]
regarding the daily recovery for noneconomic losses under a
$250,000 cap even for the most serious injuries. He highlighted
that the calculation specifies that under a $250,000 cap someone
with a 50-year life expectancy is paid for the pain, suffering,
and loss of enjoyment of life at the value of $13.69 per day.
The aforementioned value is too low, he opined.
Number 0713
REPRESENTATIVE GARA moved that the committee adopt [new]
Amendment 1, labeled 23-LS1743\A.1, Bullock, 3/10/04, which
read:
Page 2, line 19, following "$250,000":
Insert ", except that, in the case of severe
permanent physical impairment or severe disfigurement,
the damages may not exceed $1,000,000. The limit on
damages applies"
Page 2, line 25:
Delete "$250,000"
Insert "the maximum amount allowed under (d) of
this section"
CHAIR McGUIRE recognized that there was an objection.
REPRESENTATIVE GARA explained that Amendment 1 would essentially
reinstate the current two-tier damage cap that already exists.
The current two-tier damage cap is $400,000 with the possibility
of more for those with a long life expectancy. However, in
cases of severe permanent physical impairment or severe
disfigurement [the noneconomic damage cap] is $1 million or in
some rare cases it could go up to $2 million, depending upon the
life expectancy of the individual. Amendment 1 provides the
insurance industry certainty with a hard cap [on noneconomic
damages] of $250,000, except in cases in which there is severe
permanent physical impairment or severe disfigurement which
allows for a noneconomic damages cap of up to $1 million.
Therefore, Amendment 1 addresses his concern with regard to
valuing the damages of an individual at $13.69 a day.
REPRESENTATIVE ANDERSON said that although he wasn't adamantly
opposed to [Amendment 1] in the context of those severe cases,
the other side is that such [noneconomic damage caps] would
[work against] attracting new physicians and solidifying the
insurance market. With regard to the argument about the $13.69
per day [damage award], Representative Anderson said he didn't
believe the $400,000 cap would provide that much more per day.
Furthermore, he posited, a $250,000 award could be quadrupled by
the individual if he/she makes the proper investments.
REPRESENTATIVE ANDERSON relayed his fear that the insurance
companies wouldn't know whether the cap is $250,000 or $1
million until the jury [rules]. Therefore, he suggested that in
order to protect itself the insurance company will assume every
case is a $1 million worth of exposure and so perhaps the
insurance rates would increase. Representative Anderson said
that it's a balance between individuals who [should receive $1
million in compensation] for pain and suffering, and physicians
leaving and the inability to recruit new physicians.
Representative Anderson requested that the committee vote
against Amendment 1 and allow [the legislation] to try to
recruit more physicians. "Again, the cases where this occurs is
so miniscule, I think the needs of the many outweigh the needs
of the few," he said.
Number 1015
REPRESENTATIVE HOLM said he agrees with Representative Gara on
this issue, noting that he has received some compelling e-mails
regarding the $250,000 cap, especially considering that that cap
minus attorney's fees may result in nothing for a damaged
individual. The compensation for malfeasance should be greater
than $250,000, he opined, though he said he also agrees with
Representative Anderson with regard to the need to attract more
physicians to Alaska. Representative Holm said that he didn't
believe that the case has been made that physicians will come
because of a specific [noneconomic] damage cap nor has it been
made that there will be any [rate] reduction or increased
availability [due to this legislation]. Representative Holm
announced his support of Amendment 1.
REPRESENTATIVE SAMUELS expressed concern with insurance
companies leaving the state as well as with the lack of
physicians in the state. He inquired as to how one measures the
person who has to catch a Medivac flight because there was no
physician to perform a certain procedure and the individual dies
en route. Representative Samuels asked if there are definitions
for "severe disfigurement" or if it is based on what the
attorney claims. Representative Samuels said that although he
has no illusions with regard to insurance rates decreasing, he
is fearful of it not being available.
REPRESENTATIVE GARA explained that he thought it would be best
to use the standard that has been on the books since the late
1980s, during the first round of Tort Reform. He noted that
there is one supreme court case and several superior court cases
that address it. The [current] standard seems to be a
reasonable standard. In a case in which the individual isn't
terribly injured, but the higher standard is satisfied, the
question regarding what should be awarded in noneconomic damages
would be submitted to the jury. Representative Gara highlighted
that Alaska is a conservative state and that jury verdicts in
the state tend to be so as well, especially in medical
malpractice cases. Therefore, he opined, there shouldn't be a
fear that there will be an automatic award of $1 million in a
case that isn't serious. Representative Gara pointed out that
the language is tailored narrowly.
Number 1360
REPRESENTATIVE OGG turned attention to the [case by case
analysis provided by ASMA], and highlighted those cases that
were over the cap. He indicated that it seems the claim amounts
are increasing, although he noted that the chart merely shows
the total claim. The increase is concerning, he said, adding
that he likes the $250,000 cap, although he noted that he is a
bit uncomfortable with it having known individuals who have had
something happen to them. The key, he said, is that the
negligence or malpractice has to be proven. Although $1 million
is a bit high, at least it's certain.
REPRESENTATIVE HOLM asked if the [information provided by ASMA
refers to] jury awards, and therefore are "agreed-to"
settlements.
REPRESENTATIVE GARA answered that these are mostly agreed-to
settlements. He clarified that [the settlements] are all the
payments, some of which are after a verdict while others are
after a settlement.
REPRESENTATIVE OGG announced that he would go along with
Amendment 1.
CHAIR McGUIRE clarified that the record shouldn't be construed
to have emphasis on any one [issue] that has been discussed,
since the record is comprehensive and includes testimony from
various groups. She highlighted that [since the implementation
of MICRA] in California, California's costs have only increased
100 percent while nationwide the costs have increased by over
563 percent. Although there is no proof or knowledge that this
legislation will keep the two medical malpractice insurance
providers in the state or will attract more physicians, the
[committee] has looked to other jurisdictions to review what was
done. California was the model for the $250,000 cap that appear
to work, at least in part.
CHAIR McGUIRE declared a conflict because her father is a
physician [and requested that she be excused from voting].
REPRESENTATIVES GRUENBERG and OGG objected [and thus Chair
McGuire was required to vote].
CHAIR McGUIRE specified that her father doesn't really fall into
any of the categories listed. She further specified that she is
reviewing this legislation in terms of the overall health of the
medical industry in this state. Alaska is close to a crisis,
and therefore it's incumbent upon the legislature to address it.
Furthermore, it's important to remember that this cap is dealing
with noneconomic damages.
Number 1655
CHAIR McGUIRE remarked that [medical malpractice] suits are
similar to aviation lawsuits because the liability has to be
projected in terms of the possible amount that could be
recovered. Therefore, it doesn't matter that there is
information that says Alaska juries are more conservative.
Insurance companies, she reiterated, have to factor in the
entire amount that is possible to recover. The aforementioned
is the problem with Amendment 1, she opined. Furthermore, the
terms "serious physical impairment and disfigurement" aren't
defined. She said she understood the reluctance to define those
terms in this [statute] because they already appear in common
law, but relayed that discussions with health care professionals
have revealed that these terms have been interpreted more
loosely than committee members probably envision. Furthermore,
most cases are borne out through settlements, for which there
are no statistics. The statistics are related to the trials.
However, the real costs come into play with the settlements for
which everyone pays the cost.
CHAIR McGUIRE reminded the committee that during testimony she
asked every medical malpractice attorney questions regarding
contingency fees and costs. She relayed her understanding that
it's illegal to include the cost of hiring experts as part of
the [contingency] percentage. She reminded the committee that
the federal government has said that the maximum contingency fee
is 20 percent, unless it's 30 days prior to the trial in which
case the maximum contingency fee is 25 percent. The
aforementioned has to be addressed, she emphasized. After [the
injured party] pays [25] percent in contingency fees and $50,000
in costs, she questioned what would be left for the injured
party. Chair McGuire encouraged the trial bar to contemplate
the aforementioned and she suggested that perhaps the trial bar
would want to lower its contingency fees because 20 percent of
$250,000 is a lot of money.
CHAIR McGUIRE relayed her belief that Amendment 1 would gut the
goal of HB 472, which is to reduce the amount of exposure and
the amount of settlements.
REPRESENTATIVE ANDERSON offered that it's a matter of balance.
He reminded the committee that many of the hospitals and
physicians, and the Alaska State Medical Association (ASMA) seem
to believe this legislation will work.
REPRESENTATIVE GARA informed the committee that the other
important reason for Amendment 1 is that often [the injured
party] doesn't receive anything outside of the noneconomic
damages. Although the medical expenses are covered, those are
paid to the entity for the services provided. Furthermore, many
don't receive lost wages, such as seniors because they have
stopped working. He questioned whether those following a
subsistence lifestyle would receive lost wages. Therefore,
there is little left once the $250,000 cap is reduced by one
third because it's taxable and by another third because of
attorney fees. Therefore, the two-tiered approach in Amendment
1 provides a compromise in which the insurance companies have a
hard cap.
REPRESENTATIVE ANDERSON maintained his objection.
Number 2017
A roll call vote was taken. Representatives Gara, Gruenberg,
Ogg, and Holm voted in favor of Amendment 1. Representatives
Anderson, Samuels, and McGuire voted against it. Therefore,
Amendment 1 was adopted by a vote of 4-3.
Number 2037
REPRESENTATIVE OGG moved that the committee adopt Amendment 2,
labeled 23-LS1743\A.3, Bullock, 3/10/04, which read:
Page 2, line 22, following "death.":
Insert "The limits on damages in this subsection
do not apply if the personal injury or wrongful death
was the result of gross negligence or reckless or
intentional misconduct."
Page 2, line 25, following "judgment":
Insert "unless the personal injury or wrongful
death was the result of gross negligence or reckless
or intentional misconduct"
Number 2040
REPRESENTATIVE ANDERSON objected.
REPRESENTATIVE OGG explained that many insurance companies don't
cover people for [personal injury or wrongful death] resulting
from gross negligence or reckless disregard. Representative Ogg
opined that [this legislation] would allow those who [commit
conduct that is grossly negligent or reckless or intentional] to
"walk." He said he wants to be sure that those who commit such
conduct are accountable for the damage they do, which is why he
offered Amendment 2.
REPRESENTATIVE ANDERSON relayed that the associations believe
Amendment 2 is irrelevant because punitive damages apply in
these cases of gross negligence or reckless or intentional
[misconduct]. He recalled that someone told him that 50 percent
of punitive damages go to the state, and therefore it's believed
that [Amendment 2] is an attempt to get around that arrangement.
Representative Anderson specified that those supporting this
legislation feel that this doesn't need any correction because
there are adequate remedies in the statute. Therefore, he
announced that he didn't concur with Amendment 2.
REPRESENTATIVE GRUENBERG pointed out that punitive damages are
extraordinary and not often awarded, and almost require a
separate phase of the trial. Furthermore, punitive damages have
to be proven by clear and convincing evidence, which is a much
higher standard of proof. Therefore, [punitive damages] aren't
a substitution for [Amendment 2].
REPRESENTATIVE GARA explained that [Amendment 2] would say that
in the actual damages phase, the caps wouldn't apply for those
who are [injured due to] gross negligence or worse. The
punitive damages question would be separate. Therefore, by
adding the [language] specified in [Amendment 2], the punitive
damages wouldn't be reduced nor would the state's take be
reduced. Representative Gara acknowledged that sometimes there
is a bifurcated trial in which liability [issues] are addressed
and then punitive damages are addressed; however, that's not
required.
Number 2184
CHAIR McGUIRE informed the committee that the section covering
punitive damages under civil damages and apportionment of fault
is AS 09.17.020 from which she highlighted the following:
(b) The fact finder may make an award of punitive
damages only if the plaintiff proves by clear and
convincing evidence that the defendant's conduct
(1) was outrageous, including acts done with
malice or bad motives; or
(2) evidenced reckless indifference to the
interest of another person.
(c) At the separate proceeding to determine the
amount of punitive damages to be awarded, the fact
finder may consider
(1) the likelihood at the time of the conduct
that serious harm would arise from the defendant's
conduct;
(2) the degree of the defendant's awareness of
the likelihood described in (1) of this subsection;
(3) the amount of financial gain the defendant
gained or expected to gain as a result of the
defendant's conduct;
(4) the duration of the conduct and any
intentional concealment of the conduct;
(5) the attitude and conduct of the defendant
upon discovery of the conduct;
(6) the financial condition of the defendant; and
(7) the total deterrence of other damages and
punishment imposed on the defendant as a result of the
conduct, including compensatory and punitive damages
awards to persons in situations similar to those of
the plaintiff and the severity of the criminal
penalties to which the defendant has been or may be
subjected.
REPRESENTATIVE GRUENBERG indicated that the [financial condition
of the defendant] isn't normally admissible.
REPRESENTATIVE ANDERSON expressed concern with the "ceiling"
aspect, which he said he didn't believe was fair.
REPRESENTATIVE OGG remarked that he has offered Amendment 2
because when the conduct reaches the level specified in the
amendment, there shouldn't be a protection for the individual
committing [the misconduct]. Such an individual should be
subject to the present law.
CHAIR McGUIRE expressed interest in knowing the percentage of
claims that are brought on the basis of the mental intent of
simple negligence. She pointed out that now that Amendment 1
has been adopted, the [noneconomic damages] cap is essentially
at $1 million. Furthermore, the common law interpretation of
serious physical injury is broad enough to assume that the $1
million will be factored in and settlements will be adjusted
accordingly based upon people's unwillingness to go through
trials and pay the costs.
REPRESENTATIVE OGG said that the claims brought on the basis of
simple negligence weren't identified.
REPRESENTATIVE GARA remarked that punitive damages and informed
consent aside, all medical malpractice cases are brought on a
simple negligence theory.
TAPE 04-36, SIDE B
Number 2393
REPRESENTATIVE GARA said that one would never find out which
cases involved gross negligence because only negligence has to
be proven in order to be entitled to basic damages.
CHAIR McGUIRE surmised that [with the adoption of Amendment 2],
there would be an incentive to argue the higher levels [of
negligence] knowing that the caps would not apply.
REPRESENTATIVE GARA interjected to say that such would be a
separate claim.
CHAIR McGUIRE opined that Amendment 2 should be rejected given
the fact that the caps have been increased. She suggested that
Amendment 2 "opens it up too far," highlighting that it's not
what's proved but rather what's alleged. A clever attorney
could easily argue gross negligence. Chair McGuire pointed out
that this legislation doesn't impact punitive damages, which
attempts to deter bad conduct. Compensatory damages aren't
going to change due to one's mental intent, she noted. She also
noted that there have been statements that noneconomic damages
are being used to address loss of consortium, loss of enjoyment
of life, and possibly to grant recovery to groups such as the
elderly who don't have the ability to recover under an economic-
damages basis. However, Chair McGuire opined, that's mixing
apples and oranges because she believes that when the discussion
is regarding someone's mental intent [at the level specified in
Amendment 2], the discussion should be about punitive damages as
a separate consideration. Therefore, Chair McGuire announced
that she opposes Amendment 2.
Number 2228
REPRESENTATIVE SAMUELS relayed his understanding that under the
present law, the cap [for gross negligence or reckless or
intentional misconduct] is $2 million. Therefore, Amendment 2
would [eliminate] the present cap. He expressed interest with
regard to where the suits normally fall. Although he didn't
believe there would be any argument regarding intentional
misconduct, he doubted that there are many suits brought based
on it. Representative Samuels asked if "this" is covered under
the punitive damages portion. He expressed concern with proving
negligence versus gross negligence to jurors who don't know
anything about the law or medicine. Such a situation would seem
to result in a contest of attorneys.
REPRESENTATIVE OGG said he has a problem with those whose
actions rise to the level [of gross negligence or reckless or
intentional misconduct], and therefore he believes that such
behavior should be reigned in somewhat. He echoed earlier
comments that punitive [damages] are a separate category. He
reiterated his understanding that the insurance companies don't
cover claims of gross negligence, and therefore he didn't
believe the notion that [injured parties] go for the deep pocket
would fit in this case.
REPRESENTATIVE GARA informed the committee that the only medical
malpractice case he ever took involved intentional misconduct,
for which others in the medical community congratulated him. He
relayed that in most [medical] malpractice cases [there are
charges of] negligence. However, in American society the
thought is that if someone is hurt by exercising unreasonable
care, the victim should be compensated. At some point, he
remarked, the conduct becomes so egregious that there is no
reason for society to offer any protections. Representative
Gara relayed his experience with the medical malpractice case
and highlighted the [usual] practice of offering a low
settlement until the eve of trial. The aforementioned seems to
be a strategy to deter people from filing for claims by "running
them through the ringer if they file them." Furthermore, just
because [a case] qualifies for a higher cap, it isn't the case
that the money is just given out, because [the attorneys] take
into account what a jury is likely to do with the evidence, the
client, and the extent of the injuries. Representative Gara
concluded that ultimately, there are some classes of conduct
that the legislature shouldn't protect, and therefore he agreed
with Representative Ogg.
REPRESENTATIVE GRUENBERG turned attention to the [case by case]
list of [malpractice cases], and commented that there are a
number of things that are clearly negligence while there are
others that seem to fall under Amendment 2. He pointed out that
even for serious [misconduct], such as performing arthroscopy on
the wrong knee, it doesn't necessarily result in a large
settlement. He expressed the need to be fair.
CHAIR McGUIRE, upon being informed that someone had flown in to
testify on other legislation, announced that HB 472 would be set
aside with Amendment 2 pending.
HB 339 - TRADE PRACTICES
Number 1947
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 339, "An Act relating to negative option plans
for sales, to charges for goods or services after a trial
period, and to acts that are unlawful as unfair trade
practices." [Before the committee was CSHB 339(L&C).]
Number 1928
REPRESENTATIVE GRUENBERG moved to adopt the proposed committee
substitute for HB 339, Version 23-LS1265\S, Bannister, 3/5/04,
as the work draft. There being no objection, Version S was
before the committee.
Number 1893
ROBERT B. FLINT, Attorney at Law, Hartig Rhodes Hoge & Lekisch,
relayed he has been retained by a firm in Virginia, DeHart &
Darr, to represent Direct Marketing Association and Magazine
Publishers of America, which combined constitute a large group
of people who conduct business via mail, Internet, and telephone
selling products. He said:
The industry here is regulated in significant respects
by the Federal Trade Commission [FTC], both on
telemarketing and aspects of mail, and also at the
state level in various ways. Particularly in Alaska,
for example, there's an unsolicited merchandise Act
governing things you might receive in the mail without
soliciting them or without agreeing to them and it's
considered a free gift. The industry is large and
diverse and old; it's been around a long time, [and]
I'm sure you're all familiar with it. Its basic
advantage, obviously, ... to the business, is they
have that way to sell to the public, to boost up their
subscription rates, and for the consumer it's a
discounted value because [they're] usually accompanied
by promotions including the free-trial type, which is
what I'm going to talk about right now.
House Bill 339 ... arises, as I understand it, out of
certain circumstances from last year and also
complaints [received by] ... the attorney general's
office ... through the [Commercial/Fair Business
Section]. We've been working with ... Representative
Meyer's office and the attorney general's office ...
diligently ... to try to come to a draft bill which
will work to protect [consumers from] ... the problems
[that are] perceived and allow the vast majority of
the honest and legitimate business folks to go about
doing this type of promotion. ... In fact, legitimate
[business] people always want to go after the
problems, after all, because they're the ones that get
splashed with the mud even though they're maybe doing
the correct thing.
Number 1767
MR. FLINT continued:
Let me just go to ... one of the sections we're hung
up with now .... What I'm speaking to ... [are] some
suggested amendments [that] have come from my clients,
in large part, and have been changed a little bit by
the attorney general's office which creates a problem.
... We're dealing largely with ... the question of
free trial offers via the telephone. The sections in
the bill regulate both inbound and outbound calls.
Outbound calls are the ones that we all love to hate;
those are the telemarketers that call you up at
dinnertime and offer to sell you something. These
calls are regulated by [FTC] rules and also ... by the
"do not call" list at the federal level which now has
57 million names on it.
MR. FLINT said:
I suspect that "cold called" sales - telephonic
marketing - is probably going to decline rapidly
because that list is now upgradeable every 90 days and
at Congress's insistence is going to upgraded every 30
days, and I assume that 57 million will ... rise
dramatically. ... But we're also dealing [with] the
inbound calls; [this] is where ... the customer ...
originates the call in response to an ad, or [they
are] calls to existing customers - people who are
already on the business's list and have purchased
products or dealt with them before.
Number 1592
[The amendment Mr. Flint then discusses, with original
punctuation provided but containing some formatting changes, is
as follows:]
Page 2, line 3
Delete: "(3) a description of the seller's refund,
cancellation, exchange, and repurchase policies; and"
Insert: "(3) the right to cancel; and"
Page 2, line 8:
After: "express"
Delete: "written"
Insert: "verifiable"
Page 2, line 9-12
Delete: "The seller shall obtain the written consent
on a form prepared by the seller. The form prepared
by the seller must include the information required by
(b) of this section and the consumer's acknowledgement
that the consumer has received and understands the
information in the consent."
Insert: A seller who provides goods or services to a
consumer for a free trial period has the burden of
proving that the seller provided the information
required by (b) of this section and that the consumer
gave express verifiable consent to the free trial
period.
Page 2, line 16
Insert new subsection (e)
(e) If the consumer agrees to a free trial period
by telephone, the seller shall comply with the
following:
(1) the seller shall send the consumer an
invoice which the consumer may pay or write
"cancel" on the invoice and return to the
seller;
(2) the seller shall disclose by telephone
the consumer's right to cancel and how to
cancel;
(3) the seller shall record the disclosures
required in subsection (b) of this section
as well as the consumer's express verifiable
consent required by subsection (c) of this
section; and
(4) the seller shall send the consumer
written confirmation at least 10 days before
charging the consumer's account which will
include a telephone number the consumer may
use to cancel. The telephone number
provided to the consumer to use to cancel
must be operative during the consumer's
normal business hours.
Page 2
Insert new subsection (f)
(f) In a free trial period, when a consumer
cancels goods or services to be provided after the end
of a free trial period, the seller must cancel the
billing or credit the consumer's account within 30
days for unused goods or services.
Page 2
Re-letter the remaining subsections accordingly
MR. FLINT went on to say:
We have in the amendment a [new] subsection (e) ....
There are two stages involved in the telemarketing for
free trial offers. Stage 1 I believe ... we have come
to acceptable language on, and that is the call and
the promotion itself. And in that the requirements
there are that the seller disclose certain items
including the charges, cancellation policy, and so
forth; that the customer agrees - express consent - to
the promotion; and that in all cases, both on the
disclosure and in the agreement, the burden of proof
is on the seller to show that those ... disclosures
have been complied with and that the agreement is
there. That does not appear to be a problem.
But then in stage 2, what ... follows on ... in the
mail, the clients proposed the list of four items you
see here as alternatives, [but] the attorney general
would prefer that you do all of them. The problem is
that the business doesn't do all of them. For
example, if you look on this list of four items, if
the customer chooses to be billed by credit card ...
they would obviously not receive an invoice because
they have already paid. So the fact of the matter is
... that flexibility [via] the alternatives is what
the business needs at this stage 2, where we feel
we've complied the disclosures, certainly, and also
that the customer always has the right to ... cancel
it.
And ... the great majority of free trial promotions
are canceled. It is not an unusual situations; most
of them end up being canceled after the free trial
period or during the free trial period. So that's
just a regular cost of doing business. So it's trying
to fit the legitimate concerns, which we totally agree
with, into business practices that occur nationwide.
It's a complicated problem, it's a diverse industry,
there are various methods used to use it, there are
regulations at the [FTC] level, so I'm not saying this
is easy to do. We are working diligently; we'll
continue to work diligently to help get this bill
through ... and I think we can, but we're still trying
to fit a few things together.
Number 1508
REPRESENTATIVE GARA remarked that with a lot of free offers
there are two problems: one is that consumers forget the rules
for cancellation, and the other is that sometimes cancellation
involves dialing a phone number that only works during the same
hours that consumers are at work. He opined that to be
perfectly fair, it would be best if consumers receive a paper
billing, before the billing is actually due, that contains a box
that clearly tells consumers how to cancel and that could then
be used to cancel before actually owing money. He mentioned
that he has a proposed [handwritten] amendment to this effect,
which read [original punctuation provided]:
Insert at P.2 line 24
(g) within 30 days of the first billing, the consumer
must be provided a form that clearly states how the
consumer can discontinue service without payment. The
form shall provide a box or other space allowing the
consumer to indicate they wish to discontinue service,
and must be accompanied by a return envelope.
MR. FLINT said, however, that it does not appear, from the
volume of people who cancel "these things," that there's a
persistent problem out there. He remarked that the attorney
general's office has statistical information regarding the
complaints received, and suggested that such information could
help quantify the perceived problem. The problem with putting
on extra obligations is that although such may be alright for
the bigger companies, it is not going to be alright for the
smaller companies and will ultimately result in increase costs
to consumers, he remarked, and noted that one of the advantages
of "this type of system" is that products are discounted.
Number 1283
REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor,
characterized HB 339 as a consumer protection bill that pertains
to two business practices: one practice pertains to the free
trial period, and the other practice pertains to the opt-out
marketing plan. The bill requires businesses to fully disclose
to consumers what is involved in their offers, for example, what
the consumer's obligations are and what any forthcoming charges
will be. He relayed that the concept of HB 339 was brought
forth by a constituent, and stemmed from the fact that last year
one of the telephone companies offered a new feature on cell
phones that was automatically provided unless people opted out
of receiving it, and so folks wound up getting billed for
something they didn't ask for.
REPRESENTATIVE MEYER offered a personal example of a company
that was billing his credit card for a service that he had not
asked for but that was part of a free-trial program with an opt-
out provision that he'd not been aware of. He noted that it was
very hard to cancel this unsolicited service and that he was
unable to get reimbursed for the months he was charged for a
service he didn't know he had and that he'd unknowingly paid
for. He said that HB 339 will prohibit opt-out marketing plans
unless all of its provisions are fully disclosed to the
consumer, and will place more responsibility on businesses to
disclose such provisions before engaging in opt-out marketing
plans. He suggested that the Department of Law has received
numerous complaints about "these type of business practices,"
and relayed that he is willing to be flexible in working with
the industry to come up with compromise legislation as long as
it fully protects consumers.
REPRESENTATIVE HOLM said that a simple fix could be for
companies to just include on the billing a box that could be
checked if the consumer wants to opt out.
REPRESENTATIVE MEYER surmised that Representative Gara's
suggested amendment followed a similar line of thought, but
remarked that there could be certain limitations on such a
concept because of federal law dealing with interstate commerce.
Number 0895
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), said that the DOL supports
Representative Meyer's efforts to deal with the issues related
to free trial periods and opt-out marketing situations. He went
on to say:
There are a number of reasons why this kind of
legislation ... would help consumers understand
obligations that they undertake when they respond to
these kinds of offers. And these are the kinds of
offers that are the most enticing to consumers, and
you'll note the legislation is really only directed at
the free trial offer or the opt-out plan. ... Direct
sales aren't a problem ...: I call you up, I have
this product, do you want to buy it, yes or no - no,
okay, see you later. ... This legislation is directed
at ... the kind of offer that people just simply don't
refuse or don't want to refuse. This creates fertile
ground for all [kinds] of potential deception because
it easy to say, on the phone, to someone, "Oh sure,
I'm going to get it for free and no obligation for me;
yeah, I'll take this thing, and then ... if I don't
want it later I can cancel," and everyone thinks it's
easy to cancel.
MR. SNIFFEN continued:
Well, as Representative Gara pointed out, a lot of
telemarketers have phone lines that really only go one
way; they make outgoing calls but ... they can't take
incoming calls, so the ability to cancel these
services in the same manner in which they are sold is
unavailable in a lot of circumstances. So the
singular intent of the bill, I believe, from our
perspective, was to require some kind of a written
confirmation from the consumer that they in fact agree
to this deal, whatever the deal is. And ... we had
suggested that that written confirmation be obtained
from the consumer before the product or service was
provided or at least billed for. And the response we
got from the Direct Marketing Association essentially
was that [that] would create an economic burden that
would really be unfair and that there might be other
ways to address this problem [for example] by
requiring some disclosures over the phone or [sending]
out a written confirmation of the sale that the
consumer can review and then send back in the event it
didn't comport with their understanding ....
Number 0761
I couldn't agree more ... [that] people tend to forget
what they say on the phone, and these phone
transactions are very interesting to say the least,
but they're targeted at elderly folks who a lot of
times don't remember what they said, or even not so
elderly folks, like myself, who don't remember
sometimes what we say. And to get something in
writing to at least confirm what you've agreed to, and
if it's not what you've agreed to, give you the
ability to say, "No, I don't want this deal anymore,"
is ... what we'd like to see in this legislation. ...
The way the bill was originally drafted, which I
played a significant role in drafting ..., contained
some fairly strict requirements for obtaining that
kind of consent up front. And we have worked with Mr.
Flint and his clients ... to come up with some
compromise language that would still achieve the goal
of making sure that the telemarketers or direct
marketers -- and it's not just limited to telephone
sales, it's ads on late-night TV and mail that you
get, and it's ... a barrage of consumer media that you
might respond to.
MR. SNIFFEN relayed:
We had a consumer file a complaint this year who
responded to a Focus Factor (ph) ad on TV ... for
these vitamins - and it was free for 30 days, just pay
$4.95 shipping [and] handling - and she called ...
this number up ... and they said, "Oh, sure, give us
your credit card for the $4.95," and she does and they
say, "Okay, we're going to put you on auto-shipment
for this product." And she didn't know what that
meant, and they said, "You're under no obligation and
[if] you don't want anything we send you, you can just
send it back or you don't have to pay for it." Well,
cut to the chase, ... they kept sending her this
product month after month after month at $60 a bottle
and she didn't want it. She tried to call the number
to cancel and she couldn't cancel, and she tried ...
sending them letters and ... they wouldn't get them or
she got no response.
Number 0623
And finally she reached someone and they said, "Well,
we're not going to charge you for future shipments,
but ... since you've already gotten this past product
and you've used it, we can't give you the refund;
we're going to bill you $120 and then we're going to
cancel the rest of your order." So the consumer is
out $120, not something she's going to fight about,
she just kind of soaks it up and goes on.
But it's that kind of thing that happens, and we were
involved in a multistate case involving a try-and-
discount (ph) buying club out of Florida that up-sold
a lot of products to consumers, and ... that's a
national case that received some attention that all
the states participated in where telemarketers [were]
doing very similar things. So ... we do see these
abuses and we're hoping this legislation will target
that at a minimum - at least require these marketers
... to make consumers aware of what they're
obligations are in some fashion that we can easily
verify. And if it's not written consent from the
consumer, at least have it be in some form of
verifiable consent, either over the telephone or
through a confirmation mailing or something of that
sort. And we're certainly happy to work with [the
sponsor] and Mr. Flint and his clients to come up with
language that works for everyone.
Number 0549
MR. SNIFFEN concluded:
And I would like to respond just briefly to a
[suggestion] earlier about why you couldn't send an
invoice [and] have box on there that you just check
that says, "No, I don't want this, thank you very
much," and send it back. Those kinds of things
actually look deceptively like bills; sometimes you
don't know that it's not an invoice ... that you have
to pay, and some consumers will get those things, not
see that little box, not see the fine print, [and
think], "Now I've got an invoice; I've got to pay it."
Heck, there's a huge scam going on now involving
yellow pages ... - you've probably all received these
things - they come in the mail, they look like
invoices ..., [but] it's really an advertisement and
they're asking you if you want that service but it
looks like an invoice, and a lot of businesses don't
rally read it - they send a check (indisc. -
coughing). And we're concerned that just ... putting
a box on an invoice that lets the consumer out of this
transaction ... might not alert consumers sufficiently
that that's the way that you need to cancel these
things. So, I hope that answers that question.
REPRESENTATIVE GARA said Mr. Sniffen's examples were useful, and
relayed that he would like to keep the protections currently
proposed in the bill as they are and on top of those also add
language to the effect that a form will be required to remind
consumers, 30 days before being billed, of how to cancel the
transaction. This proposed form would be one that the consumer
could fill out and send back. He referred to his aforementioned
amendment, and asked Mr. Sniffen to comment.
MR. SNIFFEN responded:
I think that's a terrific idea and I didn't mean to
suggest in my testimony that wouldn't work. ... I
think if it's a separate confirmation that is separate
from an invoice, that works very well because then
consumers [are] getting a form [that] doesn't look
like an invoice, it doesn't tell them to pay any
money, [it] just says, "You've agreed to this, ... and
we're going to send you an invoice for this product
and this is how much it's going to cost you, and if
you don't want this, or if you don't remember doing
this deal, you need to call this number or you need to
check this box and send it back to us."
Something that doesn't confuse the consumer with the
fact that this may be an invoice they have to pay, I
think would be preferable; ... 30 days is good, 15
days would be good. I know in the amendment proposed
by Mr. Flint's client, the Direct Marketing
Association, they had an alternative requiring the
seller to send the consumer a written confirmation at
least 10 days before charging the consumer that
included a telephone number that the consumer could
use to cancel. I think it is also a way that you
could do it in writing for the reasons you suggest
Representative Gara, and that would be good as well.
Number 0288
REPRESENTATIVE GARA remarked that he didn't want to put the
companies through an undue burden of cost. He surmised that the
two options are to have a separate form and either having that
as part of an invoice or not part of an invoice. He said that
he didn't mind [the separate form] being part of the invoice so
long as it clearly states how the consumer can opt out.
MR. SNIFFEN agreed that would be okay, but noted that it would
need to be carefully reviewed. He indicated the need for the
[cancellation language] to be done clearly and conspicuously.
REPRESENTATIVE GARA said he might go that route.
REPRESENTATIVE GRUENBERG turned attention to page 3, lines 24-
25, where "seller" is defined. He pointed out that under the
Uniform Commercial Code (UCC), AS 45.02.103, it says: "(4)
'seller' means a person who sells or contracts to sell goods."
The UCC defines "goods" in AS 45.02.105, and the term
"contracts" is also defined in the UCC in AS 45.02.106.
Representative Gruenberg explained that the UCC generally
governs the laws of the sale of goods. The Act is well drafted
because things are defined somewhere in the Act, and therefore
one doesn't have to look so much to common law. Representative
Gruenberg noted that he liked the definition of "seller" in AS
45.02.103(4) because one could enter into a contract before the
sale is actually made and the individual would still be covered.
However, he acknowledged that the definition of "seller" in AS
45.02.103(4) only covers goods while this legislation covers
goods and services.
CHAIR McGUIRE informed the committee that the legislation will
be set aside shortly. She suggested that Representatives Gara
and Gruenberg work with the sponsor between now and the end of
the week in order to come to an agreement on the aforementioned
issues.
TAPE 04-37, SIDE A
Number 0001
REPRESENTATIVE GRUENBERG inquired as to why this legislation
pertains to AS 45.45 rather than the UCC. He asked if the
reason was that the legislation covers services [as well as the
sale of goods].
MR. SNIFFEN replied yes, pointing out that the legislation
begins with the following language: "Notwithstanding a
provision in AS 45.02 to the contrary ...." He explained that
the desire was to use these definitions to ensure that not only
the sale of goods was included but also services. However, Mr.
Sniffen noted that he liked the idea of including "selling or
contracting" as well.
REPRESENTATIVE GRUENBERG mentioned that Mr. Sniffen may want to
review the definition of "contracting" and "goods" in the UCC.
He indicated the need to define the term "services."
Representative Gruenberg questioned whether there would be any
benefit to placing these statutes in the UCC while indicating
that the two statutes [specified in the legislation] apply to
the sale of services. He asked if Mr. Sniffen could comment.
MR. SNIFFEN noted his willingness to review that, but he wasn't
sure about complicating the legislation any more than necessary.
Mr. Sniffen said: "I think the intent defining "seller" in this
bill was ... just to include the types of direct marketers who
would be engaging in the kind of conduct that we're trying to
regulate and we didn't mean any more ... than that, but we'll
certainly take a look at that."
REPRESENTATIVE GRUENBERG pointed out that under the UCC, there
are provisions that might provide the consumer with some
protections. At the very least, he suggested reviewing the
definitions [found in the UCC].
CHAIR McGUIRE announced that HB 339 would set aside.
HB 468 - APPEAL BONDS: TOBACCO SETTLEMENT PARTIES
Number 0240
CHAIR McGUIRE announced that the final order of business would
be HOUSE BILL NO. 468, "An Act relating to the amount of the
bond required to stay execution of a judgment in civil
litigation involving a signatory, a successor of a signatory, or
an affiliate of a signatory to the tobacco product Master
Settlement Agreement during an appeal; amending Rules 204 and
205, Alaska Rules of Appellate Procedure; and providing for an
effective date."
Number 0331
CHAIR McGUIRE moved to adopt Amendment 1, which read [original
punctuation provided]:
Page 2, Line 2:
Delete "25,000,000"
Insert "100,000,000"
REPRESENTATIVE HOLM objected.
CHAIR McGUIRE explained that Amendment 1 would increase the bond
amount, which is reflective of what was done in the Senate. She
opined that such an increase in the bond amount is commiserate
with what other states have done and more representative of the
type of capital that could be put forward.
REPRESENTATIVE GARA agreed that $100 million is appropriate. He
recalled that there was concern with regard to punitive damages.
However, he expressed the need to be sure that there is enough
of a bond to cover compensatory [damages]. He suggested that
the best avenue would be to have a $100 million bond, but
specify that such a limitation should only apply to punitive
damages. Therefore, for compensatory damages, the bond would
have to be provided under the current rules. Representative
Gara noted that the committee should have an amendment from him
that also increases the bond amount to $100 million, but only
limits the punitive damages verdict to $100 million.
CHAIR McGUIRE suggested that the committee should dispense with
Amendment 1 first and then, when Representative Gara offers his
amendment, the portion addressing the amount [as specified in
Amendment 1] could be deleted.
REPRESENTATIVE HOLM removed his objection.
Number 0558
CHAIR McGUIRE, noting that there were no further objections to
Amendment 1, announced that Amendment 1 was adopted.
Number 0593
REPRESENTATIVE GARA moved to adopt Amendment 2, labeled 23-
LS1719\A.1, bullock, 3/2/04, which read:
Page 2, line 1:
Delete "total"
Insert "portion of the"
Page 2, line 2, following "collectively":
Insert "that is attributable to the amount of the
judgment for punitive damages"
Page 2, lines 2 - 3:
Delete "$25,000,000, regardless of the value of
the judgment"
Insert "$100,000,000"
CHAIR McGUIRE objected.
REPRESENTATIVE GARA recalled that at the last hearing on this
bill, the testimony from the tobacco industry's attorney relayed
concern with regard to large punitive damages amounts. This
[legislation] creates a special exception to the bond rules,
with which he is uncomfortable. He said that he could perhaps
[understand such an exception] if the bonds are being limited
only in the area of punitive damages. However, he reiterated
that he didn't want to limit the bond amount for compensatory
damages.
REPRESENTATIVE ANDERSON opined that [Amendment 2] doesn't follow
the intent of the legislation, and could cause the reverse
effect. Representative Anderson announced that he opposed
Amendment 2, save the last portion that is encompassed in
Amendment 1.
CHAIR McGUIRE pointed out that most of the states that apply
similar legislation to punitive [damages] use [a bond amount of]
$25 million.
REPRESENTATIVE GARA remarked that a minority of states, one of
which is Kentucky, do [what is proposed in Amendment 2].
Number 0777
REPRESENTATIVE ANDERSON opined that this is a financial issue
not a public health issue. Furthermore, when the [limit] is
changed with regard to punitive damages, it changes the intent
of the law. Therefore, the change made by Amendment 1 is
sufficient.
REPRESENTATIVE GARA remarked that a class action lawsuit is the
only circumstance for which he could envision a verdict this
large. He surmised that if it is a class action lawsuit, then
the bond amount would apply to the entire suit. If there ever
is such a case, the cigarette company should have to post a bond
to cover those it has harmed under the current laws and rules.
Representative Gara said he is willing to [give the cigarette
company] something on the punitive damages portion, but not on
the compensatory damages portion.
Number 0887
CHAIR McGUIRE moved an amendment to Amendment 2, which would
delete the last portion of Amendment 2, which read:
Page 2, lines 2 - 3:
Delete "$25,000,000, regardless of the value of
the judgment"
Insert "$100,000,000"
CHAIR McGUIRE asked whether there were any objections to the
amendment to Amendment 2. There being none, the amendment to
Amendment 2 was adopted.
CHAIR McGUIRE clarified that before the committee is Amendment 2
as amended, which now read:
Page 2, line 1:
Delete "total"
Insert "portion of the"
Page 2, line 2, following "collectively":
Insert "that is attributable to the amount of the
judgment for punitive damages"
REPRESENTATIVE OGG offered his understanding that [subsection]
(a) of the bill only applies to the tobacco settlement.
Number 0919
A roll call vote was taken. Representatives Samuels, Gara, and
Gruenberg voted in favor of Amendment 2, as amended.
Representatives Holm, Anderson, Ogg, and McGuire voted against
it. Therefore, Amendment 2, as amended, failed by a vote of 3-
4.
REPRESENTATIVE GARA, speaking with regard to Amendment 3,
explained that he wanted this limited bond to only apply in
tobacco cases. Many of the signatories of the Master Settlement
Agreement ("MSA") are conglomerates that might harm people in
areas outside of the tobacco area. Therefore, he said he didn't
want these conglomerates to benefit from this reduced bond in
cases that aren't tobacco related litigation.
Number 1000
REPRESENTATIVE GARA moved that the committee adopt Amendment 3,
which read [original punctuation provided]:
Page 1, line 10, after "civil"
Insert: "tobacco-related"
REPRESENTATIVE ANDERSON objected.
CHAIR McGUIRE recalled that Keith A. Teel, Attorney, Co-Chair,
Legislative Practice Group, and Chair, Tobacco Practice Group,
Covington & Burling, indicated that there might be a practical
problem with this. She recalled that the problem was in regard
to how the assets would be separated when [a signatory of the
MSA] was involved in other industries besides tobacco.
REPRESENTATIVE GARA answered that the assets wouldn't be
separated out. If a tobacco-related case is against a
[signatory] of the MSA, then the bond limit applies. However,
if the case isn't tobacco related, then the bond limit doesn't
apply.
REPRESENTATIVE SAMUELS remarked that it seems like that's
already accomplished through the language on page 1, lines 9-10.
REPRESENTATIVE GRUENBERG directed attention to AS 45.53.010,
which reads:
Sec. 45.53.010. Tobacco product Master Settlement
Agreement recognized.
The Master Settlement Agreement entered into by
certain United States tobacco product manufacturers
and the state, and related documents, for settlement
of claims raised in State of Alaska v. Philip Morris,
Incorporated, and approved by the Alaska Superior
Court on February 9, 1999, are recognized.
REPRESENTATIVE GRUENBERG pointed out that the entire chapter
only relates to the State of Alaska v. Philip Morris,
Incorporated litigation, which is tobacco related. He said he
didn't believe Amendment 3 did any harm, but indicated that it's
already clear.
Number 1125
REPRESENTATIVE GARA said he disagrees. He explained that the
MSA is a tobacco-related case between the state and tobacco
companies. However, Section 1 of HB 468 refers to other cases
that have nothing to do with the MSA; HB 468 refers to private
litigation involving people who sign onto the MSA. Therefore,
since "Phillip Morris" [Phillip Morris USA, Inc.] signed onto
the MSA five years ago, this [proposed] bond rule will apply to
any future case brought against Phillip Morris, even those
unrelated to the MSA. The future litigation to which this bond
rule would apply doesn't have to be tobacco-related litigation
but could be related to anything [a signatory of the MSA] does
to a member of the Alaska public. Although he acknowledged that
the circumstances happening at this damage amount are remote, he
said that he saw no reason to go out of his way to adopt a
special rule for these companies. Representative Gara said, "To
the extent these companies might injure people outside of the
tobacco context, because they're conglomerates, the bond rule
will apply in those cases."
REPRESENTATIVE GRUENBERG remarked that he would be surprised if
having the proposed bond rule apply to non-tobacco related cases
is the intent of the legislation, but added that if that is the
intent, then Amendment 3 is necessary.
REPRESENTATIVE GARA stated that he didn't like adopting special
legislation for special industries.
REPRESENTATIVE ANDERSON maintained his objection.
Number 1299
A roll call vote was taken. Representatives Gara, Gruenberg,
and Ogg voted in favor of Amendment 3. Representatives Samuels,
Anderson, Holm, and McGuire voted against it. Therefore,
Amendment 3 failed by a vote of 3-4.
Number 1321
REPRESENTATIVE GRUENBERG moved that the committee adopt
Amendment 4, as follows:
Page 2, line 5,
Delete "outside the ordinary course of business"
CHAIR McGUIRE objected, and subsequently removed her objection.
There being no further objection, Amendment 4 was adopted.
Number 1409
ROBERT EVANS, Lobbyist, Phillip Morris USA, Inc., in response to
questions from Representative Gara, confirmed that Phillip
Morris and virtually all of the 40 signatories to the MSA are
supporting this [legislation]. He mentioned that the National
Association of Attorneys General is comfortable with this as
well.
REPRESENTATIVE GARA highlighted the discussion regarding whether
the bond rule proposed in the legislation only applies to
tobacco-related litigation. He asked if Mr. Evans's intent is
for [this proposed bond rule] to only apply to tobacco-related
litigation.
MR. EVANS replied yes, noting that Mr. Teel testified to that
effect in the Senate Judiciary Standing Committee meeting.
REPRESENTATIVE GARA remarked that he was comforted that it's the
intent of the legislation to only apply to tobacco-related
litigation.
Number 1475
EMILY NENON, Alaska Advocacy Director, American Cancer Society
(ACS), recalled a question from the last hearing, and explained
that although the American Cancer Society doesn't have a
position on appeal bond caps, the American Cancer Society is
staunchly opposed to HB 468, which is special consideration
being given to the world's largest tobacco companies. Ms. Nenon
said that she understands that the idea is to ensure that the
state receives its MSA payments. Ms. Nenon disputed the
statement at a previous hearing that the state receives, into
the general fund, $22-$27 million from the MSA. She informed
the committee that the state receives $4-$5 million from the MSA
while the other 80 percent of the income stream has already been
pulled out as bonds. Therefore, the state wouldn't lose
anything from that [80 percent that is set aside] if the tobacco
industry went bankrupt. If the major tobacco companies went
bankrupt, the state would lose $4-$5 million in MSA payments,
and she said she presumes there would be an impact on the over
$200 million the state spends for direct health care costs and
lost productivity from tobacco-related illness.
MS. NENON recalled that at the bill's last hearing, Mr. Teel
stated that the only reason similar legislation didn't pass in
New Mexico was because the session ended before its passage.
However, her American Cancer Society counterpart in New Mexico
related to her the following:
We fought this tooth and nail and we got two
consecutive votes in our favor and the first vote was
a tabling motion and the second vote a couple of days
later on the last evening of the session was to keep
the bill tabled in our House Judiciary Committee after
Phillip Morris had to reside the bill there during the
last week of our session. On the last day of our
session, the Speaker of the House pulled the bill out
of that committee ... and they couldn't get it through
legitimately. But, [when] he was explicitly
threatened with a filibuster on the floor in the final
hours of the session, the Speaker backed off.
MS. NENON reiterated that the American Cancer Society believes
tobacco companies should be held to the same standard as other
industries and shouldn't receive special protection from state
legislatures.
Number 1647
JENNIFER APP, Alaska Advocacy Director, American Heart
Association, began by recalling Mr. Teel's statements with
regard to the [potential] broad impact of this legislation. She
recalled that a hypothetical situation in which a Nabisco truck
hit a school bus was posed as an example. In response, Mr. Teel
said that the aforementioned wouldn't be a problem because there
aren't Nabisco employees in Alaska, and did not say that the
legislation is so narrowly drafted that it would prohibit any
non-tobacco litigation from falling under this cap. Ms. App
said the legislation is clear as it specifies: "in civil
litigation under any legal theory involving a signatory, a
successor of a signatory, or an affiliate of a signatory to the
Master Settlement Agreement". The language "or an affiliate of
a signatory to the Master Settlement Agreement" would include
any Altria company, which is an affiliate of a signatory of the
MSA, in any civil litigation. Therefore, she opined that this
[legislation] goes beyond just tobacco.
MS. APP noted that she reviewed the rules [Alaska Rules of
Appellate Procedure] that this legislation would amend. She
pointed out that Rule 204(d) specifies:
When the judgment is for the recovery of money not
otherwise secured, the amount of the bond shall be
fixed at such sum as will cover the whole amount of
the judgment remaining unsatisfied, costs on the
appeal, and interest, unless the superior court, after
notice and hearing and for good cause shown, fixes a
different amount or orders security other than the
bond.
MS. APP opined that currently, Rule 204 already provides
protections against bankruptcy. Furthermore, she relayed that
she hasn't been able to find any record of any company going
bankrupt in Alaska because of needing to pay an appeal bond.
She attributed the aforementioned to the safeguard in Rule
204(d). In conclusion, Ms. App announced that the American
Heart Association continues to be concerned about HB 468,
especially since it believes current rules protect all
companies. She commented that tobacco-related companies
certainly aren't deserving of additional protection.
Number 1786
REPRESENTATIVE GRUENBERG, noting that the intention for this
legislation is to apply only to tobacco-related litigation and
that there is the potential for it to be read otherwise, moved
that the committee [rescind] its [action] in failing to adopt
Amendment 3.
REPRESENTATIVE ANDERSON objected, saying that the title
specifies the [intent] of HB 468.
REPRESENTATIVE GRUENBERG pointed out that there is an existing
statute that specifies that the title [of legislation] isn't
legally part of the act. Therefore, if the intent is to conform
to the title, then [the adoption of Amendment 3] is necessary,
he opined.
REPRESENTATIVE ANDERSON withdrew his objection.
CHAIR McGUIRE clarified that Amendment 3 [text previously
provided] is now before the committee. Upon determining there
were now no objections to the adoption of Amendment 3, she
announced that Amendment 3 was adopted.
Number 1891
REPRESENTATIVE ANDERSON moved to report HB 468, as amended, out
of committee with individual recommendations and the
accompanying zero fiscal notes.
REPRESENTATIVE GARA objected and indicated that the legislation
is unnecessary. This seems like special legislation, he said.
Furthermore, this state already has punitive damage caps and
economic damage caps that will probably prevent the types of
verdicts [that these companies] fear, except in a class action
lawsuit. In a class action lawsuit, [these companies] should be
subject to the same rules as would anyone else. Therefore,
Representative Gara stated that he opposes HB 468.
REPRESENTATIVE ANDERSON highlighted that half the states in the
nation disagree with Representative Gara and have passed this
type of legislation.
REPRESENTATIVE GARA maintained his objection.
Number 1846
A roll call vote was taken. Representatives Anderson, Ogg,
Holm, Samuels, and McGuire voted in favor of reporting HB 468,
as amended, from committee. Representatives Gruenberg and Gara
voted against it. Therefore, CSHB 468(JUD) was reported out of
the House Judiciary Standing Committee by a vote of 5-2.
ADJOURNMENT
Number 1976
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 5:35 p.m.