BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 140
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          Date of Hearing:   April 2, 2013

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                Bob Wieckowski, Chair
                AB 140 (Dickinson) - As Introduced:  January 17, 2013

                              As Proposed to be Amended

           SUBJECT  :  FINANCIAL ABUSE: UNDUE INFLUENCE

           KEY ISSUE  :  IN ORDER TO BETTER PROTECT SENIORS AND DEPENDENT  
          ADULTS, SHOULD THE DEFINITION OF "UNDUE INFLUENCE" BE MODIFIED  
          TO BETTER REFLECT CURRENT KNOWLEDGE ABOUT ELDER FINANCIAL ABUSE?  


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

                                      SYNOPSIS
          
          This bill seeks to modify the existing definition of "undue  
          influence" as it applies to the financial abuse of elders and  
          dependent adults.  Under the Elder and Dependent Adult Civil  
          Protection Act (EDACPA), a person is guilty of financial abuse  
          of an elder or dependent adult for misappropriating the property  
          of an elder or dependent adult by undue influence, as defined in  
          Section 1575 of the Civil Code.  That section defines undue  
          influence as (1) using a confidence or real or apparent  
          authority for the purpose of obtaining an unfair advantage; (2)  
          taking unfair advantage of another's weakness of mind; or (3)  
          taking a grossly oppressive and unfair advantage of another's  
          necessities or distress.  According to the author, the existing  
          definition has not been changed since 1872 and does not take  
          account of contemporary understandings of financial elder abuse.  
           This bill, therefore, would create a definition of "undue  
          influence" for purposes of EDACPA and relevant sections of the  
          Probate Code; it would not change Civil Code Section 1575, which  
          will still apply to contracts generally.  This bill would define  
          "undue influence" in terms of "excessive persuasion," and unlike  
          the strict elements set forth in the existing definition, this  
          bill would set forth a number of factors that the court should  
          consider, including such things as the vulnerability of the  
          victim, the apparent authority and tactics used by the  
          influencer, the equity of the result and the extent to which it  
          diverges from the victim's intent.  The bill is sponsored by the  








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          California Advocates for Nursing Home Reform.  It is opposed by  
          the Civil Justice Association of California, the California  
          Chamber of Commerce, and other trade associations unless amended  
          to address their concerns that the language of the bill is too  
          broad.  In an effort to partially address opposition concerns,  
          the author will amend the bill in this Committee.  The bill  
          summary below reflects the bill as proposed to be amended. 

           SUMMARY  :  Modifies the definition of undue influence.   
          Specifically,  this bill  : 

          1)For purposes of the Elder and Dependent Adult Civil Protection  
            Act (EDACPA) and the Probate Code, defines "undue influence"  
            as excessive persuasion that causes another person to act or  
            refrain from action and results in inequity.  In determining  
            whether a result was produced by undue influence, requires the  
            court to consider all of the following:  

             a)   The vulnerability of the victim;
             b)   The influencer's apparent authority;
             c)   The actions or tactics used by the influencer;
             d)   The equity of the result.

          2)Provides that the above definition of undue influence is  
            intended to supplement common law, without superseding or  
            interfering with that law.

          3)Provides that nothing in this bill shall be construed to imply  
            that an inequitable result, by itself, constitutes undue  
            influence or excessive persuasion. 

           EXISTING LAW  :  

          1)Defines "undue influence" as:

             a)   Using a confidence or a real or apparent authority over  
               another person for the purpose of obtaining an unfair  
               advantage over that person;
             b)   Taking unfair advantage of another's weakness of mind;  
               or
             c)   Taking a grossly oppressive and unfair advantage of  
               another person's necessities or distress.  (Civil Code  
               Section 1575.)

          2)Establishes EDACPA to protect elderly and dependent adults  








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            from abuse.  (Welfare & Institutions Code Section 15600 et  
            seq.  Unless stated otherwise, all further statutory  
            references are to that code.)

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

          4)When it is proven by a preponderance of the evidence that the  
            defendant is liable for financial abuse of an elder or  
            dependent adult, requires the court to award compensatory  
            damages and attorney's fees and costs.  (Section 15657.5.)

          5)Provides that the execution or revocation of a will is  
            ineffective if it was procured by duress, menace, fraud or  
            undue influence.  (Probate Code Section 6104.)

           COMMENTS  :  This bill seeks to modify the definition of undue  
          influence and apply that definition to actions brought under  
          EDACPA and the Probate Code.  By its own terms, the bill would  
          not alter the common law definition of undue influence, but  
          rather purports to supplement it.

          While undue influence is defined under the Civil Code, the  
          author notes that this definition dates back to 1872 and has not  
          been updated since then.  Moreover, there is no definition of  
          undue influence in the Probate Code, even though the Probate  
          Code provides that the execution or revocation of a will is  
          ineffective if it was procured by "undue influence." 

          Because of the general nature of the definition of "undue  
          influence" in Civil Code Section 1575, a body of California case  
          law has fleshed out the elements of "undue influence."  Although  
          it did not deal with an elderly victim, one of the seminal cases  
          on undue influence in California is Odorizzi v. Bloomfield  
          (1966) 246 Cal.App.2d 123.  The court, in upholding the  
          plaintiff's action, described undue influence as "a shorthand  
          legal phrase used to describe persuasion which tends to be  
          coercive in nature, persuasion which overcomes the will without  
          convincing the judgment.  The hallmark of such persuasion is  
          high pressure, a pressure which works on mental, moral, or  
          emotional weakness to such an extent that it approaches the  








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          boundaries of coercion.  In this sense, undue influence has been  
          called overpersuasion."  (Id. at 130.)  The court found that the  
          characteristics of overpersuasion include: "(1) discussion of  
          the transaction at an unusual or inappropriate time, (2)  
          consummation of the transaction in an unusual place, (3)  
          insistent demand that the business be finished at once, (4)  
          extreme emphasis on untoward consequences of delay, (5) the use  
          of multiple persuaders by the dominant side against a single  
          servient party, (6) absence of third-party advisers to the  
          servient party, (7) statements that there is no time to consult  
          financial advisers or attorneys."  (Id. at 133.) 

          As with elements set forth in Odorizzi, the factors set forth in  
          this bill focus on the nature and context of "persuasion."   
          However, where Odorizzi speaks in terms of "coercive" or "high  
          pressure" persuasion, especially pressure that works on a  
          person's "mental, moral, or emotional weakness," this bill would  
          define undue influence as any "excessive persuasion" that causes  
          a person "to act or refrain from acting and results in  
          inequity."  In short, this bill appears not only to modify but  
          arguably expands the definition of "undue influence" by  
          incorporating considerations of the equity (or fairness) of the  
          result as opposed to only looking to the methods and context of  
          persuasion that overcome the will.  An unfair result would not  
          in itself be evidence of excessive persuasion, but it would be  
          something that a court would consider along with the methods and  
          context of persuasion.

          Although opponents of this bill (as detailed below) focus on the  
          potential vagueness and over-breadth of the words "excessive"  
          and "inequity," it should be noted that that is not all that the  
          bill says.  The bill lays out several factors that a court shall  
          consider in determining whether the persuasion was "excessive"  
          and whether it led to an "inequity."  These factors appear to be  
          more or less consistent with the language in Civil Code Section  
          1575 and the factors set forth in Odorizzi.  That is, they look  
          to the vulnerability of the victim (which the 1872 statute more  
          prosaically defines as "weakness of mind;" to the apparent  
          authority of influencer; to the influencer's tactics and the  
          settings in which the persuasion took place; and the equity of  
          the result in light of the victim's intent and the value of the  
          things exchanged.  

          It is likely true, as opponents contend, that the definition and  
          factors set forth in this bill are potentially more expansive  








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          than in existing statute and case law.  The author contends,  
          however, that this new definition is needed in order to take  
          account of our contemporary knowledge about how elders are  
          unduly influenced and the nature and extent of financial elder  
          abuse that occurs today - not that which might have occurred in  
          1872.  Indeed, the existing definition of "undue influence"  
          appears in the Civil Code provisions governing contracting  
          generally; it was written well before the Legislature determined  
          that elder financial abuse had become a significant problem and,  
          accordingly, enacted EDACPA.  The financial abuse provisions of  
          EDACPA are premised, at least in part, on the view that  
          financial agreements entered into by the elderly should not be  
          subject only to the general rules of contract, but should  
          instead be subject to special scrutiny.  Moreover, the author  
          and sponsor contend that the language of the existing definition  
          does not adequately capture the nuances of elder financial  
          abuse.  For example, an elderly person's cognitive vulnerability  
          may not rise to the level of "weakness of mind;" persons who  
          take advantage of the elderly are not always persons with real  
          or apparent authority; and an elderly person may have  
          considerable assets and thus not suffer from "necessities or  
          distress" as usually understood.  

           ARGUMENTS IN SUPPORT  :  According to the sponsor, the California  
          Advocates for Nursing Home Reform (CANHR), the current  
          definition of "undue influence" does not adequately take account  
          of the realities of elder financial abuse.  Specifically, CANHR  
          notes that "undue influence" under the existing statute must be  
          predicated on the existence of a "confidential relationship,"  
          the victim's "weakness of mind," and "grossly oppressive"  
          conduct that takes unfair advantage of another's "necessities or  
          distress."  According to CANHR, this terminology does not  
          describe the kinds of situations that constitute elder financial  
          abuse.  For example, the perpetrators of elder abuse are not  
          always in a "confidential relationship" with the elder.  In  
          addition, we would no longer characterize the recognized  
          vulnerabilities of the elderly as "weakness of mind."  Finally,  
          the unfair advantage does not always arise out of "necessities  
          or distress," because "predators prefer to target victims with  
          readily available liquid assets."  In short, under the current  
          definition "elders who have capacity and resources and who are  
          exploited by persons who are not confidants cannot recover." 

           ARGUMENTS IN OPPOSITION UNLESS AMENDED  :  The Civil Justice  
          Association of California, the California Chamber of Commerce,  








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          and a coalition of other business and trade associations oppose  
          this bill unless amended.  Opponents contend that the bill is  
          overbroad, could result in unwarranted liability in many  
          business transactions involving people over the age of 65 years,  
          and further claim that existing law "appropriately encompasses  
          the situation where a person with authority or apparent  
          authority wrongfully takes advantage of a person's weakness of  
          mind."  This bill, opponents contend, would "broadly expand the  
          definition of undue influence to any excessive persuasion by an  
          expert that results in an inequity" based on "a long list of  
          factors that are impossible for a business to know" when engaged  
          in a transaction with a person.  Opponents also contend that "AB  
          140 does not require that the person know of the person's  
          weakness, or that the wrongdoer intended to use manipulative  
          tactics in order take the unfair advantage.  This new  
          broadly-structured definition could apply to such cases where a  
          65-year-old in a mid-life crisis buys a car, a house, stocks,  
          electronics, or a boat.  Under AB 140, businesses may need to  
          ask a person's age, education or emotional state before engaging  
          in a sales transaction in order to limit its liability."  In  
          sum, opponents believe that this bill is unnecessary and that  
          its broad definition of "undue influence" will lead to lawsuits  
          in any situation "where a person has significant buyer's  
          remorse." 

          Opponents write that they would remove their opposition only if  
          the definition of "undue influence," on page 3, lines 18-20 of  
          the bill in print is amended as follows:

             "Undue influence" means  the use of manipulative and unfair  
             tactics intended to cause   excessive persuasion   that causes   
             another person to act or refrain from acting and results  
             in inequity.

          However, this proposed amendment potentially creates two  
          additional problems.  First, the word "manipulative" is  
          arguably just as vague as the words in the bill to which the  
          opponents object.  After all, any attempt at persuasion tries  
          to manipulate the target of the persuasion to some extent.   
          Second, the opposition's proposed amendment would require the  
          elderly plaintiff to prove "intent" to cause an inequitable  
          result.  As a practical matter, this intent may be very  
          difficult to prove, even where unquestionably coercive and  
          high pressure tactics led to an obvious inequity.  









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           PROPOSED AUTHOR'S AMENDMENT  :  Opponents' primary contention  
          appears to be that this bill improperly focuses on the equity  
          of the "results" of the persuasion instead of the tactics,  
          conditions, and the overall context in which the persuasion  
          took place.  This would be a fair criticism if the bill  
          allowed a court to find undue influence solely on the basis  
          of an inequitable result, even where the result reflected the  
          elderly person's intent and no coercive or oppressive tactics  
          were used.  In an effort to address this concern the author  
          will take the following amendment in this Committee.

             -    On page 4 after line 2 insert a new subdivision which  
               reads:

          (e) Nothing in this section shall be construed to imply that  
          an inequitable result, by itself, constitutes undue influence  
          or excessive persuasion. 

          While this amendment may not satisfy the opposition, the  
          Committee agrees that it addresses much of the opposition's  
          concern without creating the potential pitfalls of the  
          opposition's proposed amendment. 

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Advocates for Nursing Home Reform (sponsor)
          Alzheimer's Association 
          California Alliance for Retired Americans
          California Commission on Aging 
          California Police Chiefs Association
          Consumer Federation of California 
          Institute on Aging
          Older Women's League of California (OWL)
          Ohlone/East Bay OWL
          Three individuals 

           Opposition 
           
          California Association of Health Facilities 
          California Building Industry Association 
          California Business Properties Association 
          California Chamber of Commerce 
          California Manufacturers and Technology Association 








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          Civil Justice Association of California 
          Western Electoral Contractors Association 
           
          Analysis Prepared by  :    Thomas Clark / JUD. / (916) 319-2334