Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred H.B. No. 2633 entitled:

beg leave to report as follows:

The purpose of this bill is to clarify that the standards for granting a motion to dismiss, motion for summary judgment, or motion for judgment as a matter of law, including the burden of proof and the burden of providing evidence, shall be the same for actions under chapter 480, Hawaii Revised Statutes, as for other civil actions.

Three private attorneys testified in support of this bill. The Department of the Attorney General (AG) opposed the bill.

Your Committees heard testimony about the difficulties faced by consumers in holding businesses accountable under the antitrust law. Specifically, starting with the seminal case of Matsushita Electrical Industrial Co. v. Zenith Radio, 475 U.S. 574 (1986) (Matsushita), federal courts have required plaintiffs to respond to motions for summary judgment by producing evidence that tends to exclude the possibility that the alleged conspirators acted independently.

This unusual requirement has allowed judges to prevent cases in which there is evidence of antitrust activity from ever being heard by a jury. In effect, the alleged conspirators need only say: "We all raised our prices at the same time, because we are all equally motivated by the desire to maximize our income." Then the plaintiff must exclude this possibility by producing a "smoking gun." For this reason, antitrust cases may effectively only be pursued when one of the conspirators turns state's evidence. This deprives plaintiffs of their right to their day in court.

While Hawaii courts have not yet addressed this issue under the State's antitrust law in chapter 480, Hawaii Revised Statutes (HRS), section 480-3, HRS, directs Hawaii courts to follow federal precedent. The benefit is that this allows Hawaii's courts and attorneys to look to the federal law when Hawaii's case law is silent. However, there are some federal cases, like Matsushita, that do not deserve to be followed.

Your Committee also heard concerns from the AG that the title of the bill might contain two subjects in violation of the State Constitution.

The concern about the title of the bill, which references the title of chapter 480, HRS, is technical, but critical. However, the AG's testimony represents a radical departure from historical interpretation. It is at odds with three formal opinions from two prior AGs: AG Opinion 57-23a of March 19, 1957, AG Opinion 72-16 of June 19, 1972, and AG Opinion 74-8 of March 15, 1974. It is also at odds with substantial case law.

The testimony is so inconsistent with precedent, that your Committees assumes it is simply an error. Such errors are understandable, given the timeframes for responding to hearing notices. However, because of the critical nature of such testimony, clarification by the AG has been requested.

The AG also provided persuasive testimony that the amendment proposed by the bill is unclear. To correct this, instead of creating a new section, your Committees have amended section 480-3, HRS. Hopefully, it is now clear that this amendment merely ensures that Hawaii will not follow the Matsushita line of cases and that plaintiffs will not be denied their right to a jury's decision.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2633, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2633, H.D. 1, and be placed on the calendar for Third Reading.