BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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  








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            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)








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          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  








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            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:








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             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.











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          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  








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          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  








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          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  








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          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  








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          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  








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          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  








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          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













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