SENATE JUDICIARY COMMITTEE February 28, 1996 1:30 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Lyda Green, Vice-Chairman Senator Mike Miller Senator Al Adams MEMBERS ABSENT Senator Johnny Ellis COMMITTEE CALENDAR CS FOR HOUSE BILL NO. 158(FIN) am(ct rls pfld)(efd fld) "An Act relating to civil actions; amending Alaska Rule of Civil Procedure 95." SENATE BILL NO. 289 "An Act relating to runaway minors and their families or legal custodians." SENATE BILL NO. 194 "An Act relating to offenses associated with criminal street gangs, and to sentencing for those offenses; and amending Rule 702(a), Alaska Rules of Evidence." PREVIOUS SENATE COMMITTEE ACTION HB 158 - See Judiciary minutes dated 5/3/95, 8/21/95, 8/23/95, 8/24/95, 8/25/95, 2/9/96, and 2/19/96. SB 289 - See Judiciary minutes dated 2/26/96. SB 194 - See Senate Judiciary minutes dated 1/19/96 and 2/23/96. WITNESS REGISTER Anne Carpeneti Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Commented on SB 194 Dennis Mestes Alaska Action Trust P.O. Box 102323 Anchorage, AK 99510 POSITION STATEMENT: Commented on SCS CSHB 158(JUD) Jeff Bush Dept. of Commerce & Economic Development P.O. Box 110800 Juneau, AK 99811-0800 POSITION STATEMENT: Commented on SCS CSHB 158(JUD) ACTION NARRATIVE TAPE 96-18, SIDE A Number 001 SB 289 MISC. LAWS RELATING TO RUNAWAY MINORS  CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:35 p.m. All committee members were present except Senator Ellis. The first matter of business was SB 289. SENATOR TAYLOR informed committee members an amendment (amendment modifies Section 1(4) on page 2, line 2, by removing the words "just cause" and inserting the words "the knowledge or permission of the parent, guardian, or custodian," and changes lines 5 through 17 to read: ; it is an affirmative defense to a prosecution under this paragraph that, at the time of the alleged offense, the defendant (A) reasonably believed that the child was in danger of physical injury or in need of temporary shelter; and (B) within eight hours after taking the actions comprising the alleged offense, notified a peace officer, a law enforcement agency, or the Department of Health and Social Services of the name of the child and the child's location. SENATOR TAYLOR stated the original bill required a 12 hour notification requirement. He moved adoption of amendment #1, as modified, changing the eight hour time limit to 12 hours. There being no objection, the motion carried. SENATOR ADAMS noted the committee debated the removal of the "just cause" term on page 1, line 15, at its previous meeting as well as changing the word "suspect" to "believe." He asked for clarification of any action taken on those changes. SENATOR TAYLOR explained the committee removed the terms "without just cause" and "within 12 hours" in a prior amendment. ANNE CARPENETI, representing the Department of Law, advised retaining the phrase "without just cause" on page 1, lines 14 and 15, because without it a parent could be acting illegally for keeping a child home sick for two consecutive days, or for taking the child out of school for a family vacation. SENATOR TAYLOR stated that if one follows through to Section 1(a)(4)(A), it is considered an affirmative defense if the parent reasonably believed the child's health or welfare was in imminent danger. MS. CARPENETI explained the word "or" at the end of line 15, page 1, makes paragraphs (1) through (4) exclusive of each other. SENATOR TAYLOR agreed but questioned whether this language is problematic for truancy officers because the term "just cause" can be used to justify differing beliefs. MS. CARPENETI felt removal of that term would cause more problems than it would solve. SENATOR TAYLOR asked Senator Frank his opinion. SENATOR FRANK replied he was under the impression that truancy laws are not well enforced, but felt the language could be drafted to address truancy problems yet allow parents to remove children from schools for a vacation. SENATOR MILLER commented he understood Senator Frank's desire to address truancy problems, but expressed concern that a school district that might consider homeschooled children truant. SENATOR TAYLOR believed amendment #1, adopted at a previous meeting, removed the "just cause" term from page 1, lines 14 and 15. SENATOR ADAMS moved reinsertion of the term "without just cause" on page 1, lines 14 and 15. There being no objection, the motion carried. SENATOR TAYLOR discussed changing the word "suspect" to "believe" on page 2, line 29 and on page 3, line 3. MS. CARPENETI noted the Department of Law maintains the better standard to require is "suspect" because reasonable cause to believe is close to the, if not the same, standard of evidence required to justify an arrest. Number 187 SENATOR TAYLOR moved to delete the word "suspect" on page 2, line 29, and page 3, line 3, and to insert the word "believe." SENATOR ADAMS objected to the motion. SENATOR FRANK questioned whether the court would hold a police officer to the same standard as it would hold a prosecutor. The intent of the language is to expect the police officer to sincerely believe a problem in the home exists, not that a problem might exist. SENATOR ADAMS felt the word "suspect" would better address that situation, because if the officer was required to believe a problem exists, he/she would need to find evidence. SENATOR TAYLOR stated the suspect standard is existing law, and has created a tremendous amount of parental frustration because police officers tend to believe the child. He felt the officer should be required to have more than a slight suspicion when deciding whether to return a child to the home. He expressed concern that in the state's zeal to protect the child, it is destroying the family system. He discussed problems created for families by manipulative adolescents. MS. CARPENETI pointed out an officer would need more than a scintilla of evidence to meet the current reason to suspect standard; the suspicion must be based on reason. SENATOR TAYLOR discussed a case in which a 13 year old girl flew to California with her 20 year old boyfriend but the police would not intervene at the Juneau airport because she stated her father had hit her which is considered physical punishment. SENATOR ADAMS called for the question on the motion, as this issue will be debated on the Senate floor, and then voiced his objection to adoption of the amendment. The motion carried with Senators Taylor, Green, and Miller voting "yea," and Senator Adams voting "nay." SENATOR MILLER moved SB 289 as amended out of committee with individual recommendations. The motion carried with Senators Taylor, Green and Miller voting "yea," and Senator Adams voting "nay." SB 194 GANG RELATED CRIMES SENATOR TAYLOR moved and asked unanimous consent that CSSB 194 (2/23/96, Chenoweth) be adopted. SENATOR ADAMS objected, noting his opposition to the dress code contained in the definition in CSSB 194. He questioned how a group, such as girl scouts, would be treated under this bill if the group committed a misdemeanor. Number 294 SENATOR TAYLOR commented the committee has anguished over the definition of a gang, and asked Ms. Carpeneti to respond to Senator Adams' concerns. MS. CARPENETI agreed the "or" in between the identifying markers in the definition does provide that any one of those markers can be used, however the word "and" at the end of line 16 requires that the group must have committed two or more specific offenses in the past. The definition has been tested and upheld by the California courts and is considered to be the best definition found so far. Additionally, participation in a gang is not a criminal act under CSSB 194; participation in a crime in connection with a gang is. SENATOR TAYLOR commented the girl scouts in Senator Adams' analogy would receive an enhanced penalty under CSSB 194 if they had committed two or more other offenses while dressed as girl scouts during the past three years. MS. CARPENETI noted the sentence enhancement under CSSB 194 would apply when they committed the third offense. SENATOR ADAMS removed his objection to the motion to adopt CSSB 194, therefore the motion carried. For purposes of clarification, SENATOR TAYLOR moved adoption of Version W (Chenoweth) of CSSB 194. SENATOR ADAMS objected and requested additional time to review Version W. SHERMAN ERNOUF, legislative aide to Senator Kelly, sponsor of SB 194, explained the only change to Version W was the addition of (JUD) after CS for SENATE BILL 194, to identify the committee's sponsorship. Otherwise Version W is identical to Version U which was previously adopted. SENATOR GREEN moved Version W of CSSB 194 out of committee with individual recommendations. SENATOR ADAMS objected. The motion carried with Senators Taylor, Green, and Miller voting "yea," and Senator Adams voting "nay." HB 158 CIVIL LIABILITY  SENATOR TAYLOR announced many tort reform hearings, including hearings in Fairbanks, Anchorage, and Sitka, have been held, and several amendments have been considered by the committee. A proposed committee substitute has been drafted, which incorporates many suggested changes. SENATOR TAYLOR moved, and asked unanimous consent, that the proposed committee substitute be adopted for purposes of discussion. SENATOR ADAMS objected, and asked if the proposed committee substitute incorporates the amendments submitted by committee members. SENATOR TAYLOR replied it does, and noted Senator Adams' amendment was incorporated as Section 27. SENATOR ADAMS removed his objection to the motion, therefore SCS CSHB 158(JUD) was adopted. DENNIS MESTES, representing Alaska Action Trust, gave the following sectional analysis of the differences between the SCS CSHB 158(JUD) and the House version. Section 1 of SCS CSHB 158(JUD) does not contain one of the purposes listed in the House version. That purpose was designed to ensure liable parties equitably share fault in accordance with the amount of damage caused by each party. The elimination is appropriate since the bill did not provide for equitable sharing of fault; it provided for consideration of people who are out of the jurisdiction of the court for various reasons. The time limit in the statute of repose in Section 2 was increased from eight years to 15 years. Section 2 is broader in scope in that subsection (1) refers to construction and subsection (b) refers to personal injury, death, or property damage. Subsection (b)(3) is problematic, however, because it provides for a 15 year statute of repose, unless there is a shorter period of time imposed under another provision of law. Section 4 imposes a two year time limit for action. MR. MESTES stated if the committee desires to grant a longer statute of repose for construction, medical care, or anything else, that intent needs to be stated in Section 2 and differentiation needs to be made between what Sections 2 and 4 apply to. Section 3 does not differ from the House version. Section 4 links with Section 2 but is unclear as previously stated. SENATOR TAYLOR stated the committee has questioned the Department of Law and others about how those two sections coordinate, as well as the definitional change regarding minors. The Department of Law has not provided clarification of either. He agreed the differentiation of minors and mentally incompetent individuals is a fallacy, however major constitutional research concerning due process would be necessary to correct the definition, and perhaps the legislature wishes to not bound mentally incompetent individuals by the statute of repose. MR. MESTES responded Section 4 eliminates the language, "not withstanding the disability of minority ..." but the same language is retained in the 15 year statute of repose. The Attorney General's Office believed it to be unconstitutional to discriminate against some children versus others. Alaska Action Trust does not believe this differentiation can be fixed, because children should not be discriminated against since they have no legal rights to contract or manage their own affairs until the age of majority. This legislation victimizes them. SENATOR TAYLOR commented the medical community supports that provision because it does not believe it should have to continue to carry malpractice coverage for 23 years to cover undiscovered birth problems since most problems are discovered within 18 years. He discussed the story about the teenage child who has been misdiagnosed until recently, whose family cannot sue under the eight year statute of repose. MR. MESTES agreed the 15 year limit is better, but repeated his concern that the linkage between Sections 2 and 4 is unclear. MR. MESTES explained Section 5 of the House version pertained to non-economic damages, and has been removed from the Senate Judiciary version. Alaska Action Trust approves of its removal, since juries would have to differentiate how damaged a person was in terms of permanency. It used a "Mr. Potatohead" concept since a person would have to be completely incapacitated before the larger cap of $500,000 would apply. The fixed amounts provided in that section were arbitrary and most likely unconstitutional. Section 5 of the Senate Judiciary version defines punitive damages, and is identical to Section 6 of the House version. SENATOR TAYLOR indicated the definition of punitive damages was determined by the Alaska Supreme Court, and probably does not need to be restated. Including the definition in the bill may lock the Supreme Court into using it when it may prefer a harsher definition. MR. MESTES explained it is the definition contained in jury instructions. Regarding the removal of the non-economic section, SENATOR TAYLOR drew the committee's attention to a letter received from the United Fishermen of Alaska (UFA) in response to the committee's request for suggestions to the Cordova Fishermen's Union (CDFU) dilemma. The CDFU believed the non-economic damages cap of $300,000, contained in the House version, would allow an Exxon Valdez bailout. Environmental damages would be considered non-economic because one cannot speculate the monetary value of a damaged portion of the environment. If a small community brought an action against a company that spilled oil over the surrounding coastline, the company would only be required to pay $300,000. When attempting to separate environmental non-economic damages from pain and suffering as an economic damage, definitional difficulties arise that violate due process of law. Input was solicited on this problem from all interested parties, however the committee has received no response or suggested solutions which is why that provision was removed from the bill. MR. MESTES explained Section 6 of the Senate Judiciary version defines the cap on punitive damages, which is three times the amount of compensatory damages or $300,000, whichever is greater. He submitted there are instances in which this limit is completely inappropriate, such as fraudulent schemes used to deceive consumers. Because the compensatory damages may be relatively small, but the scheme is nationwide, the company may be making hundreds of millions of dollars in profits. The Consumer Protection Division can verify it is one of its major concerns. Alaska Action Trust believes this provision is not appropriate in that it makes no exception for such schemes. SENATOR TAYLOR commented the punitive damage award against Exxon was $5 billion. He felt if support for that provision continues, other committees can choose to keep it in the bill. MR. MESTES pointed out the last of the Exxon Valdez Phase Four trial has been proposed to be settled. The $284 million award has been reduced by the courts to $26 million because of payments under the TAPS fund and settlements made by Exxon. If this provision was in effect, the punitive damage award would have been under $90 million, which is less than Exxon probably pays per year for coffee. It would provide no disincentive whatsoever. TAPE 96-18, SIDE B Number 000 MR. MESTES noted Section 7 of the Senate Judiciary version contains two minor changes: a state or self-insured municipality was removed from the list of entities that do not have to post security when periodic payments are required; and the reference to when periodic payments become due was deleted. Section 9 prohibits fault from being allocated to a person who cannot be a party to the suit under the statute of repose. The House version allowed anyone, anywhere, anytime to be considered as a person at fault in the suit, regardless of factors such as whether that person was a minor. The Senate version rectifies and limits who may be considered at fault. SENATOR TAYLOR clarified this section removes the "empty chair" provision. The collateral benefits provision of the House version (Sec.10) was eliminated in the Senate Judiciary version. Alaska Action Trust supports that elimination as there is no double recovery problem because subrogation provisions exist among carriers, and it is confusing and unfair to disclose the plaintiff's insurance benefits and payments to a jury, but not provide similar information about the defendant. SENATOR TAYLOR felt that provision penalized people conscientious enough to purchase insurance. MR. MESTES stated Section 10 of the Senate Judiciary version is very confusing and removes any incentive for the wealthy defendant to settle because it only requires that costs and attorneys' fees be paid, which is required under Rule 82 anyway. SENATOR TAYLOR remarked the language in Section 10 is from the House version except for the addition of the sentence on lines 15-17. He explained that sentence was included so that in a case with multiple defendants, all defendants must come forward as a group when making offers of judgment. This would eliminate the guesswork on the part of the plaintiff in trying to determine whether one offer of judgment is the true portion of liability for that party. Section 10 in the Senate Judiciary version eliminates the provision allowing the jury to consider all parties for allocation of fault, whether each party is capable of being served or is beyond the jurisdiction of the court. MR. MESTES asserted Alaska Action Trust supports the elimination of that provision as it is unfair and confusing. SENATOR TAYLOR explained Section 11 of the Senate Judiciary version sets the rate on judgments, including prejudgment interest, at three percent above the interest rate set by the United States Bureau of the Public Debt for five-year treasury notes to better reflect the true market rate, rather than on the 12th Federal Reserve discount rate. The floating interest rate will eliminate the need for legislative action every few years to readjust the interest rate. SENATOR TAYLOR discussed Section 12, which provides for mandatory arbitration. MR. MESTES believed this provision to be marvelous as it will have a major effect upon the legal system and should affect insurance rates. Alternate dispute resolution is happening across the country and cuts down on litigation costs as well as the number of cases filed and amount of time spent on each case. SENATOR TAYLOR mentioned that this provision has had universal support from all people testifying on this bill. MR. MESTES noted Section 15 of the House version was not included in the Senate Judiciary version, and wisely so because present law disallows interest on punitive damages but does allow prejudgment interest for future damages in order to compensate for the loss of use of the money after awards have been reduced to present value. Therefore, the present system will be left intact. SENATOR TAYLOR believed no one would ever want to settle a case if no interest had to be paid on the settlement until the case was decided, as he/she could earn a large sum off of investments in the meantime. MR. MESTES remarked Alaska Action Trust supports the elimination of that section. He added federal and state governments charge interest and penalties on money owed during a dispute. Regarding Section 13 of the Senate Judiciary version, SENATOR GREEN asked if health care providers were intentionally dropped from that section. SENATOR TAYLOR replied the reference to medical professionals was removed to broaden the expert witness qualification provision to apply to all professionals. He expressed concern about this requirement because in professions with a limited number of practicing individuals, such as neurosurgery, conflicts of interest may arise among those individuals when asked to testify against each other. Alaska Action Trust supported the change made to Section 15 as it requires independent contractors to carry a minimum of $2,500,000 per incident of malpractice insurance before a hospital can claim immunity from liability for that contractor's conduct. SENATOR TAYLOR noted Harlan Knudson responded to the committee's request for information which was provided to committee members. He felt the amount may need to be revisited as it may be high for some specializations, and low for others. MR. MESTES indicated Section 18 contains several repeals, the affects of which he was unaware. One repealer allows a physician to refuse to treat a patient who will not agree to participate in mandatory arbitration if a dispute arises. A second repealer disbands the Medical Advisory Board, which screens all malpractice cases. Alaska Action Trust supports Section 27 which activates the legislation only when insurance rates are reduced by 10 percent. MR. MESTES noted Alaska Action Trust provided a three page document to committee members which outlines court system statistics that do not reveal an avalanche of tort cases being heard by the court system. In 1995, 43 civil jury trials took place in Alaska. Alaskans are three times more likely to be indicted for a felony and four times more likely to be divorced than they are to be involved in a personal injury accident. SENATOR TAYLOR commented the 43 civil cases include contract suits, appeals on decisions by administrative bodies, and other civil actions. The personal injury suits probably account for 25 percent of those trials. JEFF BUSH, Deputy Commissioner of the Department of Commerce and Economic Development, testified on behalf of the Governor's Office. The Governor has stated that any tort reform legislation that appears on his desk must contain three essential elements. First, the bill must effectively lower insurance rates. He believed the Governor would support Section 27. Second, the Governor strongly supports efforts to reduce frivolous lawsuits and the workload of the Court System therefore strongly supports mandatory arbitration and mediation efforts. He suspected the Governor would also support the provision in the bill relating to reduction of frivolous lawsuits through enhancement of the offers of judgment. Third, the Governor has stated that any tort reform legislation that passes must be "clean" as far as the Attorney General's Office is concerned, therefore legal and constitutional issues have to be resolved. He noted that although constitutional issues related to the statute of repose still remain, the Senate Judiciary version is cleaner than existing statute. MR. BUSH pointed out three technical errors in the bill: on page 3, line 22, the word "or" should be moved to the end of line 24; on page 5, line 7 the language, "Except as provided in this subsection," should be deleted; and on page 10, line 19 a comma needs to be inserted after the word "felony." MR. BUSH explained the repealers are all in reference to the medical malpractice arbitration provisions which will no longer be necessary if mandatory arbitration is adopted. SENATOR TAYLOR believed one of the provisions may still be necessary if a physician can require a patient to sign a more binding arbitration agreement before services are provided. He also questioned why two separate sections are contained in the bill dealing with the statute of limitations, and noted the board certification requirement for expert witnesses poses problems because certification procedures do not exist for all professions. There are a limited number of practitioners in certain professions in the state, and the licensure requirement may prevent anyone from testifying. He stated that section was drafted to be as broad as possible yet address some the of medical community's concerns. SENATOR TAYLOR moved to amend SCS CSHB 158 (JUD) with the technical corrections identified by Mr. Bush. There being no objection, the motion carried. There being no further discussion on SCS CSHB 158 (JUD), SENATOR MILLER moved the measure out of committee with individual recommendations. SENATOR ADAMS objected to the motion. SENATOR ADAMS objected on the basis that the legislation benefits the wrongdoer, attempts to keep victims out of court, and prevents adequate compensation for injuries from being awarded. He also discussed drafting problems with the bill, particularly Sections 2 and 4, and expressed concern that this bill is unconstitutional because it discriminates among a class of plaintiffs by violating equal protection and due process rights. He thanked committee members for the hard work it did on this bill. SENATOR TAYLOR also thanked committee members for the considerable amount of time and effort put into this legislation. He also thanked members of the tort reform movement who have worked on the bill. The motion carried with Senators Taylor, Green and Miller voting "yea," and Senator Adams voting "nay." Senator Taylor adjourned the meeting at 3:05 p.m.