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Business, Labor, and Economic Development Interim Committee

MINUTES OF

BUSINESS, LABOR, AND ECONOMIC DEVELOPMENT INTERIM COMMITTEE

Wednesday, August 20, 1997 - 9:00 a.m. - Room 403 State Capitol


Members Present:
    Sen. L. Steven Poulton, Chair
    Rep. Peter C. Knudson, Chair
    Sen. David L. Buhler
    Sen. Eddie "Ed" P. Mayne     Sen. Michael G. Waddoups
    Sen. Blaze D. Wharton
    Rep. Gerry A. Adair
    Rep. Eli H. Anderson
    Rep. Patrice M. Arent
    Rep. Steven Barth
    Rep. Afton B. Bradshaw
    Rep. Don E. Bush
    Rep. Bradley T. Johnson
    Rep. Brad King
    Rep. David L. Zolman, Sr.

Members Absent:
    Rep. Katherine M. Bryson
    Rep. Glenn L. Way
    
Staff Present:
    Mary Catherine Perry,
        Research Analyst    
    Patricia Owen,                 Associate General Counsel     Beverlee LeCheminant,
        Legislative Secretary

Note:    Names of others present and copies of information distributed at the meeting are on file in the Office of Legislative Research and General Counsel.
1.     Call to Order - Rep. Knudson called the meeting to order at 9:10 a.m.

2.     Committee Business -

     MOTION: Rep. Bush moved to approve the minutes of the July 16, 1997 meeting. The motion passed unanimously. Sen. Mayne and Reps. Barth, Johnson, and Zolman were absent for the vote.

    Rep. Knudson introduced Mr. Tom Hardy as the state's new Olympic Coordinator and Ms. Loraine T. Pace as Rep. Fred Hunsaker's replacement in the House of Representatives.

3.    Whistleblower Statutes - Rep. Bradshaw gave an overview of possible legislative options on statutory protection for whistleblowers. She indicated that she does not feel the committee has had enough input on this issue and asked what action the committee would like to take.

    Sen. Buhler said he agrees that a whistleblower law covering private employees is needed, but he feels that the issue needs to be studied further. He suggested that a bill be sponsored by a committee member forming a task force to study employee protection related to whistleblowing during the 1998 interim for both the public and private sectors.

    Rep. Arent said she agrees that this issue needs to be studied further, but is concerned that it might not rise to a level to receive funding for a task force.
    Rep. Bradshaw indicated that she has discussed this issue with leadership and their suggestion was to create a task force.

    Mr. John Preston Creer, Attorney at Law, stated that the state's whistleblower law for public employees is a proven instrument and there is no reason why the private citizens should not be as protected as public employees.

    Sen. Waddoups said he does not feel that this is an issue that needs a lot of study at this point and he is not convinced that there is an additional need. He indicated that he does not think this is an area that would be appropriate for Utah to be a leader in setting reform.

    Sen. Buhler suggested three alternatives for the committee to take regarding this issue: 1) do nothing; 2) to make a motion that a bill be drafted creating a task force to study this issue during the 1998 interim; or 3) to have a member of the committee file a bill on this issue.

     MOTION: Sen. Buhler moved that a bill be drafted forming a task force to study employee protection related to whistleblowing in the public and private sectors during the 1998 interim. The motion passed. Sens. Mayne and Wharton voted in opposition to the motion.

4. Statutes Governing Business Entities - Ms. Mary Catherine Perry, Research Analyst, reviewed current and proposed statutory regulations for business entities and distributed copies of her comments to committee members.

     a. Limited Liability Companies - Rep. John L. Valentine gave the committee some background information on the Limited Liability Company Act.
    
    Mr. Bruce Olson, Ray Quinney & Nebeker, indicated that a committee has been formed under the Business Section of the Utah State Bar and has met several times to consider whether Utah should adopt the Uniform Act and, if so, which provisions should be adopted or amended. The committee is considering suggesting to the Legislature that Utah adopt this law for the following reasons: 1) it organizes the provisions governing limited liability companies (LLC) in a fashion that makes it much easier to deal with; 2) it has a number of default rules so that limited liability companies that do not have operating agreements will have certain provisions that must be followed; and 3) it indicates what provisions of an operating agreement control the provisions of the statute. He also stated that the statute clarifies that there can be one LLC member. The Uniform Act also gives commentary on each of the provisions which provide a legislative history that is helpful to members, managers, and judges when cases come to controversy. One of the issues the committee will be looking at is what kind of a grandfather rule would the state have and would the act be effective immediately or after a year or more to give the state time to review and analyze its provisions prior to making it effective.

     b. Partnerships - Sen. Lyle Hillyard told the committee that the Uniform Partnership Law has been in existence since 1914 and is becoming very antiquated, not only in how it is written, but in how it is being used. He said that the LLC is taking the place of the Uniform Partnership Law and that will be the main business thrust. However, the Uniform Partnership Law remains important for those who choose to operate as a partnership and because it would likely govern business relationships when there has been no formal selection of a business structure. Sen. Hillyard indicated that the National Conference of Commissioners on Uniform State Laws would like to pass the Uniform Partnership Law as it is, but in the context of more current business forms like LLCs.
    
    Mr. Chris Anderson, Holland & Hart, gave an overview of the Uniform Partnership Act and indicated that they have circulated copies of this statute to the business community, different organizations, and the Utah State Bar and have received positive feedback from these organizations and entities. They have also met with the Department of Commerce Division of Corporations and Commercial Code to make sure the division is comfortable with what they are doing.

    Sen. Hillyard told the committee that it is his intention to file a bill that will be tied in with the Limited Liability Company bill.

     c. Nonprofit Organizations - Sen. Hillyard stated that a number of lawyers involved in the area of nonprofit organizations have indicated to him that the nonprofit law is outdated, so the commissioners are in the process of updating it.

    Mr. Bruce Olson, Ray Quinney & Nebeker, stated that they have a list of attorneys who have expressed an interest in forming a committee to review and clarify the nonprofit statute. Some of the changes the committee would review are: 1) standards of care and conduct among the trustees and members of nonprofit corporations; 2) procedures for amending and restating articles of incorporation; 3) statutes that govern churches; and 4) conflicts between the Business Corporation Act and the nonprofit statute.

5. Beer Industry Distribution Act - Ms. Patricia Owen, Associate General Counsel, gave an overview of two issues: 1) the beer wholesaler/brewer relationship; and 2) legislative developments. She distributed copies of her comments to the committee members.

    Sen. Leonard Blackham stated that 29 states mandate exclusive territories, and of these 29 states, only Utah does not have a franchise protection law for the beer industry. He indicated that the purpose of the Utah Beer Industry Distribution Act is to strengthen the three-tier system (supplier/brewer, wholesaler/distributor, retailer) in Utah by establishing regulations that promote good faith and fair dealing in the business relationship between suppliers and wholesalers of beer. He distributed copies of the bill to the committee and gave a brief summary of its intent.

    Sen. Poulton expressed concern about the impact this would have in the private sector and the free market place when the Legislature interferes this way. Sen. Blackham explained that the

decision of the competition, the right to be a wholesaler, and the right to distribute beer is separate from this bill and is a decision that was made in the state several years ago. The distributorship of beer is a tier system where brewers cannot market directly in the state and it limits competition. This bill does not limit competition, but restricts the brewers' ability to change wholesalers without complying with certain standards or procedures.

    Mr. M. Byron Fisher, attorney for Anheuser-Bush, discussed the interaction between the brewers and wholesalers during the interim and indicated that the bill presented at the meeting has not been reviewed by the brewers and is not yet ready for introduction. It is their request that they be permitted some additional time to meet again with the wholesalers before this committee takes action on the bill.

    Mr. Robert Hill, attorney for beer wholesalers, stated that this bill was originally introduced in January of the 1997 legislative session. About half of the current bill consists of changes that were requested by the brewers. The remaining points of the bill are not new, but are the same points on which the wholesalers and brewers have continued to disagree. The wholesalers support this version of the bill. Many of the changes the brewers have suggested have been adopted in the bill, but the wholesalers cannot accept some of the requested changes. The purpose of the bill is not to level the playing field, but to get the wholesalers on to the same playing field. The brewers still have all of the economic power in this relationship. The beer industry in Utah is not a free market business, but a highly regulated business and this bill gives wholesalers some protection because they lack the flexibility that they would have if the industry was a freely competitive business.

    Sen. Blackham indicated that there are three issues that are unresolved with the brewers: 1) retroactive application; 2) the notice of termination provision; and 3) arbitration.

     MOTION: Rep. Bradshaw moved to approve the Utah Beer Industry Distribution Act bill as a committee bill. The motion passed unanimously. Sen. Mayne was absent for the vote.

     MOTION: Rep. Zolman moved to adjourn the meeting at 11:20 a.m. The motion passed unanimously. Sen. Mayne was absent for the vote.    

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