BILL ANALYSIS Ó
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Loni Hancock, Chair
2015 - 2016 Regular
Bill No: AB 2820 Hearing Date: June 14, 2016
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|Author: |Chiu |
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|Version: |March 15, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|ML |
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Subject: Crimes: Price Gouging: States of Emergency
HISTORY
Source: Author
Prior Legislation:ABX1 57 (Archie-Hudson) - Ch. 51, Stats. 1994
SB 1363 (Ducheny) - Ch. 492, Stats. 2004
AB 457 (Núñez) -2006, died in Senate
Support: Consumer Attorneys of California; Office of Attorney
General Kamala D. Harris
Opposition:California Public Defenders Association
Assembly Floor Vote: 68 - 10
PURPOSE
The purpose of this bill is to revise the definition of state of
emergency and local emergency for purposes of criminal price
gouging, specifying that criminal price gouging during a
declared emergency includes the rental of any housing with an
initial lease of up to one year and also the transportation of
persons and towing services.
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Existing law finds that during emergencies and major disasters,
including, but not limited to, earthquakes, fires, floods, or
civil disturbances, some merchants have taken unfair advantage
of consumers by greatly increasing prices for essential consumer
goods and services. (Penal Code § 396, subd. (a).)
Existing law states that it is the intent of the Legislature in
to protect citizens from excessive and unjustified increases in
the prices charged during or shortly after a declared state of
emergency for goods and services that are vital and necessary
for the health, safety, and welfare of consumers. (Penal Code §
396, subd. (a).)
Existing law provides that upon the declaration of a state of
emergency resulting from an earthquake, flood, fire, riot,
storm, or natural or manmade disaster declared by the President
of the United States or the Governor, or upon the declaration of
a local emergency resulting from an earthquake, flood, fire,
riot, storm, or natural or manmade disaster by the executive
officer of any county, city, or city and county, and for a
period of 30 days following that declaration, it is unlawful for
a person, contractor, business, or other entity to sell or offer
to sell any consumer food items or goods, goods or services used
for emergency cleanup, emergency supplies, medical supplies,
home heating oil, building materials, housing, transportation,
freight, and storage services, or gasoline or other motor fuels
for a price of more than 10 percent above the price charged by
that person for those goods or services immediately prior to the
proclamation of emergency. (Penal Code § 396, subd. (b).)
Existing law states that upon the declaration of a state of
emergency resulting from an earthquake, flood, fire, riot, or
storm declared by the President of the United States or the
Governor, or upon the declaration of a local emergency resulting
from an earthquake, flood, fire, riot, or storm by the executive
officer of any county, city, or city and county, and for a
period of 180 days following that declaration, it is unlawful
for a contractor to sell or offer to sell any repair or
reconstruction services or any services used in emergency
cleanup for a price of more than 10 percent above the price
charged by that person for those services immediately prior to
the proclamation of emergency. (Penal Code § 396, subd. (c).)
Existing law specifies that upon the proclamation of a state of
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emergency resulting from an earthquake, flood, fire, riot,
storm, or other natural disaster declared by the President of
the United States or the Governor, or upon the declaration of a
local emergency resulting from an earthquake, flood, fire, riot,
storm, or other natural disaster by the executive officer of any
county, city, or city and county, and for a period of 30 days
following that proclamation or declaration, it is unlawful for
an owner or operator of a hotel or motel to increase the hotel
or motel's regular rates, as advertised immediately prior to the
proclamation or declaration of emergency, by more than 10
percent. (Penal Code § 396, subd. (d).)
Existing law specifies that, a greater price increase for the
goods and services, mentioned above, is not unlawful if that
person can prove that the increase in price was directly
attributable to additional costs imposed by specified
circumstances. (Penal Code § 396, subd. (a)-(c).)
Existing law provides that time frame prohibiting specified
price increases may be extended for additional 30-day periods by
a local legislative body or the California Legislature, if
deemed necessary to protect the lives, property, or welfare of
the citizens. (Penal Code § 396, subd. (e).)
Existing law states that the conduct described above is a
misdemeanor punishable by imprisonment in a county jail for a
period not exceeding one year, or by a fine of not more than ten
thousand dollars ($10,000), or by both that fine and
imprisonment. (Penal Code § 396 subd. (f).)
Existing law specifies that the conduct described above shall
constitute an unlawful business practice and an act of unfair
competition. (Penal Code § 396 subd. (g).)
Existing law defines "state of emergency" as "a natural or
manmade disaster or emergency resulting from an earthquake,
flood, fire, riot, or storm for which a state of emergency has
been declared by the President of the United States or the
Governor of California." (Penal Code § 396, subd. (g)(1).)
Existing law defines "Local emergency" as "a natural or manmade
disaster or emergency resulting from an earthquake, flood, fire,
riot, or storm for which a local emergency has been declared by
the executive officer or governing body of any city or county in
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California." (Penal Code § 396, subd. (g)(2).)
Existing law defines "housing" as "any rental housing leased on
a month-to-month term" for purposes of criminal price gouging.
(Penal Code § 396, subd. (g)(2).)
Existing law states that except as specified, in all leases of
lands from week to week, month to month, or other period less
than a month, the landlord may, upon giving notice in writing to
the tenant, in the appropriate manner, change the terms of the
lease to take effect, as to tenancies for less than one month,
upon the expiration of a period at least as long as the term of
the hiring itself, and, as to tenancies from month to month, to
take effect at the expiration of not less than 30 days, but if
that change takes effect within a rental term, the rent accruing
from the first day of the term to the date of that change shall
be computed at the rental rate obtained immediately prior to
that change. (Civil Code § 827, subd. (a).)
Existing law specifies that the notice, when served upon the
tenant, shall in and of itself operate and be effectual to
create and establish, as a part of the lease, the terms, rents,
and conditions specified in the notice, if the tenant shall
continue to hold the premises after the notice takes effect.
Existing law states that all leases of a residential dwelling,
or of any interest therein, from week to week, month to month,
or other period less than a month, the landlord may increase the
rent provided in the lease or rental agreement, upon giving
written notice to the tenant, as follows, by either of the
following procedures:
a) By delivering a copy to the tenant personally; or (Civil
Code § 827, subd. (b)(1)(A).)
b) By serving a copy by mail under the procedures as
specified. (Civil Code § 827, subd. (b)(1)(B).)
Existing law states that for an increase in rent greater than
10%, the minimum notice period required pursuant to that
paragraph shall be increased by an additional 30 days, but does
not apply to an increase in rent caused by a change in a
tenant's income or family composition as determined by a
recertification required by statute or regulation. (Civil Code §
827, subd. (b)(3).)
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This bill revises the definition of a state of emergency to mean
a natural or manmade disaster or emergency caused by conditions
such as, but not limited to, air pollution, earthquake, fire,
flood, storm, epidemic, riot, drought, sudden and severe energy
shortage, plant or animal infestation or disease, for which a
state of emergency has been declared by the President of the
United States or the Governor of California.
This bill revises the definition a local emergency to mean a
natural or manmade disaster or emergency caused by conditions
such as, but not limited to, air pollution, earthquake, fire,
flood, storm, epidemic, riot, drought, sudden and severe energy
shortage, plant or animal infestation or disease, for which a
local emergency has been declared by an official, board, or
governing body vested with authority to make such a declaration
in any city, county, or city and county in California.
This bill applies the definitions above, throughout the criminal
price gouging statute.
This bill includes the transportation of persons and towing
services in the crime of price gouging during a declared
emergency.
This bill specifies that criminal price gouging during a
declared emergency includes any rental housing with an initial
lease term of up to one year.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
For the past several 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
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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 December of 2015 the administration reported that as "of
December 9, 2015, 112,510 inmates were housed in the State's 34
adult institutions, which amounts to 136.0% of design bed
capacity, and 5,264 inmates were housed in out-of-state
facilities. The current population is 1,212 inmates below the
final court-ordered population benchmark of 137.5% of design bed
capacity, and has been under that benchmark since February
2015." (Defendants' December 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).) One
year ago, 115,826 inmates were housed in the State's 34 adult
institutions, which amounted to 140.0% of design bed capacity,
and 8,864 inmates were housed in out-of-state facilities.
(Defendants' December 2014 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 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
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Whether a proposal proposes penalties which are
proportionate, and cannot be achieved through any other
reasonably appropriate remedy.
COMMENTS
1. Stated Need for This Bill
The author states:
Following the devastating Aliso Canyon gas leak, unscrupulous
individuals took advantage of a loophole in current law and
raised the prices of short-term rentals. Current law protects
those with month-to-month leases, but does not apply if the
initial lease is longer than 30 days. It also does not apply
to hotel and motel operators if the disaster is man-made
rather than natural, leaving families vulnerable to
exploitation. Current law also does not explicitly apply to
towing service or personal transport providers.
AB 2820 refines short-term housing as any housing with a lease
term of no longer than one year. It also prohibits towing and
transportation service providers from raising rates more than
10 percent when a state of emergency is declared. Since
current law has been limited and inconsistent depending on the
type of disaster, AB 2820 also ensures that whether the
disaster prompting the declaration of a state of emergency is
natural or manmade, familiar or unprecedented, consumers
across the state will be protected from excessive price
increases. Disaster victims should not be victimized twice.
2. What This Bill Would Do
This bill clarifies the definition of State of Emergency and
Local Emergency. This bill applies the definitions consistently
within the existing statute prohibiting price gouging during a
declared emergency. The existing statute prohibits raising
prices above a specified amount, for a variety of goods and
services, once an emergency has been declared. The existing
statute has different definitions of what constitutes a
triggering emergency depending on the type of goods or services
being sold. For example, the prohibition against increasing
hotel or motel prices more than 10% does not apply if the
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emergency is a result of a manmade disaster. In contrast, the
prohibition on price increases for goods such as food, medical
supplies, housing, or gasoline includes both natural and manmade
disasters. This bill provides a consistent definition of
emergency throughout the statute, including both natural and
manmade disasters.
3. Background - Aliso Canyon Disaster
In October of 2015, a large leak was discovered at the Aliso
Canyon natural gas storage facility. The methane leak forced
more than 4,600 households into temporary housing and took 112
days to plug.<1> The Los Angeles Board of Supervisors declared a
state of emergency in December of 2015. Governor Brown declared
a state of emergency in January of 2016.
A news story by KPCC in January of 2016 discussed the extent to
which rental prices increased after the leak was discovered.
KPCC quoted, Allen Brodetsky, president of Boutique Realty in
Tarzana, who stated "Where rental prices would normally go
between $3,000 and $4,000, now landlords are asking six, seven,
eight, nine thousand dollars- double, triple the rent of what it
should be."<2> Brodetsky also said that "The rental market
around Porter Ranch has gotten so hot, that some home sellers,
including a neighbor of his, have taken their houses off the
market and turn them into short-term rentals."<3>
To the extent that the rent increases described above were for
month-to-month leases and the leases were entered into after the
declaration of a state of emergency, the conduct would be
prohibited under the current price gouging law. However, there
was concern that existing law was not providing sufficient
protection to individuals and families displaced by the Aliso
Canyon disaster when landlords were demanding a year lease in
conjunction with the high monthly rental prices. Current law
does not cover rental contracts entered during a declared
emergency if the rental contracts were for any period longer
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<1>
http://thinkprogress.org/climate/2016/02/12/3749190/aliso-canyon-
methane-leak-stopped/
<2>
http://www.scpr.org/news/2016/01/07/56700/fears-of-price-gouging-
as-porter-ranch-families-lo/
<3> ibid.
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than month to month. This bill expands the scope of the leases
that would be covered under criminal price gouging to include
leases with an initial term of up to one year.
4. Argument in Support
According to the Consumer Attorneys of California:
AB 2820 will prevent prices for short-term housing units and
towing services from being raised more than 10% without
justification when a state of emergency has been declared. AB
2820 further provides that all consumer price gouging
protections in current law apply during a state of emergency
whether the disaster was natural or manmade.
The need for this bill is highlighted by the aftermath of the
Aliso Canyon gas leak. Following the devastating leak,
unscrupulous individuals took advantage of a traffic loophole
in current law and raised the prices of short-term rentals.
Landlords in nearby Woodland Hills and Northridge jacked up
rents after the gas leak was discovered. Rental prices in the
area were typically between $3,000 and $4,000 per month,
during the gas leak, landlords were commonly asking for $6000
to $9000 per month - double or triple the amount of normal
rents. Current law protects those with month-to-month leases,
but does not apply if the initial lease is longer than 30
days. It also does not apply to hotel and motel operators if
the disaster is man-made rather than natural, leaving families
vulnerable to exploitation.
During some disasters residents have had no choice but to
abandon their vehicles as they fled to safety. Towing
companies have taken advantage of the crisis by charging
exorbitant rates. AB 2820 will specifically prohibit towing
service providers from raising rates more than 10% when a
state of emergency is declared.
-- END -
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