BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 12, 2016


                           ASSEMBLY COMMITTEE ON JUDICIARY


                                  Mark Stone, Chair


          AB 2244  
          (Gatto) - As Amended April 5, 2016


                              As Proposed to be Amended


          SUBJECT:  COURT FEES: ELECTRONIC FILING


          KEY ISSUE:  IN ORDER TO REDUCE COSTS FOR LITIGANTS AND TO  
          PROMOTE ACCESS TO JUSTICE FOR INDIGENT PARTIES, SHOULD  
          ELECTRONIC FILING VENDORS BE PROHIBITED FROM CHARGING A PAYMENT  
          TRANSACTION COST THAT EXCEEDS THE ACTUAL COST, AND BE REQUIRED  
          TO PROVIDE A VARIETY OF PAYMENT METHODS, INCLUDING METHODS THAT  
          DO NOT CHARGE A TRANSACTION COST?

                                      SYNOPSIS


          During the 2013-14 fiscal year, there were nearly 7.5 million  
          cases filed in our trial courts statewide.  Given the high  
          volume of filings, a party's ability to file and serve documents  
          electronically significantly improves the court's capacity to  
          process filings.  The now-defunct statewide Court Case  
          Management System (CCMS) would have made it easier for courts to  
          accept electronic filings.  As a result of CCMS's termination,  
          trial courts have looked toward private vendors to provide  
          electronic filing services.









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          It seems safe to say that electronic filing has dramatically  
          improved over the years and this technological improvement has  
          helped improve access to courts.  But of course, the electronic  
          filing system isn't perfect.  Indeed, courts need to ensure that  
          any electronic filing system protects low-income and indigent  
          litigants and reduces costs for all parties by promoting  
          competition among vendors.


          Consistent with these goals, this bill reduces costs for  
          litigants and promotes access to justice for indigent litigants.  
           First, this bill prohibits electronic filing vendors from  
          charging a credit card convenience fee that exceeds the cost  
          incurred by vendors in providing that transaction, consistent  
          with existing law.  Second, this bill prohibits electronic  
          filing vendors from charging indigent litigants a payment  
          processing fee and clarifies existing law so that indigent  
          litigants may more easily file electronically without being  
          charged.  Third, this bill requires the court or the electronic  
          filing manager to provide a menu of alternative forms of  
          payment, including payments methods that do not charge  
          transaction fees.  Lastly, this bill allows parties to recover  
          electronic service fees as allowable recoverable costs in courts  
          that require mandatory electronic filing.  This author-sponsored  
          bill is supported by the Coalition for Improving Court Access, a  
          coalition of electronic filing service providers and others who  
          support the growth of electronic filing in California courts,  
          and has no opposition on file.


          SUMMARY:  Prohibits electronic filing vendors from charging a  
          payment method convenience fee that exceeds the cost incurred to  
          provide the processing.  Specifically, this bill:  


          1)Provides that an agent of the court may impose a fee for the  
            use of a credit card or debit card or electronic funds  
            transfer, not to exceed the costs incurred by the agent in  








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            providing for that payment method.  Provides that fees, if  
            any, charged by the court, an electronic filing manager, or an  
            electronic filing service provider to process a payment shall  
            not exceed the actual costs incurred for processing.


          2)Requires the court, an electronic filing manager, or an  
            electronic filing service provider to waive processing payment  
            fees if the court deems waiver appropriate, including in  
            instances where a party has received a fee waiver.


          3)Requires a court or an entity contracted with a court to  
            provide a system for acceptance of electronically transmitted  
            documents to provide a menu of payment options that may  
            include credit or debit cards, electronic funds transfers,  
            electronic networks for financial transactions, and payment  
            methods that do not charge a transaction cost. 


          4)Allows a prevailing party to recover electronic filing service  
            provider fees as costs.


          5)Allows a prevailing party to recover electronic filing service  
            provider hosting fees as cost until January 1, 2022.


          EXISTING LAW:  


          1)Authorizes courts to allow parties to electronically file  
            court documents in accordance to rules established by the  
            Judicial Council, and as provided by state law.  (Code of  
            Civil Procedure Section 1010.6(b).  Unless stated otherwise,  
            all further statutory references are to the Code of Civil  
            Procedure.)










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          2)Authorizes courts to require parties to electronically file  
            documents in a class action, a consolidated action, or a group  
            of actions, a coordinated action, or an action that is deemed  
            complex under Judicial Council rules, provided that the trial  
            court's order does not cause undue hardship or significance  
            prejudice to any party to the action.  (Section 1010.6 (c).)


          3)Authorized the Orange County Superior Court, by local rule and  
            until July 1, 2014, to establish a pilot project to require  
            parties to electronically file and serve documents in  
            specified civil actions subject to specified conditions,  
            including:  


             a)   The court shall have the ability to maintain the  
               official court record in electronic format for all cases  
               where electronic filing is required.


             b)   The court and the parties shall have access either to  
               more than one electronic filing service provider capable of  
               electronically filing documents with the court, or to  
               electronic filing access directly through the court.


             c)   Any fees charged by the court shall be for no more than  
               the actual cost of the electronic filing and service of the  
               documents, and shall be waived when deemed appropriate by  
               the court, including, but not limited to, for any party who  
               has received a fee waiver.  Any fees charged by an  
               electronic filing service provider shall be reasonable and  
               shall be waived when deemed appropriate by the court,  
               including, but not limited to, for any party who has  
               received a fee waiver.  (Section 1010.6 (d).)


          1)Authorizes trial courts to require parties to electronically  
            file and serve documents, provided that the trial court  








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            follows the rules adopted by the Judicial Council for  
            mandatory electronic filing, and meets the conditions  
            specified under the Orange County Superior Court pilot, as  
            provided above in #3.  (Section 1010.6 (g).)


          2)Provides that rules adopted by the Judicial Council relating  
            to mandatory electronic filing and service of documents in  
            trial courts shall include statewide policies on vendor  
            contracts, privacy, access to public records, unrepresented  
            parties, parties with fee waivers, hardships, reasonable  
            exceptions to electronic filing, and the integrity of  
            electronic service.  (Section 1010.6 (f).)


          3)Sets forth the rules adopted by the Judicial Council regarding  
            electronic filing and serving of court documents.  (Cal. Rules  
            of Court, Rules 2.250-2.261.)


          4)Pursuant to the Federal Rules of Civil Procedure, a court may,  
            by local rule, allow papers to be filed, signed, or verified  
            by electronic means as provided.  A local rule may require  
            electronic filing only if reasonable exceptions are allowed.   
            The clerk must not refuse to file a paper solely because it is  
            not in the form prescribed by a local rule or practice.  (Fed.  
            Rules Civ. Proc., rule 5(d), 28 U.S.C.)  


          5)Requires the court to permit a party or an attorney to file an  
            application for a fee waiver as part of the electronic filing  
            process.  (Section 1010.6 (b)(6).)


          6)Authorizes a court and other specified public agencies to  
            accept credit card, debit card, or electronic fund transfers  
            for the payment of specified government services and fees.   
            Provides that when a court or other specified public agencies  
            authorizes one of the payment methods, the public agency may  








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            impose a fee for the use of a debit card, or electronic fund  
            transfer not to exceed the costs incurred by the public agency  
            in providing for payment.  If a court is imposing the fee, the  
            fee shall be approved by the Judicial Council.  (Government  
            Code Section 6159.) 


          7)Provides that a prevailing party is entitled as a matter of  
            right to recover costs in any action or proceeding, as  
            provided.  (Section 1032.)


          8)Provides specified items that are allowable recoverable costs  
            and others that are not allowable recoverable costs.  (Section  
            1033.5)


          9)Provides that any award of costs shall be subject to the  
            following:


             a)   Costs are allowable if incurred, whether or not paid.
             b)   Allowable costs shall be reasonably necessary to the  
               conduct of the litigation rather than merely convenient or  
               beneficial to its preparation.


             c)   Allowable costs shall be reasonable in amount.


             d)   Items not specifically mentioned and items assessed upon  
               application may be allowed or denied in the court's  
               discretion.  (Ibid.)


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


          COMMENTS:  California's court system is one of the largest in  








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          the world, with more than 2,000 judicial officers and  
          approximately 19,000 judicial branch employees statewide who  
          assist in the court's management of cases every year.  (2015  
          Courts Statistics Report: Statewide Caseload Trends, Judicial  
          Council of California (2015).)  During the 2013-14 fiscal year,  
          there were 7.5 million cases filed statewide in the superior  
          courts.  (Ibid.)


          Given the high volume of filings in California's courts each  
          year, a party's ability to file and serve documents  
          electronically significantly improves the court's capacity to  
          process filings.  Ideally, parties could file their legal  
          documents electronically directly to the court through a  
          statewide case management system at no additional cost (aside  
          from the court filing fee).  But given the reality of the courts  
          not having such a system, trial courts are doing the best they  
          can to facilitate electronic filing with county systems that  
          rely upon fees for service. 


          The Failure of a Statewide Court Case Management System (Which  
          Would Have Allowed Parties to File Electronically) Has Forced  
          Trial Courts to Look Elsewhere for Technological Improvements.   
          The Judicial Council's Court Case Management System (CCMS), an  
          ambitious court technology project to provide all 58 superior  
          courts with a long-needed uniform, linked case management system  
          would have, among other things, made it easier for parties to  
          file their legal documents electronically with the courts.


          In February 2011, the California State Auditor issued a report  
          roundly criticizing the Judicial Council's lack of proper  
          management and oversight of the project.  In its report, the  
          Auditor concluded that, among other criticisms of the project,  
          the Judicial Council did not ensure adequate independent  
          oversight of CCMS, as would be expected of a project of similar  
          size and complexity.  Concern about the computer project  
          continued, resulting in internal and independent reviews,  








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          legislative hearings, and proposed legislation.  In March of  
          2012, the Legislature concluded the project must be halted and  
          denied any further funding to CCMS.  Later that month, the  
          Judicial Council terminated the project.  The termination of  
          CCMS, after the expenditure of more than half a billion dollars,  
          not only depleted the courts' increasingly scarce resources, but  
          also left many trial courts with failing case management  
          systems.  As a result, counties have turned to various private  
          vendors to provide technology systems to their courts.   
          Generally, these private technology systems allow for the  
          electronic filing of documents.


          In support of the bill, the author writes that electronic filing  
          represents the future in California courts and benefits the  
          courts, litigants, lawyers and the public generally: 


            Since the demise of the Judicial Council's proposed California  
            Case Management System (CCMS) in the heights of the Great  
            Recession, California courts have moved to upgrade their  
            information technology systems with local contracts with  
            various vendors.  These contracts typically provide for case  
            management systems, electronic filing of documents, and more.  
            Usually the third party vendor acts as an "electronic filing  
            managers" (EFMs) in creating the portals through which  
            "electronic filing service providers" (EFSPs) actually file  
            documents on behalf of law firms and other users of court  
            services.


            Increasingly, courts are moving to require the filing of  
            documents electronically.  In some counties, certain case  
            types must be filed electronically, and often complex civil  
            cases require e-filing.  In some counties, EFSPs must pay  
            court filing fees and e-filing transaction costs with credit  
            cards, and pay convenience fees to electronic filing managers  
            for the use of credit cards.









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            While electronic filing represents a major benefit to the  
            courts and public, how the systems are implemented can raise  
            policy questions of fair access to the judicial system.  In  
            addition, present law contains a number of ambiguities which  
            should be resolved as these systems are being implemented.  AB  
            2244 is intended to address some of these ambiguities.


          Background on Electronic Filing.  Many state courts throughout  
          the country have electronic filing capabilities.  Some of these  
          courts allow electronic filing, while others mandate it.   
          Likewise, federal rules allow federal courts to accept documents  
          via electronic filing, if they so choose and allow federal  
          courts to require electronic filing "only if reasonable  
          exceptions are allowed."  (Fed. Rules Civ.Proc., rule 5(d), 28  
          U.S.C.)  Generally, under the federal approach, only attorneys  
          are mandated to participate in electronic filling.  However, the  
          federal courts have a rule that prohibits a court clerk from  
          refusing to accept paper filings - even if a local court rule  
          mandates electronic filing.  (Ibid.)


          How Does Electronic Filing Work?  According to a recent staff  
          report from the Judicial Council, an electronic filing system  
          requires both an electronic filing service provider (EFSP) and  
          an electronic filing manager (EFM).  Generally, the litigant  
          files the legal document with the EFSP which translates the  
          information, and sends it to the EFM, which delivers and  
          communicates that information to the court's case management  
          system.  (The Critical Role of the State Judiciary in Increasing  
          Access for Self-Represented Litigants: Self-Help Access 360,  
          Judicial Council, July 2015.)  


          If Electronic Filing Is Not Managed Correctly, It May Create  
          Barriers to Justice for Self-Represented and Low-Income  
          Litigants.  In that same report, concerns about electronic  
          filing and access to justice were raised:








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            Early experiences with e-filing, both in California and in  
            other states, suggest that many private vendor EFSPs are not  
            focused on serving the market segment of self-represented  
            litigants, many of whom are indigent and qualify for fee  
            waivers.  The access community believes that the exclusion of  
            self-represented litigants from electronic filing "has the  
            potential to enlarge the access to justice gap in the long  
            run."  Electronic filing is an area in which a slight tip of  
            the balance means that the technology tool is no longer used  
            to achieve greater access; rather, it becomes a barrier.  The  
            California judicial branch has the opportunity to "place a  
            finger on the scale" in favor of low-income and  
            self-represented litigants by developing the capacity to serve  
            as the EFSP and EFM for all self-represented litigants in the  
            state.


          In other states, the judicial branch serves as either a sole  
          EFSP or sole EFM for all forms of electronic filing on behalf of  
          all courts throughout the state.  In California, the Judicial  
          Council can ensure that electronic filing is available to all  
          court users by serving as a one-stop EFSP and EFM for  
          self-represented litigants.  This function is the culmination of  
          the work currently being undertaken to apply user-centered  
          design concepts to the information currently available on the  
          statewide self-help website and is the final link in providing  
          full and equal access to the courts for self-represented  
          litigants.  (The Critical Role of the State Judiciary in  
          Increasing Access for Self-Represented Litigants: Self-Help  
          Access 360, supra.)  


          Electronic Filing is Not New to California.  California  
          initially authorized electronic filing in 1999 under SB 367  
          (Dunn, Chap. 514, Stats. 1999).  In 2012, the Legislature  
          authorized a pilot program to allow the Orange County Superior  
          Court to require parties to file their legal documents  








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          electronically under AB 2073 (Silva, Chap. 320, Stats. 2012).   
          Among other things, the AB 2073 pilot required the following:  
          (1) the court to have the ability to maintain the official court  
          record in electronic format for all cases where electronic  
          filing is required; (2) the court and the parties to have access  
          either to more than one EFSP capable of electronically filing  
          documents, or to electronically file directly through the court;  
          and (3) the court to have a procedure for the filing of  
          non-electronic documents in order to prevent undue hardship or  
          significant prejudice to any party in an action.


          Assuming that other trial courts would eventually want mandatory  
          electronic filing, AB 2073 required the Judicial Council to  
          adopt rules for trial courts.  Those rules required a  
          consideration of statewide policies on vendor contracts,  
          privacy, access to public records, unrepresented parties,  
          parties with fee waivers, hardships, reasonable exceptions to  
          electronic filing, and the integrity of electronic service.   
          Trial courts that choose mandatory electronic filing must also  
          follow the conditions required under the Orange County Superior  
          Court pilot.


          In 2014, the Judicial Council reported that the Orange County  
          pilot "was a success": 


            Mandatory electronic filing resulted in significant cost  
            savings for the court and was generally less expensive for  
            represented and self-represented litigants.  Electronic filing  
            also offered ease of use and convenience for litigants.  And  
            when issues arose, the court responded to address those  
            issues.  Similarly, changes to the California Rules of Court  
            ameliorated any latent access issues by exempting SRLs  
            [self-represented litigants] from the mandatory electronic  
            filing requirement.  (Report on the Superior Court of Orange  
            County's Mandatory E-Filing Pilot Project, Judicial Council of  
            California, September 30, 2014.)








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          To date, 13 trial courts have adopted some form of mandatory  
          electronic filing system.  Although mandatory electronic filing  
          may be an attractive option for trial courts because of the  
          significant efficiencies to courts, electronic filing has not  
          been perfect.  Indeed, as more and more courts implement  
          electronic filing systems, this Committee discovers new issues,  
          such as how the current process has affected indigent litigants;  
          competition among vendors; and the high cost of electronic  
          filing.  To some extent at least, this bill addresses several of  
          those issues.


          Consistent with Existing Law, this Bill Prevents Electronic  
          Filing Vendors from Charging a Payment Method Convenience Fee  
          that Exceeds the Cost to Vendors of that Payment Transaction.   
          Government entities may accept credit cards, debit cards, or  
          electronic funds transfers for the payment of certain government  
          services, including court filings.  Although current law allows  
          a government entity, including a court, to impose a convenience  
          fee for those transactions, the government entity may not charge  
          a convenience fee that exceeds its costs for providing that  
          payment method.


          When it comes to electronic filing, vendors who apply a  
          convenience fee for the use of credit cards, debit cards, or  
          electronic funds transfer are not bound by the same rules  
          described above.  For example, this Committee has learned that  
          some vendors charge a credit card transaction fee at a  
          percentage of a filing service fee (for example, a 2.5 percent  
          credit card fee for $1,435 complex civil filing fee, which  
          amounts to an additional $35.86 charge).  


          Consistent with current law, this bill sensibly provides that an  
          electronic filing service provider, who remits funds in order to  
          complete an electronic filing transaction, acts as an agent of  








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          the court, and may not charge a convenience fee that exceeds the  
          provider's cost to provide that service.  In order to further  
                                     protect litigants and provide greater clarity about convenience  
          costs associated with processing payment methods, this bill also  
          requires that when a trial court adopts rules for mandatory  
          electronic filing, the fees (if any) that are charged by the  
          court, an electronic filing manager, or an electronic filing  
          service provider to process a payment shall not exceed the  
          actual costs incurred by the court, manager, or provider.  


          This Bill Makes Electronic Filing More Accessible to Indigent  
          Litigants and Litigants with Fee Waivers, Consistent with  
          California's Goals of Promoting Access to Justice.  As  
          previously mentioned, trial courts that mandate electronic  
          filing must adopt the conditions required by the Orange County  
          Superior Court pilot and the applicable Rules of Court issued by  
          the Judicial Council.  Under Rules of Court 2.253, a party who  
          has a fee waiver is exempt from all electronic filing fees.  


          To ensure that litigants with fee waivers have true access to  
          electronic filing without fees, this bill does two important  
          things.  First, it prohibits those litigants from being required  
          to pay transaction processing fees.  Second, it clarifies  
          existing law to require an electronic filing service provider to  
          electronically file a fee-waiver-litigant's documents if that is  
          the litigant's preferred method.  


          In order to protect litigants who may not have access to credit  
          or debit cards, this bill also sensibly requires electronic  
          filing managers to accept alternative forms of payment beyond  
          credit cards for the payment of filing fees and e-filing  
          transaction costs.  Specifically, this bill requires the court  
          (or the electronic filing manager) to offer a menu of payment  
          options, including but not limited to, credit cards or debit  
          cards, electronic fund transfers, Automated Clearing House, and  
          payment methods that do not charge a transaction cost, such as  








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          an electronic check.


          Given That Some Courts Mandate Electronic Filing, this Bill  
          Would Allow Costs Associated With Electronic Filing to Be  
          Recoverable Litigation Costs.  Throughout litigation, parties  
          pay for costs associated with the legal proceeding, such as  
          filing fees, expert-witness fees, and attorney's fees.  In  
          addition to any judgment award, current law allows the  
          prevailing party to recover specific litigation costs from the  
          unsuccessful party.  Current law specifically provides which  
          items are allowable or not allowable as recoverable costs.  For  
          example, transcripts of court proceedings ordered by the court  
          are allowable, while costs for the investigation of jurors  
          during voir dire are not allowable.  Additionally, costs must be  
          reasonable in amount and reasonably necessary to the conduct of  
          the litigation; if certain costs are not mentioned in statute, a  
          court may use its discretion to allow or deny a cost.


          Given that some courts have mandated electronic filing, this  
          bill reasonably adds electronic filing service provider fees to  
          the list of allowable recoverable costs when a court requires or  
          orders a party to file and serve documents electronically with  
          the court.  This bill also limits those costs to costs that are  
          actually incurred.  


          Recovering Hosting Costs.  This Committee has learned that,  
          sometimes, courts will order parties to have their documents  
          "hosted" by an electronic filing service provider.  This often  
          occurs in complex cases when certain documents are never lodged  
          with the court, and courts lack the infrastructure to hold these  
          out-of-court documents.


          Although this bill still allows parties to recover these hosting  
          costs, the bill, as proposed to be amended, includes a five-year  
          sunset.  On a certain level, it seems that certain depository  








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          responsibilities belong to the court, and not third party  
          vendors.  Additionally, this Committee has learned that some  
          courts may soon acquire the technology to become the depository  
          in complex cases.  


          In order for this Committee to assess whether trial courts  
          should acquire hosting technology, or whether it is more  
          appropriate for electronic filing service providers to host  
          documents, the author proposes to make the following amendments:


               On page 8, line 39, after file, insert "and".


              On page 8, line 39, delete the first comma and ", and host"


              On page 8, line 40, after the period, insert "(15)  
            Electronic filing service provider hosting fees.  If a court  
            requires or orders a party to have documents hosted by an  
            electronic filing service provider, the recoverable costs are  
            those actually incurred to host documents through an  
            electronic filing service provider.  This paragraph shall  
            remain in effect only until January 1, 2022, and as of that  
            date is repealed, unless a later enacted statute deletes or  
            extends that date."


               On page 9, line 1, delete (15) and insert (16) 


               On page 14, line 1, delete "or" and insert "and"


          Although this Bill Does Not Specifically Address the Issues of  
          Vendor Competition, this Bill Highlights the Need for the  
          Legislature's Oversight in the Courts' Progress in Mandating  
          Electronic Filing.  When AB 2073 moved through the Legislature,  








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          this Committee raised several concerns about how trial courts  
          would implement mandatory e-filing.  First and foremost, this  
          Committee signaled that indigent litigants should not be  
          required to file electronically.  (Indeed, this bill takes  
          significant steps to help achieve that goal.)  Second, this  
          Committee signaled that "[l]itigants should not be forced to use  
          only one vendor, but should have the ability to either directly  
          file with the court or have a choice of multiple vendors to  
          use."  (Assembly Judiciary Committee analysis of AB 2073; April  
          24, 2012.)  Indeed, in order to promote access to justice, there  
          should be robust competition to keep electronic filing costs  
          low, and to prevent a de facto increase in California's civil  
          filing fees.


          As this bill was being analyzed, this Committee learned that the  
          Judicial Council is considering a recommendation to encourage  
          courts to have multiple electronic filing managers.  While this  
          policy is consistent with this Committee's goals of promoting  
          robust competition among vendors, the Legislature should  
          continue to actively monitor how our courts' are implementing  
          electronic filing.  


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Coalition for Improving Court Access




          Opposition









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          None on file




          Analysis Prepared by:Eric Dang / JUD. / (916) 319-2334