BILL ANALYSIS                                                                                                                                                                                                    



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          (Without Reference to File)





          SENATE THIRD READING


          SB  
          873 (Beall)


          As Amended  August 25, 2016


          Majority vote


          SENATE VOTE:  39-0


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Housing         |6-0  |Chiu, Steinorth,      |                    |
          |                |     |Burke, Chau, Beth     |                    |
          |                |     |Gaines, Lopez         |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Revenue &       |9-0  |Ridley-Thomas,        |                    |
          |Taxation        |     |Brough, Dababneh,     |                    |
          |                |     |Gipson, Mullin,       |                    |
          |                |     |O'Donnell, Patterson, |                    |
          |                |     |Quirk, Wagner         |                    |
          |                |     |                      |                    |








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          |----------------+-----+----------------------+--------------------|
          |Appropriations  |15-0 |Gonzalez, Bigelow,    |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Chang, Eggman, |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |Jones, Obernolte,     |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Weber, Wood, McCarty  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |10-0 |Mark Stone, Wagner,   |                    |
          |                |     |Alejo, Chau, Chiu,    |                    |
          |                |     |Gallagher,            |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Cristina Garcia,      |                    |
          |                |     |Holden, Maienschein,  |                    |
          |                |     |Ting                  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Companion legislation to AB 691 (Calderon) of the  
          current legislative session, the Revised Uniform Fiduciary  
          Access to Digital Assets Act (RUFADAA), that seeks to narrow the  
          scope of immunity from liability provided to custodians of  
          digital assets for complying with the Act.  Specifically, this  
          bill:   


          1)Declares that is the intent of the Legislature that this act  
            shall be enacted subsequent, and as a companion, to AB 691 so  
            that in the event that AB 691 is chaptered, the version of  
            Probate Code Section 881 reflected in this act shall replace  
            the version of that same section which is provided in AB 691.


          2)Establishes that a custodian and its officers, employees, and  








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            agents are not immune from liability for an act or omission  
            done in good faith in compliance with AB 691 in a case of  
            gross negligence or willful or wanton misconduct of the  
            custodian or its officers, employees, or agents.


          3)Provides that this act shall become operative only if AB 691  
            is also enacted and this act is enacted after AB 691.


          4)Makes other technical and corrective amendments.


          FISCAL EFFECT:  None.


          COMMENTS:  This bill is a companion to AB 691 (Calderon) of the  
          current session, and is intended to enact changes to Probate  
          Code Section 881, as proposed to be added by AB 691.   
          Specifically, this bill seeks to narrow the scope of custodians'  
          immunity from liability for compliance with RUFADAA, as  
          currently provided by AB 691.  As currently in print, AB 691  
          provides that "a custodian and its officers, employees, and  
          agents are immune from liability for an act or omission done in  
          good faith in compliance with this part [i.e. the entirety of  
          RUFADAA]."  Probate Code Section 881Subdivision (f), as proposed  
          by AB 691, would grant custodians broad immunity from liability  
          as long as they act in good faith in complying with the Act-with  
          no exception even for conduct amounting to gross negligence or  
          willful or wanton misconduct.


          Opponents of AB 691, including the American Civil Liberties  
          Union (ACLU), Consumer Watchdog, and the Privacy Rights  
          Clearinghouse, contend that the broad grant of immunity in that  
          legislation gives custodians no incentive to act responsibly,  
          and increases the probability that cases of privacy invasion  
          will occur since there will be little consequence to custodians  
          for their careless actions, or even gross negligence.  They  








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          state:


               Is it possible that [custodians] will make mistakes -  
               both by releasing too much information without  
               authorization, or releasing it to the wrong person?  We  
               think the history of digital records shows that it is  
               likely there will be mistakes.  While mistakes cannot  
               be prevented they should be deterred.  Unfortunately,  
               (AB 691) does very little or nothing to give technology  
               companies an incentive to behave responsibly.  (AB 691)  
               gives custodians sole and complete discretion to  
               release all digital assets, and it gives them complete  
               immunity when they do it wrongly. ...The only liability  
               they would apparently not be absolved for is for direct  
               violation of a court order, which is arguably beyond  
               the province of the Legislature in any event.  The  
               combination of total discretion and no responsibility  
               for unlawful conduct will give custodians very little  
               reason to behave with reasonable prudence.


          According to the Uniform Law Commission (ULC), the drafters of  
          RUFADAA, the release of digital assets or electronic  
          communications, if not done carefully, could result in harm or  
          an invasion of privacy.  The ULC's official comments to RUFADAA  
          even state:  "Access to a digital asset might invade the privacy  
          or harm the reputation of the decedent, protected person,  
          principal, or settlor; it might harm the family or business of  
          the decedent, protected person, principal, or settlor; and it  
          might harm other persons."  (Uniform Law Commission, Revised  
          Uniform Fiduciary Access to Digital Assets Act (2015), p. 30.)


          While the ULC's intent may have been to protect the custodian  
          from liability for disclosure of a digital asset as long as the  
          custodian was acting in good-faith compliance, the Legislature  
          has a long history of ensuring that legislation it approves does  
          not provide blanket immunity from liability for acts rising to  








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          the level of gross negligence or willful or wanton misconduct,  
          even when done "in good faith."  (See, e.g. AB 83 (Feuer),  
          Chapter 77, Statutes of 2009, amending the California "Good  
          Samaritan" statute to grant qualified immunity to any person who  
          renders medical or non-medical aid in an emergency, so long as  
          that person acts in good faith and not for compensation, but  
          specifically exempting gross negligence and willful or wanton  
          misconduct.)  


          In order to ensure that RUFADAA, should it become law, would not  
          immunize a custodian from liability for a disclosure of  
          information that constituted gross negligence or willful or  
          wanton misconduct, the author of AB 691 has agreed to revise the  
          immunity language in Probate Code Section 881subdivision (f), as  
          provided in his bill.  Because AB 691 cannot be amended in the  
          Assembly to address this concern, the author of AB 691 and the  
          author of this bill have agreed to use this bill as a vehicle to  
          amend Section 881, as proposed to be added by AB 691, for the  
          purpose of narrowing the scope of custodian immunity from  
          liability.  As amended in the Assembly, this bill establishes  
          that, if RUFADAA is enacted into law, a custodian is not immune  
          from liability for an act or omission done in good faith in  
          compliance with the Act but which constitutes gross negligence  
          or willful or wanton misconduct.  In addition, the author of AB  
          691 is now the principal co-author of this bill.  


          Recent amendments state the Legislature's intent that this act  
          shall be enacted subsequent, and as a companion, to AB 691 so  
          that in the event that AB 691 is chaptered, the version of  
          Section 881 of the Probate Code reflected in this act shall  
          replace the version of that same section which is provided in AB  
          691.  The bill specifically provides that this bill shall become  
          operative only if Assembly Bill 691 is also enacted and this  
          bill is enacted after Assembly Bill 691.


          As recently amended, the bill also clarifies that a custodian  








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          and its officers, employees, and agents are immune from  
          liability for an act or omission done in good faith and in  
          compliance with RUFADAA (emphasis added), and corrects a  
          drafting error from the previous set of amendments.




          Analysis Prepared by:                                             
          Anthony Lew / JUD. / (916) 319-2334  FN: 0005006