Legislature(1995 - 1996)

01/11/1996 01:30 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  SB 119 MANDATORY MEDIATION/DESIGN PROF LAWSUITS                              
  CHAIRMAN TIM KELLY  called the Labor and Commerce Committee meeting          
 to order at 1:30 p.m. and announced SB 119 was up for                         
 consideration.  He noted all members were present, except Senator             
 Duncan, who arrived at 1:31 p.m.                                              
 SENATOR LEMAN, sponsor of SB 119, explained the measure                       
 incorporates alternative dispute resolution into the process of               
 settling disputes.  It does not remove the ability of the aggrieved           
 parties to seek judgment in court, but does allow the court to                
 appoint a three-member conciliation panel consisting of a member of           
 the design profession, an attorney, and a person involved in                  
 alternative dispute resolution.  The panel would hear the case,               
 through a more informal process, and render one of four judgments,            
 specified in SB 119.  One of the judgments would determine whether            
 the case had merit, so that if it did not, it would be more likely            
 that a judgment would be found against a party bringing a frivolous           
 case to court.  This concept is in place in seven states, and other           
 states are considering similar legislation, to reduce the court               
 system backlog, and to reduce costs associated with litigation.               
 Number 052                                                                    
 SENATOR SALO asked if the purpose of the panel would be to decide             
 whether the case merits court action or to actually recommend                 
 solutions to the disagreement.  SENATOR LEMAN reiterated there are            
 four conclusions the panel could reach, specified in SB 119.  He              
 reviewed those conclusions.  He added other states have found that            
 enactment of similar legislation has reduced the number of cases              
 that are litigated.                                                           
 Number 088                                                                    
 SENATOR SALO questioned whether the panel would act as a legal                
 advisory panel, deciding whether or not a case has merit, or                  
 whether it would have the latitude to determine whether reparative            
 work should be done.  SENATOR LEMAN answered that would depend on             
 how the panel was set up.  He explained it could make such a                  
 determination informally.                                                     
 Number 110                                                                    
 SENATOR KELLY clarified that if the parties do not agree to the               
 panel's recommendation, either party can litigate, and the panel's            
 decision would not be admissible in court, therefore the parties              
 would be starting over.  SENATOR LEMAN explained the panel would              
 use a less formal procedure than what is required in a court case.            
 SENATOR KELLY stated it would set out each party's position which             
 would give the parties a better opportunity to determine the                  
 outcome of litigation.  The panel's recommendation could act as a             
 deterrent to further action by the unfavored party.                           
 Number 130                                                                    
 SENATOR LEMAN cited a case he was previously involved in.  The case           
 lacked merit from the onset, yet cost the parties hundreds of                 
 thousands of dollars and a substantial amount of time, before the             
 jury determined the case lacked merit.                                        
 Number 142                                                                    
 SENATOR TORGERSON questioned the magnitude of the problem.  SENATOR           
 LEMAN responded he did not have an actual number of claims being              
 brought in Alaska, but estimated the number to be small.  SENATOR             
 TORGERSON asked if any other profession in the State of Alaska has            
 a panel similar to the one in SB 119.  SENATOR LEMAN stated SB 119            
 is patterned after legislation in other states.  He added the                 
 medical profession may have a similar procedure, and both the                 
 medical and legal professions in other states have such procedures.           
 Number 162                                                                    
 RICHARD RITTER, president of a Juneau architectural and design                
 firm, and a representative of the Alaska Chapter of the American              
 Institute of Architects, expressed his support of SB 119 for the              
 following reasons.  SB 119 would reduce the number of frivolous               
 claims as well as reduce frivolous denial of liability by deterring           
 a patently liable party from attempting to defend itself in court.            
 The intent of the bill is to be fair to either potential.                     
 Secondly, in his experience with three or four cases over the past            
 15 years, the cases have cost tens of thousands of dollars to                 
 resolve, even though the cases never went to court.  In one case              
 involving the University of Alaska, the University's engineer                 
 determined his firm to be blameless, but the University's legal               
 counsel recommended his firm be sued.  His firm settled out of                
 court to minimize legal costs.  A conciliation panel would have               
 discredited the claim initially.                                              
 Number 206                                                                    
 MIKE TAURIAINEN, representing himself, testified in support of SB
 119 because it provides a minimum encumbrance on the system with              
 the net result of encouraging settlement without litigation.  He              
 added it should improve the professional liability insurance market           
 and indirectly reduce the cost of services to residents and                   
 Number 293                                                                    
 MR. TAURIAINEN recommended the following changes to SB 119.  On               
 page 2, line 1, change the term "design professional" to "one                 
 person who is a licensed member of the defendant's profession."               
 This change would allow, for example, a surveyor to make a decision           
 regarding a surveying issue.  On page 2, line 19, add the following           
 sentence.  "The decision shall include assignment of liability and            
 any appropriate award of damages."  This would allow the panel to             
 set a definition of liability and appropriate damages.  On page 3,            
 line 14, after the word "panel," insert "and legal costs of the               
 prevailing party"....  That would require any party frivolously               
 denying responsibility to pay those costs.  On page 3, lines 22-24,           
 a loophole exists for a design professional who is practicing                 
 outside his licensed area.  He did not have any alternative                   
 language to offer.  He added on page 3, line 27, the effective date           
 should be changed to 1996.                                                    
 SENATOR SALO referred to Mr. Tauriainen's suggestion to give the              
 panel considerably more authority than what is currently included             
 in SB 119, and asked whether he foresees any downside to an                   
 increase in authority.  MR. TAURIAINEN replied that an increase in            
 authority would require more work of the panel, but could reduce              
 the workload of the court.  He noted the Hawaii statute has similar           
 Number 304                                                                    
 COLIN MAYNARD, representing the Legislative Liaison Committee of              
 the Alaska Professional Design Council, testified.  He discussed              
 several examples of frivolous lawsuits, including one in which a              
 driver, with a blood alcohol content of twice the legal limit, ran            
 several detour signs and crashed, and then sued the engineers who             
 designed the detour.  After five years, the driver settled for                
 $35,000, however the engineer's firm paid $200,000 in legal fees.             
 He stated SB 119 is based on the national model act.  He was unsure           
 about whether Mr. Tauriainen's suggestion to give the panel more              
 authority would help the court system.                                        
 Number 361                                                                    
 CHRIS CHRISTENSEN, general counsel to the Alaska Court System,                
 stated the Court System supports the concept of alternative dispute           
 resolution, however finds SB 119 to be more complex and expensive             
 than necessary to achieve the desired result.  He discussed the               
 state costs associated with the use of a conciliatory panel, which            
 could include per diem, court reporters, witness fees, record                 
 procurement, and travel to sites.  SB 119 would essentially create            
 a state-funded mini-trial which would add one additional lawyer to            
 the court process.  He added that currently, 90-95 percent of all             
 civil cases are settled out of court.                                         
 MR. CHRISTENSEN discussed other options for alternative dispute               
 resolution which fall into three methods.  The first requires the             
 plaintiff's attorney to consult with a design professional prior to           
 filing a lawsuit.  The second method requires an affidavit from a             
 design professional to be filed with the lawsuit.  The third method           
 establishes a dispute resolution screening panel similar to SB 119.           
 The first two methods would not cost the state any money, but would           
 require the plaintiff to hire an expert before filing a lawsuit.              
 MR. CHRISTENSEN continued.  SB 119 is a modification of the model             
 act prepared by the American Consulting Engineers Council and is              
 based on the Hawaii law.  Unlike SB 119, the Hawaii law is drafted            
 in a way that eliminates costs to the court system, and minimizes             
 costs to its Department of Commerce.  The design panels are                   
 appointed by the Hawaii Department of Commerce, the agency which              
 regulates those professions.  The parties are required to go to a             
 panel before filing a lawsuit.  The court system would prefer a               
 similar system because it would take the court system out of the              
 loop and perhaps eliminate cases before, as opposed to after, they            
 are filed.                                                                    
 MR. CHRISTENSEN referred to an analysis of the California law.                
 Since enactment of the law, fewer lawsuits have been filed, more              
 were dismissed, and costs have been insignificant.  The California            
 law requires a plaintiff's attorney to consult with a design                  
 professional prior to filing a lawsuit, and to file a certificate             
 with the court verifying the consultation.  The court system would            
 prefer such a method to creating a state-funded advisory panel.               
 Number 438                                                                    
 SENATOR KELLY asked if the plaintiff would pay the cost of the                
 consultation with a design professional.  MR. CHRISTENSEN replied             
 that most design professionals who serve as expert witnesses do               
 charge.  SENATOR KELLY asked if such a system would develop a host            
 of design professional witnesses that get paid to say a case has              
 merit.  MR. CHRISTENSEN responded there are professional witnesses            
 in every discipline.  SENATOR KELLY asked how that problem is                 
 avoided in California.  MR. CHRISTENSEN stated that problem was not           
 addressed in the analysis, but if an honest independent answer is             
 provided by the consultant, a realistic evaluation of the case, and           
 its merits, can be made.  He added that plaintiffs' attorneys                 
 proceed on a contingency fee and would be unlikely to take a case             
 that lacks merit.                                                             
 SENATOR KELLY stated that because of the number of significant                
 questions raised about the approach set out in SB 119, costs to the           
 state, and specific language recommendations, the bill would be               
 held over to enable staff to work with the sponsor of the measure             
 to draft a committee substitute.                                              
 There being no further business before the committee, the meeting             
 was adjourned at 2:04 p.m.                                                    

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