BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING


          SB  
          270 (Mendoza)


          As Amended  August 4, 2016


          Majority vote


          SENATE VOTE:  29-9


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Business &      |9-6  |Salas, Bloom, Dodd,   |Brough, Baker,      |
          |Professions     |     |Eggman, Gomez,        |Chávez, Dahle,      |
          |                |     |Holden, Mullin, Ting, |Gatto, Jones        |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |7-3  |Mark Stone, Alejo,    |Wagner, Gallagher,  |
          |                |     |Chau, Chiu, Cristina  |Maienschein         |
          |                |     |Garcia, Holden, Ting  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |14-5 |Gonzalez, Bloom,      |Bigelow, Gallagher, |
          |                |     |Bonilla, Bonta,       |Jones, Obernolte,   |
          |                |     |Calderon, Daly,       |Wagner              |
          |                |     |Eggman, Eduardo       |                    |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Santiago,      |                    |








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          |                |     |Weber, Wood, Chu      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Provides the Court Reporters Board (CRB) with broad  
          powers of enforcement, as specified, over foreign or domestic  
          corporations that offer or arrange for shorthand reporting  
          services, as specified, in California.  Specifically, this bill:  
            


          1)Authorizes the CRB to seek injunctive relief or issue  
            citations, fines, and other penalties in accordance of  
            existing law against corporations, persons, or entities,  
            whether foreign or domestic, that for a fee or other financial  
            consideration, offer, offer to arrange for, render, or provide  
            the services of a certified shorthand reporter for violations  
            of the following provisions that relate to shorthand  
            reporting:


             a)   Chapter 9 of Title 4 of Part 4 (commencing with Section  
               2025.010) of the Code of Civil Procedure;
             b)   Part 4 of Division 3 of Title 1 (commencing with Section  
               13400) of the Corporations Code (CORP));


             c)   Chapter 12 of Division 3 (commencing with Section 8000)  
               of the Business and Professions Code (BPC); and,


             d)   Section 2475 of Title 16 of the California Code of  
               Regulations (CCR).


          2)Provides that nothing in this bill shall be construed to  
            authorize or prohibit an individual without a certificate to  








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            practice shorthand reporting as specified in BPC Section 8017,  
            or construed to authorize or prohibit the provision of  
            shorthand reporting services by a foreign corporation in  
            violation of CORP Section 13401(c) or construed to authorize  
            or prohibit violations of BPC Section 8044. 


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, this bill will result in minor and absorbable costs  
          to the CRB for a potential increase in complaint volume  
          resulting in potentially higher citations.


          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  
          permitted the certification of individuals and at one time, the  
          registration of shorthand reporting corporations.  Currently,  








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          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, 12 months (or 1,400 hours) of  
          full-time work experience related to making records of hearings,  
          obtain 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) as 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.  Currently, the CRB does not separately license  
          or register court reporting corporations.  


          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 license to practice as a  
          shorthand reporter may be suspended, revoked, or denied, or  
          other disciplinary action may be taken against a certificate  
          holder for a number of reasons including 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  
          Section 2475), which include acting without bias toward, or  
          prejudice against, any parties and/or their attorneys; not  
          entering into, arranging, or participating 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 maintaining confidentiality of information,  
          among others. 








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          Under current law, the CRB has the authority to carry out its  
          licensing and enforcement authority against any person or  
          corporation, as defined in CORP Section 13401.  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 because each director,  
          shareholder, and officer of a shorthand reporting corporation is  
          required to be a licensed shorthand reporter; however, the same  
          authority is not specified in statute for foreign corporations  
          providing or arranging for court reporting services in  
          California.  This bill aims to increase the CRB's disciplinary  
          reach to include those entities or corporations which for a fee  
          offer, offer to arrange for, render, or provide the services of  
          a shorthand reporter, by permitting the CRB to discipline  
          entities for specified violations including those corporations  
          (foreign or domestic) who are arranging for shorthand reporting  
          services, as specified.   


          Scope of Practice.  BPC Section 8017 defines 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 transcript thereof.


          16 CCR Section 2403 further specifies that the practice of  
          shorthand reporting includes services for actions in superior  
          court such as delivering a copy of the original transcript in a  
          computer-readable form, as specified, labeling disks of  
          transactions with the case name and court number, and the dates  
          of the proceedings contained on the disk, among others.  For a  
          deposition, 16 CCR Section 2403 includes making a full or  








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          partial copy of a transcription available, notifying all parties  
          who attended a deposition of requests made by other parties for  
          either an original copy of the transcript, or any portion  
          thereof, and securely sealing the transcript in an envelope or  
          package, as specified.  These provisions are aggregated from  
          various sections in the Code of Civil Procedure and the Civil  
          Code.


          Professional Corporations and The Moscone-Knox Professional  
          Corporation Act (Act).  BPC Section 8044 specifies that each  
          director, shareholder, and officer of a shorthand reporting  
          corporation must be a licensed shorthand reporter.  Business  
          models for shorthand reporting corporations and other service  
          providers vary throughout the state.  While there are a number  
          of licensee-owned corporations in California, there are a number  
          of businesses that do not hold themselves out to be court  
          reporting corporations.  These corporations claim to be  
          litigation service providers that only arrange for court  
          reporting services, but are not actually responsible for the  
          making of the written record.  


          According to the author, the need for this bill is in response  
          to the CRB's inability to take the appropriate disciplinary  
          actions against a foreign 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 Reporters Board of California v. U.S. Legal Support, Inc.,  
          1-11-CV197817.  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  








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          argued that the CRB lacked the jurisdictional authority to issue  
          a citation to the company, and did not pay the fine.  


          As a result, a formal case was brought against U.S. Legal  
          Support, Inc. in 2012.  The court held that the CRB lacked the  
          jurisdictional authority to issue citations and fines to an  
          out-of-state corporation rendering 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 the  
          corporation was not authorized to do business in California  
          under the BPC.  This bill will authorize the CRB, under this new  
          section, to seek injunctive relief or issue citations, fines,  
          and other penalties against corporations, persons or entities,  
          whether foreign or domestic, that for a fee or other financial  
          consideration, offer, offer to arrange for, renders, or provides  
          the services of a certified shorthand reporter, for violations  
          of specified areas of law.  


          The issue of professional conduct was raised in the CRB's 2015  
          Sunset Review Report.  As noted in the Committee Background  
          Paper, according to the CRB, additional complaints have been  
          received about overcharging for court transcripts, a violation  
          of Government Code 69950 and is direct consumer harm; the  
          overcharging of one party for transcripts is in practice  
          cost-shifting, or akin to giving a large gift.  This is a  
          practice whereby a court reporting firm offers to charge the  
          noticing party a nominal amount if the noticing party chooses to  
          utilize the services of that firm.  The costs of the transcripts  
          are then shifted over to the defending attorney(s), who has no  
          ability to choose the shorthand reporter and is essentially  
          stuck with the bill presented in order to obtain a transcript.   
          While the practice is not specifically illegal on its face, the  
          CRB is concerned about the serious ethical considerations that  








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          arise out of this type of scenario.  As a result, it is  
          important for the CRB to ensure that the same rules that apply  
          to all licensees that serve to protect consumers are enforced  
          against all entities that provide shorthand reporting services.




          The authority granted by the bill allows the CRB to take  
          enforcement actions for violations of the laws which comprise  
          virtually all of the applicable statutes and regulations  
          governing shorthand reporters.


          Analysis Prepared by:                                             
                          Elissa Silva / B. & P. / (916) 319-3301  FN:  
          0004065