BILL ANALYSIS
AB 2365
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2365 (Lieu) - As Amended: April 8, 2010
PROPOSED CONSENT
SUBJECT : VETERANS AFFAIRS: ADMINISTRATION
KEY ISSUE : SHOULD U.S. SERVICE MEMBERS BE GIVEN ADDITIONAL
TOOLS, INCLUDING THE ABILITY TO RECOVER REASONABLE ATTORNEY'S
FEES, THAT WILL ENABLE THEM TO ENFORCE, ON THEIR OWN ACCORD,
SPECIFIED RIGHTS AND FINANCIAL PROTECTIONS UNDER THE MILITARY
AND VETERANS CODE THAT EXIST FOR THEIR BENEFIT?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This non-controversial bill seeks to increase the ability of
service members to enforce, on their own accord, certain
financial and consumer-related rights and protections granted to
them under the Military and Veterans Code to assist them with
financial hardships associated with deployment. To accomplish
this objective, the bill expressly authorizes service members to
recover actual damages, reasonable attorney's fees, and costs
from any person who violates any of these rights and protections
as specified throughout the Military and Veterans Code.
Supporters contend that the attorney's fees provision will
provide an incentive for attorneys to represent service members
and their families in cases where they are attempting to cope
with financial hardships associated with deployment of the
service member, which also has the effect of making the service
member unavailable to participate in efforts to enforce these
statutory rights on their own accord. This bill would also
grant service members an expedited review of a certain petition
for relief, which would potentially help resolve the dispute
before the service member must ship out for deployment and
becomes unavailable to participate in the action. This bill is
sponsored by the California Military Department and supported by
the National Guard Association of California. It previously
passed the Assembly Committee on Veterans Affairs on consent and
has no registered opposition.
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SUMMARY : Seeks to increase the ability of service members
deployed or facing deployment to enforce, on their own accord,
certain rights and protections granted to them under the
Military and Veterans Code. Specifically, this bill :
1)Makes a person who has violated certain sections of the
Military and Veterans Code liable for actual damages,
reasonable attorney's fees, and costs incurred by the injured
party. These sections generally afford financial and
consumer-related rights and protections to service members
designed to ease financial hardships associated with
deployment. The existing code sections for which violators
are liable under this bill provide that:
a) A stay or postponement of payment of any tax, fine or
other civil liability shall not alone provide the basis for
a denial or revocation of credit, or a change in terms of
an existing credit arrangement, with respect to credit
transactions between the service member and creditors.
(Military and Veterans Code Section 401. All further
references are to this code unless otherwise noted.)
b) The legal right of a service member who is a defendant
in a civil case to have an attorney represent and protect
his or her interests before any default judgment may be
entered against the service member in the case. (Section
402.)
c) The service member's period of military service
(deployment) shall not be included in computing any statute
of limitations for bringing a civil action or other court
proceeding. (Section 404.)
d) No obligation bearing interest at a rate greater than 6%
per year incurred by the service member before that
member's entry into service shall bear interest at a rate
greater than 6% during any part of the period of military
service. (Section 405.)
e) The service member's family may not be evicted from
their principal residence during the member's period of
military service, unless otherwise ordered by a court.
(Section 406.)
f) No person engaged in an installment contract with the
service member prior to that member's deployment may
rescind or terminate the installment contract for any
breach for nonpayment of an installment occurring prior to
or during the service member's period of military service.
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(Section 407.)
g) In any proceeding to enforce nonpayment of an obligation
secured by mortgage or deed of trust, the court shall stay
the proceedings upon application of the service member. In
addition, no sale, foreclosure, or seizure of property for
nonpayment of such an obligation shall be valid if made
during the service member's period of service or within
three months thereafter, except as provided. (Section
408.)
h) No assignee of a service member's life insurance policy
shall, during the period of military service, exercise any
right or option by virtue of that assignment unless upon
leave of the court. Furthermore, no person shall exercise
any right to foreclose or enforce any lien for storage of
household goods, furniture, or personal effects during the
service member's period of service or within three months
thereafter, except as provided. (Section 409.1.)
i) The court may grant relief to the service member by
staying enforcement during the member's period of military
service of an obligation payable under a mortgage or a
contract to purchase real estate, as provided, and of
payment of any tax or assessment incurred by the member.
(Section 409.3.)
j) An exclusion or waiting period may not be imposed in
connection with reinstatement of health insurance coverage
held by the service member prior to the member's period of
military service. (Section 409.4.)
2)Provides that, with respect to the California Military
Families Financial Relief Act, or any provision of the
California Military Families Financial Relief Act of 2005:
a) Any person violating any provision of either Act shall
be liable for actual damages, reasonable attorney's fees,
and costs incurred by the injured party.
b) A service member or other person seeking to enforce
rights under either Act shall not be required to pay a
filing fee or court costs.
3)Prohibits the court from charging a service member any filing
fee or court costs for a petition for relief from an
obligation or liability incurred prior to the member's period
of military service, or from a tax or assessment falling due
prior to or during the period of service. Specifies further
procedural requirements, including that:
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a) The court shall set a hearing on the petition within 25
days from the filing date of the petition.
b) The petition shall be served at least 10 days before the
hearing.
c) The respondent shall file and serve a response at least
five days before the hearing.
EXISTING LAW :
1)Provides legal rights and financial protections for service
members, with respect to credit agreements, court proceedings,
interest liabilities, eviction proceedings, contracts,
mortgages and trusts, leases, life insurance policies, taxes
and assessments, and health insurance policies, as specified.
(Sections 401 to 409.4, 800 to 811, 820 to 828.)
2)Establishes the California Military Families Financial Relief
Act (Chapter 3 of Division 4 of the Military and Veterans
Code, commencing with Section 800) which provides financial
relief for a service member who is called to active duty as
part of the Iraq and Afghanistan conflicts. (Sections 800 to
811.)
3)Establishes the California Military Families Financial Relief
Act of 2005 (Chapter 3.3 of Division 4 of the Military and
Veterans Code, commencing with Section 820), which provides
financial rights and relief to service members called into
active duty, generally. (Sections 820 to 828.)
4)Permits a service member to apply to the court for relief from
an obligation or liability incurred prior to the member's
period of military service, or from a tax or assessment
falling due prior to or during the period of service, and
allows the court to grant specified relief after appropriate
notice and hearing, unless in its opinion the ability of the
service member to comply with the obligation or pay the tax or
assessment has not been materially affected by reason of the
member's military service. (Section 409.3.)
COMMENTS : This non-controversial bill seeks to increase the
ability of service members to enforce, on their own accord,
certain financial and consumer-related rights and protections
granted to them under the Military and Veterans Code to assist
them with financial hardships associated with deployment. To
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accomplish this objective, the bill expressly authorizes service
members to recover actual damages, reasonable attorney's fees,
and costs from any person who violates any of these rights and
protections as specified throughout the Military and Veterans
Code. The attorney's fees provision, in particular, is intended
to provide an incentive for attorneys to represent service
members and their families in cases where they are attempting to
cope with financial hardships associated with the deployment
(and prolonged absence) of the service member.
Statutory Protections for Service Members in the California
Military and Veterans Code. In 2002, the Military Department
sponsored AB 1433 (Horton), which was chaptered into law and
repealed California MVC 399 and 399.5 and added Chapter 7.5
"Protections," commencing with 400 through 420. The new law
provided financial protection for military members performing
military service in regards to court proceedings, credit
contract obligations, rental agreements, taxes (except income
taxes), and health insurance, as well as eviction protection for
the military members' families. The law also enabled National
Guard members serving in state or federal status and other
military reservists performing federal duty to receive financial
protections consistent with those found within the federal
SSCRA.
In December 2003, President Bush signed an updated version of
the SSCRA, now known as the Servicemembers Civil Relief Act
(SCRA). The new federal statute revised and expanded the
protections included in the outdated SSCRA to reflect new
economic realities.
California Military and Veterans Code Sections 800 to 811 were
amended in 2005, with the chaptering of AB 306 (Baca). As part
of the California Military Families Financial Relief Act of
2005, this legislation applied to members of the California
National Guard or Reserves called to active federal duty for the
Iraq or Afghanistan conflicts, and ensured that these service
members would be provided enhanced financial protections during
the period of their deployment.
Also in 2005, AB 1666 (Frommer), the California Military
Families Financial Relief Act of 2005, was enacted to provide
additional protections for members of the California National
Guard and Reserves ordered to military duty.
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Need for the Bill. According to the author, the California
Military Department has recently coordinated with State Military
Reserve Judge Advocate General (JAG) Officers to assist deployed
and deploying service members who incur financial hardship
because of their deployments. In the past year, these
experienced lawyers have either counseled or represented 22
service members, but the resources that the California Military
Department can expend on these issues are very limited.
Generally, these cases arise when service members seek to
exercise the financial rights and protections afforded to them
under the Military and Veterans Code. The form of relief may
vary from deferment of a financial obligation or reduction of an
interest rate to the statutory requirement of 6%. In a typical
case, the service member might contact a creditor directly
seeking relief, but is denied the protection of his statutory
right to relief. At this point, many service members are at an
impasse. Judge Advocates are limited by regulation and
geography from doing anything more than sending a letter on
behalf of the service members. The service member is limited by
geography and his or her own limited sophistication in enforcing
these rights in court.
The author of this bill, himself a Judge Advocate General,
contends that this legislation is necessary to enable service
members, on their own accord, to fully enforce the rights and
protections afforded to them under the Military and Veterans
Code. In support, the author states:
This legislation is critical because more Citizen
Soldiers and Airmen of California are being called to
active duty in Iraq and Afghanistan. As a result,
service members and their families are suffering the
hardships of these ongoing deployments. It is
necessary to provide an enforcement mechanism to
ensure the Legislature's stated intent to enable
service members to devote their entire energy to the
defense needs of the nation or state.
This bill enables service members to recover an award of
reasonable attorney fees. Not only is finding an attorney to
represent a service member difficult without an attorney's fees
provision, but on a typical claim the service member cannot be
made whole when a significant portion of his or her damages
award must go toward non-recoverable attorney's fees. According
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to the author, finding an attorney to take such a case is nearly
impossible unless that attorney knows that reasonable
compensation will be allowed by the court for undertaking such
an action to protect the rights of a service member. The author
further explains:
Many of the rights sought to be enforced have either
no damages or minimal damages. The service member is
primarily seeking an order from the court compelling
the lender to stop violating the Military and Veterans
Code and honor his or her requests. An example is a
case to clear up the service members' credit after the
institution has wrongfully denied the service members
the protections of the Military and Veterans Code.
There would be no damages in a case where the service
members is only seeking a court order to accurately
reflect his or her credit if no attorney's fees are
available. There is no money to pay an attorney in an
injunction action.
The author believes voluntary compliance will be much more
likely if creditors know that litigation over violations of the
Military and Veterans Code may result in an award against them
of the service members' reasonable attorney's fees and costs.
In addition, many service members do not have the ability to
immediately pay court fees at the time of filing because of
financial hardship, which is compounded when the member has been
deployed overseas or faces imminent deployment. This bill would
also waive some court filing fees for service members so that
they may proceed to enforce statutory protections on their own
accord.
This bill would also grant service members an expedited review
of a petition for relief . Under current law, a service member
may not be able to enforce these protections until the service
member returns from deployment. Expedited review of a service
member's petition for relief can be very helpful in resolving
disputes before the service member must ship out for deployment
and becomes unavailable to participate in the action. Delay in
enforcement unfortunately may cause irreversible credit problems
for some service members, regardless of the eventual outcome of
the case. In a matter concerning obligations, taxes, or
assessments that are past due, this bill requires a court to set
a hearing on the service member's petition for relief within 25
days from filing, lending more certainty to the process than the
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current statute which simply authorizes the court to grant
relief "after appropriate notice and hearing."
ARGUMENTS IN SUPPORT : The National Guard Association of
California writes in support: "AB 2365 will ensure that
California National Guard members and Reservists receive court
awarded damages, including reasonable attorney fees and court
costs, incurred while pursuing certain protections under
specified sections of the Military and Veterans Code. AB 2365
will greatly assist Service members in accessing the courts to
enforce their rights."
REGISTERED SUPPORT / OPPOSITION :
Support
California Military Department (sponsor)
National Guard Association of California (NGAC)
Opposition
None on file
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334