MINUTES SENATE FINANCE COMMITTEE February 17, 2000 9:23 AM TAPES SFC-00 # 30, Side A & B SFC-00 # 31, Side A CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:23 AM PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Dave Donley, Senator Pete Kelly, Senator Loren Leman, Senator Randy Phillips, Senator Gary Wilken, Senator Green Also Attending: SENATOR ROBIN TAYLOR; DARWIN PETERSON, Finance Committee Aide, Co-Chair Torgerson; LAUREE HUGONIN, Director, Alaska Network on Domestic Violence and Sexual Assault; PAM LABOLLE, President, Alaska State Chamber of Commerce; Attending via Teleconference: From Anchorage: BOB DICKSON, Attorney, Atkinson, Conway and Gagnon. From Wrangell: David Sneed. SUMMARY INFORMATION SB 123-ATTY FEES:APPORTIONMT/PUBLIC INT.LITIGANT The Committee heard testimony from the sponsor and members of the public. The bill was held in Committee. SB 6-DISPOSALS OF STATE LAND The Committee heard testimony from the sponsor and members of the public. The bill was held in Committee. SENATE BILL NO. 123 "An Act relating to public interest litigants and to attorney fees; and amending Rule 82, Alaska Rules of Civil Procedure." DARWIN PETERSON, Finance Committee Aide, Co-Chair Torgerson, stated that currently, the court treats public interest litigants differently than civil litigants. He then referred to a handout, which explained the difference between the various proposed committee substitutes before the Committee regarding this issue. He continued that Version "I" of SB 123 amends Rule 82, which allows for the award of attorney's fees to and against public interest litigants in the same manner as civil litigants under Rule 82. He stated that the prevailing public interest litigant receives 30 percent of attorney's fees for a case, which goes to trial and 20 percent attorney's fees for a case that does not go to trial. He noted that a loosing public interest litigant would be required to pay the prevailing party 30 percent for a trial case, and 20 percent for a non-trial case. Mr. Peterson stated that the exceptions to varying attorney's fees found under Rule 82, would apply to public interest litigants under Version "I" before the Committee. He affirmed that under this same Version apportionment would not be required for attorney's fee. He noted that this change took place in reaction to the case of Dansereau v. Ulmer and he went on to outline the particulars of this decision. He added that essentially the court found that apportionment does not have to be applied by issue. Mr. Peterson noted that under current statute, a public interest litigant could be awarded attorney's fees for all of their issues even if they prevailed on just one. In response to a question posed by Co-Chair Parnell, he stated that it was up to the judge's discretion to pay attorney's fees for regular civil litigants, under Rule 82, by issue. Mr. Peterson continued that Version "I" does not address the issue of cost as is noted in Version "K." He referred to this latter Version and stated that it amends Rule 79 and Rule 82. He noted that Rule 79 deals with costs and Rule 82 deals with attorney's fees. Mr. Peterson asserted the under Version "K," a prevailing public interest litigant would receive 50 percent of attorney's fees for a case that goes to trial and 25 percent for those that do not. He remarked that under this Version, a judge would award attorney's fees against a losing public interest litigant if the court finds that an issue is frivolous. He continued that this same Version allows the court to apportion attorney's fees by issue. He added that another difference with Version "K" is that it touches on cost, an issue which had not been addressed before. He continued that this was also allowed for a prevailing public interest litigant in regards to cost apportioned by issue. Mr. Peterson noted that a losing public interest litigant would pay costs for frivolous issues only. Mr. Peterson continued with a summary of Version "M," which is a compromise Version. He noted that it only amended Rule 82, so that a public interest litigant would receive attorney's fees in the same manner as civil litigant, which is 30 percent if a case goes to trial and 20 percent if it does not, only if the court found the issue frivolous. He added that the fees should be apportioned by issue. He affirmed that a losing public litigant would not have to pay attorney's fees to a prevailing party unless the court finds that the issue is frivolous. He continued that the exceptions under Rule 82 (b) (3) would apply, adding that the court may vary attorney's fees above the 30 percent/20 percent limit for exceptional circumstances. He explained that the court would be required to apportion by issue unless the court could find exceptional circumstances. Senator P. Kelly referred to Version "M" and asked about the requirement of frivolousness for the award of attorney's fees. He asked about the latitude awarded to the courts to make this determination. Co-Chair Torgerson responded with a general discussion about the intent of this legislation to encourage public interest litigant efforts. He noted that his goal in drafting the proposed language was to keep the public interest litigant held harmless. He added that currently under Rule 11, the court has this discretion. Co-Chair Parnell noted under Version "I" that public interest litigants should be treated the same as civil litigants. He added that public interest litigants should not be required to pay more attorney's fees than civil litigants. He continued that Version "K," on page two in awarding costs or attorney's fees, includes the following language: "if the court finds that an issue presented by a public interest litigant upon which litigant was not the prevailing party, was not well grounded in fact or not warranted by existing law or good faith argument then the court may award attorney's fees." He noted that the same type of language is included for costs, but added that this language did not exist in Rule 82 in respect to civil litigants. He added that if a party to a case thinks that the other party's claims are frivolous, then a Rule 11 motion can be filed. He continued that this remedy already exists for both civil litigants and public interest litigants. Co-Chair Parnell summed up that he did not think this type of language was necessary to include in any Committee Substitute adopted by the Committee. Senator Adams stated that he did not think this legislation was necessary. He noted the companion measure, HB 176, failed on the floor. He added that the Supreme Court ruled that public interest litigant cases are to be encouraged. He felt as though the rules in place were sufficient. LAUREE HUGONIN, Director, Alaska Network on Domestic Violence and Sexual Assault, stated that in 1996 after the passage of the Domestic Violence Act, the court system in trying to implement portions of this Act, refused to allow individuals to apply for three separate protective orders, something which had been granted as part of this Act. She then went into specific detail regarding the agencies her organization worked with to rectify this problem, as well as those procedural steps they took to avoid litigation. She noted that her agency was unsuccessful in these efforts. She noted that the Network then took their case to court as a public interest litigant against the court system administration to compel them to comply to the "three protective order" statute. The Network was successful. She noted that the Network did everything necessary to reduce their costs to pursue this action, as well as trying to settle out of court, but the court system was not willing to compromise. She remarked that although they were awarded attorney's fees, they did not get the full amount and were forced to fundraise to make up the difference. She urged the Committee to consider those small entities that are forced to bring forward valid arguments, which can benefit many. She then shared her feelings regarding the distinction between non-public interest litigants and public ones. Senator Green asked Ms. Hugonin why she felt her organization should be exempt from the same standards that apply to anyone else who choses to bring litigation. She commented that it was hard to argue this issue because of the political sensitivity involved. Ms. Hugonin responded that the difference between being a public interest litigant, and two citizens that may have a disagreement, for example, is that a public interest litigant has the potential to bring forth an issue that could benefit the public at large. BOB DICKSON, testified via teleconference from Anchorage. He stated that he was a lawyer and a shareholder in the law firm of Atkinson, Conway and Gagnon. He stated that he supported Version "I" of this legislation because it fundamentally treats all public interest litigants (PIL) the same as all other civil litigants. He clarified that the Alaska Supreme Court has held that it is the lower court's discretion to determine who is the prevailing party. He noted that the lower court is supposed to look at all of the issues, determine which are core and those that were litigated to determine who prevailed. He continued that the Supreme Court did not necessarily give the lower court the discretion to divide up issues, but to determine whom the overall, prevailing party is when all of the issues litigated are considered. Mr. Dickson suggested that this discretion is very difficult to implement. He noted that some of the CS Versions include language that allows the award of attorney's fees on an issue by issue basis, something which would be especially hard to carry out. He continued in regards to Version "K," before the Committee, which allows attorney's fees to be awarded only against a PIL, when their case is determined frivolous. He stressed that Rule 82 already allows for attorney's fees for frivolous lawsuits or as sanctions against vexatious conduct, but that this rarely happens Mr. Dickson responded to comments made by Senator Adams regarding the necessity of SB 123 in light of tort reform. He offered that litigation involving public interest litigants has nothing to do with torts, which is when a party allegedly does something wrong, is negligent and there is an incentive of monetary award to right a wrong. He continued that public interest litigant cases usually center on an issue that affects the community at large such as opposition of a timbering operation or when someone attacks a zoning ordinance or an election result. Mr. Dickson stated that public interest litigation is an exception to Rule 82. He added that the related concepts are not codified or set out in statute or even in Rule 82. He asserted that as a result, the Alaska Supreme Court essentially makes political decisions that ought to be made by the legislature. He offered that out of over 100 cases since 1968, those parties accorded public interest litigant status, live a subsistence lifestyle. He used the example of newspapers, even though they are commercial operations, they have been awarded this status, along with environmental protection and conservation groups, also Native cultural interests, home owners who are opposing an apartment house going up a few doors away, etceteras. He noted that in contrast oil companies, miners, logging companies, trucking companies, labor unions, and others have always been consistently refused the status of public interest litigants because the Supreme Court has said that these parties have a sufficient economic interest in the result of the litigation. Mr. Dickson pointed out that the court has made distinctions about who is considered a public interest litigant for the good of the public. He referred to the McCave case, which launched the concept of awarding full attorney's fees to a party that prevails. He cited the following language to bolster his point: "litigation on behalf of the public interest should be encouraged. Few aggrieved parties would be in the position to advance the public interest by invoking the injunctive powers of the courts." He summarized (in his opinion) that the Supreme Court wishes to encourage these types of public issues that have gone through the executive branch and have been found in accordance with the laws passed by the legislature. He felt as though the Supreme Court wants these issues to be brought before them for their interpretation of the issues. He added that the results of these decisions are basically a matter of separation of powers, as to who should make the political decision to determine which groups are going to be preferred over others. Mr. Dickson stressed that there was a very definite pattern of those groups and interests out of the 100 or so cases originally cited which could be considered "politically correct," or politically influential such as newspapers and others. He continued that these groups that receive this status, do so over the interests of those groups aligned with economic development, such as the mining or timber industry. He submitted that these more political designations of merit ought to be made by the legislature and suggested the passage of Version "I" to effectuate this change. He added that Version "I" treats all PIL litigants the same as other civil litigants. He noted that Alaska is the only state in the union that permits the recovery of even a portion of attorney's fees as a matter of course in all civil cases. He continued that Rule 82, in its normal application, does have the affect of keeping frivolous lawsuits at a minimum and awarding those people who have prevailed, giving them an incentive because they will be able to recover a portion of their attorney's fees. He added that since all other civil litigants in the state have to abide by Rule 82, in its normal application, all other parties ought to be treated equally, without trying to give a boost or a detriment to one political group over another. Senator Adam asked what the purpose of applying Civil Rule 82 was to public interest litigants. He thought that Alaska Rules of Civil Procedure helped to stop frivolous lawsuits. He also wondered if this legislation would stifle the right of individuals or Alaska organizations to question the actions of the state, thus upsetting the checks and balances presently in place. Mr. Dickson responded that Rule 11 was a part of the Rules of Civil Procedure and basically states that any lawyer who signs a pleading, certifies that they have made some reasonable inquiry into the facts of a case. He added that this rule requires that arguments should be made, reasonably based upon the facts and in accordance with the law. He remarked that he has never seen a lawsuit thrown out of court as frivolous. He continued that the Alaska Supreme Court in interpreting Rule 82, created an additional provision allowing for full attorney's fees against a loosing party if the case is frivolous. Mr. Dickson noted that this legislation would take the financial incentive to bring suit as a result of a disparity and it would put everybody on an equal standing who have wrongs or interests, which need protection. He added that presently, public interest litigants are not required to pay attorney's fees if they lose, but stand to gain attorney's fees if they prevail. He felt as though this situation has been abused in the past. Senator Adams asked why it was necessary to apply Civil Rule 82 to public interest litigants. Mr. Dickson responded that the Supreme Court awards fees and costs by virtue of AS 09.60.10, which authorizes them to determine costs including attorney's fees assigned to the prevailing party in a civil action. He noted that Rule 82 automatically covers PIL litigation, but this legislation attempts removal of an exception to it. PAM LABOLLE, President, Alaska State Chamber of Commerce stated that her organization supports this legislation. She noted that the Chamber has never been able to declare themselves public interest litigants even though they are a non-profit organization. Presently, the Chamber is challenging three different claims and has had to raise funds to defend themselves, she offered. The Chamber would like the law to require the same percentage of cost and fees paid to a public interest litigant as the percentage of issues raised on which the litigants prevail. Co-Chair Parnell made a motion to adopt CSSB 123, 1- LS0636\M as a working draft. He noted that this Version would make the civil and public interest litigants more equal in standing. Hearing no objection it was ADOPTED. Senator Donley noted that the draft Version "M" was a reasonable compromise to the provision in Section 2, which provides that unless exceptional circumstances are found, public interest litigants are provided with larger than Rule 82 awards. He added that Version "M" also includes apportionment by issue, which does not presently exist. He continued that there are present allowances for determining whether a case is frivolous, but he thought it worthwhile to reiterate this right through Version "M." Amendment #1: Senator Donley made a motion to substitute Section 2 of Version "M" for Section 2 of Version "I." Co-Chair Parnell stated that the Committee had an amendment before them. He reiterated that Senator Donley had moved an amendment adding language from Version "M," page two, subsection (g) that would require the court to apportion fees by issue and stated, if the "court finds an issue presented by public interest litigants to be frivolous, then the court shall award attorney's fees under (b) of this rule." He noted that this provision was more punitive to public interest litigants than the civil litigants since it requires the court to apportion fees by issue, which is not required of non-public interest litigants. Co-Chair Parnell objected. He disagreed with the court apportioning fees by issue and noted how difficult this would be. He continued that frivolous sanctions are already granted under Rule 11, so he felt as though the insertion of this clause was not necessary. Tape: SFC - 99 #30, Side B, 10:10 AM Co-Chair Torgerson commented on why the language regarding frivolousness was included in Version "M," the first of which is because the courts do not use this provision. He continued that this Version would redirect the courts on how they should apportion or set fees, while at the same time not award them if frivolousness is determined by the use of Rule 82. He understood that Rule 11 existed for this purpose, but was doubtful that the court considers it very seriously. Co-Chair Parnell referred to Version "M," on page two, line 8 and read: "If the court finds an issue presented by a public interest litigant to be frivolous." He thought about dividing the question, to vote once on whether the court could apportion fees and then vote on whether they could award fees for bringing forward a frivolous issue. Additional discussion followed regarding whether an attorney could apportion their fees by issue if forced to do so. It was determined that this could be conducted on an approximation. Senator Wilken asked for clarification under Version "I," that for non-monetary judgments the prevailing PIL would receive 30 percent, no more, no less, and whether or not Version "M" contained some other manner of calculation. Co-Chair Parnell responded that under Version "I" a PIL could receive more than 30 percent, but noted that under Rule 82 enhanced attorney's fees over 30 percent are only available if the parties prove certain factors. He added that this is available to both civil and PIL litigants. It was determined that apportionment by issue was the same across both Versions "I" and "M" of this legislation. There was some general discussion about the difference between the two. Senator Donley stated that Version "I" implies that apportionment is available, afforded by Rule 82. He added that Version "M" requires apportionment by incorporation of specific language to this effect. Co-Chair Torgerson called for a short at ease at 10:15 AM. Co-Chair Parnell asked Mr. Dickson when the court awards attorney's fees and whether or not they currently apportion by issue. Mr. Dickson responded that the Supreme Court has discouraged awarding attorney's fees by issue. He added that the lower courts have been instructed on numerous occasions to look at all of the issues, decide which are the ones primarily litigated and which ones are the core points. He continued that the party, who prevails on these core issues, is determined to be the prevailing party and then recovers 30 percent of all attorney's fees if the case goes to trial. He noted that this would be so, even if some of those attorney's fees were spent on unsuccessful motions for summary judgment or discovery issues that were disregarded. He summed up that the issue of who prevails is within the discretion of the trial court. Co-Chair Parnell asked if Mr. Dickson had any experience with attorney's fees being awarded based upon a particular issue as versus, based on a prevailing party determination. Mr. Dickson responded that he understood that the trial court is supposed to determine whom prevailed overall and not on an issue by issue basis. He noted that it is difficult to determine how much attorney's fees are spent on which issue. He offered that typically all issues move forward at the same time and some are subject to a summary judgment. He summed up that it is very difficult to separate out fees that are attributable to a definitive claim or point. Senator Donley gave a scenario of professional litigators who might enter 20 different pleas for any given lawsuit, based on an hourly rate of $30 to $40. He noted that these same attorneys could potentially file for attorney's fees in relation to these 20 claims, but do so based upon a higher hourly rate to make more money. He added that they could potentially take this money and file more lawsuits for the purposes of claiming attorney's fees. He noted that this type of system could actually encourage frivolous lawsuits if attorneys see the potential of pleading issues they felt they could get attorneys fees, even if they only prevail on one issue. He felt a good compromise would be to apportion only the issues that they prevailed upon and only if the court awards more than the standard Rule 82. Co-Chair Torgerson asked if this would be above the 30 percent. Senator Donley responded affirmatively and added that if the court went above the 30 percent, then they would be required to apportion. Co-Chair Torgerson noted that this would not be true in regards to Rule 82, because Rule 82 allows excesses of 30 percent. He asked if Mr. Dickson had a comment regarding this possibility. Mr. Dickson responded that this might be a reasonable compromise. He noted that it was true that Rule 82 permits a trial court to go beyond the 30 percent or 20 percent, but that there were are about six different factors that affect this determination. He added that one of these factors was that, to the extent to which a given fee award may be so erroneous to the non-prevailing party, it would deter similarly situated litigants from the voluntary use of the courts. He used the example of keeping poor people out of the courts as an issue that has troubled the Supreme Court with Rule 82, and rightfully so. He pointed out with this most recent amendment, if the Committee were to say Rule 82 applies to everybody, including public interest litigants, this would still give the lower court the opportunity to prevent the losing public interest litigant from being hit with a lot of attorney's fees. He noted that if the court awarded more attorney's fees on an issue by issue basis above the 25 to 30 percent, this would be better than the current system. Senator Parnell asked why the Committee would treat public interest litigants differently than civil litigants in this instance. He gave an example of someone that might file eight different claims in a complaint, one or two of, which is very strong, the other six of which they have a ten- percent chance of winning. He pointed out that currently, a civil litigant is allowed to ask for attorney's fees related to these claims, but the proposed language before the Committee would not allow the same for public interest litigants. Senator Donley responded that the court should apply this to everyone under Rule 82, but if the court goes beyond what is allowed under this rule the court could apportion based on which issues were prevailed upon. He felt this was necessary since the court uses the public interest litigant label to abuse the process in order to award excessive fees. Mr. Dickson hesitated to suggest making a change beyond the 20 to 30 percent applied to all litigants. He noted that there have been numerous challenges to Rule 82 and saw potential changes to this rule as creating more of the same. He stated that he would rather make all litigants equal under the law. Senator Adams added that the compromise language suggested by Senator Donley was very good. He had hoped this was the direction the Committee was leaning towards. Co-Chair Parnell outlined once again his argument against trying to apportion attorney's fees by issue. Senator Donley reiterated his intent that if the court awards an excess of the Rule 82 standard amount, then it would apportion based on issue, unless it finds exceptional circumstances. He added that the court should be required to explain why they deemed exceptional circumstances if so asserted. Senator Green asked if actual costs of attorney's fees are submitted for consideration in these circumstances. Mr. Dickson responded that this is based upon actual attorney's fees incurred and actual checks written by a client. He added that the court then determines if these costs are reasonable and if not, are reduced and then 30 percent of this amount is calculated. He noted an exception to this scenario with a Trustees of Alaska case, where they showed that similar lawyers charge $150 to $200 per hour for the same services they provide for $40 to $50 per hour and that their time should be valued at a higher rate. Senator Green asked if the Committee could address this problem since she felt that this was the bigger issue. Senator Donley stated that a court could find, after passage of this law, that for all cases they would award the value of an action versus actual costs. He noted that the court would have to do this for all litigants and not just the PIL. Co-Chair Torgerson asked that Senator Donley remove his motion and requested that compromise language be drafted. Senator Donley made a motion to WITHDRAW Amendment #1 before the Committee. Co-Chair Torgerson ordered the bill HELD in Committee. SENATE BILL NO. 6 "An Act relating to the disposal of state land." DARWIN PETERSON, Finance Committee Aide, Co-Chair Torgerson reviewed the adopted committee substitute, 1-LS0071\H and the proposed committee substitute, Version "M." He noted that everywhere in Version "H" where the state is required to dispose of land, the word "offer" was included, and he added that the new language would read, "the state shall offer for disposal." He continued that the number of acreage to be offered was changed from 250,000 acres to 100,00 acres. He offered that the "creation of the Land Disposal Advisory Board," was deleted from Version "H" and replaced by public nominations that are sent to the State Land Commission. He continued that all the sections in the bill that address lapse dates are changed to June 30, 2009, which is the sunset date of the new Land Commission. He noted that the previous sunset date was also deleted, so the Land Commission would exist in perpetuity. He added that Section 7, Section 9, Section 11, that address the powers of the Commissioner, were given to the Commission in order to submit reports to the Legislature for analysis and assessment of market demand. Mr. Peterson concluded that Version "M" of this bill was much shorter in length than the previous. He noted that a fiscal note had not yet been requested yet for Version "M." Co-Chair Torgerson suspected that this legislation would have a $10 million dollar fiscal note attached. He noted that the state currently has 50,000 acres of land to be re- offered that was included in this legislation. He continued that 150,000 acres would be added to this legislation and the fiscal note would reflect the necessary zoning costs, mapping costs, etceteras. Senator Adams referred to and asked for an explanation of Section Two, which creates the Land Sale Commission, and then to Section 10, which solves disputes between the Commissioner and the State Land Commission when there are problems deciding what lands should be offered in the first place. Co-Chair Torgerson explained how the land would be considered for distribution. Senator Phillips referred to page four and asked what the difference was between permanent fund eligibility and living in Alaska for a year. SENATOR TAYLOR responded that the primary reason for inserting this section was that a lot of public comment and concern was expressed about how Alaska land-holdings were being offered for sale. The Department of Natural Resources was posting available land on the Internet. He noted one example, where some groups of wealthy doctors were outbidding local Juneau residents who had tried obtaining these same offerings for years. He outlined the legislation that was passed as a result of this situation, with allowances for residents who qualify for the permanent fund dividend. Senator Phillips questioned the current law and its residency requirements that allows for at least one year prior to date of application and pointed out that this new committee substitute proposes something else. He asked what the differences were between the two. He generally noted conflicts of using the Permanent Fund Dividend status as a determinant for this program qualification. Senator Taylor responded that they would work on this aspect. Senator Taylor added that included in the first "blush" of this bill, was a requirement that the purchaser would pay for the appraisal and land survey, which would help diminish the attached fiscal note. He noted that this clause had been taken out of the latest Version. Co-Chair Torgerson responded that this issue would be considered again, but pointed out that the state as property owner is the only entity that can bring action before local planning commissions. He noted that this did not mean that the Committee could include some type of stipulation to pay costs up front. He pointed out that if the State were going to sell land, somehow, they would have to come up with the necessary money and establish a solid program to transfer this property. DAVID SNEED, testified via teleconference from Wrangell. He stated that he had been a resident of Alaska for eleven years. He noted that he has tried saving money in order to buy land, but added that the he was unable to keep up with rising appraisals. He recommended that the Committee encourage development of remote sites, while making these areas less dependent upon publicly supplied services. He added that the Department of Natural Resources makes too much land available for recreation rather than for private residential status. He outlined his ideas about making land available for agricultural pursuits. He stated his concern about two real estate members being placed on the Commission. Tape 31, Side A, 11:05 AM. Senator Phillips asked Mr. Sneed if he thought applicants under this legislation should pay for the land survey and appraisal. Mr. Sneed did not respond. The bill was HELD in Committee. ADJOURNED Co-Chair Torgerson adjourned the meeting at 11:09 a.m. SFC-00 SS1 (15) 02/17/00