BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  August 10, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 270  
          (Mendoza) - As Amended August 4, 2016


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          |             |Business and Professions       |     |9 - 6        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:  This bill provides the Court Reporters Board (CRB)  
          with broad powers of enforcement, as specified, over foreign or  
          domestic corporations that offer or arrange for court reporter  
          services in California.  Specifically, this bill: 


          1)Authorizes the CRB 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, render, or provide the services of a certified shorthand  








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            reporter, for violations regarding the taking of oral  
            depositions within the Civil Discovery Act, the rendering of  
            shorthand reporting services by professional corporations, the  
            licensing law for shorthand reporters, and the Professional  
            Standards of Practice for shorthand reporters.




          2)Provides that nothing in this bill is to be construed to  
            authorize or prohibit the provision of shorthand reporting  
            services by an unlicensed, foreign corporation.

          FISCAL EFFECT:


          Minor and absorbable costs to the CRB for a potential increase  
          in complaint volume resulting in potentially higher citations.


          COMMENTS:


          1)Purpose.  According to the author, "SB 270 addresses a  
            complex problem that pits California Court Reporting firms  
            and licensed court reporters against out-of-state  
            corporations. These corporations not only arrange for  
            shorthand reporting services, they also determine the fees  
            charged to parties and set timelines for the delivery of  
            transcripts, among other things.  All of these activities  
            are strictly regulated to ensure impartiality in the  
            handling of transcripts, legal documents, that are  
            essentially an extension of a court proceeding.  
            Corporations, either foreign or domestic, that are not  
            headed by a licensed court reporter believe they can  
            ignore and violate ethical rules and laws of impartiality  
            and objectivity when they are arranging for court  
            reporting services. These corporations have interpreted  
            current law to mean they are not subject to the  








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            jurisdiction of the board because they are not licensees.  
            This has created an un-fair playing field within the  
            industry. Most disturbing is that under current law,  
            licensed court reporters find themselves liable for the  
            ethical violations of these companies; even if the  
            reporter has no knowledge of or involvement in the  
            violation."


          2)Background.  The CRB is responsible for licensing and  
            disciplining certified shorthand reporters, approximately  
            7,000 in California.  Currently, in California, certified  
            shorthand reporters work in two separate capacities: a) as an  
            "official reporter" who works as a court reporter employed by  
            a state court, or b) 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, which are established by the CRB.  In order to  
            qualify for licensure as a certified shorthand reporter, an  
            individual must have a high school education, twelve months  
            (or 1,400 hours) of full-time work experience related to  
            making records of hearings, a passing score on the California  
            State Hearing Reporters Examination, and completion of a  
            course from an approved court-reporting school. In addition to  
            the licensing and discipline functions, the CRB specifies the  
            professional standards of practice for professionals. 
            


            According to the author, the need for this bill stems from the  
            inability of the CRB to take appropriate disciplinary action  
            against a foreign (out-of-state) corporation that was accused  
            of operating in violation of the CRB's professional standards  
            of practice-a problem identified by a Santa Clara Superior  
            Court decision.  In that case, the CRB issued a citation to  
            defendant U.S. Legal, assessing a fine of $2,500 for violation  
            of professional standards, specifically the prohibition on  
            gift-giving.  U.S. Legal refused to pay the fine, and  








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            challenged in court the Board's jurisdiction to issue the  
            citation under California law. The CRB argued that the  
            defendant was a foreign corporation as defined under the  
            Moscone-Knox Professional Corporations Act, and therefore a  
            "shorthand reporting corporation" as otherwise defined under  
            the Business and Professions Code which is subject to the  
            regulation.  


            In holding for the defendant, the court found that neither the  
            Moscone-Knox Act nor the Business and Professions Code  
            extended authority to the CRB to issue citations to foreign  
            corporations like U.S. Legal that do not meet the statutory  
            definition of "foreign professional corporation," by virtue of  
            the fact that they do not actually hold a license or  
            certificate in this state. Accordingly, this bill would  
            provide such enforcement authority to the CRB.


          3)Arguments in Support. The California Court Reporters  
            Association writes in support:


               SB 270 provides specific authority for the board to  
               seek injunctive relief to stop individuals and  
               corporations that are providing services in California  
               without having ever been licensed in our state, or to  
               impose penalties if they are also in violation of  
               California's professional standards.  Court reporters  
               ensure the integrity of judicial records and are  
               unmatched in their ability to produce a real-time  
               transcript of court proceedings. The board should have  
               undisputed authority to ensure that any entity  
               rendering court reporting services in California is  
               upholding the state's professional and ethical  
               standards.


          4)Arguments in Opposition.  A coalition of deposition service  








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            companies remains opposed to the bill.  These companies are  
            Esquire Deposition Services, LLC; Magna Legal Services; U.S.  
            Legal Support, Inc. and Veritext Corp.  They state:
               The bill effectively creates a new quasi- licensing  
               program for companies "offering" court reporting  
               services, regulating activities which courts have  
               expressly concluded do not constitute the practice of  
               court reporting.  The bill illogically and  
               inappropriately attempts to apply regulations  
               applicable to the practice of court reporting to the  
               business of deposition services companies, thereby  
               disrupting perfectly legitimate business relationships,  
               and leaving companies completely unsure of which  
               activities are permitted and which are not.  Further,  
               the bill would give the Court Reporters Board  
               unfettered authority to issue citations and penalties  
               against companies which will not even enjoy the  
               protections of a property interest in a license.  The  
               effect will be to drive business out of the state and  
               make litigation more costly and less efficient.


          


          Analysis Prepared by:Jennifer Swenson / APPR. / (916)  
          319-2081