BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Martha M. Escutia, Chair
2003-2004 Regular Session
AB 862 A
Assembly Member Firebaugh B
As Amended July 2, 2003
Hearing Date: July 8, 2003 8
Government Code 6
GMO:cjt 2
SUBJECT
State Agencies: Hiring of Outside Counsel
DESCRIPTION
This bill would require specified state agencies and the
Attorney General to provide notices, as specified, to the
designated representative of State Employees Bargaining
Unit 2, regarding any contract for outside counsel and the
consent of the Attorney General with respect to the
contract. The bill would provide that certain matters
would be exempt from the notice requirement, and that
disclosures made in the notice are deemed privileged
communications.
BACKGROUND
AB 862 is a new and improved version of the author's bill
last year, AB 2850, which was vetoed by the Governor. The
Governor's veto message states:
I had hoped to be able to sign this bill.
However, it is necessary that there be adequate
protection so that providing notice of legal
services contracts to State Employees Bargaining
Unit 2 does not result in a waiver of the
attorney-client, work product or deliberative
process privileges. Unfortunately, AB 2850 does
not address this satisfactorily.
(more)
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The Governor then directed the Department of Personnel
Administration to work with State Employees Bargaining
Unit 2 to meet and confer in order to structure a
Memorandum of Understanding that addresses the
legitimate concerns of both the bargaining unit and
the state.
This bill cures the deficiencies identified by the
Governor's veto, and further memorializes agreements
reached between the California Attorneys,
Administrative Law Judges, Hearing Officers and Deputy
Labor Commissioners in State Employment (CASE),
sponsor of this bill, the Attorney General, and the
administration.
CHANGES TO EXISTING LAW
Existing law establishes the state civil service system
that, with limited exceptions, includes every officer and
employee of the state. The civil service system requires
that every appointment and promotion be based on merit
ascertained by a competitive examination. [Article 7,
California Constitution.]
Existing law establishes standards for the use of personal
service contracts outside the civil service system, if
contracting would achieve cost savings, as defined, or if
certain conditions are met. [Gov. Code Sec. 19130.]
Existing law requires, with certain exceptions, the consent
of the Attorney General prior to the employment of outside
counsel for representation of any state agency or employee
in a judicial proceeding. [Gov. Code. Sec. 11140.]
Existing law permits the Attorney General to employ outside
counsel in cases involving the escheat of property,
whenever a special prosecutor is necessary to substitute
for a district attorney disqualified to prosecute, or
whenever the employment of outside counsel for state
agencies is justified. [Gov. Code. Sec. 12520.]
This bill would require that state agencies and the
Attorney General provide specified notices to the
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designated representative of State Employees Bargaining
Unit 2 regarding contracts with outside counsel and also
provide notice of the Attorney General's consent to those
contracts.
This bill would further:
detail the contents of the notice;
define the agencies that would be required to
comply with the notice requirements;
provide exceptions to the class of contracts for
which the notification would be required;
exempt certain information from disclosure; and
deem any disclosure made privileged communication.
COMMENT
1. Need for the bill
According to the author, the issue of state agencies
employing outside counsel for representation in various
matters is not currently negotiated in collective
bargaining. The increased use of outside counsel in
recent years has become a great concern to the
representative of State Employees Bargaining Unit 2 (the
representative is CASE), because the cost of contracting
with outside counsel results in substantially higher
legal costs to the state.
Thus, according to the author, AB 862 is necessary to
"enhance the State's compliance with constitutional and
statutory requirements governing the civil service
system, while permitting the State to contract for legal
services?The bill would provide substantial cost savings
to the State by ensuring that the legal work is performed
by the state's existing work force."
2. Outside Counsel: legal services contracts by state
agencies
Most state agencies have "in-house" counsel (i.e., a
legal division composed of lawyers, paralegals, and in
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some cases hearing officers who are attorneys) that
provide the agency with day-to-day legal services.
Whenever an agency becomes a party to litigation,
however, the agency is required to be represented by the
Attorney General, except for those agencies that have
statutory authority to seek outside counsel. Those that
do not have this statutory authority have to seek the
consent of the Attorney General before they are able to
sign contracts with outside counsel for legal services.
The current memorandum of understanding between
representatives of the state's attorneys, hearing
officers, and commissioners (CASE) and the State
Personnel Board (which governs the civil service system)
requires a monthly report that summarizes the requests by
state agencies to contract out for legal services for the
State of California. This bill would require a more
detailed and frequent notice to the designated
representative of State Employees Bargaining Unit 2 (SBU
2), which at present is CASE, to enable CASE to monitor
the employment of outside counsel by state agencies.
a. Notice whenever Attorney General consent is
required: notice to SBU 2 within five business days
of request for consent
This bill would require that whenever an agency
required to do so requests the consent of the Attorney
General to employ outside counsel, the state agency
shall provide the representative of SBU 2 with written
notification of the request within five business days.
The bill does not specify whether the "five business
days" begins to run from the date the request is
mailed or personally delivered to the Attorney General
or the date on the request itself.
Presumably the reason for the notice requirement is to
give CASE the opportunity to oppose the granting of
the request, or to evaluate first before such
opposition whether or not the request would violate
the collective bargaining agreement between CASE and
the state or whether the employment of outside counsel
is necessary. Thus, time is of the essence in regard
to this notice, and detail regarding when the five
business days begin to run is important.
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SHOULD THIS BE SPECIFIED?
b. Notice when Attorney General consent is not
necessary: prior to execution of the contract by any
party
AB 862 would require all state agencies (except,
obviously, the Attorney General) that do not require
the Attorney General's consent in order to employ
outside counsel to provide the detailed notice to CASE
prior to execution of a contract by any party.
AB 862's language could possibly be improved to get at
its stated goal. For instance, if a prepared contract
has been signed by the outside counsel, but not yet
approved for signing by the state agency, there is no
reason for this notice to be given to CASE. If
anything, the notice to CASE should be given after the
decision to enter a contract has been made (after the
"deliberative process" has gone its course), and
within a specified period prior to its signing by the
state agency. In other words, the language of the
provision should state, for example, that the detailed
notice to CASE would be given at least five business
days (or whatever period is appropriate) prior to
signing of a contract by the state agency. In cases
of emergency, where for example a state agency needs
to file a complaint for an injunction immediately, the
notice that outside counsel has been employed may be
given to CASE within 5 business days after outside
counsel was hired.
SHOULD THIS NOTICE REQUIREMENT BE MORE SPECIFIC?
Following is the list of state agencies not required
to obtain the consent of the Attorney General in order
to employ outside counsel:
Regents of the University of California
Board of Trustees of the California State
University (who must pay costs of outside counsel
within their existing resources)
Legal Division of the Department of
Transportation
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Division of Labor Standards Enforcement of the
Department of
Industrial Relations
Workers' Compensation Appeals Board
Public Utilities Commission
State Compensation Insurance Fund
Legislative Counsel Bureau
Inheritance Tax Department
State Lands Commission
Secretary of State
Alcoholic Beverage Control Board (except when
the board affirms a decision of the Department of
Alcoholic Beverage Control)
State Department of Education
Treasurer, with respect to bonds
Any other state agency authorized to employ
outside counsel after enactment of Chapter 213,
Statutes of 1933
c. Notice by Attorney General
Under existing law, the Attorney General is authorized
to employ outside or special counsel whenever
necessary to recover escheated property, or to
prosecute cases when a district attorney is
disqualified from prosecuting cases in a county, or
when requested by a state agency where such outside
counsel is justified under conditions specified in
Section 19130.
This bill would also require the Attorney General to
provide notice to CASE whenever it grants the consent
for a state agency to employ outside counsel. The
notice is to be given within 10 days of the
determination (i.e., the granting of the request).
d. Contents of the required notice
AB 862 details the notice that would be sent to the
SBU 2 representative in all cases. The notice under
proposed Section 11045(d) would contain:
(1) a copy of the complaint or other pleadings that
gave rise to the litigation or matter for which the
contract is being sought, or other identifying
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information;
(2) the justification for the contract under Section
19130(b) of the Government Code;
Section 19130(b) enumerates various conditions under
which a personal legal services contract is
permitted. Those conditions include exempted
executive appointments, where the contract is for a
new state function and the Legislature specifically
authorized or mandated the use of independent
contractors, emergency appointments, and where "the
services contracted are not available within civil
service, cannot be performed satisfactorily by civil
service employees, or are of such highly specialized
and technical nature that the necessary expert
knowledge, experience, and ability are not available
through the civil service system."
Section 19130(b) also justifies the use of outside
counsel by state agencies "because a conflict of
interest on the part of the Attorney General's
office prevents it from representing the agency
without compromising its position." These contracts
require the consent of the Attorney General,
however.
(3) the nature of the legal services to be performed;
(4) the estimated hourly wage to be paid under the
contract;
(5) the estimated length of the contract; and
(6) the identity of the person or entity that is
entering into the contract with the state.
3. Exemptions and limitations
a. Exemptions from the notice requirement
This bill would exempt the following situations from
the notice requirements:
Contracts for expert witnesses.
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Consultations in connection with a confidential
investigation or to any confidential component of a
pending or active civil action, but only as long as
necessary to protect the confidentiality of the
investigation or the confidential component of the
pending or active civil action.
These exemptions are consistent with exemptions
provided for public contracts by the California Public
Records Act.
b. Limitations on disclosure of information
AB 862 would protect information provided to SBU 2
through this notice requirement by deeming privileged
any disclosure made under Section 912(c) of the
Evidence Code (a disclosure that is itself privileged
is not a waiver of the privilege).
Additionally, the bill expressly provides that
disclosures made in the notice would not constitute a
waiver of any privilege or exemption provided by law,
including the attorney-client privilege under the
Evidence Code and the attorney work product protection
under the Code of Civil Procedure.
These limitations address the Governor's concerns when
he vetoed AB 2850 last year.
c. Exclusions from "state agency" definition
Comment 2b lists the state entities that are not
required to obtain the consent of the Attorney General
when employing outside counsel.
This bill would require all state agencies, including
those not required to obtain the Attorney General's
consent and the Attorney General as specified, that
propose to employ outside counsel to provide the
specified notice to CASE, with the exception of the
following:
Regents of the University of California.
Trustees of the California State University.
The Legislature.
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The Courts or any agency in the judicial branch
of government.
Support: None Known
Opposition: None Known
HISTORY
Source: California Attorneys, Administrative Law Judges,
Hearing Officers and Deputy Labor Commissioners in
State Employment (CASE)
Related Pending Legislation: None Known
Prior Legislation: AB 2850 (Firebaugh, 2002). See
Background.
Prior Vote: Asm. P.E., R. & S.S. (Ayes 8, Noes 0); Asm.
Appr. (Ayes 24, Noes 0, Consent); Asm. Flr. (Ayes
73, Noes 0, Consent)
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