BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 387 (Jackson)
Version: February 24, 2015
Hearing Date: May 12, 2015
Fiscal: No
Urgency: No
BCP
SUBJECT
Attorneys: annual membership fees
DESCRIPTION
This bill would authorize the State Bar of California (State Bar
or the Bar) to collect active membership dues of up to $390 for
the year 2016. Consistent with existing law, those dues would
fund only mandatory programs of the State Bar, and members could
deduct $5 if they did not wish to support lobbying and other
legislative activities. Members could also deduct an additional
$5 if they did not wish to fund access and elimination of bias
programs.
BACKGROUND
The State Bar of California is a public corporation. Attorneys
who wish to practice law in California generally must be
admitted and licensed in this state and must be a member of the
State Bar. (Cal. Const., art. VI, Sec. 9.) The State Bar of
California is the largest state bar in the country. As of May
2015, the State Bar had 183,978 active members and 55,240
inactive members, which represents a slight annual increase in
both active members and inactive members. Total State Bar
membership is listed at 253,208, which includes 2,149 judge
members and 11,840 members who are "Not Eligible to Practice
Law."
The Bar's programs are financed mostly by annual membership dues
paid by attorneys
as well as other fees paid by applicants seeking to practice
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law. This bill would authorize the State Bar to collect the
annual membership dues for 2016.
CHANGES TO EXISTING LAW
Existing law requires all attorneys who practice law in
California to be members of the State Bar and establishes the
State Bar for the purpose of regulating the legal profession.
Pursuant to the State Bar Act, the annual mandatory membership
fee set by the State Bar's Board of Trustees to pay for
discipline and other functions must be ratified by the
Legislature. (Bus. & Prof. Code Sec. 6000 et seq.)
Existing law authorizes the State Bar to collect $315 in annual
membership fees from active members for a total annual dues bill
of $390 for the year 2015. (Bus. & Prof. Code Sec. 6140.) The
other $75 is pursuant to statutory authorization to assess
annually the following fees: $40 for the Client Security Fund
(Bus. & Prof. Code Sec. 6140.55); $25 for disciplinary
activities (Bus. & Prof. Code Sec. 6140.6); and $10 to fund the
Lawyer Assistance Program (Bus. & Prof. Code Sec. 6140.9).
Existing law authorizes the State Bar to collect $75 in annual
membership fees from inactive members for a total annual dues
bill of $115 for the year 2015. (Bus. & Prof. Code Sec. 6141.)
The other $40 is pursuant to statutory authorization to assess
annually the following fees: $10 for the Client Security Fund
(Bus. & Prof. Code Sec. 6140.55); $25 for disciplinary
activities (Bus. & Prof. Code Sec. 6140.6); $5 to fund the
Lawyer Assistance Program (Bus. & Prof. Code Sec. 6140.9).
Existing case law , Keller v. State Bar of California (1990) 496
U.S. 1, prohibits the use by the State Bar of mandatory dues to
fund political and ideological activities, as a violation of a
member's First Amendment freedom of speech rights, where such
expenditures are not necessarily or reasonably incurred for the
purpose of regulating the legal profession or improving the
quality of the legal services available to the people of the
state. Existing law allows members to deduct up to $5 from the
mandatory dues if the member does not wish to fund legislative
activities and non-Keller lobbying and activities with his or
her dues. (Bus. & Prof. Code Sec. 6140.05; Keller v. State Bar
of California (1990) 496 U.S. 1.)
Existing law authorizes the State Bar to increase the annual
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membership fees by an additional $40, to be allocated only for
purposes of providing voluntary support for nonprofit
organizations that provide free legal services to persons of
limited means. Members have the option of deducting the $40
from the annual membership fee if they elect not to have the
amount allocated for the purposes of legal services. (Bus. &
Prof. Code Secs. 6033, 6140.03.)
This bill would authorize the State Bar to collect active
membership dues of up to $390 for the year 2016.
COMMENT
1. Stated need for the bill
According to the author, "SB 387 seeks to authorize the State
Bar of California to collect membership dues for 2016. The
State Bar's current authority to collect membership dues sunsets
on January 1, 2016." The author further notes that the annual
bar dues bill is the vehicle by which the Legislature performs
its historic oversight function of the State Bar.
2. Mandatory membership dues
This bill would authorize the State Bar to collect active
membership dues of up to $390 for the year 2016. That amount is
consistent with last year and is broken down as follows: $315
for the actual membership fee, $40 for the Client Security Fund,
$25 for disciplinary activities, and $10 to fund the Lawyer
Assistance Program. Also consistent with prior bar dues bills,
SB 387 would only extend the authority for the State Bar to
collect membership dues by one year so as to provide an
opportunity next year for continued oversight of the State Bar.
Staff notes that while there appears to be no debate as to
whether or not the State Bar should be able to continue to
collect dues for 2016, there has been significant public
discussion, as the result of recent litigation, about the
activities of the State Bar. It should be noted that some of
the concerns arise from allegations that are still subject to
pending litigation - as a result, it is unclear what, if any
misconduct occurred at the State Bar. In light of those
concerns - including those involving the discipline system
(which is currently subject to a State Audit) - the following
comments discuss significant updates as to the status of the
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State Bar.
3. Discipline
Under existing law, the State Bar's highest priority is
protection of the public, and, whenever the protection of the
public is inconsistent with other interests sought to be
promoted, the protection of the public shall be paramount.
(Bus. Prof. Code Sec. 6001.1.) The State Bar, in submitting its
Annual Discipline Report for Year Ending December 31, 2014,
noted that "[t]he attorney discipline system is, by far, the
largest component of the State Bar, and it plays an
indispensable role in carrying out the Bar's mission of public
protection. It is the discipline system which receives
complaints against attorneys, investigates those complaints,
prosecutes them when warranted, and recommends sanctions against
attorneys found culpable of misconduct. The performance of the
discipline system is a crucial measure of the success of the
State Bar as a public regulatory agency." (R. Hawley letter re:
Annual Discipline Report for Year Ending December 31, 2014 (Apr.
30, 2015) State Bar, pg. 1.) The State Bar further outlined the
structure of the discipline system as follows:
In California, a lawyer is licensed when admitted as a member
of the State Bar. Only active members of the State Bar may
practice law. The State Bar is a constitutional agency
established in the judicial branch. In administering the
requirements for admission and discipline of California
lawyers, the State Bar is an administrative arm of the
California Supreme Court. Under its inherent judicial power
to regulate admission and discipline, it is the Supreme Court
that admits and disbars, or suspends a lawyer from the
practice of law.
In California's attorney discipline system, all communications
and information concerning the conduct of California lawyers
are first received by the State Bar's Office of the Chief
Trial Counsel [(OCTC)]. OCTC investigates those complaints
involving allegations of professional misconduct and may
initiate and prosecute disciplinary proceedings in the State
Bar Court. The Hearing Department of the State Bar Court
conducts evidentiary hearings and renders a decision with
findings and recommendations of discipline that are reviewable
by the Review Department of the State Bar Court. The State
Bar Court's final decision and accompanying record in each
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case are then transmitted to the Supreme Court. In cases
where the State Bar Court recommends the suspension or
disbarment of a lawyer, the Supreme Court undertakes an
independent determination of the discipline to be imposed.
Discipline occurs with a final decision and order of the
Supreme Court. (Id., pgs. 2-3.)
Regarding the performance of the discipline system, the 2014
Annual Discipline Report notes that, "[a]s of December 31, 2014,
the number of backlog active cases was 263, compared to 2,612 in
2010. This included 157 cases still under inquiry or active
investigation, as compared to 1,584 in 2010 and 106 cases, for
which the investigation was complete but charges had not yet
been filed, significantly lower than the 1,028 cases in 2010."
(Id., transmittal page.) The report further includes the
following statistical data about the discipline system:
Activity in 2014
The State Bar's Office of Chief Trial Counsel
(OCTC) received 16,024 new complaints, reportable
actions, and other cases in 2014.
OCTC's Intake Unit processed 15,497 cases, of
which 3,791 were referred to the Enforcement Unit for
investigation.
OCTC completed 3,648 investigations, with 1,084 of
those having sufficient evidence to support the
imposition of discipline against the attorney, and
filed formal charges in 1,008 cases.
The State Bar Court took action on 1,675 cases,
closing 117 and referring 1,158 to the California
Supreme Court.
The Supreme Court disposed 1,536 cases, dismissing
4; remanding 1 to the State Bar Court; suspending 1;
granting 508 requests for resignations of attorneys
without charges pending; and imposing discipline in
1,012 cases.
The Supreme Court disbarred 171 attorneys in 2014,
including 55 by reason of default, and suspended 263
attorneys.
Caseload in 2014
On December 31, 2014, OCTC had an open caseload of
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4,095 active cases, which included 1,796 in the inquiry
stage, 1,225 in the investigation stage, 174 in
pre-filing, and 900 cases before the State Bar Court.
The office's active caseload included 261 active
cases over six months old, including 39 in inquiry, 116
in investigation and 106 in pre-filing matters.
The office also had a suspended caseload of 1,816
cases in the investigation or pre-filing stages. Of
these, 1,712 were over six months old (including 1,548
investigations and 164 pre-filing cases).
The office's total backlog, encompassing all
active and suspended cases older than six months and
not yet formally filed, was 1,973 cases.
Speed of Case Handling in 2014
The median time to evaluate a case and refer it for
investigation was 21 days.
The median time to complete an investigation having
sufficient evidence to support the imposition of
discipline against the attorney was 155 days.
The median time between the completion of an
investigation and filing formal charges was 74 days.
The median time from formal filing to a referral to
the Supreme Court was 168 days.
The median total time from the receipt of a
complaint to filing of formal charges was 263 days.
The median total time from the receipt of a
complaint to final disposition by the Supreme Court was
505 days. (Id., pgs. 2-3.)
It should be noted that, under existing law, the Board of
Trustees is required to contract with the California State
Auditor's office to conduct a performance audit of the State
Bar's operations every two years. That audit is currently under
way and will reportedly focus on the discipline system -
accordingly, the State Bar should work with the author and other
stakeholders on any recommendations made by the State Auditor
when the report is released in the next couple months. As a
matter of policy, addressing any concerns raised by the audit
would appear essential to ensuring that the State Bar is
performing its fundamental mission of public protection by
appropriately disciplining attorneys who have violated the
public trust.
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4. Client Security Fund
Under existing law, the Client Security Fund (CSF) seeks to
protect consumers of legal services by mitigating losses caused
by the "dishonest" conduct of California attorneys. The CSF is
funded through a mandatory contribution that is collected as
part of the annual bar dues bill - active members contribute
$40, and, inactive members contribute $10. Under the State
Bar's rules, the following types of dishonest conduct can lead
to reimbursement from the fund: (1) theft or embezzlement of
money or the wrongful taking or conversion of money or property;
(2) failure to refund unearned attorney fees paid to the lawyer
in advance where the lawyer performed no services, or an
insignificant portion of the services; (3) the borrowing of
money from a client without the intention or reasonably
anticipated ability to repay the money; (4) obtaining money or
property from a client by representing that it would be used for
investment purposes when no investment is made; and (5) an act
of intentional dishonesty or deceit that directly leads to the
loss of money or property that actually came into the lawyer's
possession. The State Bar's 2014 Annual Discipline Report
further notes:
Between 2005 and 2008, the Client Security Fund (CSF)
program received about 1,100 applications per year.
However, in 2009, the loan modification fraud crisis spurred
a dramatic surge in CSF applications. Over 3,000 new
applications were received in 2009 and almost 4,000 were
received in 2010. The rate of new applications has declined
every year since then, but, even in 2014, applications
remained 40 [percent] above the 2005 - 8 level.
As a consequence, the Client Security Fund has drawn down
its reserves from $11.4 million at the beginning of 2010 to
$2.2 million at the end of 2014. At year end, there were
5,674 open applications for CSF assistance. Based on past
experience, the State Bar estimates that payouts related to
these applications will eventually total $17.6 million. At
current revenue levels, it will take approximately three
years to collect sufficient funds to finance these grants.
(State Bar, Annual Discipline Report for Year Ending
December 31, 2014 (Apr. 30, 2015), pg. 58.)
Given the current status of the CSF and the public policy goal
of ensuring that the losses of consumers injured by dishonest
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attorneys are made whole (to the extent possible), the State Bar
should continue to explore ways in which the CSF deficit can be
addressed. Furthermore, it should be noted that an additional
influx of claims could occur in the near future should there be
increased instances of immigration fraud as a result of
President Obama's series of executive actions relating to
immigration accounted on November 20, 2014.
5. Composition of Board of Trustees
Under existing law, the State Bar is governed by a Board of
Trustees that is generally made up of 19 members.<1> Of those
19 members, 13 are "lawyer members," and 6 are public
"non-lawyer" members. The six public members are appointed as
follows: four by the Governor, one by the Senate Committee on
Rules, and one by the Speaker of the Assembly. Currently, there
are four vacant public member seats, and, of those seats, three
are due to the lack of appointments of public members by the
Governor. The fourth seat has been appointed by the Governor
and is pending approval by the Senate Committee on Rules.
In light of the current focus on the State Bar, it appears
essential that these appointments be made as soon as possible by
the Governor. Accordingly, all interested parties should
continue working to encourage the Governor to make those
appointments as soon as possible so as to allow the Board of
Trustees to have the benefit of those public members. The
appointment of those public members would appear to be essential
so that the Board of Trustees can adequately respond to the
recent concerns.
6. Fiscal Condition of the State Bar
The following information was reported to the Legislature in the
2014 Financial Statement and Independent Auditor's Report of the
State Bar of California:
Assets - As of December 31, 2014, the State Bar's total
assets were $195.6 million, down slightly by $2.4 million,
or 1.2 [percent] compared to $198.0 million last year. The
--------------------------
<1> The State Bar notes that the Board of Trustees can
theoretically have 20 members as follows: "A president may
continue to serve an extra year if his or her term as one of the
appointed or elected members has expired. He or she would become
the 20th board member."
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decrease is due to a combination of 1) a $6.7 million
decrease in cash [and] investment; 2) a $0.8 million net
decrease in capital assets; partially offset by 3) a $4.6
million net increase in prepayments and accounts
receivables; and 4) a $0.5 million net increase in Other
Postemployment Benefits Obligation (OPEB) assets.
Cash, investments, and restricted cash consisted of balances in
demand deposit accounts, money market accounts, the State Bar's
share of California's Local Agency Investment Fund, and
investment securities. For the year ended December 31, 2014,
the combined cash and investment balance was $78.9 million, down
by $6.6 million or 7.8[percent] from $85.6 million last year.
The lower cash balance is due primarily to grant prepayment made
for 2015 and a $1.5 million contribution made to the State Bar's
OPEB Plan.
Capital assets consisted of land, buildings, building and
leasehold improvements, tenant improvement, office equipment,
and furniture and fixtures, net of accumulated depreciation.
Net capital assets balance as of December 31, 2014, was $101.4
million, a $0.8 million decrease compared to $102.2 million last
year. The decrease is due to normal depreciation of $3.6
million, partially offset by $2.8 million additional capital
expenditures incurred in 2014.
Other assets consisted of interest receivable, prepayments,
grants receivable, other receivable, and the OPEB asset. The
combined balance as of December 31, 2014, was $15.3 million, up
by $5.1 million or 50.0 [percent] from $10.2 million in 2013.
The increase is due to a $0.6 million net increase in the OPEB
plan asset and a higher prepayment balance as a result of timing
of payments of the [State] Bar's two grant funds. The 2015
first quarter grant payments for the Legal Service Trust Fund
and Equal Access Fund programs were prepaid in December 2014.
Liabilities - The State Bar's total liabilities
consisted of accounts payable to vendor accounts, unearned
fees collected in advance, grants payable, loans payable,
and employee vacation and sick leave accruals. As of
December 31, 2014, State Bar's total liabilities were $57.6
million, down by $9.5 million or 14.2[percent] compared to
$67.1 million last year. The decrease is a result of a
$1.3 million reduction in the loan payable from the
repayment of the Los Angeles building mortgage, and a $8.2
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million decrease in [Interest on Lawyers' Trust Accounts
(IOLTA)] grant and accounts payable. The higher accounts
payable balance in 2013 was due to the timing of payments
for the L.A. building construction costs at year-end. The
decrease in grants payable in 2014 is due to the
restructuring of the IOLTA grant program. In March, 2014,
the Board adopted a resolution to align the IOLTA grant
year to a calendar year. As a result, all of the 2014
grant distributions were processed in 2014 and there was
not a grants payable balance as of December 31, 2014.
Net Position - The State Bar's net position as of
December 31, 2014, was $138.0 million, up by $7.1 million
or 5.4 [percent] compared to $130.9 million in 2013.
Operating Revenues - For the fiscal year ended December
31, 2014, the State Bar's total operating and non-operating
revenues were $140 million. Total operating revenues for
all programs for 2014 were $137.9 million, up by $1.8
million or 1.3 [percent] compared to $136.2 million last
year. The increase is due to a $3.5 million increase in
membership revenue, partially offset by a $1.8 million
decrease in the AB 145 [(Committee on Budget, Chapter 75,
Statutes of 2005)] filing fees in the Equal Access Fund
program. The increase in membership revenue is due largely
to higher membership revenues received as a result of the
$10 increase in the optional contribution to legal services
and overall growth in the membership due to new admittees.
Total non-operating revenues were $2.1 million, up by $0.8
million or 61.5 [percent] from $1.3 million last year.
Operating Expenses - For fiscal year 2014, the State
Bar's total operating expenses were $132.8 million, down by
$8.7 million or 6.1 [percent] compared to $141.5 million
last year. The decrease is a due to a decline of $9
million in IOLTA grant distribution as a result of the
program restructuring explained above and a $2.2 million
decrease in the Client Security Fund application payouts.
These decreases are partially offset by higher operating
costs from the new L.A. facility and higher personnel costs
from the Bar's implementation of the 2014 MOU. (State Bar,
2014 Financial Statement and Independent Auditor's Report
of the State Bar of California (Apr. 30, 2015) pgs. 5-6,
8.)
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7. Update on Strategic Plan
Under existing law, the Board of Trustees is required to
complete and implement a five-year strategic plan, updated every
two years, and submit a report each year on measures taken to
implement that plan. The most recent report, submitted by the
current president of the State Bar on February 13, 2015,
contained various updates, including the following items of
particular interest to this Committee:
Legal Services - The State Bar has been very active in
support of enhanced funding for legal services and
administers the following funds: Interest on Lawyers'
Trust Accounts (IOLTA) grants; Equal Access Fund (EAF);
Justice Gap Fund; State Bar Dues voluntary contribution to
legal services; and the Attorney General National Mortgage
Settlement Fund Grants. In 2014-2015, annual grants went
to almost 100 non-profit legal aid organizations, including
direct legal services providers and support centers that
collectively provide services in all 58 California
counties. Legislatively, the Bar successfully supported an
increase, beginning in 2015, to $40 of non-mandatory (opt
out) member dues earmarked for legal services funding. The
State Bar's Annual dues bill also includes a voluntary
check-off box and a suggested donation amount of $100
contribution to the Justice Gap Fund. In 2014, Justice Gap
funds were supplemented with an additional line-item on the
attorney member dues bill enabling attorneys to contribute
$30 to the fund through an opt-out check-off. The
donations received through the Justice Gap Fund are
combined with revenue from IOLTA and distributed on a
formulaic basis to all California legal aid organizations
that qualify for grant funding.
In 2014, the $30 voluntary check-off box on the Annual dues bill
for legal services and the suggested donation amount of $100
contribution to the Justice Gap Fund, allowed the State Bar to
raise over $5.5 million [in] additional support for legal
services programs. In addition to the funds discussed above, in
2013-2014, the State Bar administered over $10.4 million in
grants from the Attorney General National Mortgage Settlement
Fund. The State Bar distributed over $6 million of these
one-time grants to legal aid organizations helping California
families deal with the foreclosure crisis. In addition to
supporting increased funding for legal services, the State Bar
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is working to find other ways to expand access to courts and
lawyers for low and moderate income Californians.
The Task Force on Civil Justice Strategies, chaired by then
State Bar President Luis Rodriguez and co-chaired by myself was
charged with analyzing the "justice gap," evaluating the role of
the legal profession in addressing the crisis, seeking broad
input from groups working in this area, studying creative
solutions being considered in other states and countries, and
developing an action plan to fill the justice gap and achieve
true "access to justice" in California. The Task Force on Civil
Justice Strategies met seven times in 2014, focusing on
innovative strategies to address California's "justice gap." A
report is forthcoming.
Immigration reform - In the wake of the Obama
administration's November 2014 announcement of a plan to
provide administrative relief and work permits to as many
as 3.7 million undocumented parents of U.S. citizens and
legal permanent residents, as well as an additional 300,000
young immigrants who were brought to the country illegally
as children, the State Bar took unprecedented proactive
action to help prevent a potential explosion of misconduct
and client abuse in the area of immigration reform fraud.
The State Bar has continued to monitor complaints received
by the Office of the Chief Trial Counsel since the
effective date of AB 1159 [(Gonzalez, Chapter 574, Statutes
of 2013)]to identify complaints that the office has opened
against attorneys related to immigration work.
Additionally, in the area of external relations, the State
Bar has taken proactive steps to seek out those who
continue to exploit immigrants by ignoring AB 1159:
o Developed an External Relations & Outreach Program
to targeted partnerships, in order to advance the
directive of AB 1159;
o Conducted town halls with community organizations,
to provide information about the protections and
resources available to the immigrant community;
o Created an "immigration hotline" telephone number
and tracked the number of calls which are directed to the
Intake Unit for handling and will track the number of
complaints that allege fraudulent acts related to an
immigration matter, including violations of AB 1159; and
o Issued media releases alerting consumers on
immigration related issues.
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Public Protection - In the area of expanding external
relations to enable a more pro-active approach to public
protection, the Bar organized 11 town hall meetings
throughout the State in conjunction with other consumer
protection agencies and members of state and local
government, which focused on consumer fraud issues for
Seniors, Veterans, and the general public. (State Bar,
Measures To Implement Strategic Plan and To Enhance and
Ensure Public Protection (Feb. 13, 2015) pg. 4.)
Support : None Known
Opposition : None Known
HISTORY
Source : State Bar of California
Related Pending Legislation : SB 134 (Hertzberg, 2015) would
authorize the State Bar of California to collect, in conjunction
with its annual membership dues, voluntary fees for the support
of the Public Interest Attorney Loan Repayment Program. SB 134
is currently on the Senate Floor.
Prior Legislation :
AB 2746 (Committee on Judiciary, Chapter 429, Statutes of 2014)
SB 345 (Evans, Chapter 681, Statutes of 2013)
AB 2685 (Committee on Judiciary, Chapter 348, Statutes of 2012)
SB 163 (Evans, Chapter 417, Statutes of 2011)
AB 2764 (Committee on Judiciary, Chapter 476, Statutes of 2010)
SB 55 (Corbett, Chapter 2, Statutes of 2010)
SB 641 (Corbett, 2009) was vetoed by the Governor.
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AB 3049 (Committee on Judiciary, Chapter 165, Statutes of 2008)
SB 686 (Corbett, Chapter 474, Statutes of 2007)
AB 1529 (Jones, Chapter 341, Statutes of 2005)
AB 145 (Committee on Budget, Chapter 75, Statutes of 2005)
SB 1490 (Committee on Judiciary, Chapter 384, Statutes of 2004)
AB 1708 (Committee on Judiciary, Chapter 334, Statutes of 2003)
SB 352 (Kuehl, Chapter 24, Statutes of 2001)
SB 1367 (Schiff, Chapter 118, Statutes of 2000)
SB 144 (Schiff, Chapter 342, Statutes of 1999)
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