BILL ANALYSIS Ó AB 2819 Page 1 Date of Hearing: April 26, 2016 ASSEMBLY COMMITTEE ON JUDICIARY Mark Stone, Chair AB 2819 (Chiu) - As Amended April 18, 2016 As Proposed to be Amended SUBJECT: UNLAWFUL DETAINER PROCEEDINGS: RELEASE OF COURT RECORDS KEY ISSUE: IN ORDER TO PROTECT THE CREDIT HISTORY AND REPUTATION OF INNOCENT TENANTS INVOLVED IN EVICTION PROCEEDINGS, SHOULD TENANTS BE ENTITLED TO HAVE COURT RECORDs OF eviction proceedings KEPT PRIVATE UNLESS THE LANDLORD PREVAILS WITHIN 60 DAYS OF HAVING FILED THE LAWSUIT? SYNOPSIS Under Code of Civil Procedure Section 1161.2, court unlawful detainer records are withheld from public access (or "masked") by the court clerk for 60 days after the date of the filing of the complaint. At the end of the 60-day masking period, unless the tenant has already prevailed in the eviction, the record becomes public and is available to credit agencies, landlord registries, and others. According to the author, once these unlawful detainer records AB 2819 Page 2 become public, tenant screening companies and credit reporting agencies capture and publish personal identifying information regarding tenants who are named as defendants in those records. This information appears in published lists, known as unlawful detainer registries, and on tenants' credit reports. So long as it is accurate, the fact that a tenant was once sued for unlawful detainer is publicly available for up to seven years and cannot be challenged under federal or state laws governing consumer credit reporting. Because this information is made public, regardless of tenants ultimately prevail in these proceedings, the names of thousands of innocent tenants whose cases were favorably resolved after the 60-day masking period appear on unlawful detainer registries. Many of these tenants successfully settle, secure a dismissal, or win at trial. But for resolving their cases after the 60-day period, they would have escaped negative credit reporting. In other instances, unlawful detainer complaints are filed against tenants but never served. Because these complaints are never dismissed, the tenant's names are publicly released after 60 days and negative credit reporting consequences ensue. Landlords, when attempting to decide between numerous applicants for scarce rental housing, rely on unlawful detainer registries and credit reports, and therefore often choose not to rent to tenants who appear on these registries, even if the tenants were eventually found innocent of unlawful detainer. As a result, given the statewide housing shortage, these innocent tenants may be shut out of rental markets for up to seven years through no fault of their own. This bill, co-sponsored by the Western Center on Law and Poverty and California Rural Legal Assistance Foundation, seeks to keep court records of eviction lawsuits from becoming public unless the landlord prevails within 60 days of filing the lawsuit. The bill also establishes a 60-day masking period that is measured from the date when a default or a default judgment is set aside any time after expiration of the first 60-day period. This provision essentially ensures that the 60-day timeline is reset to begin running when the tenant successfully obtains a default AB 2819 Page 3 judgment, or a default judgment is set aside. According to the author, this bill attempts to strike a balance between the interests of protecting the credit records of innocent tenants and allowing landlords and others sufficient access to court records. The bill is supported by numerous legal aid organizations who report examples of clients whose credit records have been damaged simply by being named as defendants in unlawful detainer cases that were settled but never officially dismissed, or otherwise resolved in a manner in which the landlord did not prevail. Supporters believe this bill will directly help address the problems reported by their clients arising from the existing masking period rule. The bill is opposed by several apartment associations who believe that the proposed changes go too far in shielding records of nonpayment of rent from the public. They contend that this bill will put landlords at risk of renting to serial defaulters, conflicts with California's open records and public access policies, and unfairly keeps rental property owners from knowing the truth about prospective tenants. SUMMARY: Keeps court records in eviction lawsuits from becoming public unless the landlord prevails within 60 days of having filed the lawsuit. Specifically, this bill: 1)Provides that, in unlawful detainer cases, the court clerk shall allow access to civil case records to any person 60 days after the complaint has been filed if the plaintiff prevails in the action within 60 days of the filing of the complaint, in which case the clerk shall allow access to any court records in the action. 2)Provides that if a default or default judgment is set aside more than 60 days after the complaint has been filed, the above timekeeping rule shall apply as if the complaint has been filed on the date the default or default judgment is set aside. AB 2819 Page 4 3)Clarifies that these provisions do not prohibit the court from issuing an order that bars access to the court record in an unlawful detainer case if the parties to the action so stipulate. 4)Revises the definition of "good cause" to include the gathering of evidence by a party to an unlawful detainer action solely for the purpose of making a request for judicial notice pursuant to subdivision (d) of Section 452 of the Evidence Code (i.e. judicial notice of an abusive litigant.) 5)Clarifies that nothing in this act alters any provision of the Evidence Code. 6)Allows (but does not require) the action to be dismissed by the court without prejudice if 60 days elapse after the complaint is filed and no proof of service of the summons has been filed. Further clarifies that nothing in this provision shall require a court to dismiss a case. EXISTING LAW: 1)Provides that, in unlawful detainer proceedings, the court clerk shall allow access to case records to the following persons: a) A party to the action, including a party's attorney. b) Any person who provides the clerk with the names of at least one plaintiff and one defendant and the address of the premises, including the apartment or unit number, if any. c) A resident of the premises who provides the clerk with the name of one of the parties or the case number and shows AB 2819 Page 5 proof of residency. d) To any person by order of the court on a showing of good cause, as defined. e) To any other person 60 days after the complaint has been filed, unless a defendant prevails in the action within 60 days of the filing of the complaint, in which case the clerk may not allow access to any courts records in the action, except to a party to the action or by court order, as specified. (Code of Civil Procedure Section 1161.2 (a), paragraphs (1) to (5).) 2)Provides that the court clerk, in addition to observing the above, shall allow access to case records in the case of a unlawful detainer complaint involving residential property based on Section 1161a ("foreclosure eviction") as indicated in the caption of the complaint, to any other person, if 60 days have elapsed since the complaint was filed with the court, and, as of that date, judgment against all defendants has been entered for the plaintiff, after a trial. Further provides that if judgment is not entered under the conditions described above, the clerk shall not allow access to any court records in the action, except as provided. (Code of Civil Procedure Section 1161.2 (a), paragraph (6).) FISCAL EFFECT: As currently in print this bill is keyed non-fiscal. COMMENTS: This bill seeks to keep court records in eviction lawsuits private unless the landlord prevails within 60 days of having filed the lawsuit. The author wishes to find a balance that allows landlords and others sufficient access to court records, but that better protects innocent tenants who may be unfairly shut out of a difficult housing market because of an undeserved black mark on their credit report. According to the author: The recent economic and foreclosure crises have only AB 2819 Page 6 exacerbated the challenges that low-income households face in securing affordable housing. The difficulty of securing affordable housing in competitive rental markets is worsened by the existing law governing access to civil case records in unlawful detainer proceedings. Specifically, once unlawful detainer civil case records become public, tenant screening companies and credit reporting agencies capture and publish personal identifying information regarding tenants named as defendants in those records. This information appears in published lists, known as unlawful detainer registries, and on tenants' credit reports. So long as it is accurate, the fact that a tenant was once sued for unlawful detainer is publicly available for up to seven years and cannot be challenged under federal or state laws governing consumer credit reporting. The names of thousands of innocent tenants whose cases are resolved only after the 60-day deadline appear on unlawful detainer registries. Many of these tenants successfully settle, secure a dismissal, or win at trial, and would have escaped negative credit reporting if only they had prevailed before the deadline. In other instances, unlawful detainer complaints are filed against tenants but never served. Because these complaints are never dismissed, the tenant's name is publicly released after 60 days and negative credit reporting ensues. Because landlords, who are attempting to decide between numerous applicants for scarce rental housing, rely on unlawful detainer registries and on credit reports, landlords often choose not to rent to tenants who appear on these registries, even if the tenants were eventually found innocent of unlawful detainer. As a result, given the statewide housing shortage, these tenants may be shut out of rental markets for up to seven years through no fault of their own. AB 2819 Page 7 This bill seeks to protect the credit and reputation of innocent tenants by requiring that civil case records in unlawful detainer proceedings remain sealed unless landlords prevail in eviction lawsuits within 60 days of filing. Legislative history of 60-day masking policy . In 1991, the Legislature approved and the governor signed SB 892 (Ch. 1007, Stats. 1991), legislation that restricted public access to court files in unlawful detainer (UD) cases for the first 30 days after filing of the complaint. The rationale at the time, as stated in the uncodified findings and declarations of SB 892, was to address a "crisis due to unscrupulous eviction defense services which utilize records of court filings . . . to solicit and defraud tenants." A pilot project was established to evaluate the effectiveness of this new restrictive access policy, and in 1993, the Legislature determined that the available data demonstrated the policy was effective in meeting predetermined benchmarks for success. The Legislature also noted that some tenants continued to be solicited and defrauded, however, so it enacted SB 236 (Ch. 1191, Stats. 1993) to extend the masking period from 30 days to 60 days in order to further prevent tenants from being defrauded by eviction defense scams. In 2003, the Legislature enacted SB 345 (Kuehl, Ch. 787, Stats. 2003), which for the first time established the rule of permanent masking of court records for UD actions in which the tenant prevails within 60 days of the filing of the complaint. The reason for this new rule, however, was to combat the problem of blacklisting of tenants who had had a UD filed against them, rather than to prevent fraudulent eviction defense scams. According to the Assembly Judiciary analysis, SB 345 was a legislative response to a Court of Appeals decision, U.D. Registry, Inc. v. State of California (1995) 34 Cal. App. 4th 107, which invalidated a previous anti-blacklisting statute that prohibited credit reporting agencies from including in a credit AB 2819 Page 8 report any information relating to a UD unless the landlord prevailed. In its decision, the court held that the statute could not single out credit reporting agencies for its prohibition of disclosure of court records. The court also specifically noted that the state could control the initial release of such information without distinguishing between users of the information. Subsequently, the Legislature passed SB 345 to establish precisely this type of control of the information at issue. Finally, in 2010 the Legislature enacted SB 1149 (Corbett, Ch. 641, Stats. 2010), which provided for a strong masking policy of court records (often permanently) for many defendants in foreclosure evictions pursuant to Section 1161a (authorizing banks to initiate post-foreclosure evictions of former owners who hold-over after the property has been sold.) As reflected in this Committee's analysis of SB 1149, what made those evictions so inequitable was the fact that tenants are often evicted through no fault of their own, but only because the property owner has failed to make payments to the lender. Existing law allows the court record of the filing of an eviction to potentially jeopardize a tenant's credit report or rental history. Similarly, this bill recognizes the potential damage to an innocent tenant's credit record created the moment when an unlawful detainer is filed in court against the tenant, even when the tenant later prevails in the case, but the favorable outcome occurs more than 60 days after the date when the complaint is filed. Under Code of Civil Procedure Section 1161.2, court unlawful detainer records are withheld from public access (or "masked") by the court clerk for 60 days after the date when the complaint is filed. At the end of the 60-day masking period, unless the tenant has already prevailed in the eviction, the record becomes public and is available to credit reporting agencies, landlord registries, and others. Unless access is withheld by the court, the fact that an eviction was filed against the tenant may very well end up reflected in AB 2819 Page 9 landlord registry records compiled by specialized credit reporting agencies whose services are often used by landlords for a fee, even if the tenant ultimately prevails in the case. In such cases, innocent tenants can suffer damage to their credit histories simply by virtue of the fact that eviction complaints were filed against them, without any regard to the outcome of the cases. As the author explains, landlords who rely on this information, unable to distinguish between problematic and innocent tenants, are prone to end up screening out meritorious applicants. These unfortunate prospective tenants may find their credit records cause them to be rejected over and over for rental housing, particularly in competitive rental markets where there are multiple applicants for each property listing. According to Western Center and CRLA, the sponsors of the bill, there are three groups of tenants who are most at risk for suffering damage to their credit reports under the current rules: (1) Those who are named in eviction lawsuits but are never served with a copy of the complaint because the landlord decides not to pursue the case. Landlords are reluctant to pay attorneys to dismiss such cases. As a result, these tenants find themselves blacklisted for lawsuits they never even knew about. (2) Those that raise meritorious defenses to eviction, such as habitability or retaliation, and successfully settle or win at trial, but only after the 60-day period has expired. Despite their victories, these unlucky individuals find themselves unable to rent new housing. AB 2819 Page 10 (3) Those that would have raised meritorious defenses, but were too afraid of crossing the 60-day threshold and ruining their credit for seven years. These tenants are wrongly deprived of both their housing and their day in court, and their successors in the unit will likely face the same hardships. The author believes that such tenants deserve stronger protection of their credit reports and rental histories. In the case of low and fixed-income tenants, this protection is crucial to help them find replacement housing when they are forced to move. This bill would aid such tenants by keeping court records of eviction proceedings private unless the landlord, rather than the tenant, prevails in the case within 60 days of the lawsuit being filed. This bill attempts to strike a balance between the interests of protecting the credit records of innocent tenants and allowing landlords and others access to court records. As discussed above, the existing rule that provides for release of court records unless the tenant prevails within 60 days after filing of the complaint creates many problems for innocent tenants and potentially threatens credit reporting profiles for years. According to the author, the proposed new rule, which flips the standard around and keeps these court records private unless the landlord prevails within 60 days, is an attempt to balance competing concerns while still allowing landlords sufficient access to relevant court records. The bill also establishes a 60-day masking period measured from the date when a default or default judgment is set aside any time after the expiration of the first 60-day period. This essentially ensures that the 60-day timeline is set back to zero whenever the tenant is successful in getting a default or default judgment set aside and the case basically becomes an AB 2819 Page 11 active case again. Without this provision, it would be a hollow victory in the relatively rare occurrence where the tenant successfully argues to get the default judgment set aside because the 60 day period from the filing of the complaint would surely have passed. This bill allows the tenant who prevails on a motion to set aside the default to argue the underlying case with a clean slate, instead of being in a position where the 60+ day old record of the initial filing of the eviction threatens to damage the tenant's credit record, even as he or she is defending the underlying case in court for the first time. The bill is opposed by a number of apartment associations who believe that the proposed changes go too far in shielding records of eviction proceedings from the public. They write: The problem is that tenants can default, never pay, but never make it to trial. The default still occurs, but no record of it will ever be made public. No other type of financial default is treated this way. It puts landlords at risk of renting to serial defaulters. Public access to court records in UD cases not only serves to encourage people to pay their rent on-time, property owners have the right to know whether a prospective tenant is a serial rent defaulter or vexatious litigant. Legislation like this bill, that serves to keep important information from public view, is contrary to California's open records and public access policies, and unfairly keeps rental property owners in the dark and from knowing the truth about prospective tenants. Supporters of the bill contend, in response, that the bill does little to put landlords at risk of renting to serial defaulters, as claimed. In order for a "serial defaulter" to repeat a pattern of defaulting on rent shielded from public access over AB 2819 Page 12 and over again, this person would have to somehow repeatedly get each case of default past the 60-day timeline without the landlord ever prevailing either at trial, or at summary judgment-a task that could realistically only be accomplished with legal representation. Only at that point would this bill prevent those records, indicating repeated default of rent, from being made public after 60 days. Supporters contend the likelihood of the opponent's hypothetical example occurring is minimal because statistics confirm the vast majority of tenants in UD cases are unrepresented, and legal aid attorneys would not realistically represent a person with a repeated history of defaulting on rent who had no legitimate defenses. With respect to opponents' concern about not being able to know whether a prospective tenant is a vexatious litigant, the author notes that he has made amendments to the bill (clarifying the definition of "good cause") to help facilitate the release of records for the purpose of making a request for judicial notice of a vexatious litigant under Evidence Code Section 452 (d). This should address opponents' concerns by ensuring access to those records to take notice of a vexatious litigant. The author also notes, for reasons laid out in the extensive findings and declarations of the bill, that he takes seriously the task of finding a balanced approach to ensuring open access to public records and protecting the credit of innocent tenants, but believes this legislation is needed to respond to an ongoing crisis of affordable housing in the state. Finally, with respect to opponents' contentions that this bill keeps rental property owners in the dark about prospective tenants, Committee staff notes that there is nothing in existing law or in this bill that prevents landlords from simply requesting references from a prospective tenant's previous landlords and making a phone call to find out if the person is a good tenant who pays rent on time, or is perhaps a "serial defaulter" instead. It is not known why this direct, common-sense practice of calling references is not sufficient to AB 2819 Page 13 produce the information that a landlord needs to "find out the truth" about a prospective tenant, unless landlords do not routinely share truthful information with other landlords about past tenants. In any case, as the author has argued, the notation on a credit report that an eviction lawsuit was filed against a person on a certain date in the past, without any other information about the resolution of that case, can hardly be said to convey "the truth" about a prospective tenant. Proposed author's amendments. Supporters of the bill report having many clients whose credit records were affected by so-called "zombie UDs"-eviction lawsuits that were filed but never pursued further, yet continue to wreak havoc with the credit records of tenants because they were never dismissed by the landlord or otherwise resolved. After discussions with the Judicial Council and several superior courts, the author proposes the following amendment to provide courts with discretionary authority to dismiss such actions if 60 days have elapsed since the complaint was filed and no proof of service of the summons has been filed. The amendment is: On page 7, after line 17, insert: SEC. 4. Section 1167.1 is added to the Code of Civil Procedure, to read: 1167.1. If 60 days elapse after the complaint is filed and no proof of service of the summons has been filed, the action may be dismissed by the court without prejudice. Nothing in this section shall require a court to dismiss a case. The author also proposes the following amendment to correct a grammatical error: AB 2819 Page 14 On page 5, line 10, strike "has" and insert "had" ARGUMENTS IN SUPPORT: This bill is supported by numerous legal aid organizations who report having represented clients whose credit records have been damaged by their mere involvement in unlawful detainer cases in which the landlord ultimately dismissed the case, or otherwise did not prevail. For example, the East Bay Community Law Center (EBCLC) writes: The Housing Practice at EBCLC counsel tenants every week who are unable to obtain rental housing due to evictions on their credit records. Although reason enough to deny a rental applicant, these records frequently paint and unfair and inaccurate picture. Tenants who win or settle their cases after the 60-day period, or whose landlords refuse to dismiss the case before the 60 days are up, are routinely denied housing because the court records become public, and then appear as blemishes on the tenants' credit record. One client, a homeless mother in Oakland, called our office because she had been denied housing three times in one month because of an eviction on her rental history. However, the tenant had never been evicted. Rather, six years earlier, her landlord began eviction proceedings against her, but abandoned the case after she paid her rent. Because the landlord neither set the case for trial nor dismissed the case before the 60-day period expired, the case became a public record, permanently marring her rental history. Another client we worked with had an eviction lawsuit filed against her when she had been in a coma for several months, and thus, had not paid her rent. When she regained consciousness, she called us from the hospital, and AB 2819 Page 15 immediately paid her landlord the full amount of rent due. Her landlord accepted the money, and dismissed the case. However, because it was dismissed more than 60-days from the day it was filed, it is a public record and will appear as an eviction on her rental history, making it difficult for her to secure housing in the future. ARGUMENTS IN OPPOSITION: A number of apartment associations, led by the Apartment Association, California Southern Cities, submitted a joint letter of opposition to the Committee outlining three set of amendments: The following are amendments that will achieve a more balanced and fair approach to addressing UD masking and the associated eviction defense problems: 1) UD proceedings should be allowed to permanently mask under the following conditions: a) if the tenant prevails, b) if a plaintiff-property owner voluntarily dismisses his or her UD action against the tenant, c) if the parties stipulate, or d) if the tenant vacates the premises within 30 days from the time the UD action is filed. 2) Tenants should also be barred from asserting a habitability defense unless they have previously given notice to the property owner of the habitability condition, and the landlord has been given a reasonable time to remedy the condition. 3) If public records contain any errors or mistakes about a person pertaining to a UD proceeding, that person should have the ability to go to court and request a correction. That person already can seek correction in his or her credit report and may also submit a writing that AB 2819 Page 16 must be included in the debtors credit records. This approach reflects a more balanced approached. Because most UD proceedings begin because a tenant has not paid his or her rent, UD proceedings should be made public. Allowing a tenant to permanently mask the UD record if he or she vacates the premises within 30 days promotes judicial efficiency, and disincentives eviction defense organizations from lodging frivolous claims. The proposed amendments also address the central loophole-the habitability defense-that allows eviction defense organizations to prolong UD actions and force lopsided and unfair settlements. Requiring tenants to give notice of habitability conditions as they arise is reasonable and fair, and removes a tactic used by eviction defense organization to defraud property owners and delay UD proceedings. With respect to Amendment 2, proposing to bar the habitability defense unless the landlord has been given notice and an opportunity to correct, Committee staff notes that a similar proposal has already been rejected by the Committee this year (AB 2003, Lackey) and that it seems to be outside the scope of this much more narrow bill, relating to the release of court records. With respect to Amendment 3, Committee staff notes that under federal and state laws governing consumer credit reporting, a person cannot seek a correction of the type of information at issue in this bill. Specifically, the fact that an unlawful detainer was filed against a person on a certain date in the past cannot be challenged under credit reporting laws because it is an accurate report of fact. There is nothing inaccurate to correct. Proponents respond that inclusion of this fact without any other information about the resolution of the case is the precise reason why the information is so harmful and misleading in its impact on tenants and their credit reports. AB 2819 Page 17 REGISTERED SUPPORT / OPPOSITION: Support Western Center on Law & Poverty (co-sponsor) California Rural Legal Assistance Foundation (co-sponsor) AIDS Legal Referral Panel (ALRP) American Civil Liberties Union (ACLU) Bay Area Legal Aid City of Santa Monica Community Legal Services in East Palo Alto East Bay Community Law Center Eviction Defense Collaborative Eviction Defense Network Inner City Law Center AB 2819 Page 18 Legal Aid Foundation of Los Angeles (LAFLA) Legal Services of Northern California National Housing Law Project Neighborhood Legal Services of Los Angeles County (NLS-LA) Public Law Center Tenants Together Opposition Apartment Association, California Southern Cities Apartment Association of Orange County East Bay Rental Housing Association North Valley Property Owners Association San Diego County Apartment Association AB 2819 Page 19 Western Manufactured Housing Communities Association Analysis Prepared by:Anthony Lew / JUD. / (916) 319-2334