BILL ANALYSIS Ó SB 270 Page 1 Date of Hearing: August 24, 2016 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Rudy Salas, Chair SB 270(Mendoza) - As Amended August 19, 2016 SENATE VOTE: 29-9 SUBJECT: Shorthand reporting services. SUMMARY: Provides the Court Reporters Board (CRB) with broad powers of enforcement, as specified, over foreign or domestic corporations that offer or arrange for shorthand reporting services, as specified, in California, and clarifies that the provisions of this bill do not regulate the setting of negotiated transcript fees and reasonable fees for non-contracting parties. EXISTING LAW: 1)Provides for the regulation and certification of shorthand reporters by the CRB within the Department of Consumer Affairs (DCA). (Business and Professions Code (BPC) Section 8000, et seq.) 2)Prohibits a person from engaging in the practice of shorthand reporting, as specified, unless that person is the holder of a certificate in full force and effect issued by the CRB unless SB 270 Page 2 he or she is a salaried, full-time employee of any department or agency of the state who is employed as a hearing reporter. (BPC Section 8016) 3)Defines the "practice of shorthand reporting" as the making, by means of written symbols or abbreviations in shorthand or machine shorthand writing, of a verbatim record of any oral court proceeding, deposition, court ordered hearing or arbitration or proceeding before any grand jury, referee, or court commissioner and the accurate transcription, thereof. (BPC Section 8017) 4)Specifies that nothing requires the use of a certified shorthand reporter when not otherwise required by law. (BPC Section 8017) 5)Except as specified, prohibits a person, firm or corporation from assuming or using the title "certified shorthand reported" or the abbreviation "C.S.R." or using any words or symbols indicating or tending to indicate that he, she, or it is certified. (BPC Section 8018) 6)Provides the CRB, in addition to its authority to conduct disciplinary proceedings, the authority to issue administrative citations or assess fines for the violation of any rules and regulations adopted by the CRB. (BPC Section 8027.5) 7)Defines a "shorthand reporting corporation" as a corporation which is authorized to render professional services, as specified in the Corporations Code (CORP) Section 13401, as long as that corporation and all of its shareholders, officers, directors, and employees rendering professional services who are certified shorthand reporters are in compliance with specified requirements in the CORP. (BPC Section 8040) SB 270 Page 3 8)Specifies that each director, shareholder, and officer of a shorthand reporting corporation must be a licensed shorthand reporter. (BPC Section 8044) 9)Prohibits a shorthand reporting corporation from doing or failing to do any act which would constitute unprofessional conduct under any statute, rule, or regulation which pertains to shorthand reporters or shorthand reporting. (BPC Section 8046) 10)Requires a shorthand reporting corporation in conducting its practice to observe and be bound by statutes, rules, and regulations to the same extent as a person holding a license. (BPC Section 8046) 11)Requires every person under the jurisdiction of the CRB who holds a license or certificate, or temporary license or certificate, or business that renders professional services, namely shorthand reporting services, within the meaning of CORP Section 13401, to comply with professional standards of practice, as specified. (California Code of Regulations Title 16 (16 CCR) Section 2475) 12)Defines "professional services" to mean any type of professional service that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the BPC, the Chiropractic Act, or the Osteopathic Act. (CORP Section 13401(a)) 13)Defines "foreign professional corporation" to mean a corporation organized under the laws of a state of the United States other than this state that is engaged in a profession SB 270 Page 4 of a type for which there is authorization in the BPC for the performance of professional services by a foreign professional corporation. (CORP Section 13401(c)) 14)Defines "professional corporation" to mean a corporation organized under the General Corporation Law, as specified, that is engaged in rendering professional services in a single profession, except as otherwise authorized, pursuant to a certificate of registration issued by the governmental agency regulating the profession as herein provided and that in its practice or business designates itself as a professional or other corporation as may be required by statute. However, any professional corporation or foreign professional corporation rendering professional services by persons duly licensed by the Medical Board of California or any examining committee under the jurisdiction of that board, the Osteopathic Medical Board of California, the Dental Board of California, the Dental Hygiene Committee of California, the California State Board of Pharmacy, the Veterinary Medical Board, the California Architects Board, the CRB, the Board of Behavioral Sciences, the Speech-Language Pathology and Audiology Board, the Board of Registered Nursing, or the State Board of Optometry is not be required to obtain a certificate of registration in order to render those professional services. (CORP Section 13401(b)) THIS BILL: 15)Authorizes the CRB to seek injunctive relief or issue citations, fines, and other penalties in accordance of existing law 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 reporter for violations of the following provisions that relate to shorthand reporting: SB 270 Page 5 a) Chapter 9 of Title 4 of Part 4 (commencing with Section 2025.010) of the Code of Civil Procedure; b) Part 4 of Division 3 of Title 1 (commencing with Section 13400) of the Corporations Code (CORP)); c) Chapter 12 of Division 3 (commencing with Section 8000) of the BPC; and, d) Section 2475 of Title 16 of the CCR. 16)Provides that nothing in this bill is to be construed to authorize an individual without a license to practice shorthand reporting, as defined in BPC Section 8017. 17)Provides that nothing in this section is to be construed to authorize or prohibit the provision of shorthand reporting services by a foreign corporation in violation of subdivision (c) of Section 13401 of the CORP or construed to authorize or prohibit violations of BPC Section 8044. 18)Specifies that nothing in this bill shall be construed to regulate the setting of negotiated transcript fees and reasonable fees for non-contracting parties as long as the fees are otherwise in compliance with applicable law. FISCAL EFFECT: According to the Assembly Committee on Appropriations, this bill will result in minor and absorbable costs to the CRB for a potential increase in complaint volume resulting in potentially higher citations. SB 270 Page 6 Purpose. This bill is sponsored by the California Court Reporters Association . According to the author, "[this bill] strengthens the authority of the CRB to regulate or prevent unlicensed individuals and corporations from unlawfully rendering court reporting services in California by issuing fines or injunctions for acts in violation of the CRB's professional and ethical rules for certified shorthand reporters. Under current law, the CRB has limited authority to impose penalties on any court reporter or court reporting corporation that is rendering services without a court reporting license. However, for unlicensed entities, the CRB has had challenges in imposing fines for any violations. This has jeopardized the integrity of the court reporting profession and places at a disadvantage licensed businesses that provide court reporting services." Court Reporters Board. The CRB is responsible for licensing and disciplining CSRs. CSRs are responsible for reporting depositions in legal cases as well as court proceedings. Since 1972, the CRB has permitted the certification of individuals and at one time, the registration of shorthand reporting corporations. Currently, the CRB oversees approximately 7,000 certified shorthand reporters. The CRB establishes the educational requirements for certification including authorizing the minimal educational standards and approving schools. In order to qualify for licensure as a certified shorthand reporter, an individual must have a high school education, 12 months (or 1,400 hours) of full-time work experience related to making records of hearings, obtain a passing score on the California State Hearing Reporters Examination, and complete a course from an approved court-reporting school. Currently, in California, certified shorthand reporters work in two separate capacities: 1) as an "official reporter" who works as a court SB 270 Page 7 reporter employed by a state court, or 2) 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. Currently, the CRB does not separately license or register court reporting corporations. Enforcement Authority. In addition to the CRB's licensing function, the CRB is also tasked with enforcement-related activities for shorthand reporters who violate the practice act. BPC Section 8025 states that a license to practice as a shorthand reporter may be suspended, revoked, or denied, or other disciplinary action may be taken against a certificate holder for a number of reasons including unprofessional conduct, or loss or destruction of stenographic notes that prevents the production of a transcript, among others. In addition to the provisions of BPC Section 8025, the CRB specifies through regulation the professional standards of practice (16 CCR Section 2475), which include acting without bias toward, or prejudice against, any parties and/or their attorneys; not entering into, arranging, or participating in a relationship that compromises the impartiality of the certified shorthand reporter, including but not limited to a relationship in which compensation for reporting services is based upon the outcome of the proceeding; and maintaining confidentiality of information, among others. Under current law, the CRB has the authority to carry out its licensing and enforcement authority against any person or corporation, as defined in CORP Section 13401. According to the author, the CRB has limited authority to impose penalties on any court reporter or court reporting corporation that is rendering services without a court reporting license. While the CRB does not register or certify corporations in California, BPC Sections 8044 and 8046 provide the CRB with the explicit authority over corporations incorporated in California because each director, shareholder, and officer of a shorthand reporting corporation is SB 270 Page 8 required to be a licensed shorthand reporter; however, the same authority is not specified in statute for foreign corporations providing or arranging for court reporting services in California. This bill aims to increase the CRB's disciplinary reach to include those entities or corporations which for a fee offer, offer to arrange for, render, or provide the services of a shorthand reporter, by permitting the CRB to discipline entities for specified violations including those corporations (foreign or domestic) who are arranging for shorthand reporting services, as specified. Scope of Practice. BPC Section 8017 defines shorthand reporting as the making by means of written symbols or abbreviations in shorthand or machine shorthand writing, of a verbatim record of any oral court proceeding, deposition, court ordered hearing or arbitration , or proceeding before any grand jury, referee, or court commissioner, and the accurate transcript thereof. 16 CCR Section 2403 further specifies that the practice of shorthand reporting includes services for actions in superior court such as delivering a copy of the original transcript in a computer-readable form, as specified, labeling disks of transactions with the case name and court number, and the dates of the proceedings contained on the disk, among others. For a deposition, 16 CCR Section 2403 includes making a full or partial copy of a transcription available, notifying all parties who attended a deposition of requests made by other parties for either an original copy of the transcript, or any portion thereof, and securely sealing the transcript in an envelope or package, as specified. These provisions are aggregated from various sections in the Code of Civil Procedure and the Civil Code. Professional Corporations and The Moscone-Knox Professional Corporation Act (Act). BPC Section 8044 specifies that each director, shareholder, and officer of a shorthand reporting SB 270 Page 9 corporation must be a licensed shorthand reporter. Business models for shorthand reporting corporations and other service providers vary throughout the state. While there are a number of licensee-owned corporations in California, there are a number of businesses that do not hold themselves out to be court reporting corporations. These corporations claim to be litigation service providers that only arrange for court reporting services, but are not actually responsible for the making of the written record. According to the author, the need for this bill is in response to the CRB's inability to take the appropriate disciplinary actions against a foreign corporation who was accused of operating in violation of the CRB's professional standards of practice; specifically, 16 CCR Section 2475(b)(8) which prohibits any person or business under the jurisdiction of the CRB from either directly or indirectly giving or receiving any gift, incentive, reward, or anything of value to or from any person or entity associated with a proceeding being reported that is more than $100. Court Reporters Board of California v. U.S. Legal Support, Inc., 1-11-CV197817. In 2010, the CRB took disciplinary action against a corporation, charging it with violating 16 CCR Section 2475(b)(8) by issuing a citation and fine. The corporation argued that the CRB lacked the jurisdictional authority to issue a citation to the company, and did not pay the fine. As a result, a formal case was brought against U.S. Legal Support, Inc. in 2012. The court held that the CRB lacked the jurisdictional authority to issue citations and fines to an out-of-state corporation rendering court reporting services in California without authorization to do so. As the court noted in its decision, although U.S. Legal Services, Inc. was rendering court reporting services in California and was in violation of the gift giving rules as defined in the CRB's SB 270 Page 10 regulations, there was no explicit authority in statute authorizing CRB to impose citations or fines because the corporation was not authorized to do business in California under the BPC. This bill will authorize the CRB, under this new section, 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, renders, or provides the services of a certified shorthand reporter, for violations of specified areas of law. The issue of professional conduct was raised in the CRB's 2015 Sunset Review Report. As noted in the committee's 2016 Background Paper, according to the CRB, additional complaints have been received about overcharging for court transcripts, a violation of Government Code Section 69950 and is direct consumer harm; the overcharging of one party for transcripts is in practice cost-shifting, or akin to giving a large gift. This is a practice whereby a court reporting firm offers to charge the noticing party a nominal amount if the noticing party chooses to utilize the services of that firm. The costs of the transcripts are then shifted over to the defending attorney(s), who has no ability to choose the shorthand reporter and is essentially stuck with the bill presented in order to obtain a transcript. While the practice is not specifically illegal on its face, the CRB is concerned about the serious ethical considerations that arise out of this type of scenario. As a result, it is important for the CRB to ensure that the same rules that apply to all licensees that serve to protect consumers are enforced against all entities that provide shorthand reporting services. The authority granted by the bill allows the CRB to take enforcement actions for violations of the laws which comprise virtually all of the applicable statutes and regulations SB 270 Page 11 governing shorthand reporters. Further, this bill seeks to clarify that this bill does not regulate the setting of negotiated transcript fees and reasonable fees for non-contracting parties as long as the fees are otherwise in compliance with applicable law. Current Related Legislation. AB 2192 (Salas) of the current Legislative Session, extends the sunset date for the CRB and its executive officer. Although the bill does not address court reporting corporations, the issue was raised in the sunset review hearing on March 9, 2016. STATUS: This bill is pending on the Assembly Floor. Prior Related Legislation. AB 1461 (Ruskin) of 2009, would have prohibited a firm, partnership, sole proprietorship, or other business entity providing or arranging for shorthand reporting services, from doing or failing to do any act that constitutes unprofessional conduct under any statute, rule or regulation pertaining to shorthand reporters or shorthand reporting. NOTE: This bill was held in the Assembly Committee on Appropriations. ARGUMENTS IN SUPPORT: None on file. ARGUMENTS IN OPPOSITION: The Liberty Mutual Insurance Corporation writes in opposition, "if passed, [this bill] jeopardizes the ability to contract with SB 270 Page 12 deposition service firms for these litigation services. There is simply no public policy justification to eliminate such contracts. Amendments were offered that would clarify [this bill] and ensure that deposition service firms could provide these litigations services including court reporting and ancillary litigation services based on market rates, but these amendments were rejected. This will unnecessarily drive up litigation costs and create inefficiencies in this market place. Although we recognize the different issues between court reporters and deposition service firms, we do not necessarily have a position on those particular issues. However, this bill will drive up litigation costs and prohibit businesses and other entities from using deposition service firms for these litigation and ancillary services." REGISTERED SUPPORT: None on file. REGISTERED OPPOSITION: Liberty Mutual Insurance Corporation Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301 SB 270 Page 13