BILL ANALYSIS                                                                                                                                                                                                    Ó






           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 2820|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  AB 2820
          Author:   Chiu (D), et al.
          Amended:  8/19/16 in Senate
          Vote:     21 

           SENATE PUBLIC SAFETY COMMITTEE:  6-0, 6/14/16
           AYES:  Hancock, Anderson, Glazer, Leno, Liu, Monning
           NO VOTE RECORDED:  Stone

           SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           ASSEMBLY FLOOR:  68-10, 5/9/16 - See last page for vote

           SUBJECT:   Crimes:  price gouging:  states of emergency


          SOURCE:    Author
          
          DIGEST:  This bill revises 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.

          Senate Floor Amendments of 8/19/16 (1) specify further which  
          events will constitute an emergency or major disaster; (2)  
          remove "air pollution" and "sudden and severe energy shortages"  
          from the type of disasters in which this bill applies; (3) and  
          clarify that this bill can apply in local emergencies.

          Senate Floor Amendments of 8/1/16 (1) add Assembly Member Wilk  
          as a principal coauthor; and (2) add technical, non-substantive  








                                                                    AB 2820  
                                                                    Page  2


          amendments.
          
          ANALYSIS:  

          Existing law:


           1) 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).) 


           2) States that it is the intent of the Legislature 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).)


           3) 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).)


           4) States that upon the declaration of a state of emergency  
             resulting from an earthquake, flood, fire, riot, or storm  







                                                                    AB 2820  
                                                                    Page  3


             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).)


           5) Specifies that upon the proclamation of a state of 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).)


           6) 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).)


           7) 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).)


           8) States that the conduct described above is a misdemeanor  
             punishable by imprisonment in a county jail for a period not  







                                                                    AB 2820  
                                                                    Page  4


             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).)


           9) Specifies that the conduct described above shall constitute  
             an unlawful business practice and an act of unfair  
             competition. (Penal Code § 396 subd. (g).)


           10)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).)


           11)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  
             California." (Penal Code § 396, subd. (g)(2).)


           12)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).)


           13)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).)









                                                                    AB 2820  
                                                                    Page  5


           14)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.


           15)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).)


           16)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).)


          This bill:


           1) 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.









                                                                    AB 2820  
                                                                    Page  6


           2) 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.


           3) Applies the definitions above, throughout the criminal price  
             gouging statute and also includes the transportation of  
             persons and towing services in the crime of price gouging  
             during a declared emergency. Additionally, 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.


          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.  [http://thinkprogress.org/climate/  
          2016/02/12/3749190/aliso-canyon-methane-leak-stopped/] 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."   
          [http://www.scpr.org/news/2016/01/07/56700/fears-of-price-gouging 
          -as-porter-ranch-families-lo/]  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  







                                                                    AB 2820  
                                                                    Page  7


          houses off the market and turn them into short-term rentals."  
          [ibid.] 

          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  
          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. 


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes

          SUPPORT:   (Verified8/19/16)

          Office of Attorney General Kamala D. Harris
          Consumer Attorneys of California


          OPPOSITION:   (Verified8/19/16)


          California Public Defenders Association




          ASSEMBLY FLOOR:  68-10, 5/9/16
          AYES:  Achadjian, Alejo, Arambula, Atkins, Baker, Bigelow,  
            Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos,  
            Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Roger Hernández, Holden,  
            Irwin, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, McCarty, Medina, Melendez, Mullin,  
            Nazarian, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas,  







                                                                    AB 2820  
                                                                    Page  8


            Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,  
            Ting, Weber, Wilk, Williams, Wood, Rendon
          NOES:  Travis Allen, Chávez, Gatto, Hadley, Harper, Jones,  
            Mayes, Obernolte, Wagner, Waldron
          NO VOTE RECORDED:  Beth Gaines, Eduardo Garcia

          Prepared by:Molly Lao / PUB. S. / 
          8/22/16 22:43:26


                                   ****  END  ****