Legislature(2003 - 2004)
04/06/2004 01:50 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 549 - UNSOLICITED COMMUNICATION:AIRCRAFT CRASH Number 0077 CHAIR McGUIRE announced that the first order of business would be HOUSE BILL NO. 549, "An Act relating to unsolicited communications following an aircraft accident; and amending Rule 503, Alaska Rules of Evidence." Number 0120 VANESSA TONDINI, Staff to Representative Lesil McGuire, House Judiciary Standing Committee, Alaska State Legislature, presented HB 549 on behalf of the House Judiciary Standing Committee, sponsor. Calling it is a good, straightforward, "anti-ambulance chaser bill" that regulates the conduct of attorneys, Ms. Tondini said it mirrors what is currently done under the Alaska Rules of Professional Conduct and federal law. It basically says an attorney cannot solicit business or contact individuals for 45 days after an aviation accident. Number 0201 REPRESENTATIVE HOLM moved to adopt the proposed committee substitute (CS) for HB 549, Version 23-LS1860\D, Bullock, 4/1/04, as a work draft. There being no objection, Version D was before the committee. MS. TONDINI explained that the original bill included a reference to the attorney-client privilege. At such an early stage of communication, however, there is no attorney-client privilege in effect, so that reference was removed in Version D after review of the bill and discussions with other attorneys. MS. TONDINI noted that while HB 549 is based on federal law, it applies only to intrastate flights that take place entirely within Alaska. It differs from the federal counterpart in that a reference to the air carrier's attorney has been added to make it clear that all attorneys are to refrain from unsolicited contact with injured passengers and their families during this difficult time when they are vulnerable to external pressures and may make premature decisions. The bill only prevents lawyers and their agents from initiating contact; a person may call an attorney at any time. Thus Ms. Tondini opined that this doesn't hinder a person's ability to get effective assistance or counsel. Noting that people on teleconference could provide greater detail, she offered to answer questions. Number 0358 REPRESENTATIVE GARA remarked that the intent seems fine of not having an attorney seek these clients, but the bill as written seems to go beyond that. He explained two concerns. First, a person might want the attorney he/she hired to be able to contact a witness - who may be an individual injured in the accident - for confirmation. Second, if a potential party may not contact an individual injured in the accident, that means someone may not speak about [a potential action] to the person who was sitting in the adjacent seat, for example, in order to decide how to proceed. He asked why that should be included. CHAIR McGUIRE suggested the first part could be narrowed as to the potential party to say something like "unless the attorney has been voluntarily contacted by a claimant" and that the party is a part of the [incident], for example. REPRESENTATIVE GARA, in response to a request from Chair McGuire, reiterated his second concern. REPRESENTATIVE SAMUELS agreed with respect to the second concern and allowing passengers to talk with each other. As for the first concern, he urged caution, since a lawyer who'd been contacted by one person would be the only lawyer who could then call everybody else. REPRESENTATIVE GARA noted that it would still be criminal for that lawyer to ask, "By the way, can I represent you?" REPRESENTATIVE SAMUELS mentioned connecting the dots, though. MS. TONDINI explained that the language is based on the federal law, which includes both an attorney and a potential party. Number 0645 CHAIR McGUIRE asked whether this is identical to the federal language. MS. TONDINI replied, "Except that it's expanded to cover the air carrier's attorney." She noted that the federal law and the language of the Alaska Rules of Professional Conduct are in the bill packet. Addressing Representative Gara's concern about the breadth, she suggested possibly including language from Rule 7.3(a) and narrowing it to situations of solicitation, rather than actual working relationships. Ms. Tondini surmised that one reason for saying someone shouldn't be contacted by an attorney might be that once a person is represented by an attorney, it is illegal to go through that person and not his/her lawyer. Since there will be a time during which people won't be represented, she suggested this will "keep everyone away" until they take it upon themselves to seek [legal counsel]. CHAIR McGUIRE remarked that 45 days is a fairly insignificant amount of time to ask somebody to wait and have a cooling-off period when compared with the years such a case could take. She indicated her intention to look at narrowing it a little bit, but added that there still probably will "be a place where there's a rub" because of the concerns Representative Samuels had brought up. REPRESENTATIVE SAMUELS suggested [a plaintiff] who wanted his/her attorney to talk to other passengers could ask the passengers to talk to the attorney. He said it wouldn't be fair to a reputable attorney who follows the 45-day rule, which is the federal standard, to "let somebody in the back door here." REPRESENTATIVE GARA said there are two different issues. First, in any involved case it is necessary to start investigating right away in order to gather facts, find people before they leave the state, avoid having stale evidence, and so forth. As for having an attorney contact a witness who then wants to be represented by the attorney, Representative Gara said that happens now. He clarified that he has no problem making it a crime for an attorney to solicit a client, especially in this timeframe, but emphasized the need to avoid getting in the way of someone to be represented and have fact finding done. Second, he said he doesn't understand the policy of not letting a potential party talk to another passenger for 45 days. Number 0928 REPRESENTATIVE GRUENBERG remarked that he sees nothing in the federal law that has a criminal penalty anything like this. He asked Ms. Tondini about it. MS. TONDINI replied that she believes the state criminal penalty was chosen "just for teeth" in enforcement. She conveyed her understanding that it's not enforced very much on the federal level and is a small civil fine. REPRESENTATIVE GRUENBERG said it's $1,000 a day. MS. TONDINI responded, "They shouldn't be doing it anyway." CHAIR McGUIRE highlighted the desire for a meaningful penalty and said the amount [attorneys] could get in contingency fees could be high enough that they'd pay a $10,000 penalty with no problem, as part of doing business. She said the point of the criminal penalty is that it's recognized by the bar in terms of retaining a license. She expressed the desire for this to have teeth and not be a cost that's simply absorbed [by the offending attorney]. REPRESENTATIVE GRUENBERG asked whether there has been any constitutional challenge at the federal level. MS. TONDINI said she wasn't sure, but suggested somebody on teleconference might be able to answer. REPRESENTATIVE GRUENBERG remarked that he sees one or two minor problems with this. Number 1052 REPRESENTATIVE GARA proposed having the bill read as follows beginning on line 6 [page 1]: ... an attorney may not initiate contact with an individual injured in the accident or a relative of an individual involved in the accident to offer or discuss representation based on the accident for personal injury or wrongful death within 45 days of the accident. REPRESENTATIVE GARA explained that the foregoing would [exclude] "potential party" and replace "concerning a potential action" with "to offer or discuss representation based upon the accident". CHAIR McGUIRE turned to public testimony. Number 1127 MARCIA R. DAVIS, Vice President and General Counsel, Era Aviation, Inc. ("Era"), indicated the proposal [by Representative Gara] is exactly what she'd suggest. She pointed out that under the federal law where it has the language "potential party", the reference was intended to capture the air carrier. However, the state bill goes further by including language that prohibits contact by an attorney for the air carrier. Thus she said "or potential party" is not needed. MS. DAVIS referred to comments by Representative Gara that one wouldn't want to prohibit an attorney from contacting other witnesses or gathering facts. Saying this is a legitimate concern, she suggested that deleting "or potential parties" solves that problem and yet still bars the attorney for the air carrier from contacting individuals. She added that the language just proposed about retention for employment works extremely well also. MS. DAVIS spoke to the overall bill, saying ERA's Bush operations out of Bethel have run very smoothly, with a good relationship with passengers, management by people who live in Bethel, and little difficulty; in the last year and a half, however, there has been evidence that people are creating "nuisance lawsuits" in situations that previously weren't litigable. She said it's almost a cottage industry in the Bush, with attorneys advising people in the immediate aftermath when they hear that a plane landed just short of the runway and there was a bump, for example; they plant ideas in the minds of people who otherwise wouldn't have thought about suing. MS. DAVIS said these lawsuits are beginning to be a real problem for insurers; they take away attention from legitimate claims and affect the willingness to do business. Unfortunately, the teeth in the mechanisms to prevent this behavior aren't there. The ethics rules have a lot of "wiggle room," particularly in small communities where people can claim they're personal friends or connected to the families somehow. Likewise, she said, the federal law has been virtually useless, since it requires the NTSB [National Transportation Safety Board] or the U.S. Attorney General to issue a citation; it simply doesn't happen in Alaska's intrastate environment. Even if substantial resources were expended, she suggested the $1,000 fine would be laughed at and considered the cost of doing business. MS. DAVIS opined that this is an important statement to make - not only to the community at large and lawyers at large, but also to insurers, to let them know an effort is being made to keep costs rational but fair. Ms. Davis reported that she'd seen no cases on the federal side challenging this particular statute, which was passed as part of the aviation disaster and family assistance Act and is imbedded in an NTSB provision. She noted that there was a sting operation on lawyers done perhaps 15 years ago in the aftermath of these accidents, which culminated in passage of the federal law. Number 1411 REPRESENTATIVE SAMUELS declared a conflict, saying he is employed by a small air carrier. CHAIR McGUIRE objected, specifying that Representative Samuels is required to participate and vote. REPRESENTATIVE GARA asked Ms. Davis if attorneys are calling people and asking whether they want to sue. MS. DAVIS answered that they're actually going to the hospital. Whenever there is a bump, for example, Era [encourages] the passengers to go to the health center as a prophylactic measure. [Chair McGuire turned the gavel over to Vice Chair Anderson.] REPRESENTATIVE GARA remarked that assuming the language is adopted that he and she discussed, he'll support the bill. He suggested perhaps Ms. Davis should file a bar complaint [against those attorneys]. MS. DAVIS reiterated that she'd looked at the ethics rules but found wiggle room. She said Rule 7.3 basically prohibits a lawyer from soliciting in person or via telephone contact; the exception is if the prospective client is related. REPRESENTATIVE GARA asked Ms. Davis to call him if she sees a case that comes close to that line again, saying he might sign a bar complaint with her. MS. DAVIS explained that she is cautious because there are lots of various relationships within small communities and it wouldn't be good to take a broad swath that makes an enemy out of a sector of a community. She acknowledged that these are extreme cases. Number 1548 TOM NICOLOS, General Manager, Cape Smythe Air Service; Vice President, Board of Directors, Alaska Air Carriers Association, voiced strong support for HB 549 on behalf of both the air service and the association in order to correct an oversight in the federal aviation disaster and family assistance Act of 1996, which failed to put into effect any substantial deterrent. Saying the air service has seen attorneys firsthand who operate with disregard to the federal Act, he cited an example. Agreeing with providing for passengers who are involved in occurrences, he emphasized the need to stop the sense of entitlement that has been fostered by attorneys who know the system and know that they can "muscle settlements" out of air carrier insurers, and who take advantage of families when they are most vulnerable. Number 1652 ART WARBELOW, President, Warbelow's Air Ventures, Inc., began by saying his business has operated about 35 years and has about 100 employees in Fairbanks. He expressed support for HB 549 because of the high cost of liability insurance, the fourth- largest expense behind labor, fuel, and parts. [Vice Chair Anderson returned the gavel to Chair McGuire.] MR. WARBELOW continued, saying most air carriers in Alaska are underinsured; there is a legal [minimum] of $300,000, and most [have insurance limits] in the range of $300,000 to $500,000. When there's an accident, a company realizes the carrier is underinsured and is willing to settle quickly for policy limits. In that scenario, an attorney who can get to the victim can extract a significant contingent fee, knowing it will be an easy case to settle; the victim ends up shortchanged. Mr. Warbelow suggested that allowing time for the operator and the insurance companies to settle will get more money to those who deserve it, rather than the attorneys. REPRESENTATIVE GARA asked whether there is a significant difference in premiums for a $300,000 policy and something Mr. Warbelow considers more adequate. MR. WARBELOW replied that part of the problem is that the underwriters won't provide higher limits, period. He cited an example and said people can barely afford to buy [the minimum]. Saying this is driven by a number of factors, he mentioned the difficulty of getting the cost of insurance to the point that people can afford to buy reasonable coverage. Number 1824 ED GREGOR (ph), AIG Aviation Insurance (ph), echoed the statements of Mr. Nicolos and Mr. Warbelow; expressed concern about capacity in the insurance market; and said although brokers make heroic efforts to make limits as high as possible on behalf of their clients, insurers sometimes suffer in their ability to effect good, strong defenses because of the low limits. "It's a concern for us," he added; "we would prefer to see higher limits." Applauding the discussion within the committee about keeping the language "broad yet specific," he said it needs to be broad enough to prevent creative solutions. MR. GREGOR noted that in 25 years he has seen interesting extremes relating to the solicitation of claims. He cited examples from Louisiana and Mississippi when events involving chemical plants led to attorneys' signing people up for huge class action lawsuits. Acknowledging it isn't to that extent in Alaska, he said there is concern by insurers nonetheless when solicitation is uninhibited for minor accidents. Offering his perspective as a claims handler, Mr. Gregor said it upsets him that he often doesn't have the opportunity to exhibit the good will that is available and to help carriers assist injured passengers as quickly as possible, including all-important immediate financial assistance when breadwinners have been injured. REPRESENTATIVE GARA opined that just as an attorney shouldn't be able to solicit a client within the first 45 days, a defendant shouldn't be able to get a client to waive the right to pursue legal action. MR. GREGOR agreed. REPRESENTATIVE GARA asked whether the early financial assistance has strings attached. MR. GREGOR answered that the federal law requires carriers to provide immediate financial assistance; it is the practice and part of the coverage of the air carriers to provide that sort of assistance up front as well. He specified that there are no strings attached. Recognizing that these claims for people who are genuinely injured can be large, he said an immediate payment of $10,000, $20,000, or $25,000 won't significantly change the fact that the claim will have to be settled for payment of additional monies down the road. Number 2024 PAUL LANDIS, Member, Board of Directors, Alaska Air Carriers Association, noted that he is senior vice president of Era Aviation, Inc., but was speaking on behalf of the Alaska Air Carriers Association, whose executive director and president were unable to testify. Mr. Landis said the association certainly understands the sense of entitlement that exists, particularly now in rural Alaska, where lawyers are making promises that can't be kept to passengers who listen in a weak moment. MR. LANDIS mentioned the air carriers' practice of bringing passengers to hospitals for an examination following any sort of incident, and that lawyers are waiting to sign them up on the spot. He reported that also being heard from the air carriers is that following turbulence or a hard landing, passengers may experience soreness that will disappear in 48 hours, but these people are hooked in with promises of easy cash. He cited the example of a fear-of-flying lawsuit and out-of-court settlement following the collapse of nose gear when a plane landed in Bethel. The effort with HB 549 is to prevent the unsolicited strong-arming of passengers by lawyers, he said, which drives up the cost of insurance and, in the long run, hurts the traveling public. He urged support for HB 549 as written. Number 2131 MELISSA FOUSE specified that she was speaking on her own behalf as a survivor and family member of someone who was killed in an airplane crash, although she is executive director of the Alaska Academy of Trial Lawyers. She said: Frankly, I'm a little offended by the testimony of the airplane people who say, ... "Oh, it's just a bump on the end of the runway and these lawyers are like piranhas." My brother was actually killed, and we didn't have a single lawyer contact us until after the federal law date - not one single lawyer. I will say that at the end of that, we did get solicitations, and that was fine because we wanted to know what to do next. MS. FOUSE related her opinion that making this a felony is absurd, and that it isn't the attorneys who start the cycle; rather, it is the accident. She asked the committee, when considering this legislation, to please consider the people who were hurt or killed. CHAIR McGUIRE apologized if any comments from the committee were offensive; she said the intent certainly isn't to minimize the loss or injury suffered in accidents, and many times recovery is deserved. She explained that there is a rule of professional conduct in this same spirit and that this is to get at [attorneys] who are soliciting passengers inappropriately. Referring to earlier discussion, she stated the intention of narrowing this from the federal law on which it is based, to clarify that it wouldn't exclude legitimate cases where information is needed. Number 2321 ROBERT JACOBSEN, President, Wings of Alaska, noted that Wings of Alaska and Wings Airways are sister companies and indicated they emplane about 75,000 passengers annually. Speaking in support of the bill, Mr. Jacobsen said he has been in the business about 25 years and has seen accidents over the years, both "bumps and bruises" and catastrophic ones. He said: Honestly, we care deeply about the industry, and this is an attempt to start to help this hemorrhaging industry that we've been experiencing for a number of years. But also, most of my professional colleagues in this business have a lot of integrity, and we care deeply about our customers too. Our customers are our neighbors, and we care about them. MR. JACOBSEN recalled four instances when there were mishaps but no serious injuries; he said plaintiff attorneys got hold of his customers, who weren't cared for in the long run because they weren't well represented and their attorneys took that "one- third plus expenses" away from the settlement. He remarked, "That doesn't make us feel good; ... we'd just as soon more of it get into the hands of the families or the victims that ... were part of the incident." He encouraged passage of HB 549 and consideration of more tort-reform issues. CHAIR McGUIRE asked whether anyone else wished to testify. Hearing no response, she then closed public testimony. TAPE 04-59, SIDE B Number 2392 REPRESENTATIVE GARA moved to adopt Amendment 1, a handwritten amendment that read [original punctuation provided]: Page 1, Line 6 After "attorney" Delete "or potential party" Page 1, Line 8 After "accident" Delete "concerning a potential action" Insert "for the purpose of offering or discussing potential representation in an action" Number 2379 REPRESENTATIVE HOLM objected. REPRESENTATIVE GARA explained that Amendment 1 does what he and Ms. Davis had discussed earlier: it limits criminal conduct to those attorneys who contact a client in the first 45 days seeking to be hired, and it deletes the language that addresses "sort of the situations that I think we don't want to address with this bill." REPRESENTATIVE HOLM removed his objection. Number 2350 CHAIR McGUIRE asked whether there was any further objection to Amendment 1. [No objection was stated, and Amendment 1 was treated as adopted.] CHAIR McGUIRE remarked that it's a good amendment and suggested, "You should contact the federal folks, too, because throughout their statute it says 'potential action' and 'potential party', and it is broad." REPRESENTATIVE GARA replied that he thinks it's trying to prevent insurance companies from getting people to settle quickly before they can contact an attorney. He added that it's beyond the scope of what [HB 549] is intended to address. REPRESENTATIVE OGG referred to line 6 and asked why "intrastate" is used, rather than having this also apply to interstate or international [flights]. CHAIR McGUIRE said it's because federal law would supercede; the bill can only apply to flights within the state because there's already a federal law. Number 2260 MS. DAVIS said that when the federal government chooses to regulate the interstate aspects of aviation, the state cannot "step over the top of that," but can legislate relative to purely intrastate [flights]. She offered her belief that there'd be a significant "federal preemption problem" if the bill went beyond intrastate activity. She added that other than the obvious ones, few flights go directly out of state; if they do, Alaska's state law would be trumped by federal law as well as international law. REPRESENTATIVE OGG asked whether Alaska's law could be stricter than the federal law. MS. DAVIS answered that because the federal law resides within NTSB's body of law, in the aviation and family disaster Act, she guessed the question would be whether [Alaska's law] could be more solicitous and helpful to families. She said that it's not quite like commerce, where there are "overlaying layers of commerce," since NTSB is "sort of an all-or-none kind of entity." She went on to say it's possible that [Alaska's law] could be more restrictive regarding intrastate aspects, and she offered to look into whether it would doom the bill if it were expanded to cover interstate [flights]. REPRESENTATIVE OGG said he'd appreciate that. Number 2149 REPRESENTATIVE ANDERSON moved to report the proposed CS for HB 549, Version 23-LS1860\D, Bullock, 4/1/04, as amended, out of committee with individual recommendations and the accompanying zero fiscal notes. There being no objection, CSHB 549(JUD) was reported from the House Judiciary Standing Committee.