BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON PUBLIC SAFETY
                             Senator Loni Hancock, Chair
                                2015 - 2016  Regular 

          Bill No:    AB 1182       Hearing Date:    July 7, 2015     
          
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          |Author:    |Santiago                                             |
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          |Version:   |May 5, 2015                                          |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|JM                                                   |
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               Subject:  Secondhand Goods:  Tangible Personal Property



          HISTORY

          Source:   California Association of Resellers, Reusers and  
          Buyers

          Prior Legislation:SB 762 (Hill) - Ch. 318, Stats. 2013

                         AB 391 (Pan), Ch. 172, Stats. 2012

          SCR 63 (Yee) - Reso. Ch. 16., Stats. 2010
                         SB 1893 (Burton) - failed in Assembly Business  
          and Professions, 2004

                         SB 1520 (Schiff) - Ch. 994, Stats. 2000


          Support:  Sacramento Antique Faire

          Opposition:California Pawnbrokers Association (unless amended);  
                    California State Sheriffs' Association; Secondhand  
                    Collectors Association (unless amended)

          Assembly Floor Vote:                 79 - 0










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          PURPOSE

          The purposes of this bill are 1) to clearly define items that  
          constitute a significant class of stolen goods that secondhand  
          dealers must report to law enforcement; and 2) to require the  
          Attorney General to annually update the list of such stolen  
          property and post the list on the Attorney General's website. 

          Existing law:

          Defines a "secondhand dealer" as any person, co-partnership,  
          firm, or corporation whose business includes buying, selling,  
          trading, taking in pawn, accepting for sale on consignment,  
          accepting for auctioning, or auctioning secondhand tangible  
          personal property and specifies that a "secondhand dealer" does  
          not include a coin dealer or participant at gun shows or events,  
          as specified.  (Bus. and Prof. Code § 21626, subd. (a).)

          Specifies that "secondhand dealers" are not persons who perform  
          the services of an auctioneer for a fee or salary, or persons  
          whose business is limited to the reconditioning and selling of  
          major household appliances, as long as specified conditions are  
          met.  (Bus. and Prof. Code § 21626.5.)


          States that "tangible personal property" includes, but is not  
          limited to, all secondhand tangible personal property which  
          bears a serial number or personalized initials or inscription,  
          or which at the time it is acquired by the secondhand dealer,  
          bears evidence of having had a serial number or personalized  
          initials or inscription.   (Bus. and Prof. Code § 21627, subd.  
          (a).)

          States that tangible personal property also includes, but is not  
          limited to, the following:  

                 All tangible personal property, new or used, including  
               motor vehicles, received in pledge as security for a loan  
               by a pawnbroker;
                 All tangible personal property that bears a serial  
               number or personalized initials or inscription which is  
               purchased by a secondhand dealer or a pawnbroker or which,  
               at the time of such purchase, bears evidence of having had  
               a serial number or personalized initials or inscription;  









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               and,
                 All personal property commonly sold by secondhand  
               dealers which statistically is found through crime reports  
               to the DOJ to constitute a significant class of stolen  
               goods.  A list of such personal property shall be supplied  
               by the DOJ to all local law enforcement agencies.  The list  
               shall be reviewed periodically by the DOJ to insure that it  
               addresses current problems with stolen goods.  (Bus. and  
               Prof. Code §  21627, subd. (b).)

          Specifies that "tangible personal property" does not include any  
          new goods or merchandise purchased from a bona fide  
          manufacturer, distributor, or wholesaler of such new goods or  
          merchandise by a secondhand dealer, and requires a secondhand  
          dealer to retain for one year from the date of purchase, and  
          make available for inspection by any law enforcement officer,  
          any receipt, invoice, bill of sale or other evidence of purchase  
          of such new goods or merchandise.  (Bus. and Prof. Code §   
          21627, subd. (c))

          Specifies that "tangible personal property" does not include  
          coins, monetized bullion, or commercial grade ingots of gold,  
          silver, or other precious metals, as specified.  (Bus. and Prof.  
          Code § 21627, subd. (d).)

          Requires every secondhand dealer or coin dealer, as specified to  
          report daily, or on the first working day after receipt or  
          purchase of secondhand tangible personal property, on forms or  
          through an electronic reporting system approved by the  
          Department of Justice (DOJ), all secondhand tangible personal  
          property, except for firearms, which he or she has purchased,  
          taken in trade, taken in pawn, accepted for sale on consignment,  
          or accepted for auctioning, to the chief of police or to the  
          sheriff, as specified.  (Bus. and Prof. Code §  21628)

          Requires the report to be legible, prepared in English,  
          completed where applicable, and include, but not be limited to,  
          the following information:  (Bus. and Prof. Code §  21628)

                 The name and current address of the intended seller or  
               pledger of the property; 
                 The identification of the intended seller or pledger, as  
               specified; 
                 A complete and reasonably accurate description of  









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               serialized property, including, but not limited to: serial  
               number and other identifying marks or symbols,  
               owner-applied numbers, manufacturer's named brand, and  
               model name or number;
                 A complete and reasonably accurate description of  
               non-serialized property, including, but not limited to:  
               size, color, material, manufacturer's pattern name (when  
               known), owner-applied numbers and personalized  
               inscriptions, and other identifying marks or symbols;
                 A certification by the intended seller or pledger that  
               he or she is the owner of the property or has the authority  
               of the owner to sell or pledge the property.
                 A certification by the intended seller or pledger that  
               to his or her knowledge and belief the information is true  
               and complete;
                 A legible fingerprint taken from the intended seller or  
               pledger, as specified; and,
                 When a secondhand dealer complies with all of the  
               provisions of this section, he or she shall be deemed to  
               have received from the seller or pledger adequate evidence  
               of authority to sell or pledge the property, as specified. 

          Requires the DOJ, in consultation with appropriate local law  
          enforcement agencies, to develop clear and comprehensive  
          descriptive categories denoting tangible personal property, as  
          specified.  (Bus. and Prof. Code § 21628, subd. (j).)

          Requires the DOJ to develop a single, statewide, uniform,  
          electronic reporting system to be used to transmit required  
          secondhand dealer reports, as specified.  (Bus. and Prof. Code §  
           21628, subd. (j)(1).)

          Requires secondhand and coin dealers to hold for a period of 30  
          days any tangible personal property acquired before disposing of  
          the property.  Pawnbrokers must wait for a period of four months  
          before disposing of tangible personal property that is acquired.  
           For purposes of this Section, tangible personal property means  
          property that must be reported to law enforcement upon  
          acquisition by the reporting entity or party.    (Bus. and Prof.  
          Code § 21636.)

          This bill:

          Narrows the definition of "tangible personal property" to mean  









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          only the forms of property specifically listed or enumerated in  
          current law: serialized property, property with personalized  
          initials or inscriptions, property that bears evidence of  
          previously having a serial number, initials or inscription, and  
          all personal property commonly sold by secondhand dealers that  
          is determined by the Attorney General to constitute a  
          statistically significant class of stolen goods.

          Eliminates the statutory provision stating that the definition  
          of tangible personal property is not limited to the specifically  
          listed or enumerated property.

          Requires the DOJ to annually update its list of personal  
          property commonly sold by secondhand dealers that constitutes a  
          statistically significant class of stolen goods and post the  
          list on the DOJ's website.

          Provides that a county law enforcement agency may use its own  
          list of TPP for purposes of the requirement that secondhand  
          dealers report acquisitions of TPP to law enforcement. 

                    RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION

          For the past eight years, this Committee has scrutinized  
          legislation referred to its jurisdiction for any potential  
          impact on prison overcrowding.  Mindful of the United States  
          Supreme Court ruling and federal court orders relating to the  
          state's ability to provide a constitutional level of health care  
          to its inmate population and the related issue of prison  
          overcrowding, this Committee has applied its "ROCA" policy as a  
          content-neutral, provisional measure necessary to ensure that  
          the Legislature does not erode progress in reducing prison  
          overcrowding.   

          On February 10, 2014, the federal court ordered California to  
          reduce its in-state adult institution population to 137.5% of  
          design capacity by February 28, 2016, as follows:   

                 143% of design bed capacity by June 30, 2014;
                 141.5% of design bed capacity by February 28, 2015; and,
                 137.5% of design bed capacity by February 28, 2016. 

          In February of this year the administration reported that as "of  
          February 11, 2015, 112,993 inmates were housed in the State's 34  









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          adult institutions, which amounts to 136.6% of design bed  
          capacity, and 8,828 inmates were housed in out-of-state  
          facilities.  This current population is now below the  
          court-ordered reduction to 137.5% of design bed capacity."(  
          Defendants' February 2015 Status Report In Response To February  
          10, 2014 Order, 2:90-cv-00520 KJM DAD PC, 3-Judge Court, Coleman  
          v. Brown, Plata v. Brown (fn. omitted).

          While significant gains have been made in reducing the prison  
          population, the state now must stabilize these advances and  
          demonstrate to the federal court that California has in place  
          the "durable solution" to prison overcrowding "consistently  
          demanded" by the court.  (Opinion Re: Order Granting in Part and  
          Denying in Part Defendants' Request For Extension of December  
          31, 2013 Deadline, NO. 2:90-cv-0520 LKK DAD (PC), 3-Judge Court,  
          Coleman v. Brown, Plata v. Brown (2-10-14).  The Committee's  
          consideration of bills that may impact the prison population  
          therefore will be informed by the following questions:

              Whether a proposal erodes a measure which has contributed  
               to reducing the prison population;
              Whether a proposal addresses a major area of public safety  
               or criminal activity for which there is no other  
               reasonable, appropriate remedy;
              Whether a proposal addresses a crime which is directly  
               dangerous to the physical safety of others for which there  
               is no other reasonably appropriate sanction; 
              Whether a proposal corrects a constitutional problem or  
               legislative drafting error; and
              Whether a proposal proposes penalties which are  
               proportionate, and cannot be achieved through any other  
               reasonably appropriate remedy.


          COMMENTS

          1.Need for This Bill

          According to the author:  

               With the passage of AB 391 [(Pan) Chapter, 172,  
               Statutes of 2012], secondhand dealers (who do not sell  
               serialized goods or goods which are statistically  
               found through crime reports [to the DOJ] to constitute  









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               a significant class of stolen goods to be licensed as  
               a secondhand dealer) will now need to take the name  
               and current address of the intended seller of the  
               property, take the identification of the intended  
               seller or pledger and a legible fingerprint from the  
               intended seller, to report daily, and to retain for 30  
               days all tangible personal property reported.  

               As outlined, California law imposes all of the  
               above-mentioned regulatory requirements on every  
               secondhand dealer, regardless of how large the number  
               of identical items or how low the value of each item  
               bought and sold.  As written, separate individual  
               reports will need to be made for every used book,  
               every old doorknob, every piece of colored glass,  
               every old name badge or game piece (amongst thousands  
               of other items) sold within the State of California.   
               There is also no consideration made for items that  
               have been gathered over the past several decades for  
               which re-sellers would be unable to locate the initial  
               owners (for purposes of gaining their information,  
               fingerprints, and identification)? With this in mind,  
               [this bill] seeks to clarify existing law, provide law  
               enforcement useful data they need in order to curtail  
               the dissemination of stolen property and to facilitate  
               the recovery of such property, and remove an  
               unnecessary burden on secondhand dealers.
          
          2.Electronic Reporting Database

          In 2012, AB 391 (Pan) established a new requirement that  
          secondhand dealers and pawnbrokers electronically report to the  
          DOJ all secondhand tangible property which has been purchased,  
          taken in trade, taken in pawn, accepted for sale on consignment  
          or accepted for auctioning.  Licensed secondhand dealers and  
          pawnbrokers use must the new system - the California Automated  
          Pawn and Secondhand Dealer System (CAPPS) - to submit the  
          requisite tangible personal property transaction information to  
          the DOJ.  The utilization of the electronic database will not  
          change the kinds of property that must be reported by secondhand  
          dealers. 
          
          3.Attorney General Opinion on the Definition of Tangible  
            Personal Property (TPP) within the Secondhand Goods Reporting  









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            Law 

          "Tangible personal property" (TPP) is property that must be  
          reported to law enforcement when acquired by a secondhand dealer  
          or pawnbroker.  By statute, TPP "includes, but is not limited  
          to," serialized property and property with an inscription or  
          initials.  This definition has been criticized as being too  
          broad, as it appears to include anything a person could touch  
          except real estate.  

          The definition of TPP is arguably, however, narrowed by the  
          following provision in the governing statute:

               [TPP includes] all personal property commonly sold by  
               secondhand dealers which statistically is found  
               through crime reports to the Attorney General to  
               constitute a significant class of stolen goods. A list  
               of such personal property shall be supplied by the  
               Attorney General to all local law enforcement  
               agencies. Such list shall be reviewed periodically by  
               the Attorney General to insure that it addresses  
               current problems with stolen goods.  (Bus. & Prof.  
               Code § 21627, subd. (b)(3).)


          In 1996, Assemblywoman Cathie Wright requested an Attorney  
          General opinion as to whether baseball trading cards constitute  
          "tangible personal property."  According to the opinion,  
          "Baseball trading cards purchased by a card shop do not  
          constitute tangible personal property<1> for purposes of  
          regulation under the Secondhand Goods Law." (79  
          Ops.Cal.Atty.Gen. 103).  

          The opinion, noting that the Attorney General had only  
          identified jewelry and silverware as frequently stolen goods  
          subject to reporting requirements, concluded:  

               Moreover, as previously indicated, it was the  
               ----------------------
          <1> The opinion did note with some significance that  
          transactions in sports trading cards are regulated by another  
          article of the Business and Professions Code that imposes  
          penalties for fraudulent practices.  (Bus. & Prof. Code §§   
          21670-21672.)









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               Legislature's purpose in enacting sections "to curtail  
               the dissemination of stolen property and to facilitate  
               the recovery of stolen property . . . ."  In  
               construing the words of a statute, [we are] required  
               to read the statute in the light of the legislative  
               objective sought to be achieved and the evil to be  
               averted.  In this regard, we note that baseball  
               trading cards have not been determined by the  
               Department of Justice "to constitute a significant  
               class of stolen goods." (Ibid., italics added,  
               citations omitted.)
               
          This appears to support an argument that unless property bears a  
          serial number or initials, or appears previously having a serial  
          number or initials, it is not subject to reporting unless the  
          property appears on the list of commonly stolen items compiled  
          by the Department of Justice. The current list of such property,  
          as at the time of the Attorney General's opinion, only includes  
          jewelry and silverware.  Arguably, a secondhand dealer need not  
          report acquisitions of other property until the Department of  
          Justice amends the list of frequently stolen property.


          Further, a secondhand dealer prosecuted for failing to report  
          property, other than property that has been serialized or  
          initialed or included on the Department of Justice list, has a  
          substantial argument that the law is unconstitutionally vague.   
          A criminal law is unconstitutionally vague if a person of  
          ordinary intelligence cannot readily understand what it  
          prohibits or requires.  (Kolender v. Lawson (1983) 461 U.S. 352,  
          357.)  Committee staff has found no cases considering whether  
          the reporting requirements for secondhand dealers are vague.    
          Nevertheless, it is recommended that the reporting requirements  
          be written so as to be clear, certain and consistent.  In  
          addition to avoiding vagueness challenges, clear and consistent  
          reporting requirements would appear to promote the purpose of  
          the law - allowing law enforcement to discover stolen property.


          4.Determining What Property is Frequently Stolen and Subject to  
            Reporting by Secondhand Dealers


          The only kinds of property the secondhand goods reporting  









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          statute specifically describes are serialized and initialed  
          property.  The statute also requires secondhand dealers to  
          report property "commonly sold by secondhand dealers which  
          statistically is found through crime reports to the Attorney  
          General to constitute a significant class of stolen goods."  The  
          statute directs the Attorney General to update the list  
          periodically.  The current list has not been updated for decades  
          and includes only jewelry and silverware.


          There are numerous sources of data from which a list of commonly  
          stolen goods could be compiled.  These include data reported to  
          the California Department of Justice (DOJ), FBI data and even  
          insurance industry data.


          DOJ is required by statute to collect data from law enforcement  
          agencies about "the amount and types of offenses known to the  
          public authorities."  DOJ has great latitude as to how data must  
          be reported.   DOJ could direct law enforcement agencies to  
          include in reports the kinds of property stolen in theft,  
          burglary and robbery offenses.    (Pen. Code § 13000, 13002 and  
          13020.) 


          However, according to the author's office and the sponsor, DOJ  
          representatives have stated that DOJ would use crime data  
          published by the Federal Bureau of Investigation (FBI) to comply  
          with a requirement to list commonly stolen property.  The use of  
          FBI reports has drawn some criticism because it would not  
          accurately reflect property stolen in California.  It can be  
          argued that the effect of unusual theft trends in various parts  
          of the country would be greatly limited when mixed with data  
          from across the country.  Further, California includes urban,  
          suburban, agricultural and other rural areas, and a wide mix of  
          economic activity, that would roughly be similar to the rest of  
          the country as a whole.
















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          The FBI maintains the Uniform Crime Reporting (UCR.) system.<2>   
          The FBI publishes four UCR reports annually.  Two of the reports  
          are "Crime in the United States" and the "National  
          Incident-Based Reporting System" (NIBRS).  The reports include a  
          compilation and analysis of data submitted in mandatory reports  
          by law enforcement agencies across the country.    

          To address concerns that the UCR would not reflect the types of  
          property most often stolen in California, the statute could  
          authorize DOJ, in addition to crime reports submitted by  
          California law enforcement agencies, to use other relevant and  
          reliable sources of data, including UCR reports.

          As noted above, the governing statute requires DOJ to  
          statistically determine property constituting a "significant  
          class of stolen goods" commonly sold by secondhand dealers.  The  
          statute does not define "significant."

          The sponsor and author have proposed that "significant" be  
          defined as property constituting 10% of the kinds of property  
          reported in the UCR.   A 10% standard would be arbitrary to some  
                                                             extent.  However, that standard would be clear and reasonably  
          simple for secondhand dealers to follow; and other standards  
          could be overly complicated, under-inclusive or over-inclusive.   
           Further, a clear and certain standard would be also useful for  
          law enforcement in tracking stolen goods.  

          The electronic reporting system that is currently being  
          implemented will provide consistency in the form and analysis of  
          reporting.  Arguably, the requirements for the contents of the  
          reports should be similarly consistent if the full benefits of  
          the electronic system in finding stolen property and prosecuting  
          thieves are to be realized.

          WOULD CATEGORIES OF PROPERTY THAT CONSTITUTE 10% OF PROPERTY  
          REPORTED AS STOLEN BE A REASONABLE STANDARD FOR "A SIGNIFICANT  
          CLASS OF STOLEN GOODS" FOR PURPOSES OF REPORTING PROPERTY  
          ---------------------------
          <2> Casualty insurance organizations track stolen property  
          claims with some specificity and detail. And have found that the  
          most commonly stolen items included in loss claims are jewelry,  
          electronics and apparel, with women's purses leading the last  
          category.  










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          ACQUISTIONS BY SECONDHAND DEALERS?

          IN COMPILING A LIST OF COMMONLY STOLEN GOODS, SHOULD DOJ BE  
          AUTHORIZED TO USE RELIABLE AND RELEVANT DATA SOURCES, INCLUDING  
          COMPREHENSIVE FEDERAL REPORTS, IN ADDITION TO REPORTS BY  
          CALIFORNIA LAW ENFORCMENTAGENCIES?
          
            


          5.State Law Currently Preempts Local Reporting Ordinances 


          The Court of Appeal, Third Appellate District, recently  
          considered whether a secondhand dealer or pawnbroker must comply  
          with a local ordinance requiring reporting of property that need  
          not be reported under state law.  The court held that a  
          Sacramento County ordinance imposing additional reporting  
          requirements was preempted by state law:


               In Sacramento County Code section 4.30.030,  
               subdivisions A through G, the ordinance prescribes the  
               collection of the information specified under various  
               state laws, including section 21628. However, as noted  
               above, Sacramento County Code section 4.30.030,  
               subdivision H adds additional reporting requirements.

               As we have explained, to the extent the ordinance is  
               duplicative of state law, it is not preempted.  But  
               under the authority of Malish, supra, 84 Cal.App.4th  
               at pages 735, 736, it cannot add to the reporting  
               requirements of state law.  Having demonstrated that  
               it is likely to prevail on this issue (without  
               rejoinder from defendants) and is at risk of  
               irreparable injury from enforcement of the ordinance,  
               CLSDA is entitled to have the preliminary injunction  
               include a restraint on enforcing Sacramento County  
               Code section 4.30.030, subdivision H as well.   
               (Collateral Loan and Secondhand Dealers Association v.  
               County Of Sacramento (2014) 223 Cal.App. 4th 1032,  
               1042-1043.)

          6.Amendment to Strike Reference in the Bill to the Authorization  









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            for each County Sheriff's Department to use its own List of  
            Property Subject to Reporting


          This bill would essentially eliminate state preemption of local  
          ordinances requiring reporting of acquisitions of secondhand  
          property until the Attorney General provides a list of  
          frequently stolen items that must be reported. It would appear  
          that state preemption would apply at that point.


          Authorizing each sheriff to determine what TPP must be reported  
          by secondhand goods dealers could be confusing and burdensome to  
          a secondhand dealer who does business in more than one county.   
          The Bay Area, for example in generally described as being  
          composed of nine counties.  Further, having a different list of  
          TPP in each county could produce a database with a myriad of  
          categories, and perhaps an overly voluminous database that could  
          be difficult to effectively search.  Further, a county-by-county  
          system conflicts with the Legislature's stated purpose of having  
          a "uniform, statewide, state-administered program." (Bus. &  
          Prof. Code § 21625.)


          Stakeholders and interested parties have told committee staff  
          that the author agreed in the Assembly Business and Professions  
          Committee to strike the county-by-county reporting provision.  
          Should this amendment be made?




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