BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  July 7, 2015


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                Susan Bonilla, Chair


                     SB 270(Mendoza) - As Amended June 23, 2015


          SENATE VOTE:  29-9


          SUBJECT:  Court Reporters Board of California: civil actions:  
          corporations.


          SUMMARY:  Authorizes the Court Reporters Board of California  
          (CRB) to bring a civil action, or request the Attorney General  
          (AG) to bring an action in a superior court to enjoin any  
          unlicensed person, corporation, or foreign corporation from  
          rendering court reporter services in this state.    


          EXISTING LAW:   


          1)Provides for the regulation and certification of shorthand  
            reporters by the CRB within the Department of Consumer Affairs  
            (DCA).  Business and Professions Code (BPC) Section 8000 et  
            seq.)


          2)Prohibits a person from engaging in the practice of shorthand  
            reporting, as specified, unless that person is the holder of a  
            certificate in full force and effect issued by the CRB unless  
            he or she is a salaried, full-time employee of any department  








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            or agency of the state who is employed as a hearing reporter.   
            (BPC Section 8016)
          3)Defines the "practice of shorthand reporting" as the 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.   
            (BPC Section 8017)


          4)Specifies that nothing requires the use of a certified  
            shorthand reporter when not otherwise required by law.  (BPC  
            Section 8017)


          5)Except as specified, prohibits a person, firm or corporation  
            from assuming or using the title "certified shorthand  
            reported" or the abbreviation "C.S.R." or using any words or  
            symbols indicating or tending to indicate that he, she, or it  
            is certified.  (BPC Section 8018)


          6)Provides the CRB, in addition to its authority to conduct  
            disciplinary proceedings, the authority to issue  
            administrative citations or assess fines for the violation of  
            any rules and regulations adopted by the CRB.  (BPC Section  
            8027.5)


          7)Defines a "shorthand reporting corporation" as a corporation  
            which is authorized to render professional services, as  
            specified in the Corporations Code (CORP) Section 13401, 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 specified requirements in the CORP Code.  (BPC  
            Section 8040)









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          8)Prohibits a shorthand reporting corporation from doing or  
            failing to do any act which would constitute unprofessional  
            conduct under any statute, rule, or regulation which pertains  
            to shorthand reporters or shorthand reporting.  (BPC Section  
            8046)


          9)Requires a shorthand reporting corporation in conducting its  
            practice to observe and be bound by statutes, rules, and  
            regulations to the same extent as a person holding a license.   
            (BPC Sections 8046)


          10)Requires every person under the jurisdiction of the CRB 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  
            CORP 13401, to comply with professional standards of practice,  
            as specified.  (California Code of Regulations (CCR) Title 16  
            Section 2475)


          THIS BILL: 


          11)Permits the CRB, in addition to any other authority or  
            remedy, to bring a civil action in a superior court, or to  
            request the AG to bring an action, to enjoin any person,  
            corporation, or corporation organized under the laws of  
            another state from rendering court reporter services in this  
            state without ever being issued a license by the CRB or  
            authorized to render court reporter services in this state.  


          12)States that if a civil action is brought, the court, in  
            addition to any other remedy authorized by law, must impose a  
            penalty of not less than $1,000 and no more than $2,500 per  
            day against the person or corporation rendering services  








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            without a license or authorization, and the court, in addition  
            to any other restitution provided by law, may also order  
            restitution and the return of any payments made to the person  
            or corporation.  


          13)Authorizes the court, in addition to any other authority or  
            remedy, if an action is brought, to also enjoin a person or  
            corporation from taking any action that would otherwise  
            constitute a violation of any statute or regulation of the CRB  
            pertaining to impartiality, including but not limited to  
            violation of the professional standards of practice of the  
            CRB, and provides that the court, in addition to any other  
            penalty provided for by statute or regulation, may impose a  
            penalty of up to $2,500 and order restitution for any acts  
            undertaken by any person or corporation rendering court  
            reporter services in this state.


          14)Requires the court in determining the amount of the penalty  
            referenced in 3) above, to take into consideration the  
            frequency of the violations and the impact of those  
            violations, as specified. 


          15)Requires the court to award reasonable investigation and  
            enforcement costs to the CRB or the AG if an injunction is  
            granted, as specified, and also authorizes the court to award  
            a portion of any unallocated penalties collected, as  
            specified, to be used for future investigation and  
            enforcement, and requires any penalty awarded to the CRB to be  
            deposited in the Court Reporter's Fund, which is subject to  
            appropriation by the Legislature.


          16)States that numbers 1)-5) above cannot be not be construed to  
            change, limit, or alter any existing authority of the board,  
            including existing injunctive authority.









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          FISCAL EFFECT:  According to the Senate Appropriations Committee  
          Analysis dated May 18, 2015, this bill will result in "unknown  
          additional CRB enforcement costs, dependent upon the number of  
          complaints investigated and enforcement actions.  If additional  
          staff is needed, costs could be in the range of $100,000  
          annually." This bill will also result in "unknown additional  
          fine revenues, which are also dependent upon the number of  
          successfully adjudicated cases.  In addition, there could be  
          reimbursements for enforcement and investigation costs that are  
          awarded by the courts." 



          COMMENTS:  


          Purpose.  This bill is sponsored by the  California Court  
          Reporters Association  .  According to the author, "[this bill]  
          strengthens the authority of the CRB to regulate or prevent  
          unlicensed individuals and corporations from unlawfully  
          rendering court reporting services in California by issuing  
          fines or injunctions for acts in violation of the CRB's  
          professional and ethical rules for certified shorthand  
          reporters.  

          Under current law, the CRB has limited authority to impose  
          penalties on any court reporter or court reporting corporation  
          that is rendering services without a court reporting license.  
          However, for unlicensed entities, the CRB has had challenges in  
          imposing fines for any violations. This has jeopardized the  
          integrity of the court reporting profession and places at a  
          disadvantage licensed businesses that provide court reporting  
          services." 

          Court Reporters Board.  The CRB is responsible for licensing and  
          disciplining certified shorthand reporters.  Certified shorthand  
          reporters are responsible for reporting depositions in legal  
          cases as well as court proceedings.  Since 1972, the CRB has  








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          permitted the certification of individuals and the registration  
          of court reporting corporations.  Currently, the CRB oversees  
          approximately 7,000 certified shorthand reporters. The CRB  
          establishes the educational requirements for certification  
          including authorizing the minimal educational standards and  
          approving schools.  In order to qualify for licensure as a  
          certified shorthand reporter, an individual must have a high  
          school education, twelve months (or 1,400 hours) of full-time  
          work experience related to making records of hearings, a passing  
          score on the California State Hearing Reporters Examination and  
          complete a course from an approved court-reporting school.   
          Currently in California, certified shorthand reporters work in  
          two separate capacities: 1) as an "official reporter" who works  
          as a court reporter employed by a state court or 2) a  
          "freelance" reporter who is hired privately by court reporting  
          businesses, firms, or attorneys to report depositions.  Both  
          official and freelance reporters are required to meet the same  
          educational and examination qualifications.  .  


          Enforcement Authority. In addition to the CRB's licensing  
          function, the CRB is also tasked with enforcement-related  
          activities for shorthand reporters who violate the practice act.  
           BPC Section 8025 states that a certificate to practice as a  
          shorthand reporter may be suspended, revoked, or denied, or  
          other disciplinary action may be taken against a certificate  
          holder for multiple reasons including the conviction of a  
          misdemeanor if the misdemeanor is substantially related to the  
          functions and duties of a court reporter, fraud or  
          misrepresentation in obtaining a certificate, unprofessional  
          conduct; or, loss or destruction of stenographic notes that  
          prevents the production of a transcript, among others.  In  
          addition to the provisions of BPC Section 8025, the CRB  
          specifies through regulation the professional standards of  
          practice (16 CCR 16 Section 2475) for professionals.  

          Under current law, the CRB has the authority to carry out its  
          licensing and enforcement authority against any person or  
          corporation (as defined in Section 13401 of the CORP).   








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          According to the author, the CRB has limited authority to impose  
          penalties on any court reporter or court reporting corporation  
          that is rendering services without a court reporting license.   
          While the CRB does not register or certify corporations in  
          California, BPC Sections 8044 and 8046 provide the CRB with the  
          explicit authority over corporations incorporated in California;  
          however, the same authority is not specified in statute for  
          foreign corporations providing court reporting business in  
          California.  This bill aims to increase the CRB's disciplinary  
          reach to include those entities or corporations who may be  
          providing professional court reporter services without a  
          California-based license by permitting the CRB to discipline  
          entities who are in violation of professional standards as  
          regulated by the CRB, or other violations of the Act. 

          According to the author, this need for this bill is in response  
          to the CRB's inability to take the appropriate disciplinary  
          actions against a corporation who was accused of operating in  
          violation of the CRB's professional standards of practice;  
          specifically, 16 CCR Section 2475(b)(8) which prohibits any  
          person or business under the jurisdiction of the CRB from either  
          directly or indirectly giving or receiving any gift, incentive,  
          reward, or anything of value to or from any person or entity  
          associated with a proceeding being reported that is more than  
          $100.  

          Court Case.  In 2010, the CRB took disciplinary action against a  
          corporation, charging it with violating 16 CCR Section  
          2475(b)(8) by issuing a citation and fine.  The corporation  
          which the fine was levied against argued, at that time, that the  
          CRB lacked the jurisdictional authority to issue a citation to  
          the company, and did not pay the fine.  


          As a result in 2012, a formal case was brought against U.S.  
          Legal Support, Inc., and in that case, Court Reporters Board of  
          California vs U.S. Legal Support, Inc. 1-11-CV197817, the court  
          held that the CRB lacked the jurisdictional authority to issue  
          citations and fines to an out-of-state corporation rendering  








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          court reporting services in California without authorization to  
          do so.  As the court noted in its decision, although U.S. Legal  
          Services, Inc. was rendering court reporting services in  
          California and was in violation of the gift giving rules as  
          defined in the CRB's regulations, there was no explicit  
          authority in statute authorizing CRB to impose citations or  
          fines because it was not authorized to do business in California  
          under the BPC.  In addition to other legal remedies, this bill  
          will authorize the CRB, under this new section, to bring an  
          action or request the AG to bring an action to enjoin any  
          unlicensed or unauthorized person, corporation or foreign  
          corporation from rendering court reporter services in this state  
          and in doing so, seek certain penalties including fines and  
          possibly restitution.  


          This bill does not require corporations to register with the  
          CRB, nor does it specifically prohibit certain professional  
          corporations from rendering court reporting services in  
          California.  However, if a corporation is providing court  
          reporting services by way of contracting with, or hiring  
          California-licensed court reporters, then this bill will  
          specifically authorize the CRB to bring an action (or request  
          the AG to bring an action) to enjoin a corporation, or  
          corporation organized under another state, from rendering court  
          reporting services in California without ever being issued a  
          license by the CRB or authorization to render court reporter  
          services in California.  In addition, this bill would authorize  
          the CRB to collect specified penalties against corporations who  
          may be in violation of the court reporting act.  


          Opponents to this bill have stated that this bill would  
          potentially authorize the CRB to put these corporations out of  
          business, "by imposing drastic civil penalties of between $1000  
          and $2500 per day for the provision of unlicensed services, and  
          creating criminal penalties for perfectly legitimate business  
          activities occurring every day in California, the intent of the  
          sponsors of SB 270 is very clear: to put non-California  








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          deposition services companies out of business in California."  



          Prior Related Legislation.  AB 1461 (Ruskin) of 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.  NOTE:  
           AB 1461 was held in the Assembly Appropriations Committee.  

          ARGUMENTS IN SUPPORT: 


          The  California Court Reporters Association  writes in support,  
          "[This bill] 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 states  
          ethical rules on gift giving.  The [CRB] 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 [CRB] lacked jurisdiction over their  
          services because they were not licensed in California and  
          therefore not subject to the [CRB'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. [this bill]  
          provides specific authority for the [CRB]  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."








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          The Deposition Reporter's Association of California writes in  
          support, "on behalf of the Deposition Reporters Association of  
          California, and approximately 1,000 of our members, we write to  
          express our support for [this bill]?DRA supports [this bill] to  
          the extent that it seeks to increase penalties and consequences  
          for such unauthorized practice.  DRA supports [this bill] to the  
          extent that it modestly seeks to gather laws dispersed in other  
          codes to clarify the authority the [CRB] already has over  
          corporations."

          ARGUMENTS IN OPPOSITION:


          According to a consortium of firms including  Esquire Deposition  
          Services, LLC; Magna Legal Services; U.S. Legal Support, Inc.;  
          and Veritext Corp  ., who write in opposition, "While the  
          provisions of [this bill] appear benign, simply adding  
          enforcement authority to prevent unlicensed court reporting  
          services, the bill must be considered in the context of actions  
          and interpretations of the [CRB] to assert jurisdiction over the  
          business activities of out of state entities contracting with  
          California certified shorthand reporters.  Interpreting current  
          provisions of the [BPC], the CRB asserts that entities such as  
          our clients are rendering court reporting services in  
          California, requiring licensure as certified shorthand reporters  
          and subjecting these entities to the practice provisions of the  
          law.  But our clients do not satisfy the legal standard of the  
          practice of court reporting, which is defined as the making of a  
          verbatim record of proceedings.  Our clients contract with the  
          very best court reporters in California, all of whom are  
          properly licensed by the [CRB], because these court reporters  
          are making the verbatim records of proceedings covered by [BPC]  
          Section 8017.













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          By imposing drastic civil penalties of between $1000 and $2500  
          per day for the provision of unlicensed services, and creating  
          criminal penalties for perfectly legitimate business activities  
          occurring every day in California, the intent of the sponsors of  
          [this bill] is very clear: to put non-California deposition  
          services companies out of business in California.  The bill even  
          authorizes courts to declare that perfectly accurate transcripts  
          prepared by entities subject to the [CRB]'s misinterpretation of  
          the statute do not qualify as certified transcripts."





          POLICY ISSUE:
          
          This bill will specify that if civil action is brought, the  
          court, in addition to any other remedy authorized by law, must  
          impose a penalty of not less than $1,000 and no more than $2,500  
          per day against the person or corporation rendering services  
          without a license or authorization.  The Committee may wish to  
          inquire of the author why the court  must  impose a penalty, as  
          specified, instead of allowing the court to have discretion in  
          determining the amount of the penalty to assess.  


          AUTHOR'S AMENDMENTS:

          The author has requested the following amendments in an effort  
          to address concerns raised during the Assembly Business and  
          Professions Committee hearing on June 30, 2015.  The amendments  
          will remove an exemption in the CORP Section 13401 which allows  
          a professional or foreign corporation, rendering professional  
          services by licensed persons, to provide professional services  
          without being required to obtain a certificate of registration.   
          The proposed amendments will instead require a foreign or  
          professional corporation to register with the CRB as a shorthand  
          reporting corporation, as specified.  Because the CRB does not  
          currently register such entities, the proposed amendments will  








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          also require the CRB to establish a registration process for  
          foreign and professional corporations no later than July 1,  
          2016.  The proposed amendments specify that any statute and  
          regulation applicable to a licensee is also applicable to a  
          professional or foreign corporation and that nothing shall be  
          construed to authorize a person without a license to provide  
          shorthand reporting services.  It is unclear at this time if the  
          proposed amendments will change the current list of support and  
          opposition.  


          The author's proposed amendments are as follows:


          1)Specifies that notwithstanding BPC Section 8044, the following  
            apply:



             a)   Requires a professional corporation or foreign  
               professional corporation, as specified, to register as a  
               shorthand reporting corporation with the CRB;

             b)   Requires the CRB to implement a shorthand reporting  
               corporation registration process no later than July 1,  
               2016;



             c)   Specifies that any statute or regulation applicable to a  
               licensee is also applicable to a professional corporation  
               or a foreign professional corporation for any services  
               produced and billed wholly inside of this state; and,



             d)   Specifies that nothing in the provisions above can be  
               construed to authorize a person without a license to  
               practice shorthand reporting, as specified.
                                                     







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          2)Deletes the exemption for a professional or foreign  
            corporation rendering professional services under the CRB from  
            obtaining a certificate or registration in order to render  
            professional services. 

          REGISTERED SUPPORT:


          California Court Reporters Association (sponsor) 
          Deposition Reporters Association 
          Orange County Superior Court Reporters Association
          Six individuals

          REGISTERED OPPOSITION:


          Esquire Deposition Services
          LLC; Magna Legal Services
          U.S. Legal Support, Inc. 
          Veritext Corp.





          Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301


















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