BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1140
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          Date of Hearing:   June 17, 2008

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Dave Jones, Chair
                   SB 1140 (Steinberg) - As Amended:  June 2, 2008

           SENATE VOTE  :   35-3
           
           SUBJECT:  ELDER AND DEPENDENT ADULTS:  FINANCIAL ABUSE

           KEY ISSUE  :  SHOULD THE Elder Abuse and Dependent Adult Civil  
          Protection Act BE REVISED AND EXPANDED IN ORDER TO BETTER  
          PROTECT FRAIL AND VULNERABLE ADULTS FROM FINANCIAL ABUSE?

                                      SYNOPSIS
          
          The Elder Abuse and Dependent Adult Civil Protection Act  
          (EADACPA) was enacted to protect elder and dependent adults from  
          abuse and exploitation.  The bill, sponsored jointly by the  
          American Association of Retired Persons, California Advocates  
          for Nursing Home Reform and the California Alliance for Retired  
          Americans, expands EADACPA to better protect vulnerable adults  
          by (1) adding the taking or appropriation of property by undue  
          influence to the definition of financial abuse; (2) creating a  
          new cause of action for financial abuse against a person who  
          takes property from an elder or dependent adult who lacks  
          capacity and then refuses to return the property after a demand  
          for return of the property is made; (3) and establishing that  
          the statute of limitations for the filing of an EADACPA  
          financial abuse action is four years from the date the plaintiff  
          discovers, or should have discovered, the facts constituting the  
          abuse.

          The author states that incapacitated and unduly influenced elder  
          and dependent adults are devastated by the loss of property  
          taken from them and this bill seeks to prevent or minimize that  
          abuse by authorizing elder or dependent adults to recover  
          attorney's fees where their property is taken through undue  
          influence or where a person delays returning property taken from  
          an incapacitated elder.  Supporters add that this bill is  
          necessary to prevent abuse by "those who would exploit the most  
          vulnerable of our population."  There is no known opposition.

           SUMMARY  :  Expands the protections of the Elder Abuse and  
          Dependent Adult Civil Protection Act.  Specifically,  this bill  :








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          1)Provides that "financial abuse" occurs when a person takes,  
            secretes, appropriates, obtains, or retains real or personal  
            property of an elder or dependent adult by undue influence, as  
            defined.  Also defines assisting another in such conduct as  
            financial abuse.  

          2)Deems a person or entity to have taken, secreted,  
            appropriated, obtained or retained property of an elder or  
            dependent adult for a wrongful use if the person or entity  
            knew or should have known that this conduct is likely to be  
            harmful to the elder or dependent adult.

          3)Provides that a person or entity takes, secretes,  
            appropriates, obtains or retains real or personal property  
            when an elder or dependent adult is deprived of any property  
            right, including by means of an agreement, donative transfer,  
            or testamentary bequest, regardless of whether the property is  
            held directly or by a representative of the elder or dependent  
            adult.

          4)Clarifies that compensatory damages are included in the  
            remedies available for financial abuse under EADACPA.

          5)Clarifies that EADACPA permits recovery from the employer of a  
            person who takes the elder or dependent adult's property by  
            means of his employment and that the standards in Civil Code  
            Sec. 3294, which limits the employer's liability, apply to the  
            imposition of punitive damages, but not to compensatory  
            damages or attorney's fees on such employer.

          6)Requires a person who takes, secretes, appropriates, obtains  
            or retains real or personal property of an elder or dependent  
            adult who lacks capacity as defined, or who is of unsound  
            mind, but not entirely without understanding, as provided in  
            Civil Code Section 39, to return the property upon demand.   
            Provides a civil action to an elder or dependent adult who  
            lacks capacity or is of unsound mind to recover the property  
            that was not returned after a demand, with all the remedies  
            available under EADACPA, including attorney's fees.

          7)Extends the statute of limitations for actions for damages  
            pursuant to the EADACPA financial abuse provisions to four  
            years after the plaintiff discovers, or through the exercise  
            of reasonable diligence should have discovered, the facts  








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            constituting the financial abuse.
                                              
           EXISTING LAW  :

          1)Establishes EADACPA to protect elderly and dependent adults  
            from abuse.  (Welfare & Institutions Code Section 15600 et  
            seq.  Unless stated otherwise, all further statutory  
            references are to that code.)

          2)Provides that "financial abuse" occurs when a person takes,  
            secretes, appropriates, or retains real or personal property  
            of an elder or dependent adult for a wrongful use or with  
            intent to defraud, or both, or when a person assists another  
            in that conduct.  (Sections 15610.30(a)(1) and (a)(2).)

          3)Deems a person or entity to have taken, secreted, appropriated  
            or retained real or personal property of an elder or dependent  
            adult for a wrongful use if the conduct was done in bad faith.  
             (Section 15610.30.)

          4)Permits an elder or dependent adult to bring a financial abuse  
            civil action when real or personal property is taken or  
            appropriated from the elder or dependent adult for a wrongful  
            use or with intent to defraud, or both.  (Section 15657.5.)

          5)Provides that actions brought under EADACPA shall be commenced  
            according to the applicable statutes of limitations as  
            provided in other statutes.  Provides, in the case of  
            financial abuse, that the applicable statute of limitations is  
            three years after plaintiff discovers the facts constituting  
            the financial abuse.  (Code of Civil Procedure Section 338.)

          6)Provides that a contract with a person of unsound mind, but  
            not entirely without understanding, made before the incapacity  
            of the person has been judicially determined, is subject to  
            rescission.  Provides a rebuttable presumption that a person  
            is of unsound mind when he or she is substantially unable to  
            manage his or her own financial resources or resist fraud or  
            undue influence.  (Civil Code Section 39.)  

           FISCAL EFFECT  :  As currently in print this bill is keyed fiscal.

           COMMENTS  :  EADACPA was enacted to protect elder and dependent  
          adults from abuse and exploitation.  EADACPA recognizes that  
          elders and dependent adults may have disabilities and cognitive  








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          impairments, such as Alzheimer's disease and other dementia  
          disorders, which often leave them incapable of seeking help and  
          protection from others; and that elders and dependent adults  
          suffer physical impairments and poor health, conditions that  
          place them in a dependent and vulnerable position.  Further,  
          legislative findings codified in EADACPA state that cases of  
          elder and dependent adult abuse are seldom prosecuted as  
          criminal matters, and few civil cases are brought in connection  
          with this abuse due to problems of proof, court delays, and the  
          lack of incentives to prosecute these suits.

          Under EADACPA, an elder or dependent adult whose property is  
          wrongfully taken by another may bring a civil action for  
          financial abuse to recover the loss of the property and the  
          expense of hiring an attorney to bring the action.  This remedy  
          is available to the elder or dependent adult when a person takes  
          their property for a wrongful use or with intent to defraud or  
          both. Under EADACPA, wrongful use is defined as retaining  
          possession of property where the person taking it knew, or  
          should have known, that the elder or dependent adult had the  
          right to have the property made readily available to him or her  
          or representative.  

          The author writes that this bill seeks to strengthen EADACPA and  
          better protect elder and dependent adults:

               Each year in California, incapacitated and unduly  
               influenced elder and dependent adults are devastated by the  
               loss of property taken from them.  Many of these adults  
               have limited resources and the inability to earn income to  
               make up the loss.  Moreover, the psychological impact of  
               exploitation significantly increases an elder's rate of  
               mortality.  The ability to quickly recover their property  
               may be critical in restoring an elder or dependent adult's  
               self-esteem and independence. 

               In many situations involving incapacitated and unduly  
               influenced elder and dependent adults, the sole remedy is  
               rescission.  Unfortunately, rescission is a grossly  
               inadequate remedy.  While the ultimate goal of rescission  
               is the return of the elder or dependent adult's property,  
               the procedure requires the plaintiff to bear their own  
               attorney's fees.  In addition, because rescission only  
               requires the return of the property, defendants are  
               encouraged to delay resolution so as to promote a  








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               compromise settlement. 

               It is particularly true for elders who may be late in life  
               that "justice delayed is justice denied."  SB 1140  
               addresses these problems by authorizing elder or dependent  
               adults to recover attorney's fees where their property is  
               taken through undue influence or where a person delays  
               returning property taken from an incapacitated elder.

           This bill creates a new basis for financial abuse of elder and  
          dependent adults -- undue influence  .  Under existing law,  
          financial abuse of an elder or dependent adult consists of  
          taking their property for a wrongful use or with intent to  
          defraud, or both.  Wrongful use is defined as retaining  
          possession of property where the person taking it knows, or  
          should have known, that the elder or dependent adult has the  
          right to have the property in his or her possession or to have  
          the property "made readily available."  

          This bill adds undue influence as another basis for financial  
          abuse of an elder or dependent adult.  Undue influence, as  
          defined by Civil Code Section 1575, consists:  (1) in the use,  
          by one in whom a confidence is reposed by another, or who holds  
          a real or apparent authority over him, of such confidence or  
          authority for the purpose of obtaining an unfair advantage over  
          him; (2) in taking an unfair advantage of another's weakness of  
          mind; or (3) in taking a grossly oppressive and unfair advantage  
          of another's necessities or distress.  Proponents argue that  
          this expansion is necessary because elders are often exploited  
          through undue influence and under circumstances where the  
          current elements necessary for financial abuse are lacking, thus  
          making an important remedy of EADACPA - attorney's fees and  
          costs to the plaintiff - unavailable today.  
                       
           This bill provides a new remedy when an elder or dependent adult  
          lacks capacity -- return the property to avoid attorney's fees  .   
          Under the bill, if an elder or dependent adult from whom  
          property has been taken lacked capacity, he or she or a  
          representative is able to demand a return of the property and,  
          if the property is not returned, may file an action for all  
          remedies available under EADACPA, which includes return of the  
          property and attorney's fees and costs. 

          A person who enters a contract as a result of undue influence or  
          who lacks capacity does not consent freely to the contract, thus  








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          the transaction is voidable by an action for rescission.   
          However, rescission, according to proponents, is an inadequate  
          remedy for elders because not only must the elder bear the  
          attorney's fees in pursuing the rescission action (and these  
          fees are not recoverable by the elder in an action for  
          rescission), but also the person who took the property is  
          encouraged to delay resolution so as to promote a compromise  
          settlement.  Rescission is particularly an inadequate remedy for  
          elders who may not be able to prosecute their cases to the end.   
          Further, abusers may be found not culpable because they can  
          claim they did not know that the elder or dependent adult lacked  
          capacity to consent to the taking of the property.

          This bill addresses these problems by authorizing elders or  
          dependent adults to recover attorney's fees and costs where  
          their property is taken through undue influence or where the  
          person taking the property delays the return of the property.   
          In the case of the elder or dependent adult who lacks capacity,  
          this bill requires that a demand for the return of the property  
          first be made.  Thus, someone who did not know that the elder or  
          dependent adult lacked capacity would be given the opportunity  
          to return the item taken.  Practitioners in elder abuse contend  
          this would be of great assistance to them in obtaining a just  
          and speedy resolution of the problem - the elder would get the  
          property back quickly, and the person who wrongly took the  
          property would not be exposed to attorney's fees and costs  
          available in an EADACPA action. 
                   
          This bill sets the statute of limitations for EADACPA financial  
          abuse actions at four years from discovery  .  Since EADACPA does  
          not specify a statute of limitations within the act, EADACPA  
          actions must be filed according to rules set forth in the Code  
          of Civil Procedure, which sets the statute of limitations for an  
          action for financial abuse to three years of discovery of the  
          facts constituting the abuse.  (Code of Civil Procedure Section  
          338.)  
           
          The bill creates a specific statute of limitations for EADACPA  
          financial abuse cases of four years after the plaintiff  
          discovers, or, through the exercise of reasonable diligence,  
          should have discovered, the facts constituting the financial  
          abuse.  This four-year statute of limitations also applies to  
          actions commenced when a person or entity refuses to return  
          property taken from an elder or dependent adult who lacks  
          capacity, as defined.








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          Proponents contend that this four-year statute of limitations is  
          needed because many elders and dependent adults who become  
          victims of financial abuse take longer to realize what has  
          happened to them, or to reach out for help in a timely manner.  

           This bill redefines taking or appropriating property  .  Under  
          current law, a person is deemed to have taken or appropriated an  
          elder or dependent adult's property in bad faith if the person  
          knew or should have known that the elder or dependent adult had  
          the right to have the property transferred or made available to  
          the elder or dependent adult or their representatives.  In this  
          context, "should have known" means it is obvious to a reasonable  
          person that the elder or dependent adult had a right to the  
          property transferred.  (Section 15610.30(b).)  
           
          The bill deletes bad faith and instead provides that a person  
          takes, secrets, appropriates, obtains, or retains real or  
          personal property when an elder or dependent adult is deprived  
          of any property right, including by means of an agreement,  
          donative transfer, or testamentary bequest, and regardless of  
          whether the property is held directly by the elder or dependent  
          adult or by an attorney-in-fact, conservator, trustee, or other  
          representative of the elder or dependent adult.  This change  
          clarifies the conduct constituting financial abuse and the  
          instrument of transfer that is subject to scrutiny.

           This bill replaces the current definition of "taking for a  
          wrongful use" with a new standard  .  Current law provides that a  
          person is deemed to have taken or appropriated property of an  
          elder or dependent adult for a wrongful use if the person took  
          or appropriated the property in bad faith.  A person is deemed  
          to have taken the property in bad faith if the person knew or  
          should have known that the elder had a right to transfer or make  
          the property available at the time of the taking.  

          Instead, the bill provides that a person or entity is deemed to  
          have taken or appropriated an elder's property for wrongful use  
          if, among other things, the person knew or should have known  
          that taking or appropriating the property is likely to be  
          harmful to the elder or dependent adult.  This definition shifts  
          the proof required from the defendant's knowledge or presumed  
          knowledge of the elder's or dependent adult's right to the  
          property taken, to the defendant's knowledge or presumed  
          knowledge of the effect of the taking on the elder or dependent  








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          adult, to which a reasonable person standard is applied.  This  
          shift of focus should encourage more advocates to assist elders  
          and dependent adults in recovering their property.

           ARGUMENTS IN SUPPORT  :  The American Association of Retired  
          Persons (AARP), a co-sponsor of SB 1140, lauds the bill for  
          providing "a very strong and meaningful protection for our most  
          vulnerable adults." 
           
           The California Alliance for Retired Americans, another  
          co-sponsor of the bill, writes that elder "financial abuse has  
          reached epidemic proportions in our country and state and still  
          continues unabated.  Few such activities are more despicable  
          than talking advantage of those who are incapacitated or unduly  
          influenced.  And while existing law enables an elder whose  
          property is wrongfully taken by another to bring a civil action  
          to recover the loss and the cost of hiring an attorney, it  
          doesn't give the same right to an incapacitated senior or one  
          who has been unduly influenced.  This unfortunate limitation in  
          the law is what SB 1140 addresses by enabling an elder to  
          recover property and the cost of an attorney when the property  
          was taken by undue influence or where the elder lacks full  
          mental capacity."

          Writes California Advocates for Nursing Home Reform, also a  
          co-sponsor: "When the Legislature enacted [EADACPA], it  
          recognized that elders and dependent adults are particularly  
          vulnerable to exploitation, including financial abuse.  Elder  
          Financial Abuse is now a national epidemic.  SB 1140 is an  
          important step forward in this fight against those who would  
          exploit the most vulnerable of our population."  

          These statements are echoed by other proponents, notably the  
          Alzheimer's Association that state: "Current law, which only  
          provides for rescission, is not even an option for those who are  
          incapacitated.  Clearly there is no deterrent to individuals who  
          are not well-intentioned and [who] take a person's property  
          knowing they have limited cognitive functioning.  [SB 1140] will  
          correct a serious weakness in current law intended to protect  
          persons with cognitive impairment, such as Alzheimer's disease  
          and other dementia disorders.  Given the expected doubling of  
          Californians living with this disease by 2030 - from the current  
          500,000 to one million - exploitation will only become a bigger  
          problem."









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           REGISTERED SUPPORT / OPPOSITION  :

           Support  

          American Association of Retired Persons (sponsor)
          California Advocates for Nursing Home Reform (sponsor)
          California Alliance for Retired Americans (sponsor)
          Alzheimer's Association 
          American Federation of State, County and Municipal Employees  
          (AFSCME), AFL-CIO
          California Association of Area Agencies on Aging
          California Commission on the Status of Women
          California Mental Health Directors Association
          California Senior Legislature
          Congress of California Seniors
          Consumer Attorneys of California
          County Welfare Directors Association of California
          Gray Panthers of California
          San Francisco Consortium for Elder Abuse Prevention
          San Joaquin County Commission on Aging

           Opposition 
           
          None on file
           

          Analysis Prepared by  :    Leora Gershenzon / JUD. / (916)  
          319-2334