BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE JUDICIARY COMMITTEE
                             Senator Noreen Evans, Chair
                              2011-2012 Regular Session


          SB 1045 (Emmerson)
          As Amended April 17, 2012
          Hearing Date: May 1, 2012
          Fiscal: No
          Urgency: No
          RD   
                    

                                        SUBJECT
                                           
                                Metal Theft: Damages

                                      DESCRIPTION  

          This bill would provide that any junk dealer or recycler who 
          possesses a fire hydrant, a fire department connection, as 
          specified, or a backflow device or connection to that device or 
          part of that device without a prescribed written certification, 
          from the agency or utility owning or previously owning the 
          material is liable to the agency or utility for the wrongful 
          possession of that material.  

          The liability provided for by this bill would be for the actual 
          damages incurred by the agency or utility, including the value 
          and cost of replacing the material, labor costs, and the costs 
          of repairing any damage caused by the removal of the material.   
          The bill would additionally require the court to also award 
          exemplary damages of three times the actual damages incurred by 
          the agency or utility, and provide that the agency or utility 
          shall also be entitled to recover court costs and reasonable 
          attorney's fees.

          The bill also makes several legislative findings and 
          declarations. 

                                      BACKGROUND  

          In recent years, metal theft has increased drastically.  
          According to a Sacramento Bee article, these thefts "have 
          increased 81 percent, driven by rising prices for the stolen 
          recyclables, according to an insurance industry report. . .  A 
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          total of 25,083 claims of theft of copper, bronze, brass and 
          aluminum were submitted in the last three years . . . .  
          Ninety-six percent of the thefts were copper. . . . The top five 
          states generating the most metal theft claims: Ohio, Texas, 
          George, California, Ýand] Illinois."  (Bill Lindelof, Sacto 911: 
          Metal thefts on the rise as copper prices increase, March 8, 
          2012.)  

          The Sacramento Suburban Water District reports that metal theft 
          is on the rise in the area, with thieves stealing fire hydrants, 
          backflow prevention devices (preventing potential contaminants 
          from entering the potable water system) and other equipment with 
          brass or other metal fittings that can be sold as scrap metal.   
          "The District responded to 65 incidents of fire hydrant theft or 
          tampering since June 2011.  The cost of replacing a fire hydrant 
          is approximately $5,000.  More than 115 backflow prevention 
          devices were stolen in 2011, often from outside commercial 
          businesses and apartment complexes."  
          (<  http://sswd.org/water/metal-theft.html  > (as of April 25, 
          2012).) 

          As a result of this growing problem, several bills have been 
          introduced in recent legislative sessions to address the problem 
          in varying ways.  For example, SB 447 (Maldonado and Florez, Ch. 
          732, Stats. 2008) required scrap junk dealers and recyclers to 
          report to local law enforcement officials specified information 
          about materials scraped at their facilities and by whom, on a 
          daily basis.  SB 691 (Calderon, Ch. 720, Stats. 2008) provided, 
          among other things, that a junk dealer or recycler shall not pay 
          for nonferrous material, as defined, unless the payment is made 
          by cash or check, the check is mailed or the cash or check is 
          provided no earlier than three days after the date of sale, and 
          the dealer or recycler obtains a photograph or video of the 
          seller and certain other identifying information, as specified, 
          including the thumbprint of a seller, to be retained by the 
          dealer or recycler for a certain period of time.  AB 844 
          (Berryhill, Ch. 731, Stats. 2008) also required junk dealers to 
          conform to additional record-keeping and payment restrictions 
          when purchasing nonferrous materials, as defined.  

          This year, the author of this bill also introduced another bill, 
          SB 1387, which provides, among other things, that no junk dealer 
          or recycler shall possess any fire hydrant, or fire department 
          connection, as specified, in the absence of a written 
          certification as prescribed.  The provisions in SB 1045 are 
          substantially related to SB 1387.  
                                                                      



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          This bill, sponsored by the Eastern Municipal Water District, 
          would seek to address the increase in metal theft by imposing 
          liability on junk dealers or recyclers who possess a fire 
          hydrant, fire department connection, or backflow device, as 
          specified, without a written certification from the agency or 
          utility owner. 

                                CHANGES TO EXISTING LAW
           
           Existing law  requires that every junk dealer and recycler, as 
          defined, keep a written record of all sales and purchases made 
          in the course of his or her business.   Records must be kept for 
          two years after making the final entry of any purchase or sale 
          of junk or scrap metals and alloys, as defined. (Bus. & Prof. 
          Code Secs. 21605, 21607.)  Existing law also requires that every 
          junk dealer and recycler set out in the written record required, 
          specified information.  (Bus. & Prof. Code Sec. 21606.)

           Existing law  prohibits a junk dealer or recycler from providing 
          payment for nonferrous materials, as defined, unless specified 
          requirements are met.  (Bus. & Prof. Code Sec. 21608.5)

           Existing law  defines junk dealer as any person engaged in the 
          business of buying, selling and dealing in junk, any person 
          purchasing, gathering, collecting, soliciting or traveling about 
          from place to place procuring junk, and any person operating, 
          carrying on, conducting or maintaining a junk yard or place 
          where junk is gathered together and stored or kept for shipment, 
          sale or transfer.  (Bus. & Prof. Code Sec. 21601.)
          
           This bill  would provide that any junk dealer or recycler who 
          possesses a fire hydrant, fire department connection, including, 
          but not limited to, brass fittings and parts, manhole cover or 
          lid or part of that cover or lid, or backflow device or 
          connection to that device or part of that device without a 
          written certification from the agency or utility owning or 
          previously owning the material shall be liable to the agency or 
          utility for the wrongful possession of that material.

           This bill  would provide that the liability of the junk dealer or 
          recycler in violation of this bill is for the actual damages 
          incurred by the agency or utility, including the value of the 
          material, the cost of replacing the material, labor costs, and 
          the costs of repairing any damage caused by the removal of the 
          material. 
                                                                      



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           This bill would also require that the court award exemplary 
          damages of three times the actual damages incurred by the agency 
          or utility. 

           This bill  would provide that the agency or utility shall also be 
          entitled to recover court costs and reasonable attorney's fees.

          This bill  would provide that a written certification shall be on 
          the agency's or utility's letterhead and shall certify both that 
          the agency or utility has sold the material described or is 
          offering the material for sale, salvage, or recycling, and that 
          the person possessing the certification or identified in the 
          certification is authorized to negotiate the sale of that 
          material.

           This bill  would make specified legislative findings, including, 
          among other things, that theft of fire hydrants, manhole covers, 
          and backflow devices has significantly increased in recent years 
          and represents very substantial, and growing, health and safety 
          issues.

                                        COMMENT
           
          1.    Stated need for the bill  

          According to the author: 

            Under current law, metal recyclers are prohibited from 
            accepting fire hydrants for the purpose of recycling.  
            Recyclers are also required to obtain and keep a photograph, 
            fingerprint, address, and vehicle license plate number of the 
            transporting vehicle that delivers the material.  Furthermore, 
            payment for metal over a specific amount must be mailed or 
            paid after a given period.  
            To address this metal theft epidemic and strengthen current 
            law, SB 1045 seeks to provide cities, counties, special 
            districts, and private utility companies with the additional 
            tools they need to recover costs and impose stiff civil 
            penalties on thieves and recyclers who violate the law.  
            Specifically, SB 1045 would prohibit a junk dealer or recycler 
            from possessing manhole covers, backflow devices, and fire 
            hydrants without written certification on the letterhead of 
            the public agency or utility that owns or previously owned 
            that material.  As a result, this bill would relieve junk 
            dealers from the responsibility of determining whether or not 
                                                                      



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            any of the three items in question are stolen since they will 
            no longer be eligible for recycling without an appropriate 
            certification.  SB 1045 would enable the agency or utility to 
            recoup the cost of the stolen items and offset repair and 
            replacement costs, as well as be awarded exemplary damages by 
            the court of three times the actual damages as a deterrent to 
            metal theft.  

          2.    Bill would provide for actual damages, exemplary damages, 
            and attorney's fees and costs
           
          This bill would provide for liability of a junk dealer or 
          recycler who possesses a fire hydrant or fire department 
          connections, as specified, without a written certification from 
          the agency or utility that owns or previously owned the 
          material.  The bill requires a written certification be on the 
          agency's or utility's letterhead and that it specify both that 
          (1) the agency or utility has sold the material described or is 
          offering the material for sale, salvage, or recycling, and (2) 
          that the person possessing the certification or identified in 
          the certification is authorized to negotiate the sale of that 
          material.  Any junk dealer or recycler in violation of this 
          section would be held liable to the agency or utility owning or 
          previously owning the prohibited material for specified damages. 


          a. Specified damages where liability is found
           
            Where a junk dealer or recycler if found to be in violation of 
            this bill and is held liable to the agency or utility, the 
            agency or utility is entitled to the following specified 
            damages: actual damages incurred by the agency or utility, 
            including the value of the material, the cost of replacing the 
            material, labor costs, and the costs of repairing any damage 
            caused by the removal of the material, and exemplary damages 
            of three times the actual damages incurred by the agency or 
            utility.  

            According to the author, "Ým]etal theft is on the rise as the 
            price of metal continues to climb.  The theft of metals has 
            devastated both public and private property and has harmed 
            critical public infrastructure, making it difficult to deliver 
            essential utilities to customers.  Moreover, the theft of 
            certain metal devices can seriously threaten public health and 
            safety.  For instance, individuals have been severely injured 
            falling down uncovered manholes and vehicles have incurred 
                                                                      



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            damage Ýwhen] driving over manholes where the covers have been 
            stolen.  In addition, stolen backflow devices leave potable 
            water sources vulnerable to cross-contamination while stolen 
            fire hydrants render properties defenseless to fire.  While 
            several laws have been enacted to curb metal theft, it is 
            still prevalent in California." 

            The ability for the agency or utility to bring an action 
            against a junk dealer or recycler in violation of this bill is 
            important.  Relatedly, many of the available damages are not 
            only justified, but also critical to encourage due diligence 
            of junk dealers and recyclers when engaging in sales of these 
            materials and to deter bad actors from engaging in the illegal 
            sale of these materials.  

            Many of the damages are directed at making the agency or 
            utility whole (e.g. actual damages, including cost of 
            material, costs of replacing the material, labor costs, and 
            costs of repairing any damage caused by the removal of the 
            material), while others are aimed more at deterring violations 
            of the law in order to curb metal thefts.  With respect to the 
            exemplary damages of three times the actual damage in 
            particular, it is less so about making the agency or utility 
            whole, and more so about the deterrence and punishment factor 
            of the damages to a potential or actual violator.  The threat 
            of these damages serves as a significant incentive for junk 
            dealers and recyclers to take due care in transactions 
            involving these materials.  It would arguably also serve as a 
            severe disincentive for junk dealers and recyclers to even 
            risk the completion of a sale when they have even the 
            slightest question as to the legitimacy of the written 
            certificate, and would additionally translate into an 
            effective and ample punishment for bad actors.  Certainly, the 
            availability of exemplary damages for three times the actual 
            damage may also be important if the agency or utility is ever 
            found liable to an individual who suffers harm to his or her 
            person or property as the result of the damage caused by the 
            theft.  

            On the other hand, as severe as the harm caused by metal theft 
            is and as important as it is to deter this activity, it is 
            also important to not unduly burden or punish a good acting 
            junk dealer or recycler who attempts to conform to the laws' 
            requirements and is ultimately deceived by the seller.   This 
            concern arises primarily where a junk dealer or recycler could 
            do their due diligence to determine whether the seller not 
                                                                      



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            only has a written certification, as required by this bill, 
            and even take extra steps to ensure that the certification is 
            not forged (i.e. a fake replica of the letterhead could 
            potentially be used), yet still be misled and ultimately found 
            liable under the provisions of this bill.  While in those 
            instances it may still be justifiable to impose the liability 
            for actual damages, as specified, onto the defendant, the 
            justification for the exemplary damages is lessened.   

            Unless there is a minimal amount of discretion provided for in 
            awarding these otherwise justifiably harsh damages in 
            instances in which violations happen despite the junk dealer's 
            or recycler's demonstrated due diligence, if not extraordinary 
            efforts to comply, this bill could unintentionally chill the 
            entire market for these materials out of fear of being held 
            liable for all of the above listed damages.  Such an outcome 
            arguably does not serve those agencies and utilities that 
            actually wish to make legitimate sales of their materials.  
            Therefore, it is important to allow for at least minimal 
            discretion by a court in those scenarios in which the court 
            finds the junk dealer or recycler took exceptional steps to 
            comply, without diluting the effectiveness these exemplary 
            damages.   The following amendment achieves this: 

             Suggested amendment : 

               On page 3, line 10, after "utility" insert ", except where 
               extenuating circumstances do not justify the award of such 
               exemplary damages in the court's discretion." 

             b.     Attorneys' fees  

            This bill would also provide that the agency or utility shall 
            be entitled to recover court costs and reasonable attorney's 
            fees from the junk dealer or recycler who is found to be in 
            violation of this bill's provisions. 

            Generally, in the United States, the "American rule" is that 
            parties must bear their own costs of civil litigation.  In 
            Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 
            240, the United States Supreme Court held that it was the 
            province of the legislative branch to craft exceptions to the 
            American rule, and courts were not free to shift such costs 
            absent express legislative authorization.  (Id. at 269-270.)  
            In 1977, the California Legislature enacted Code of Civil 
            Procedure Section 1021.5, which appeared to be "in significant 
                                                                      



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            measure ? an explicit reaction to the United States Supreme 
            Court's Alyeska decision."  (Woodland Hills Residents Assn., 
            Inc. v. City Council (1979) 23 Cal.3d 917, 934.)  

            Section 1021.5 provides courts authority to award attorney's 
            fees in actions to enforce important rights in the public 
            interest that confer a significant benefit on a large class of 
            persons.  Specifically, Section 1021.5 was intended to 
            encourage litigation deemed to be in the public interest by 
            persons acting as a private attorney general.  This doctrine 
            rests on the recognition that privately initiated lawsuits are 
            often essential to the effectuation of public policies 
            embodied in constitutional or statutory provisions, and that 
            without some mechanism authorizing the award of attorney's 
            fees, private actions to enforce such public polices will be 
            impracticable.  (Daniels v. McKinney (1983)146 Cal.App.3d 42.) 
              As explained recently by the California Supreme Court, 
            "section 1021.5 Ýaddresses] the problem of affordability of 
            such lawsuits. Because public interest litigation often yields 
            nonpecuniary and intangible or widely diffused benefits, and 
            because such litigation is often complex and therefore 
            expensive, litigants will be unable either to afford to pay an 
            attorney hourly fees or to entice an attorney to accept the 
            case with the prospect of contingency fees, thereby often 
            making public interest litigation "as a practical matter . . . 
            infeasible."  (Conservatorship of Whitley (2010) 50 Cal.4th 
            1206, 1219.)

            The standard set by Section 1021.5 is rigorous and is 
            conditioned upon three requirements being met: (1) a 
            significant benefit is provided to the general public; (2) the 
            necessity and financial burden of private enforcement, or of 
            enforcement by one public entity against another public 
            entity, are such as to make the award appropriate; and (3) 
            such fees should not in the interest of justice be paid out of 
            the recovery, if any.   Additionally, the statute specifically 
            provides for an important exception to this rule when the 
            matter involves a public agency, as follows:  "With respect to 
            actions involving public entities, this section applies to 
            allowances against, but not in favor of, public entities, and 
            no claim shall be required to be filed therefor, unless one or 
            more successful parties and one or more opposing parties are 
            public entities."  (Code Civ. Proc. Sec. 1021.5.)  In other 
            words, a public agency may not receive attorneys' fees under 
            Section 1021.5.  

                                                                      



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            In addition, the types of suits that would arise as a result 
            of this bill would largely involve a public entity bringing 
            suit against a private person or entity, and is not one of the 
            fee-shifting scenarios provided for by Section 1021.5.  

            Ultimately, attorney's fees are shifted when a statutory or 
            constitutional right is important enough to justify shifting 
            fees from one party onto the other.  The shifting helps 
            protect those rights by allowing individuals to bring cases 
            because otherwise they would not be able to afford to do so.  
            (See Choate v. County of Orange (2000) 86 Cal.App.4th 312, 
            322-23; Code Civ. Proc. Sec. 1021.)  That is not the case 
            here.  To address this issue, the following amendment is 
            suggested, which would remove the attorney's fees provisions:  


             Suggested amendments  :

               On page 2, line 14, strike ", plus" and insert period

               On page 2, strike line 15

               On page 3, line 10, strike "The"

               On page 3, strike lines 11 - 12 


           Support  :  California Association for Sanitation Agencies; 
          California Professional Firefighters; East Bay Municipal Utility 
          District

           Opposition  :  None Known

                                        HISTORY
           
           Source  :  Eastern Municipal Water District

           Related Pending Legislation  :

          AB 1387 (Emmerson, 2012) See Background.
          AB 1508 (Carter, 2012) would modify a current exception to 
          specified requirements placed on junk dealers and recyclers for 
          payment of nonferrous materials, to state instead that those 
          requirements do not apply to the redemption of nonferrous 
          material having a value of not more than twenty dollars ($20) in 
          a single transaction, when the majority (as opposed to primary 
                                                                      



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          purpose) of the transaction is for the redemption of beverage 
          containers under the California Beverage Container Recycling and 
          Litter Reduction Act.  This bill is currently in the Senate 
          Banking and Finance Committee. 

           Prior Legislation  :

          AB 316 (Carter, Ch. 317, Stats. 2011), among other things, 
          provided that every person who feloniously steals, takes, or 
          carries away copper materials of another, including, but not 
          limited to, copper wire, copper cable, copper tubing, and copper 
          piping, of a value exceeding $950, is guilty of grand theft.  
          The bill also made the grand theft of copper punishable by fines 
          or imprisonment, or both, as specified.  

          AB 1859 (Adams, Ch. 659, Stats. 2008) provided that any person 
          who buys or receives, for purposes of salvage, any part of a 
          fire hydrant or fire department connection (such as bronze or 
          brass fittings and parts) that has been stolen or obtained in 
          any matter constitution theft or extortion, knowing the property 
          to be so stolen or obtained, shall be subject to a criminal fine 
          of not more than $3,000.  
           
          AB 844 (Berryhill and Maze, Ch. 722, Stats. 2008) See 
                                                                         Background.

          SB 691 (Calderon, Ch. 720, Stats. 2008) See Background.

          SB 447 (Maldonado and Florez, Ch. 732, Stats. 2008) See 
          Background.

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