BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                           Senator Ellen M. Corbett, Chair
                              2009-2010 Regular Session


          AB 2365 (Lieu)
          As Amended April 8, 2010
          Hearing Date: June 29, 2010
          Fiscal: No
          Urgency: No
          BCP:jd
                    

                                        SUBJECT
                                           
                          Veterans Affairs: Administration

                                      DESCRIPTION  

          This bill would permit a service member to recover actual  
          damages, reasonable attorney's fees, and costs from any person  
          who violates specified rights and protections of the Military  
          and Veterans Code.

          This bill would also grant service members an expedited review  
          of a specified petition for relief, and provide that a court  
          shall not charge a filing fee or court costs for specified  
          actions.

                                      BACKGROUND  

          California law provides various financial and consumer-related  
          protections for service members.  Those provisions generally  
          seek to provide protections against various potential adverse  
          effects of a deployment, and include provisions enacted by AB  
          1433 (Horton, Chapter 60, Statutes of 2002), which provided  
          financial protection with regards to court proceedings, credit  
          contract obligations, rental agreements, taxes, health  
          insurance, and eviction protection, and AB 1666 (Frommer,  
          Chapter 345, Statutes of 2005), which provided additional  
          protection for members called into active duty with regards to  
          fees for recording a power of attorney, termination of mobile  
          telephone contracts, academic tuition, state bar fees, vehicle  
          leases, and residential utility service.

          In order to assist service members in bringing actions to  
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          protect their rights, the California Military Department,  
          sponsor, has coordinated with State Military Reserve Judge  
          Advocate General (JAG) Officers to assist service members who  
          have incurred financial hardship because of their deployments.   
          This bill seeks to help additional service members enforce their  
          rights and protections by permitting the recovery of reasonable  
          attorney's fees and costs, removing filing fees and court costs  
          for specified actions, and permitting an expedited review for  
          certain cases.
          This bill was approved by the Senate Veterans Affairs Committee  
          on June 22, 2010.

                                CHANGES TO EXISTING LAW
           
          1.    Existing law  generally provides legal rights and financial  
            protections for service members, with respect to credit  
            agreements, court proceedings, interest liabilities, eviction  
            proceedings, contracts, mortgages and trusts, leases, life  
            insurance policies, taxes and assessments, and health  
            insurance policies, as specified.  (Mil. & Vet. Code Secs. 401  
            - 409.4; 800 - 811; 820 - 828.)

             Existing law  , the California Military Families Financial  
            Relief Act, permits any member of the United States Military  
            Reserve or the National Guard who is called to active duty as  
            part of the Iraq and Afghanistan conflict to defer payments on  
            specified obligations while serving on active duty.  (Mil. &  
            Vet. Code Sec. 800 et seq.)

             Existing law  , the California Military Families Financial  
            Relief Act of 2005, provides financial protection to members  
            called into active duty regarding fees for recording a power  
            of attorney, termination of mobile telephone contracts,  
            academic tuition, state bar fees, vehicle leases, and  
            residential utility service.  (Mil. & Vet. Code Sec. 820 et  
            seq.)

            This bill  would provide that any person who violates the above  
            provisions shall be liable for actual damages, reasonable  
            attorney's fees, and costs incurred by the injured party.

             This bill  would provide that a service member or other person  
            seeking to enforce the above rights shall not be required to  
            pay a filing fee or court costs.
             
           2.    Existing law  permits a service member to, at any time  
                                                                      



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            during his or her period of service or within six months  
            thereafter, apply to a court for relief from an obligation or  
            liability incurred by the member prior to his or her period of  
            military service, or from any tax or assessment falling due  
            prior to or during the period of service.  (Mil. & Vet. Code  
            Sec. 409.3(a).)

             Existing law  allows the court to grant specified relief after  
            appropriate notice and hearing, unless in its opinion the  
            ability of the service member to comply with the obligation or  
            pay the tax or assessment has not been materially affected by  
            reason of the member's military service. (Mil. & Vet. Code  
            Sec. 409.3(a).)

             This bill  would, instead, require a court to set a hearing on  
            the petition within 25 days from the date the petition is  
            filed, unless the court shows good cause for extending the  
            date of the hearing.  That petition must be served at least 10  
            days before the hearing, and the respondent must file and  
            serve a response to the petition at least five days before the  
            hearing.
             This bill  would provide that a court shall not charge a filing  
            fee or court costs for those petitions, and provide that any  
            person violating the section shall be liable for actual  
            damages, reasonable attorney's fees, and costs incurred by the  
            injured party.

                                        COMMENT
           
          1.    Stated need for the bill  

          According to the author:

            This bill would authorize service members to recover an  
            award of reasonable attorney fees.  Not only is finding an  
            attorney to represent a service member claimant difficult  
            without an attorney's fees provision, but on a typical claim  
            the service member cannot be made whole when a significant  
            portion of his or her damages award must go toward  
            non-recoverable attorney's fees.  For example, if a creditor  
            has refused to defer a mortgage or lower the interest rate  
            to six percent for pre-service debts, the over-charged  
            interest may only amount to several hundred dollars.   
            Another significant example is if an attorney is able to  
            recover $10,000 for a service member who needs this to pay a  
            loan he or she is in default on because of the lender's  
                                                                      



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            violation of the [Military & Veterans Code] and the attorney  
            takes a 1/3 or 40% contingency, the service member will  
            still be in default, as the funds needed to clear the  
            problem are now going to the attorney.  The service member  
            is still not out of the hole. . . . Further, due to being  
            deployed overseas, many service members do not have the  
            ability to immediately pay court fees at the time of filing  
            because of geographical limitations or financial hardship.   
            This bill would grant a service member a waiver of court  
            fees so that the service member may proceed to enforce these  
            important protections.

            This bill would also grant service members an expedited  
            review of their case.  Under current law, a service member  
            may not be able to enforce these protections until the  
            service member returns from deployment.  A delay in  
            enforcement often puts the service member in irreversible  
            credit problems, regardless of the eventual outcome of the  
            case.

          2.    Awarding reasonable attorney's fees and costs  

          To assist service members in bringing actions for violations of  
          their rights and protections that have previously been granted  
          by the Legislature, this bill would provide that any person  
          violating various sections of the Military and Veterans Code  
          shall be liable for actual damages, reasonable attorney's fees,  
          and costs incurred by the injured parties.  The result of that  
          provision would be to shift the cost of the service member's  
          attorney (and any other costs incurred) to a defendant who is  
          found to have violated those sections.

          The general rule governing attorney's fees in the United States  
          is that each party must bear the costs of his or her own  
          attorney's fees, regardless of who prevails in litigation.  Fee  
          shifting statutes are enacted only when society considers a  
          statutory or constitutional right important enough to justify  
          fee shifting.  (See Choate v. County of Orange (2000) 86  
          Cal.App.4th 312, 322-23; Code Civ. Proc. Sec. 1021.)

          Regarding the importance of shifting attorney's fees onto those  
          individuals who violate specified provisions of the Military and  
          Veterans Code, the author asserts:

            Many of the rights sought to be enforced have either no  
            damages or minimal damages.  The service member is primarily  
                                                                      



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            seeking an order from the court compelling the lender to  
            stop violating the [Military & Veterans Code (MVC)] and  
            honor his or her requests.  An example is a case to defer a  
            service member's mortgage after the institution has  
            wrongfully denied the service member the deferral  
            protections.  There would be no damages in a case where the  
            service member is only seeking a deferment.  There are no  
            damages to pay an attorney in an injunction action.

            Finding an attorney to take such a case is nearly impossible  
            unless that attorney knows that reasonable compensation will  
            be allowed by the court for undertaking such an action to  
            protect the rights of a service member.  Voluntary  
            compliance will be much more likely if creditors know that  
            litigation over violations of the MVC may result in an award  
            against them of the service member's reasonable fees and  
            costs.

          Considering that the Legislature has already enacted numerous  
          important protections for service members, and that those  
          protections may be unlikely to be enforced absent the provision  
          of attorney's fees, the proposed fee shift appears appropriate  
          and consistent with the original intent of those statutes.  The  
          protections at issue - including those regarding charging high  
          interest rates, and protecting the service member from  
          foreclosure for a period of time - represent important statutory  
          rights that have previously been recognized by the Legislature.   


          The following clarifying amendment is suggested to clarify the  
          addition of the attorney fee language to two sections pertaining  
          mostly to court actions.

             Clarifying amendments:
             
            1)  On page 3, strike out lines 37 through 39, inclusive.

            2)  On page 4, line 5, after the period insert:  

            That person shall also be liable for actual damages,  
            reasonable attorney's fees, and costs incurred by the injured  
            party.

            3)  On page 11, line 34, after the period insert:

            Any person violating this subdivision shall be liable for  
                                                                      



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            actual damages, reasonable attorney's fees, and costs incurred  
            by the injured party.

            4)  On page 12, strike out lines 5 through 7, inclusive.

          3.    No filing fees or court costs  

          The Judicial Council's Self-Help Center provides the following  
          three ways that an individual may qualify for a fee waiver: (1)  
          if the person is receiving public benefits; (2) if the person's  
          household income, before taxes, is less than a specified amount;  
          or (3) if the court finds that the person does not have enough  
          income to pay for their household's basic needs and the court  
          fees.  

          This bill would also provide that a service member or other  
          person seeking to enforce specific rights shall not be required  
          to pay a filing fee or court costs.  The author asserts that  
          this waiver is necessary because "due to being deployed  
          overseas, many service members do not have the ability to  
          immediately pay court fees at the time of filing because of  
          geographical limitations or financial hardship." As a result,  
          the waiver would remove this barrier in the filing of an action  
          to enforce their rights.

          Committee staff notes that while fee waivers are currently  
          available in the above circumstances, this bill would  
          essentially guarantee that service members qualify for those  
          waivers when enforcing the rights at issue.  As of the writing  
          of this analysis, the Committee has received no opposition from  
          the Judicial Council to the proposed fee waiver.

          4.    Expedited review  

          This bill would also permit a service member to receive an  
          expedited hearing regarding: (1) any obligation or liability  
          incurred prior to their service; or (2) a tax or assessment that  
          fell due prior to, or during, their period of service.  That  
          hearing must be within 25 days from the date the petition is  
          filed, unless the court shows good cause for extending the date.  
           That petition must be served at least 10 days before the  
          hearing, and the respondent must file and serve a response to  
          the petition at least five days before the hearing.

          The author notes that: "[u]nder current law, a service member  
          may not be able to enforce these protections until the service  
                                                                      



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          member returns from deployment.  A delay in enforcement often  
          puts the service member in irreversible credit problems,  
          regardless of the eventual outcome of the case."  Although court  
          calendars are currently highly impacted in certain areas of the  
          state, with some cases being delayed for months, the Committee  
          has received no opposition to this provision that would  
          prioritize these cases.  Similar to the above provisions, this  
          provision reflects the policy choice of the Legislature to  
          provide enhanced protections for service members when they are  
          called to active military duty.  The California Military  
          Department, sponsor, further asserts that this bill is "crucial,  
          as Servicemembers and their Families continue to experience the  
          hardships of ongoing deployments."

          5.    California Bankers Association in a neutral if amended  
          position  

          The California Bankers Association (CBA) states that they  
          "believe that government enforcement is more effective than an  
          enforcement mechanism that encourages civil litigation.  If the  
          bill was amended to require government enforcement, CBA would  
          adopt a neutral position on the bill."


           Support  :  California Association of County Veterans Service  
          Officers; National Guard Association of California; Vietnam  
          Veterans of America, California State Council; one individual

           Opposition  :  California Bankers Association

                                        HISTORY
           
           Source  :  California Military Department

           Related Pending Legislation  :  None Known

           Prior Legislation  :  None Known

           Prior Vote  :

          Assembly Veterans Affairs Committee (Ayes 8, Noes 0)
          Assembly Judiciary Committee (Ayes 10, Noes 0)
          Assembly Floor (Ayes 71, Noes 0)
          Senate Veterans Affairs Committee (Ayes 4, Noes 0)

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