BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 163 (Evans)
As Introduced
Hearing Date: May 10, 2011
Fiscal: No
Urgency: No
SK
SUBJECT
State Bar Act
DESCRIPTION
This bill would authorize the State Bar of California (State Bar
or the Bar) to collect active membership dues of up to $410 for
the year 2012, which would continue the current active dues
amount of $410. Consistent with existing law, those dues would
fund only mandatory programs of the State Bar, and members can
deduct $5 if they did not wish to support lobbying and other
legislative activities. Members can also deduct an additional
$5 if they did not wish to fund access and elimination of bias
programs. Existing law also directs $10 of membership dues to
legal services purposes unless a member elects not to support
those activities.
BACKGROUND
The State Bar of California is a public corporation. Attorneys
who wish to practice law in California generally must be
admitted and licensed in this state and must be a member of the
State Bar. (Cal. Const. art. VI, Sec. 9.) The State Bar of
California is the largest state bar in the country. As of
February 2011, the State Bar had 170,986 active members and
49,034 inactive members, which represents a slight annual
increase in both active members and inactive members. Total
State Bar membership is listed at 231,982, which includes 2,098
Judge members and 9,864 members who are "Not Eligible to
Practice Law."
The Bar's programs are financed mostly by annual membership dues
paid by attorneys as well as other fees paid by applicants
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seeking to practice law. At the end of 2010, the State Bar had
a fund balance of $11.9 million in its General Fund; the Bar is
projecting a continued surplus through at least 2013 of $10.7
million (projected 2012) and $9.3 million (projected 2013).
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CHANGES TO EXISTING LAW
Existing law requires all attorneys who practice law in
California to be members of the State Bar and establishes the
State Bar for the purpose of regulating the legal profession.
Pursuant to the State Bar Act, the annual mandatory membership
fee set by the State Bar's Board of Governors to pay for
discipline and other functions must be ratified by the
Legislature. (Bus. & Prof. Code Sec. 6000 et seq.)
Existing law provides that the State Bar shall be governed by a
23-member Board of Governors (the Board), comprised of 16
lawyers elected by members of the Bar from nine specified
districts for three-year staggered terms, and six public
non-lawyer members, four of whom are appointed by the governor,
one who is appointed by the Senate Rules Committee, and one who
is appointed by the Speaker of the Assembly. The 23rd member of
the Bar Board is its president, who is elected by the other
board members to serve a fourth single year. (Bus. & Prof. Code
Sec. 6010 et seq.)
Existing law provides for the Governance in the Public Interest
Task Force in the State Bar and requires that task force to
submit a report by May 15, 2011, and every three years
thereafter, to the Supreme Court, the Governor, and the Senate
and Assembly Judiciary Committees containing recommendations for
enhancing the protection of the public, as specified. (Bus. &
Prof. Code Sec. 6001.2.)
Existing law authorizes the State Bar to collect $315 in annual
membership fees from active members for a total annual dues bill
of $410 for the year 2011. (Bus. & Prof. Code Sec. 6140.) The
other $95 is pursuant to statutory authorization to assess
annually the following fees: $40 for the Client Security Fund
(Bus. & Prof. Code Sec. 6140.55); $25 for disciplinary
activities (Bus. & Prof. Code Sec. 6140.6); $10 to fund the
Lawyer Assistance Program (Bus. & Prof. Code Sec. 6140.9); $10
special assessment to fund information technology upgrades
(expires January 1, 2014) (Bus. & Prof. Code Sec. 6140.35); and
$10 for the Building Fund (expires January 1, 2014) (Bus. &
Prof. Code Sec. 6140.3).
Existing law authorizes the State Bar to collect $75 in annual
membership fees from inactive members for a total annual dues
bill of $125. (Bus. & Prof. Code Sec. 6141.) The other $50 is
pursuant to statutory authorization to assess annually the
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following fees: $10 for the Client Security Fund (Bus. & Prof.
Code Sec. 6140.55); $25 for disciplinary activities (Bus. &
Prof. Code Sec. 6140.6); $5 to fund the Lawyer Assistance
Program (Bus. & Prof. Code Sec. 6140.9); and $10 for the
Building Fund (expires January 1, 2014) (Bus. & Prof. Code Sec.
6140.3).
Existing case law , Keller v. State Bar of California (1990) 496
U.S. 1, prohibits the use by the State Bar of mandatory dues to
fund political and ideological activities, as a violation of a
member's First Amendment freedom of speech rights, where such
expenditures were not necessarily or reasonably incurred for the
purpose of regulating the legal profession or improving the
quality of the legal services available to the people of the
state. Existing law allows members to deduct up to $10 from the
mandatory dues if the member does not wish to fund legislative
activities and non-Keller lobbying and activities with his or
her dues. (Bus. & Prof. Code Sec. 6140.05, Keller v. State Bar
of California (1990) 496 U.S. 1.)
Existing law directs $10 of membership dues to legal services
purposes unless a member elects not to support those activities.
(Bus. & Prof. Code Sec. 6140.01.)
This bill would authorize the State Bar to collect active
membership dues of up to $410 for the year 2012.
COMMENT
1.Stated need for the bill
In support of the bill, the sponsor, State Bar of California,
writes that it is "pleased to support Senate Bill 163 . . .
Existing law requires the Board of Governors to charge annual
membership dues for members. SB 163 will extend for one year
(2012) the State Bar's authority to collect the dues needed to
keep it operating in order to ensure public protection and the
proper regulation of attorneys. The bill simply extends this
authority and the amount is not increased by this legislation."
2.Governance in the Public Interest Task Force
Last year, AB 2764 (Committee on Judiciary, Chapter 476,
Statutes of 2010) created within the State Bar the Governance in
the Public Interest Task Force to be made up of 11 members
appointed by the President of the State Bar. Seven of the
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members must be attorney members of the board and three must be
public members. The president must also be a member of the Task
Force and preside over its meetings.
AB 2764 required the Task Force, on or before May 15, 2011, and
every three years thereafter, to submit a report to the Supreme
Court, the Governor, and the Senate and Assembly Judiciary
Committees containing recommendations for enhancing the
protection of the public and ensuring that protection of the
public is the highest priority in the licensing, regulation, and
discipline of attorneys. This report is to be reviewed by the
Senate and Assembly Judiciary Committees in their regular
consideration of the annual bar dues bill.
The Task Force was created in response to concerns that actions
by the State Bar Board of Governors did not sufficiently take
into account the protection of the public. Several examples
demonstrating the concern were included in this committee's
analysis of AB 2764, including the Board's action to approve a
scaled-back online "Find a Lawyer" program that critics argued
left out important helpful consumer information in response to
opposition from local bar associations. The Board decision not
to reappoint Scott Drexel as Chief Trial Counsel was also
highlighted in the analysis which noted legal press at the time
that described allegations that Drexel was not reappointed
because he aggressively pursued attorney misconduct and
suggested that the Board's decision was based on internal
profession-protection politics and not public interest issues.
The Bar Board also nearly voted to oppose two important consumer
protection measures (SB 94 (Calderon, Ch. 630, Stats. 2009) and
AB 764 (Nava, 2009)) which addressed attorney participation in
foreclosure-related scams. Finally, the malpractice insurance
disclosure rules ultimately approved by the Board were felt by
many to be considerably scaled back.
The Task Force began meeting in October 2010 and, after
regularly and diligently holding a number of meetings around the
state, the Task Force voted on May 5, 2011 to submit its reports
and recommendations to the Supreme Court, Governor, and
Legislature. AB 2764 provided that, if the task force does not
reach a consensus on all recommendations, the dissenting members
may prepare and submit a dissenting report. Although the
Committee has not yet received the final reports, it appears
that there will in fact be two reports from the Task Force-a
majority and a minority report.
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A recent article in the Recorder legal newspaper bore this out,
stating:
The minority group on the task force-which includes State Bar
President William Hebert-says the board should be smaller,
with members appointed by the state Supreme Court. The
minority members contend that elected board members tend to
represent the provincial interests of their constituents to
the detriment of a broader public interest. They also argue
that the State Bar shouldn't be the only professional
oversight body in California that governs itself.
"If we had appointees who were screened for their
qualifications and appointed by the Supreme Court, we would
have a higher-quality board that better understood the mission
of the board and better understood its public protection
mission," Hebert said after today's vote.
The majority sees the elected system as a good vehicle to give
Bar members a voice in their own governance, said board member
Jon Streeter.
Streeter said the attempt to reduce the size of the board and
throw out the election system is "little more than a power
grab by certain public members on the board," adding that "the
absence of any evidence to support the abandonment of a system
that we have had for 84 years suggests that there are some
private agendas going on here." ("Over protest, Bar task
force says structural changes aren't needed," The Recorder,
May 5, 2011.)
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Summaries of both of these draft reports are available on the
Task Force's website. While the final reports have not yet been
submitted to the Committee, the following chart briefly
summarizing the draft proposals that are available online is
provided to the Committee as background:
----------------------------------------------------------------
| |Existing law |"Comprehensive |"All-appointed |
| | |Governance Reform |Proposal" |
| | |Proposal" | |
|-----------+--------------+------------------+------------------|
|Total |23 |22 + president |Reduce to 15 |
|Board of | | | |
|Governors | | | |
|-----------+--------------+------------------+------------------|
|Attorney |17 |17 |Reduce to 9 |
|members | | | |
|-----------+--------------+------------------+------------------|
|Public |6 |6 |6 |
|members | | | |
|-----------+--------------+------------------+------------------|
|Make-up |15 attorney |12 attorney |Attorney members |
| |members |members elected |appointed by the |
| |elected from |from 5 districts |Supreme Court |
| |9 districts |(based on | |
| | |District Courts |Permit the |
| |1 CYLA* |of Appeal) |Supreme Court to |
| |attorney | |create a Merit |
| |member |3 attorney |Screening |
| | |members appointed |Committee to vet |
| |1 president |by the Supreme |attorney |
| | |Court |applicants |
| |6 public | | |
| |members = |1 CYLA attorney |No change to the |
| |4 by Governor |member |number and method |
| | | |of selecting |
| |1 by Senate |1 president |public members |
| |Rules | | |
| |1 by Speaker |Permit Supreme | |
| | |Court to create a | |
| |*California |Merit Screening | |
| |Young Lawyers |Committee to vet | |
| |Association |attorney | |
| | |applicants | |
| | | | |
| | |No change to the | |
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| | |number and method | |
| | |of selecting | |
| | |public members | |
----------------------------------------------------------------
The proposals also contain other provisions relating to the
State Bar; the following highlights a few of these provisions:
"Comprehensive Governance Reform Proposal"
Include public protection charge
Re-name the Board of Governors to the Board of Trustees
Require 50 percent public member participation on Regulations,
Admission, and Discipline Committee and Member Oversight
Committee
Make changes designed to increase transparency and complement
alignment with the Bagley-Keene Open Meetings Act
Create new Public Information and Outreach Committee
Create new Legislative Liaison committee
"All-appointed Proposal"
Include public protection charge
Re-name the Board of Governors to the Board of Trustees
Provide that the Supreme Court appoints president
Apply Bagley-Keene Open Meetings Act to the Board
Require the State Bar to make available at least 25 hours of
continuing legal education in the field of ethics at no charge
Recommend evaluation of whether the unified Bar structure
advances public protection and require a report containing
steps to disunify the Bar
As this bill moves through the process, the author may wish to
consider amending the bill to incorporate recommendations from
the Task Force which enhance the protection of the public.
1.State Bar's fiscal status
a. State Bar General Fund projections
At the end of 2010, the State Bar had a fund balance of $11.9
million in its General Fund. The Bar is projecting a
continued surplus through at least 2013 of $10.7 million
(projected 2012) and $9.3 million (projected 2013) (See chart
below). These amounts assume that the Bar continues with the
salary freeze that has been in place since 2008 and no
unanticipated significant cost increases occur. The following
chart illustrates these figures:
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---------------------------------------------------
| |Forecast |Projected|Projected|
| | 2011 | 2012 | 2013 |
|---------------------+---------+---------+---------|
|Revenues |$62.9 |$62.5 |63.4 |
|---------------------+---------+---------+---------|
|Baseline |$62.0 |$63.7 |$64.9 |
|expenditures | | | |
|---------------------+---------+---------+---------|
|Surplus (Deficit) |$0 | ($1.2) |($1.5) |
|---------------------+---------+---------+---------|
|Ending retained |$12 |$10.7 |$9.3 |
|savings | | | |
---------------------------------------------------
*$ millions
In addition to the $11.9 million fund balance in its General
Fund, the State Bar also has another $6.4 million in the
"Public Protection Reserve Fund" which is designed as its
"rainy-day" fund to allow the Bar to continue operations
should its dues authority not be continued, as occurred when
Governor Wilson vetoed the Bar's dues bill in 1997 and in 2009
when Governor Schwarzenegger did the same.
At the end of 2010, the Bar's Public Protection Reserve Fund
contained $6.4 million. That amount represents 10.7 percent
of 2010 General Fund operating expenses, 6.4 percent of total
agency-wide operating expenses, and 4.9 percent of total
agency-wide operating revenues. These percentages are
consistent with the recommendations of the Government Finance
Officers Association which suggests a "minimum GF reserve of
5% to 15% of operating revenues." The Bar states that the
Public Protection Fund is needed because it is "exposed to an
unusual financial risk not experienced by most state and local
governments: the risk of an abrupt 100% loss of its dominant
source of operating revenue-mandatory member dues . . .
Mandatory member dues account for over 95% of the State Bar's
General Fund revenues, financing operating costs exceeding
$1.1 million per week. If the State Bar were to lose the
authority to collect mandatory dues, the Public Protection
Reserve would provide a small but crucial window of time for
the organization to react in a manner that best protects the
interests of the public."
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b. History of General Fund activity
Bar documents indicate the history of the Bar's General Fund
activity. Over the past few years, the Bar has generally
taken in more money than it has spent. As illustrated below,
2006 and 2007 revenues were higher than expenditures. In
2008, however, expenditures outpaced revenues. For 2009,
revenues and expenditures were essentially equal. In 2010,
the General Fund's actual expenditures were at their lowest
level since 2007. According to the State Bar:
Ýt]he significant reduction in costs was the result of
circumstances unique to 2010 that aren't representative of
the Bar's typical expenditure levels. During 2010, six of
the Bar's executive staff positions, including Chief Trial
Counsel, General Counsel, Chief Information Officer,
Director of Media & Information Services, Web Editor, and
Senior Executive of Member Services, were vacant for all or
a significant part of the year. These executive positions,
along with higher than anticipated turnover in other staff
positions combined with lower than anticipated benefit
costs, resulted in approximately $2.8 million in savings.
Additionally, the print version of the CalBar Journal was
eliminated during the first quarter, resulting in over
$800,000 in reduced postage and printing costs. Due to the
delay in the adoption of the 2010 dues bill, many
non-critical expenditures were postponed to later years.
Significant savings were also realized from lower audit and
outside counsel costs. In total, actual expenditures for
2010 were 11% lower than the adopted budget.
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The following chart compares the budgeted annual expenses to
actual annual expenses:
---------------------------------------------------
| Year | Budget | Actual | % Variance |
|------------+------------+------------+------------|
| 2007 | $61.4* | $58.1 | 5.4% |
|------------+------------+------------+------------|
| 2008 | $65.2 | $62.3 | 4.4% |
|------------+------------+------------+------------|
| 2009 | $65.2 | $62.8 | 3.6% |
|------------+------------+------------+------------|
| 2010 | $67.4 | $59.8 |11.2% |
| | | | |
---------------------------------------------------
*$ millions
The State Bar indicates: "Typically, the State Bar's actual
annual expenses are between 4 percent and 5 percent lower than
budget - usually attributable to salary savings that occur due
to staff turnover. 2010 was an extraordinary year due to the
delay in passage of the 2010 fee bill and the transition of
executive director. The timing of filling several vacant
executive staff positions was affected by the October 2010
veto and recruitments were put on hold."
c. Temporary Emergency Legal Services Voluntary Assistance
Option
Last year's dues bill, AB 2764 (Committee on Judiciary),
created the Temporary Emergency Legal Services Voluntary
Assistance Option, directing, until January 1, 2014, $10 of
membership dues to legal services purposes unless a member
elects not to support those activities. The State Bar
indicates that this direction has resulted in a $2 million
revenue loss in member dues to the General Fund. Staff notes
that had the $2 million not been redirected either to members
if they chose or to the State Bar's Legal Services Trust Fund
Program for distribution to nonprofit organizations that
provide free civil legal services to low-income Californians,
that money would have gone to the General Fund.
The Bar indicates that it is addressing this revenue loss by
redirecting a significant portion ($1.3 million) of its
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sponsored insurance programs-primarily the general liability
and group insurance policies administered through Marsh-to the
General Fund. According to the Bar, the sponsorship revenue
generated from these policies is approximately $1.8 million
annually. In previous years, the Bar states that
approximately $1 million was allocated to the Lawyers
Assistance Program (LAP) with the remaining proceeds allocated
to covering the administrative costs of the insurance programs
and setting aside funding for future additional membership
benefit programs. The Bar indicates that, in 2011, the
allocation to LAP was discontinued and $1.3 million of the
$1.8 million of annual sponsorship revenues has been directed
to the General Fund. The Bar indicates that the $500,000
difference is being used for insurance program expenses.
Also, in 2011, there was a one-time case transfer from the
Certification Fund of $1.2 million to help cover the loss of
revenue.
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d. Salaries
As the Bar has indicated previously, there have not been
salary or step increases since 2008. The chart below shows
the relevant figures over the last ten years. According to
the Bar, its staff is divided into three categories:
represented staff, confidential staff, and executive staff.
Represented staff are covered by a Memorandum of Understanding
that includes a table of step increases by job class. A
similar structure exists for confidential staff who are not
covered by the bargaining unit and are not executive staff.
Additionally the Bar states that employees at the top step
generally only receive increases when a cost of living
adjustment is made and, in some years, employees who are
topped out may receive a lump sum payment that does not affect
their base salary. Below is the history of step and merit
increases since 2001:
-----------------------------------------------------------------------------------------------------------
|Category|2001 |2002 |2003 |2004 |2005 |2006 |2007 |2008 |2009 |2010 |2011 |
| | | | | | | | | | | | |
|--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------|
|Represen|3.5% |5% |2.5% |0% |4.5% |4.5% |5% |5% |0% |0% |0% |
|ted | |step; |step | | | | |step; | | | |
| | |9% cola | | | | | |3% cola | | | |
|--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------|
|Confiden|3.5% |5% |2.5% |0% |4.5% |4.5% |5% |5% |0% |0% |0% |
|tial | |step; |step | | | | |step; | | | |
| | |9% cola | | | | | |3% cola | | | |
|--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------|
|Executiv|5.71% |4.48% |0% |5.34% |3.2% |5.57% |5.11% |0% |0% |0% |0% |
|e | | | | | | | | | | | |
-----------------------------------------------------------------------------------------------------------
2.State Bar's annual discipline report
On April 30, 2011, the State Bar released its annual discipline
report for the year ending December 31, 2010. Required by
Business and Professions Code Section 6086.15, the report
describes the "performance and condition of Ýthe Bar's] attorney
discipline system in the previous calendar year." This year's
report notes that the figures show a significant rise in both
the backlog and caseload. Under existing law, investigations of
complaints should be completed within six months or, for complex
cases, within 12 months. Complaints that are open more than six
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months from receipt without disciplinary charges filed are
considered part of the "backlog."
The State Bar indicates that it made major changes in the
format, organization, and content of this year's report in part
to respond to recommendations from the State Auditor. As a
result, the Bar acknowledges that it is difficult to make
meaningful comparisons with reports from prior years. For
example, some of the numbers in this year's report are higher
than in years' past because they were previously excluded from
prior counts. Despite this challenge, the following key figures
are notable:
The overall backlog at the end of 2010 is 4,193 cases, an
increase of over 60 percent from the numbers for the previous
year, under the adjusted methodology used in the report. The
report notes, however, that these figures are substantially
increased by the inclusion of more than 2,000 cases, which are
either held or in abeyance because of other pending criminal,
civil, or State Bar proceedings. Excluding these cases would
yield a backlog of 1,901 complaints, an increase of over five
percent from the previous year.
As of December 31, 2010, the investigative backlog stood at
350 cases, down from 409 at the end of 2009.
During 2010, 712 investigations were completed more than six
months after receipt of the original complaint, or, in
designated complex cases, more than 12 months. This figure
was up from 546 in 2009.
During 2010, 3,866 cases were filed or closed more than six
months after the receipt of the original complaint, up from
1,971 in 2009.
The Intake Unit received 17,904 written complaints in 2010.
This is roughly equal to the 2009 level, but sharply higher
than the levels experienced in 2007 and 2008 (under 13,600
complaints each year).
The Intake Unit closed 13,325 cases and forwarded 6,028
complaints to the investigations unit. In contrast, 10,603
cases were closed and 5,378 cases were advanced to
investigation in 2009.
The Investigations Unit in turn closed 3,024 cases-up almost
50 percent from the 2009 levels. That unit forwarded 1,362
cases to the Trial Unit, an increase of more than one-third
from the prior year.
The Trial Unit closed 719 cases in 2010, up from 238 cases the
year before. The unit formally filed 636 cases with the State
Bar Court, a 50 percent increase from the previous year's
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level.
The Executive Summary also noted that the sharp rise in caseload
appears to be connected to the large number of complaints
received by the State Bar against lawyers involved in home loan
modification scams in 2009 and 2010.
1.State Auditor's biennial report on State Bar's performance
The State Auditor is required by law to conduct a performance
audit every two years of the State Bar's operations during the
prior fiscal year. This year, the Auditor's staff indicates
that the audit will likely be completed in late May. At the
request of this committee, the audit will review the Lawyers
Assistance Program (LAP) to better understand whether LAP is
meeting its mission and, importantly, whether it is protecting
clients and the public from substance-abusing attorneys.
In the past, the State Auditor's biennial report has helped to
inform this committee's oversight responsibilities. For
example, in 2007 the report raised questions regarding how the
Bar prepared its budget. The State Auditor noted that the Bar's
"budget preparation methodology does not ensure that all
resources are identified and properly allocated so that the
State Bar effectively and efficiently accomplishes its statutory
mandates." The Bar agreed with the Auditor's recommendation on
the issue and made changes to its methodology to address the
concern.
The 2007 State Auditor's report also brought to light the Bar's
action in collecting the assessment of the $10 building fund fee
for the potential purchase of a State Bar facility in Los
Angeles. That action was taken without notice to the
Legislature and without any opportunity for legislative review.
The Auditor's report played a critical role in highlighting the
issue.
As a result, it will be especially helpful to this committee's
work over the next two years to have the benefit of the
expertise and reporting of the State Auditor.
Support : None Known
Opposition : None Known
HISTORY
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Source : State Bar of California
Related Pending Legislation : AB 572 (Wieckowski), which is
identical to this bill, has been referred to the Assembly
Judiciary Committee.
Prior Legislation :
AB 2764 (Judiciary, Chapter 476, Statutes of 2010)
SB 55 (Corbett, Chapter 2, Statutes of 2010)
SB 641 (Corbett, 2009) vetoed
AB 3049 (Judiciary, Chapter 165, Statutes of 2008)
SB 686 (Corbett, Chapter 474, Statutes of 2007)
AB 1529 (Jones, Chapter 341, Statutes of 2005)
SB 1490 (Judiciary, Chapter 384, Statutes of 2004)
AB 1708 (Judiciary, Chapter 334, Statutes of 2003)
SB 352 (Kuehl, Chapter 24, Statutes of 2001)
SB 1367 (Schiff, Chapter 118, Statutes of 2000)
SB 144 (Schiff, Chapter 342, Statutes of 1999)
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