BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2570
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          ASSEMBLY THIRD READING
          AB 2570 (Hill)
          As Introduced  February 24, 2012
          Majority vote 

           BUSINESS & PROFESSIONS     6-3  APPROPRIATIONS      11-5        
           
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          |Ayes:|Hayashi, Allen, Butler,   |Ayes:|Fuentes, Blumenfield,     |
          |     |Eng, Hill, Ma             |     |Bradford, Campos, Davis,  |
          |     |                          |     |Gatto, Hall, Hill, Lara,  |
          |     |                          |     |Mitchell, Solorio         |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Bill Berryhill, Hagman,   |Nays:|Harkey, Donnelly,         |
          |     |Smyth                     |     |Nielsen, Norby, Wagner    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           
          SUMMARY  :  Prohibits licensees of any board, bureau or program 
          under the Department of Consumer Affairs (DCA) from including 
          any "regulatory gag clause" in civil settlement agreements.  
          Specifically,  this bill  :  

          1)Provides that no licensee who is regulated by a board, bureau, 
            or program within DCA, nor an entity or person acting as an 
            authorized agent of a licensee, shall include or permit to be 
            included a provision in an agreement to settle a civil 
            dispute, whether the agreement is made before or after the 
            commencement of a civil action, that prohibits the other party 
            in that dispute from contacting, filing a complaint with, or 
            cooperating with the DCA, board, bureau, or program or that 
            requires the other party to withdraw a complaint from the DCA, 
            board, bureau, or program.  

          2)Provides that a provision of the nature as described above is 
            void as against public policy, and any licensee who includes 
            or permits to be included a provision of that nature in a 
            settlement agreement is subject to disciplinary action by the 
            board, bureau, or program.

          3)Provides that any board, bureau, or program within the DCA 
            that takes disciplinary action against a licensee or licensees 
            based on a complaint or report that has also been the subject 








                                                                  AB 2570
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            of a civil action and that has been settled for monetary 
            damages providing for full and final satisfaction of the 
            parties may not require its licensee or licensees to pay any 
            additional sums to the benefit of any plaintiff in the civil 
            action.

          4)Specifies that the term "board" means the board in which the 
            administration of the above provisions are vested, and unless 
            otherwise expressly provided, shall include bureau, 
            commission, committee, department, division, examining 
            committee, program, and agency, and specifies that "license" 
            means license, certificate, registration, or other means to 
            engage in a business or profession.

           FISCAL EFFECT  :  According to Assembly Appropriations Committee, 
          minor and absorbable enforcement costs for the various DCA 
          boards and bureaus to enforce the provisions of this 
          legislation. 

           COMMENTS  :  According to the author, "Regulatory gag clauses 
          inhibit the ability of regulatory agencies to comprehensively 
          and conscientiously perform their oversight function.  The 
          regulatory boards of the DCA cannot adequately 'protect 
          consumers from unscrupulous and unqualified individuals' (quote 
          from the DCA website) if they are unable to communicate with 
          individuals filing complaints or who have been victimized.  
          Furthermore, pressuring aggrieved consumers and injured parties 
          into agreeing to such clauses enables potentially dangerous 
          licensees to continue operating.  

          "Settlement agreements are an important and valuable mechanism 
          for parties to willingly resolve differences.  However, the 
          inclusion of gag clauses into settlement agreements allows a 
          perilous veil of secrecy to envelop licensees.  Denying 
          regulators the ability to exercise their disciplinary discretion 
          not only allows the conduct to continue, but potentially 
          endangers future consumers." 

          A regulatory gag clause requires a plaintiff to agree, as a 
          condition of a malpractice or misconduct settlement with the 
          licensee, to the inclusion of a provision prohibiting the 
          plaintiff from contacting or cooperating with the defendant's 
          regulator (or requiring the plaintiff to withdraw a pending 
          complaint before that regulator).








                                                                  AB 2570
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          A regulatory gag clause is not to be confused with secret 
          settlements, which are agreements that make certain types of 
          information in a settlement agreement confidential and preclude 
          that information from being introduced as evidence in a court 
          action.  Prohibiting regulatory gag clauses does not prohibit, 
          or affect, the ability of parties to a civil action to agree to 
          a secret settlement, regardless of whether or not either party 
          is required to hold a professional license issued by DCA.  
          Prohibiting regulatory gag clauses merely prohibits 
          professionals licensed by DCA from hiding activities related to 
          their license from DCA.
           

          Analysis Prepared by  :    Angela Mapp / B.,P. & C.P. / (916) 
          319-3301 


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