California Legislature—2013–14 Regular Session

Assembly Bill No. 1679

Introduced by Assembly Member Harkey

February 12, 2014

An act to amend Section 17345.1 of the Financial Code, relating to escrow agents.

LEGISLATIVE COUNSEL’S DIGEST

AB 1679, as introduced, Harkey. Escrow companies: Fidelity Corporation: hearings.

Existing law provides for the licensing of escrow agents by the Commissioner of Business Oversight, and requires licensees to participate as members of the Escrow Agents’ Fidelity Corporation, a nonprofit corporation established to pay members for loss of trust obligations, as specified. Existing law authorizes a member or successor in interest aggrieved by any action or decision of Fidelity Corporation to file a written request for a hearing with the commissioner, as provided. Existing law requires the commissioner to abstain from proceeding with a hearing under certain circumstances.

This bill would additionally require the commissioner to abstain if an employee of the department is the member’s successor in interest.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 17345.1 of the Financial Code is amended
to read:

17345.1.  

(a) A member or successor in interest aggrieved by
any action or decision of Fidelity Corporation may file a written
request for a hearing with the commissioner within 30 days from
the action or decision.

(b) (1) Except as provided in subdivision (c), the hearing shall
be conducted by an administrative law judge on the staff of the
Office of Administrative Hearings and the administrative law
judge’s proposed decision shall be made within 120 days from the
date of the request for hearing. This time limit does not constitute
a jurisdictional deadline and may be extended by stipulation of the
parties or by order of the administrative law judge for good cause.

(2) The hearing shall be conducted in accordance with the
administrative adjudication provisions of Chapters 4.5
(commencing with Section 11400) and Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code, except as specified in this subdivision.

(3) The following sections of the Government Code shall not
apply to a hearing under this subdivision: Section 11503 (relating
to accusations), Section 11504 (relating to statements of issues),
Section 11505 (relating to contents of the statement to respondent),
Section 11506 (relating to the notice of defense), Section 11507
(relating to amended or supplemental accusations), and Section
11516 (relating to amendment of accusations after submission of
case).

(4) The sole parties to the hearing shall be the member or
successor in interest (complainant) and Fidelity Corporation
(respondent). Third-party intervention shall not be permitted. The
disputes, claims, and interests of third parties shall not be within
the jurisdiction of the proceedings. However, nothing in this
paragraph prohibits any interested party from submitting an amicus
brief upon approval by the administrative law judge, after a duly
noticed motion demonstrating good cause.

(5) Within 10 days of receipt of the request for a hearing, the
commissioner shall schedule the hearing with the Office of
Administrative Hearings and shall serve each party by personal
service or mail with notice of the hearing, which is to include the
date, time, and place of the hearing.

(A) Within 10 days of service of the notice of hearing, the
complainant shall file with the Office of Administrative Hearings,
and serve upon the respondent by personal service or mail, a written
statement setting forth the matters to be considered at the hearing
in sufficient detail to permit the respondent to prepare and present
its response. The statement shall contain the following:

(i) A brief statement of the facts that give rise to the hearing.

(ii) A statement of the issues to be considered at the hearing
including relevant statutes and rules. If the statement includes
issues not raised in the proof of loss claim or considered by
respondent in its decision, respondent may move for abatement of
the proceedings for consideration of those issues by respondent.
The administrative law judge may abate the proceedings for a
period not to exceed 60 days from the issuance of the order to
abate. The administrative law judge may extend the time period
for good cause upon motion by respondent or by stipulation of the
parties. If respondent has not issued a revised decision within the
period of abatement, the administrative law judge shall reset the
matter for hearing.

(B) Within 20 days of service of the statement, respondent may
file with the Office of Administrative Hearings, and serve upon
the complainant by personal service or mail a written response to
the statement.

(C) The statement of issues and response may be amended upon
completion of discovery, except that notice of the amendment shall
be no later than 30 days before the date set for hearing.

(6) Where the statement of issues includes a claim for a loss of
trust obligations that has been denied by respondent, complainant
shall bear the burden of establishing by a preponderance of the
evidence that a loss as defined in Section 17304 has occurred and
that respondent is required to pay the claim in accordance with
this chapter. Each legal issue shall be adjudicated in the proposed
decision and the commissioner’s decision, except for any issue
either withdrawn or waived by complainant or respondent, upon
the submission of the case after hearing.

(7) Any party may move for a judgment on the pleadings or
summary judgment, as a dispositive motion, pursuant to the Rules
of Procedure of the Office of Administrative Hearings. The
evidence in support of and standards for deciding the motions shall
be as set forth in the Code of Civil Procedure. If the administrative
law judge denies the motion, the matter shall be heard on the merits
by the administrative law judge. If the administrative law judge
grants the motion, the order shall be in the form of a proposed
decision to the commissioner pursuant to subdivision (b) of Section
11517 of the Government Code.

(8) Nothing in this section shall be construed to require the
losing party to pay the other party’s costs and expenses, including
attorney’s fees.

(9) If the statement of issues is abated and respondent issues a
revised decision, the parties may amend their pleadings within a
reasonable period of time, as ordered by the administrative law
judge.

(c) (1) If a request for hearing includes a claim for loss of trust
obligations that has been denied by Fidelity Corporation and the
claim involves the factors described in paragraph (3), the
commissioner, upon the request of Fidelity Corporation and as
provided herein, shall abstain from proceeding with a hearing. The
matter may be adjudicated in a court of competent jurisdiction
upon the filing of an action by the member or successor in interest.
Fidelity Corporation shall notify the commissioner, in writing, of
the grounds for abstention of jurisdiction within five days of the
filing of the request for a hearing by the member or successor in
interest. The commissioner shall rule on the abstention of
jurisdiction request within 10 days of the notice and the ruling
shall be considered final. In making a determination on the request
for abstention, the commissioner may examine and investigate all
facts connected with the request for abstention and may request
information from any person as deemed necessary.

(2) If the commissioner denies the request for abstention of
jurisdiction, the hearing shall be conducted in accordance with
subdivision (b), except that compliance by the commissioner with
paragraph (5) of subdivision (b) shall be within five days of the
ruling denying the abstention request.

(3) The factors requiring abstention of jurisdiction by the
commissioner are as follows:

(A) The claim for a loss is based upon an alleged escrow
transaction in which an officer, director, trustee, stockholder,
manager, or employee of the member was a principal to the
transaction.

(B) The claim involves (i) the need to determine conflicting
claims or disputes to real property and (ii) there is a potential for
double recovery by any principal to an escrow.

(4) The commissioner shall abstain if determination of the claim
will cause some escrows to have preferable or favorable treatment
over the other escrows held by the member or successor in interest.

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(5) The commissioner shall abstain if an employee of the
department is the member’s successor in interest.

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