BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 270 (Mendoza)
Version: April 14, 2015
Hearing Date: April 28, 2015
Fiscal: Yes
Urgency: No
RD
SUBJECT
Court Reporters Board of California: civil actions:
corporations
DESCRIPTION
This bill would authorize the Court Reporters Board of
California (CRB) to bring a civil action (or ask the Attorney
General to bring an action) to enjoin any unlicensed person,
corporation, or foreign corporation from rendering court
reporter services in this state.
This bill would authorize the CRB to seek certain penalties,
including fines and restitution, and would require the courts to
award reasonable investigation and enforcement costs to the CRB
or Attorney General responsible for filing an action pursuant to
this bill. The bill would also authorize courts to designate
that any transcript prepared by any person or corporation
subject to an action brought under this bill does not qualify as
a certified transcript.
The bill would also make it a misdemeanor for any person or
corporation to knowingly render court reporter services in this
state without ever being issued a license or authorized to
render those services.
BACKGROUND
The Court Reporters Board of California (CRB) is charged with
certifying and regulating shorthand reporters who perform a
vital function for the courts and litigants in providing
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official, verbatim records of a variety of proceedings. (See
Bus. & Prof. Code Sec. 8017.) The importance of this
transcription function, by such licensed individuals, is
reflected in California law, which requires that an official
reporter or official reporter pro tempore of the superior court
take down in shorthand all testimony, objections made, rulings
of the court, exceptions taken, arraignments, pleas, sentences,
arguments of the attorneys to the jury, and statements and
remarks made and oral instructions given by the judge or other
judicial officer, in specified cases. (See Code Civ. Proc. Sec.
269.) Existing law also provides that the report of the
official reporter, or the official reporter pro tempore, of any
court, duly appointed and sworn, when transcribed and certified
as being a correct transcript of the testimony and proceedings
in the case, is prima facie evidence of the testimony and
proceedings. (Code Civ. Proc. Sec. 273(a).)
Given the critical function of the record, the importance of not
just the accuracy of the skills, but the impartiality of the
shorthand reporter, cannot be overstated. Indeed, a certificate
may be suspended, revoked, denied, or other disciplinary action
may be imposed for certain causes, including, among others:
fraud, dishonesty, corruption, willful violation of duty, gross
negligence or incompetence in practice, or unprofessional
conduct in or directly related to the practice of shorthand
reporting. For these purposes, existing law defines
"unprofessional conduct" to include, but not be limited to, acts
contrary to professional standards concerning confidentiality;
impartiality; filing and retention of notes; notifications,
availability, delivery, execution and certification of
transcripts; and any provision of law substantially related to
the duties of a certified shorthand reporter. (Bus. & Prof.
Code 8025(d).)
As such, existing law is expressly designed to establish and
maintain a standard of competency for those engaged in the
practice of shorthand reporting, for the protection of the
public, in general, and for the protection of all litigants
whose rights to personal freedom and property are affected by
the competency of shorthand reporters, in particular. (Bus. &
Prof. Code Sec. 8015.)
This bill seeks to respond to a recent case where the court held
that CRB lacked jurisdiction over an out-of-state corporation
rendering court reporting services that had violated
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professional rules. Accordingly, this bill, sponsored by the
California Court Reporters Association, would authorize CRB to
bring an action or request the Attorney General to bring an
action to enjoin any unlicensed person, corporation, or foreign
corporation from rendering court reporter services in this state
and, in doing so, to seek certain penalties, including fines and
restitution, as specified. This bill would provide for
reasonable investigation and enforcement costs to be recovered
by the CRB or Attorney General bringing the act, and would also
make it a misdemeanor for any person or corporation to knowingly
render court reporter services in this state without ever being
issued a license or authorized to render those services.
CHANGES TO EXISTING LAW
Existing law establishes the California Court Reporters Board
(CRB) with, among other things, the authority and responsibility
to determine the qualifications of persons applying for
certification as a shorthand reporter; make rules for the
examination of applicants and the issuing of certificates of
qualification in professional shorthand reporting; investigate
the actions of any licensee, upon receipt of a verified
complaint in writing from any person, for alleged acts or
omissions constituting grounds for disciplinary action, as
specified; and charge and collect authorized fees. (Bus. &
Prof. Code Sec. 8000 et seq.; see Bus. & Prof. Code Secs.
8007(a), (c)), 8008(c), 8000(f), 8031.)
Existing law provides that the protection of the public shall be
the highest priority for the CRB in exercising its licensing,
regulatory, and disciplinary functions. (Bus. & Prof. Code Sec.
8005.1.)
Existing law prohibits any person from engaging in the practice
of shorthand reporting, as defined, unless that person is the
holder of a certificate in full force and effect issued by the
CRB. This provision does not apply to a salaried, full-time
employee of any department or agency of the state who is
employed as a hearing reporter. This applies to all persons who
are appointed, on and after January 1, 1983, to the position of
official reporter or pro tempore official reporter of any court,
as defined in the Government Code. (Bus. & Prof. Code Sec.
8016.)
Existing law defines the practice of shorthand reporting as the
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making, by means of written symbols or abbreviations in
shorthand or machine shorthand writing, of a verbatim record of
any oral court proceeding, deposition, court ordered hearing or
arbitration, or proceeding before any grand jury, referee, or
court commissioner and the accurate transcription thereof.
Nothing in this section shall require the use of a certified
shorthand reporter when not otherwise required by law. (Bus. &
Prof. Code Sec. 8017.)
Existing law provides that in order to qualify for licensure as
a certified shorthand reporter, a person must be over the age of
18 years, not have committed any acts or crimes constituting
grounds for the denial of licensure under specified law, have a
high school education or its equivalent as determined by the
CRB, and have satisfactorily passed an examination under any
regulations that the CRB may prescribe. Existing law further
provides, in order to be admitted to the examination that is
required prior to the issuance of the certificate, the person
must also present satisfactory evidence to the CRB that the
applicant has obtained certain experience or other
certification. (Bus. & Prof. Code Sec. 8020.)
Existing law provides that in addition to the authority to
conduct disciplinary proceedings under the chapter on shorthand
reporters, the CRB, through its duly authorized representatives,
shall have authority to issue administrative citations or assess
fines for the violation of any rules and regulations adopted by
the CRB under the provisions of the chapter. (Bus & Prof. Code
Sec. 8027.5.)
Existing law provides that a violation of any provision of the
chapter on shorthand reporters is a misdemeanor and also makes
any person who directly or indirectly assists in or abets the
violation of, or conspires to aid or abet in the violation of,
any provision of this chapter, guilty of a misdemeanor. (Bus. &
Prof. Code Sec. 8019.)
Existing law , the Moscone-Knox Professional Corporation Act,
defines a professional corporation as a corporation that is
engaged in rendering professional services (defined as any type
of professional services that may be lawfully rendered only
pursuant to a license, certification or registration authorized
by the Business and Professions Code, the Chiropractic Act, or
the Osteopathic Act) in a single profession, pursuant to a
certificate of registration issued by the governmental agency
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regulating the profession. However, a professional corporation
or foreign professional corporation, as defined, rendering
professional services by persons duly licensed by the boards in
charge of those services, including the CRB, shall not be
required to obtain a certificate of registration in order to use
those professional services. (Corp. Code Sec. 13401(a),(b); see
also Bus. & Prof. Code Sec. 8040.)
Existing law defines a "foreign corporation" as a corporation
organized under the laws of another state that is engaged in a
profession of a type for which there is authorization in the
Business and Professions Code for the professional services by a
foreign professional corporation. Existing law defines a
"licensed person" as any natural person who is duly licensed
under the provisions of the Business and Professions Code, the
Chiropractic Act, or the Osteopathic Act, to render the same
professional services as are or will be performed by the
professional corporation or foreign professional corporation of
which he or she is or intends to become an officer, director,
shareholder, or employee. (Corp. Code Sec. 13401(c), (d).)
Existing law prohibits any foreign professional corporation from
rendering professional services in this state without a
currently effective certificate of registration issued by the
governmental agency regulating the profession in which that
corporation proposes to be engaged, pursuant to the applicable
provisions of the Business and Professions Code expressly
authorizing those professional services to be rendered by a
foreign professional corporation. (Corp. Code Sec. 13404.5(b).)
Existing law provides that a shorthand reporting corporation is
a corporation which is authorized to render professional
services, as specified, as long as that corporation and all of
its shareholders, officers, directors, and employees rendering
professional services who are certified shorthand reporters are
in compliance with the Moscone-Knox Professional Corporation
Act, the Business and Professions Code's article on shorthand
reporting corporations, and all other statutes and regulations
now or hereafter enacted or adopted pertaining to that
corporation and the conduct of its officers. Existing law
provides that with respect to a shorthand reporting corporation,
the governmental agency referred to in the Moscone-Knox
Professional Corporation Act is the Court Reporters Board of
California. (Bus. & Prof. Code Sec. 8040.)
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Existing law generally requires each director, shareholder, and
officer of a shorthand reporting corporation to be a licensed
person as defined under the provision of the Moscone-Knox
Professional Corporation Act above. (Bus. & Prof. Code Sec.
8044.)
Existing law prohibits a shorthand reporting corporation from
doing or failing to do any act the doing of which or the failure
to do which would constitute unprofessional conduct under any
statute, rule or regulation now or hereafter in effect which
pertains to shorthand reporters or shorthand reporting.
Existing law provides that in conducting its practice it shall
observe and be bound by such statutes, rules and regulations to
the same extent as a person holding a license under this
chapter. (Bus. & Prof. Code Sec. 8046.)
Existing law provides that it shall constitute unprofessional
conduct and a violation of this chapter for any person licensed
under this chapter to violate, attempt to violate, directly or
indirectly, or assist in or abet the violation of, or conspire
to violate any provision or term of this article, the
Moscone-Knox Professional Corporation Act, or any regulations
duly adopted under those laws. (Bus. & Prof. Code Sec. 8042.)
Existing regulations provide that every person under the
jurisdiction of the Board who holds a license or certificate, or
temporary license or certificate, or business that renders
professional services, namely shorthand reporting services,
within the meaning of the Moscone-Knox Professional Corporation
Act, shall comply with the following professional standards of
practice, among others:
act without bias toward, or prejudice against, any parties
and/or their attorneys;
not enter into, arrange, or participate in a relationship that
compromises the impartiality of the certified shorthand
reporter, including, but not limited to, a relationship in
which compensation for reporting services is based upon the
outcome of the proceeding; and
other than the receipt of compensation for reporting services,
neither directly or indirectly give nor receive any gift,
incentive, reward, or anything of value to or from any person
or entity associated with a proceeding being reported. Such
persons or entities shall include, but are not limited to,
attorneys or an attorney's family members, employees of
attorneys or an employee's family members, law firms as single
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entities, clients, witnesses, insurers, underwriters, or any
agents or representatives thereof. Exceptions to the
foregoing restriction shall be as follows: (A) giving or
receiving items that do not exceed $100 (in the aggregate for
any combination of items given and/or received) per calendar
year to or from those aforementioned persons; or (B) providing
services without charge for which the certified shorthand
reporter reasonably expects to be reimbursed from the
Transcript Reimbursement Fund, or otherwise for an "indigent
person" as specified. (16 C.C.R. Sec. 2475(b)(6)-(8).)
This bill would provide that in addition to any other authority
or remedy, the CRB may bring a civil action (or ask the Attorney
General to bring an action) to enjoin any person, corporation,
or foreign corporation from rendering court reporter services in
this state without ever being issued a license by the board or
without authorization to render court reporter services in this
state by satisfying the requirements of the article on shorthand
reporting corporations.
This bill would provide, in an action brought as authorized
above, against a person or corporation rendering services
without a license or authorization:
the court must, in addition to any other remedy authorized by
law, impose a penalty of not less than $1,000 and no more than
$2,500 against the unlicensed or unauthorized person or
corporation; and
the court may order restitution and the return of any payments
made to the person or corporation.
This bill would provide, in an action brought as authorized
above:
the court may enjoin a person or corporation from taking any
action that would constitute a violation of any statute or CRB
regulation pertaining to impartiality, as specified; and
the court may impose a penalty of up to $2,500 (taking into
consideration the frequency of the violations and the impact
of those violations in determining the amount of the
penalty), and restitution for any acts undertaken by any
person or corporation rendering court reporter services in
this state (hereinafter, "discretionary penalties").
This bill would also allow the court to award a portion of any
unallocated discretionary penalties collected to be used for
future investigation and enforcement of this section by the CRB
and the Attorney General. Any such award of penalties to the
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CRB would then have to be deposited in the Court Reporters' Fund
and the penalties must be subject to appropriation by the
Legislature.
This bill would specify that it is a misdemeanor for any person
or corporation to knowingly render court reporter services in
this state without ever being issued a license by the board or
being authorized to render court reporter services in this state
pursuant to this article.
COMMENT
1. Stated need for the bill
According to the author, "[e]ntities who are incorporated under
the law of another state, and who are not licensed in
California, have stated, in the past, that they are outside of
the board's jurisdiction because they are not licensed by the
board in this state. The board has found that these entities
have also violated gift giving rules, jeopardizing the
impartiality of the court reporting profession." However, as
explained by the author, problems have arisen when the CRB has
attempted to take action against these corporations:
Under current law, the CRB has authority to impose penalties
on any certified court reporter or court reporting
corporation, as defined by [Bus. & Prof.] Code [Sec.] 8040,
that renders court reporting services in California in
violation of the existing rules and regulations or without a
court reporting license.
However, when the CRB has tried to regulate entities that are
incorporated under the laws of a state other than California,
the courts have found current law to be unclear on whether the
board may impose fines on a corporation that has never been
licensed in the state and does not meet the existing
definition under the board's authority.
SB 270 clarifies the boards existing authority over entities
rendering court reporting services in the state by explicitly
providing remedies for those entities that are in violation of
California's professional standards. This clear authority
will ensure that all entities rendering court reporting
services in California are following the professional
standards required in our state.
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The sponsor of this bill, the California Court Reporters
Association, adds:
SB 270 strengthens the CRB's efforts to prohibit unlawful
court reporting in California. For example, in 2010, it was
discovered that a Texas based corporation was providing court
reporting services in California in violation of our state's
ethical rules on gift giving. The board had found that this
corporation was offering incentives and gifts in exchange for
being hired to provide court reporters in depositions, a
violation of California's ethical standards that can
jeopardize the impartiality of the court reporter. In this
finding, the corporation argued that the board lacked
jurisdiction over their services because they were not
licensed in California and therefore not subject to the
board's authority.
In 2012, the court ruled that U.S[.] Legal was indeed
rendering court reporter services in California without being
in compliance with California's statutory requirements. SB 270
provides specific authority for the board to seek injunctive
relief to stop individuals and corporations that are providing
services in California without having ever been licensed in
our state, and imposes penalties if they are also in violation
of California's professional standards.
Court reporters ensure the integrity of judicial records and
are unmatched in their ability to produce a real-time
transcript of court proceedings. The board should have
undisputed authority to ensure that any entity rendering court
reporting services in California is upholding the state's
professional and ethical standards.
2. Bill authorizes limited actions by either the board or the
Attorney General
Under the Moscone-Knox Professional Corporations Act, if a
foreign corporation (i.e. out of state corporations) provides
professional services for which there is authority in the
Business and Professions Code to perform these professional
services, the foreign corporation can engage in rendering those
professional services pursuant to a certificate of registration.
If, however, the foreign corporation is rendering those
services by persons duly licensed by the Court Reporters Board
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of California (CRB), no certificate of registration is required
to render those professional services. Under the Business and
Professions Code, CRB currently has express authority over
California licensees (including California licensees used by
foreign professional corporations), as well as over shorthand
reporting corporations incorporated in California. (Bus. &
Prof. Code Secs. 8044, 8046.) This bill seeks to provide the
CRB express authority to bring certain actions against foreign
corporations, in addition to natural persons and corporations,
providing court reporter services in California without a
certificate from the CRB. This bill would further authorize
actions against those persons or entities for violating statutes
or regulations pertaining to impartiality.
According to the proponents, there are foreign corporations that
have been operating in California and rendering professional
court reporting services by employing or contracting with
California-licensed court reporters. In other words, the
corporation and its owners are not themselves licensed or
certified under California law, thus, creating a situation where
the licensee must adhere to California laws regulating court
reporting services while the corporate owners or operators
seemingly do not. However, when the CRB has sought to issue
citations and fines against such foreign corporations that do
not adhere to California statutes and regulations regarding
professional conduct (such as rules requiring the impartiality
of court reporters and thereby prohibiting gift giving or
incentives in exchange for business), they have been told by the
courts that they do not have authority to impose citations and
fines over unlicensed corporations.
The author and sponsor provide the recent example of a
California Superior Court decision in Court Reporters Board of
California v. U.S. Legal Support, Inc. from 2012, involving a
suit brought by the CRB against the U.S. Legal (USL) for
violating Business and Professions Code Section 8046 (which: (1)
prohibits a shorthand reporting corporation from doing or
failing to do any act the doing of which or the failure to do
would constitute unprofessional conduct under any statute, rule
or regulation now or hereafter in effect which pertains to
shorthand reporters or shorthand reporting; and (2) requires
that in conducting its practice it shall observe and be bound by
such statutes, rules and regulations to the same extent as a
person holding a license under the chapter on shorthand
reporting) in conjunction with a California Code of Regulations
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professional standard of practice provision that generally
prohibits (other than the receipt of compensation for reporting
services) giving or receiving any gift, incentive, reward, or
anything of value to or from any person or entity associated
with a proceeding being reported. (Santa Clara Superior Court,
Case No. 1-11-CV 197817, May 25. 2012, p.3) There, CRB issued a
citation to the defendant assessing a fine of $2,500 on the
defendant, which the defendant then refused to pay based on an
argument that CRB lacked jurisdiction to issue the citation to
USL. (Id.)
In its suit, CRB argued that the defendant was a foreign
corporation as defined under the Moscone-Knox Professional
Corporations Act and hence a "shorthand reporting corporation"
as otherwise defined under the Business and Professions Code and
subject to the anti-gift-giving regulation. The court wrote
that:
The problem with this argument is foundational. [The
Moscone-Knox Professional Corporations Act provision, Section
13401(c)] defines a foreign professional corporation as a
corporation "organized under the laws of a state . . . other
than this State that is engaged in a profession of a type for
which there is authorization in the Business and Professions
Code for the performance of professional services by a
foreign professional corporation." It is undisputed that
Defendant is organized under the laws of the State of Texas,
but it is also clear that there is no express authorization
in the Business and Professions Code for the performance of
court reporting services by a foreign professional
corporation. (Id. at 4-5.)
Finding that the CRB "is a creature of statute, limited in its
reach to certain enumerated powers and duties" and "[n]o
plausible reading of the Corporations Code and the Business and
Professions Code gives the Board authority to issue citations to
foreign corporations like Defendant (that do not meet the
statutory definition of "foreign professional corporation"
[because they do not actually hold a license or certificate])
for violating the Board's anti-gift-giving regulation, the court
ruled in favor of the defendant. (Id. at 5-6.)
This bill would not expressly authorize foreign professional
corporations to render court reporting services in California by
way of certification, but to the extent those corporations are
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able to do so anyway by way of employing or contracting with a
California-licensed court reporter, the bill would give the CRB
authority to bring an action (or request the Attorney General to
bring an action) against the corporation to enjoin any person,
corporation, or foreign corporation from rendering court
reporter services in this state without ever being issued a
license by the board or without authorization to render court
reporter services in this state by satisfying the requirements
of the article on shorthand reporting corporations. In an
action brought as authorized above, against a person or
corporation rendering services without a license or
authorization, the bill would require the court to impose
specified monetary penalties (between $1000-2500 per day)
against the unlicensed or unauthorized person or corporation and
would allow the courts to order restitution and the return of
any payments made to the person or corporation. These specific
remedies would be available in addition to any other authority
or remedy available to the CRB.
Additionally, the bill would permit the court to also enjoin a
person or corporation from taking any action that would
constitute a violation of any statute or CRB regulation
pertaining to impartiality, as specified, and would authorize
the court to impose a penalty of up to $2,500 (taking into
consideration the frequency of the violations and the impact of
those violations in determining the amount of the penalty), and
order restitution for any acts undertaken by any person or
corporation rendering court reporter services in this state.
The bill would require courts to award reasonable investigation
and enforcement costs for filing an action pursuant to this
bill.
3. Suggested technical and clarifying amendments
The following amendments would clarify that the award of
reasonable investigation and enforcement costs would only be
made where the CRB or Attorney General prevails in the action
and would correct a drafting error relating to the order of
restitution by the courts.
Suggested technical and clarifying amendments :
On page 3, line 17, before "restitution" insert "order"
On page 3, starting on line 33, strike "(f) The court shall
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award reasonable investigation and enforcement costs to the
board or Attorney General responsible for filing an action
pursuant to subdivision (a)" and insert "(f) If the board or
Attorney General is granted an injunction pursuant to
subdivision (a), the court shall award reasonable
investigation and enforcement costs"
Support : Orange County Superior Court Reporters Association
Opposition : None Known
HISTORY
Source : California Court Reporters Association
Related Pending Legislation : None Known
Prior Legislation :
AB 1461 (Ruskin, 2009) would have prohibited a firm,
partnership, sole proprietorship, or other business entity
providing or arranging for shorthand reporting services, from
doing or failing to do any act that constitutes unprofessional
conduct under any statute, rule, or regulation pertaining to
shorthand reporters or shorthand reporting. Such entities would
also have been required to observe and be bound by the same
statutes, rules, and regulations that bind a person holding a
shorthand reporting license. That bill died in the Assembly
Appropriations Committee.
SB 687 (Boatwright, Ch. 910 , Stats. 1993) was enacted to allow
foreign professional corporations to qualify as foreign
corporations to transact intrastate business in California and
defined foreign professional corporations as corporations
organized under the laws of another state that engage in
rendering services that if rendered in this state, would be
deemed professional services.
Prior Vote : Senate Business, Professions and Economic
Development Committee (Ayes 9, Noes 0)
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