BILL ANALYSIS Ó AB 381 Page 1 Date of Hearing: April 2, 2013 ASSEMBLY COMMITTEE ON JUDICIARY Bob Wieckowski, Chair AB 381 (Chau) - As Amended: April 1, 2013 SUBJECT : Estates and Trusts: Undue Influence and Elder Abuse KEY ISSUES : 1)Should an existing statute that imposes double-damage liability on a person who misappropriates the property of a principal under a power of attorney be extended to a person who has misappropriated property by the use of undue influence in bad faith, or by committing financial abuse of an elder or dependent adult? 2)Should two provisions of the probate code that make a person liable for double damages FOR MISAPPROPRIATING the property of another person, by specified means, also make that person liable for reasonable attorney's fees and costs? FISCAL EFFECT : As currently in print this bill is keyed non-fiscal. SYNOPSIS In 2011 the Legislature enacted and the governor signed AB 354 (Chapter 55, Statutes of 2011). That legislation specified that Probate Code Section 859, which assessed double damages against persons who misappropriated property belonging to the estate of a decedent, conservatee, minor, or trust, would also apply to a person who misappropriated property through the use of undue influence in bad faith, or who committed financial abuse of an elder or dependent adult, as defined in the Elder and Dependent Adult Civil Protection Act (EDACPA). However, AB 354 did not likewise extend the double damage provisions in Probate Code Section 4231.5 - which applies when a person exercising power of attorney misappropriates property belonging to a principal - to a person who misappropriates property by commission of an EDACPA violation. According to the author, this bill would correct two shortcomings of AB 354. First, it would extend the double damages provisions of Probate Code Section 4231.5 to a person who takes property by undue influence in bad faith, or through a commission of an EDACPA violation. Second, for both sections of AB 381 Page 2 the Probate Code, it would make the person who commits the wrongful act liable for reasonable attorney's fees and costs, as well as double damages. According to the author, even with double damages, there are instances in which the attorney's fees incurred exceed the damages recovered. This bill is sponsored by the Conference of California Bar Associations. The Executive Committee of the Trusts & Estates Section of the State Bar (TEXCOM) opposes this bill unless it is amended to remove the provisions allowing for attorney's fees in addition to double damages. SUMMARY : Extends existing double damage provisions in the Probate Code to a person who misappropriates property through undue influence in bad faith, or through acts of financial elder abuse, and provides that the person shall also be liable for attorney's fees and costs in addition to those double damages. Specifically, this bill : 1)Provides that a person who has taken, concealed, or disposed of property belonging to a conservatee, a minor, an elder, a dependent adult, a trust, the estate of a decedent, or has taken, concealed, or disposed of property by the use of undue influence in bad faith, or through the commission of elder or dependent adult financial abuse, as defined, shall be liable for reasonable attorney's fees and costs. Specifies that the remedies provided by this provision shall be in addition to any other remedies available in law to a trustee, guardian or conservator, or a person authorized to bring an action pursuant to the Elder and Dependent Adult Civil Protection Act. 2)Provides that if a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of property belonging to a principal under a power of attorney, or has taken, concealed, or disposed of property by use of undue influence in bad faith or through the commission of elder abuse or dependent adult financial abuse, as defined, the person shall be liable for twice the value of the property recovered and shall also be liable for reasonable attorney's fees and costs. EXISTING LAW : 1)Provides that a person found liable for taking, concealing, or disposing of property belonging to the estate of a decedent, AB 381 Page 3 conservatee, minor, or trust through the use of undue influence in bad faith, or through the commission of elder or dependent adult financial abuse, is liable for twice the value of the property taken. (Probate Code Section 859.) 2)Provides that a person who, in bad faith, wrongfully takes, conceals, or disposes of property belonging to a principal under a power of attorney is liable for twice the value of the property taken. (Probate Code Section 4231.5.) 3)Establishes the Elder and Dependent Adult Civil Protection Act (EDACPA) to protect elderly and dependent adults from abuse, including financial abuse. (Welfare & Institutions Code Section 15600 et seq.) 4)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. (Welfare & Institutions Code Section 15610.30(a).) 5)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. (Welfare & Institutions Code Section 15657.5) COMMENTS : According to the author, financial abuse of elders and dependent adults has increased in recent years and will most likely continue to do so as the Baby Boom generation ages. In 2011 the Legislature enacted and the governor signed AB 354 (Chapter 55, Statutes of 2011). That legislation specified that Probate Code Section 859, which assessed double damages against persons who misappropriated property belonging to the estate of a decedent, conservatee, minor, or trust, would also apply to a person who misappropriated property through the use of undue influence or who committed financial abuse of an elder or dependent adult. However, AB 354 did not extend the double damage provisions in Probate Code Section 4231.5 - which applies when a person exercising power of attorney misappropriates property belonging to a principal - to cases of elder and dependent adult financial abuse. This bill - which is sponsored by the Conference of California AB 381 Page 4 Bar Associations - would, the author believes, correct two shortcomings of AB 354 of 2011. First, it would extend the double damages provisions of Probate Code Section 4231.5 to a person who takes property by undue influence in bad faith, or through a commission of financial abuse of an elder or dependent adult. Second, for both sections of the Probate Code, this bill would make the person who commits the wrongful act liable for reasonable attorney's fees and costs, in addition to the double damages. According to the author, even with double damages, there are instances in which the attorney's fees incurred exceed the damages recovered. The Non-Punitive Rationale for Attorney Fee-Shifting Statutes : For reasons discussed in more detail below, the Executive Committee of the Trusts & Estates Section of the State Bar of California (TEXCOM) opposes this bill unless it is amended to remove the provisions granting attorney's fees and costs in addition to double damages. TEXCOM's opposition rests in large measure, it appears, on the claim that the double damages is already a "punitive" remedy, and this bill would add attorney's fees and costs as a "separate" and "additional punitive remedy." However, the Committee questions the assumption that statutes providing for attorney's fees are intended to be "punitive." Unlike "compensatory" damages, which are intended to compensate the plaintiff for the actual damages suffered, and therefore make the plaintiff whole, the purpose of punitive damages is, by definition, to go beyond compensation in order to deter recklessness and express moral disapproval of egregious conduct. The rationale for awarding attorney's fees is neither to compensate nor to punish, even though they are clearly compensatory in that they compensate litigation costs. Rather, the more fundamental rationale for fee-shifting statutes is that they provide an incentive for attorneys to take certain kinds of cases. For example, in Marron v. Superior Court (2003) the court concluded that "an award of reasonable attorney fees and costs under [EDACPA] cannot be considered punitive or exemplary damages under Government Code section 818." To be sure, in that particular case the court only had to decide whether the attorney's fees and costs provided under EDACPA were considered "punitive" for purposes of the Tort Claims Act, which generally prohibits punitive damages against a public entity. But the court's reasoning was more general. In discussing the underlying rationale for fee-shifting in EDACPA, the court found AB 381 Page 5 that those provisions were "intended to act as an incentive for attorneys to accept elder or dependent adult abuse cases that involve recklessness or more egregious conduct." In support of this conclusion, the court cited the unequivocal findings set forth in the statute: "The Legislature further finds and declares that infirm elderly persons and dependent adults are a disadvantaged class, that cases of abuse of these persons are seldom prosecuted as criminal matters, and few civil cases are brought in connection with this abuse due to problems of proof, court delays, and the lack of incentives to prosecute these suits." [Marron v. Superior Court (2003) 108 Cal. App. 4th 1049, 1065 (quoting subdivision (h) of Section 15600 of the Welfare & Institutions Code.)] Clearly the purpose of the award of attorney's fees and costs in EDACPA -- like the Probate Code sections amended in this bill - are intended to encourage attorneys to take difficult cases that they might not otherwise be inclined to take. ARGUMENTS IN SUPPORT : According to the sponsor, the Conference of California Bar Associations (CCBA), this measure will "extend current protections against misappropriation of property by attorneys-in-fact to elders, dependent adults, and victims of the attorney-in-facts bad faith undue influence. The bill also would add attorney's fees and costs to the award in successful cases to recover property that has been misappropriated from conservatees, minors, elders, dependent adults, decedent's estates, or victims of bad faith undue influence, so that rightful property owners do not have to make a decision as to whether they can afford to recover their property, because the attorney fees and costs might exceed the value (or even twice the value) of the property recovered." CCBA notes that SB 354 of 2011 - which CCBA also sponsored - assessed double damages against persons who misappropriated property from conservatees, wards, decedent's estates, and other vulnerable persons, also protected victims of elder and dependent adult abuse, but it did not make similar changes to the power of attorney law (Probate Code Section 4231.5). "AB 381 fills that gap," CCBA writes, "ensuring that elders, dependent adults, and victims of bad faith undue influence are also protected from bad faith misappropriation by attorneys-in-fact." However, CCBA adds, these protections "are only valuable if people can use them, and there are many instances where the attorney's fees incurred seeking redress are likely to exceed even twice the value of property that had been misappropriated." AB 381 Page 6 California Advocates for Nursing Care Reform (CANHR) support this bill because it believes that it is appropriately directed to "the growing problem of powers of attorney being used to financially abuse elders," and this bill will help targeted seniors "recoup their property along with attorney's fees and costs." CANHR claims that elder financial abuse will continue to grow as baby boomers age. According to CANHR, "California has the largest population of older Americans in the United States, with the U.S. Census Bureau projecting the elderly population increasing from 3.7 million to 6.4 million over the next 20 years. These projections, coupled with the financial strength of the 'baby boom' generation, promises even more elder financial abuse in years to come." CANHR also defends the awarding of attorney's fees and costs because there are many cases in which attorney's fees exceed the value of the property recovered. ARGUMENTS IN OPPOSITION UNLESS AMENDED : The Executive Committee of the Trusts & Estates Section of the State Bar (TEXCOM) opposes this bill unless it is amended to remove the provisions awarding attorney's fees and costs. It supports extending the double damages provided for in Section 4231.5 (the power of attorney provision) to persons who misappropriate property by undue influence, or by committing financial abuse against an elder or dependent adult. TEXCOM argues and cites case law in support of its view that the "double-recovery remedy is [already] a punitive remedy." TEXCOM claims that AB 381 will add attorney's fees and costs "as a separate punitive remedy." TEXCOM believes that adding attorney's fees and costs to an already punitive double-recovery remedy is especially problematic in these types of case, which often involve "intra-family disputes that are difficult to resolve because of emotional issues. Because the alleged victim in many of these cases is dead or incapacitated and the circumstances ambiguous, it is difficult to know the alleged victim's intent, for example, in creating a joint tenancy account or in making a gift. Raising the bar in an already difficult situation even higher" will make "these fraught cases even more difficult to settle and further burden the courts." Finally, TEXCOM argues that the additional remedy of attorney's fees is not necessary because attorney's fees are already available to successful litigants in elder abuse cases. AB 381 Page 7 REGISTERED SUPPORT / OPPOSITION : Support Conference of State Bars of California (sponsor) California Association for Health Services at Home California Association for Nursing Home Reform California Commission on Aging California Police Chiefs Association One Individual Opposition Trusts and Estates Section, State Bar of California (unless amended) Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334