SACRAMENTO (CN) — The California Senate has all but passed a bill to eliminate convenience fees charged by companies controlling electronic gateways into courthouses. The effort to adopt new technology for California courts has a long and checkered history of mismanagement by state court bureaucrats who spent enormous sums on a failed software project while fighting diehard battles against press access and giving themselves special privileges.
For centuries, the medium of court documents was parchment or paper. But in the last decade, there has been a wave of courts, first federal then state, moving to digital documents. The move has given court officials a stalking horse to limit public access and given private companies a means to extract further profit.
California, with the biggest population, economy and court system of any state in the nation, is currently in a late and at times chaotic transition to that digital world. In the switch, individual superior courts have given what amounts to a local monopoly to one or another software company, allowing it to control that court’s e-filing gateway.
Going through that gateway are the runners, a group traditionally embedded in the court ecosystem, the myriad small companies that run documents to a court’s intake window. Competition among them is extremely high. But they had been made subservient by the mother software company that keeps the keys to the gateway.
Control over the electronic passageway has also created a river of gold for the software companies because they can rely on a high volume of court filings year in, year out. They can also extract a user fee for each filing and tack on additional convenience fees.
In a move to control that power, the rule-making body for California’s courts, the Judicial Council, adopted a policy in June saying California courts can contract with more than one electronic file manager, which would lessen the single gatekeeper’s stranglehold. The bill currently pending in the California Legislature would curb another aspect of the gatekeeper’s power, the ability to tack a convenience fee onto credit payments.
The bill would limit those convenience fees to the cost of credit, and it would require that the gatekeeper allow alternative forms of payment.
Companies that have set up the e-file managers controlling the e-path into the courthouse range from tiny software developers to a long-established legal publisher to the 800-pound gorilla of e-filing nationally.
Last year, for example, Los Angeles Superior Court, the biggest court in the nation, signed a contract with Journal Technologies to put in place an electronic file manager and upgrade the court’s case management system for civil cases, with the court paying roughly $4 million. The deal also allows Journal Tech to charge the public roughly $10 for each filing, a much smaller fee for attorney service companies, and a convenience fee of 2.75 percent on credit payments. It also offers alternative forms of payment that avoid the convenience fee.
Based in Los Angeles, Journal Tech is a wholly owned subsidiary of the Daily Journal Corporation which publishes a string of legal newspapers relying on public notice ads. The company is chaired by Charles Munger who is also vice chairman of Berkshire Hathaway. Journal Tech’s business in L.A. and Riverside, apart from the user fees, is estimated to be worth roughly $7.5 million over the next five years.
San Francisco Superior Court controls its own e-filing site. It has a low-cost deal with a software company called ImageX that runs the court’s e-filing portal. The court charges a user fee of $13 for each e-filing, a fee intended to recoup the cost of setting up the e-filing system. Three attorney service companies are now permitted to file directly through the court’s interface, without paying a user or convenience fee.
But the dominant power in the technology shift from paper to digital is Texas-based Tyler Technologies. Nearly half of California’s 58 superior courts have signed contracts with Tyler estimated to be worth $80 million over the next five years, excluding user fees charged on each filing the comes through their gateways.
Tyler’s practice has been to apply a convenience fee ranging from 2.75 percent to 3.5 percent on all credit payments. But it also limits the choices for payment to credit only. The company’s cost of credit is generally estimated to be around 2 percent. The margin between the percentages represents a separate source of profit for the software giant.
The Judicial Council staff, formerly called the Administrative Office of the Courts, has been very slow to control those fees or confront the software companies. They left the fight to the runners.
The runners used to be, perhaps surprisingly, a powerful force in the state Legislature, but their influence has waned in recent years. Many have now morphed into providers of e-filing services as well as paper filing. And they deal with software companies on a daily basis because they must use their lanes into the courthouse and pay the accompanying toll.
The runners surged back onto the legislative scene this year through a new group called the “Coalition for Improving Court Access.” The coalition is made up 18 attorney service or e-file service companies, including the umbrella trade group California Association of Legal Support Professionals or CALSPro.
The runners’ coalition wrote the bill that became Assembly Bill 2244 and hired Sacramento lobbyist Mike Belote, who separately represents the California Judges Association. The coalition then negotiated for support from the Judicial Council and its technology committees.
Judicial Council committee meetings where legislative bills are discussed are generally conducted in secrecy, under an exemption from California ‘s open meetings law. Legislative leaders and Courthouse News had asked in 2013 for those meetings to be opened to the press, a request that the council eventually rejected as it does generally with press positions.
For example, in that same year, the staff of the Administrative Office of the Courts, which nominally operated under the council, wrote a bill imposing a $10 fee on every court file requested by a journalist or anyone else. The staff continued to fight for the ill-conceived bill, despite strong, organized opposition from open government groups and press groups including the California Newspaper Publishers Association.
The Legislature ultimately killed the bill.
In the same year, the same court administrative staff added a set of definitions to California e-filing rules, saying a court record was not “official” until it was administratively processed. That too was strongly opposed by the CNPA, the L.A. Times and virtually every other news group in California. The Judicial Council, chaired by the state’s chief justice, overrode the press objections on a unanimous vote.
As the press had predicted, the new definition for an “official” filing provided a pretext for local court clerks to withhold access from journalists until new filings were old news. The withholding policy was overturned in June by U.S. Judge James Otero in a case brought by Courthouse News against the court clerk in Ventura. Otero ruled that a First Amendment right of access attaches upon the court’s receipt of a document, before processing.
In the meantime, the staff of the court administrative office rebranded themselves as “the staff” of the Judicial Council, with the same highly paid civil servants pursuing the same overall policies. Despite their assertiveness in limiting press access, the staff hesitated to control the software companies.
“Just wanted to be here to state that while we have not been able to take a formal position on this bill, it is likely that we will be in support,” said Amanda Wells, a staff lobbyist for the council, speaking in April to the Assembly Judiciary Committee.
Late in the process, the coalition of runners agreed to accept a request from the council staff to include a reporting requirement for the software companies as well as a grant of power to the council to perform audits on the companies. After those provisions were amended into AB 2244, the council agreed to support the bill.
“We came to the legislation a little late but we’re very glad to be involved,” said Andi Liebenbaum, also a staff lobbyist for the council, testifying in late June before the Senate Judiciary Committee.
Assemblyman Mike Gatto, D-Burbank, who carried AB2244, said by email that there is a need for rule uniformity in the shifting technology environment. “California is unique in part that it is so big and populated, so it’s important to create consistency throughout the state,” Gatto wrote.
A representative for the runners’ coalition, speaking without attribution, was more blunt.
“What we want,” he said, “is for Tyler to allow filers to have choice, meaning, ‘Don’t force them to pay by credit card then charge them outrageous convenience fees.’ Especially if the court is going to mandate e-filing.”
Speaking for itself, the bill says, “A fee to process a payment for filing fees and other court fees shall not exceed the costs incurred.”
It also says the gatekeeper must accept more than one method of payment, such as “credit or debit cards, electronic funds transfers, electronic networks for financial transactions and other payment methods that do not charge a transaction cost.”
The bill’s provisions would apply to the polyglot assemblage of e-file vendors in California charging millions of dollars to the courts, on one side, and those who file documents, on the other. That system of private vendors stands in great contrast to the nation’s federal court PACER system which was developed and is controlled by the federal court administrative office.
Belote, the lobbyist for the runners’ coalition, put the need for the convenience fee legislation in the context of California’s early effort to develop something similar, called the Court Case Management System. Under the direction of the council staff, then called the court administrative office, the CCMS project became one of the great boondoggles in California history.
“More and more courts are requiring e-filing of documents,” Belote testified before the Senate Judiciary Committee in June. “It is the future. It means huge savings for courts and we ought to be encouraging it. But with the collapse of the now infamous CCMS, you have each court setting up their own system and there are gaps in the law that this bill attempts to close and clarify.”
Over the course of the doomed software project, the administrative office staff put more than a half-billion dollars of taxpayer money into it, most of that sum going to Deloitte Consulting. The software was so expensive, cumbersome and work-intensive that it ultimately had to be placed on the junk heap in 2012, with the Legislature forcing the Judicial Council’s hand in through a budget measure.
A few superior courts in California had enthusiastically supported the project and they now remain saddled with its remnants. They include the superior courts in Orange, San Diego and Ventura, with both Orange and San Diego now moving over to Tyler for some types of filings.
The mismanagement of the CCMS project came against a backdrop of a court agency that kept adding staff, paying them lavishly and giving them raises while the California court budget was being cut and local court workers were losing their jobs. Among the perquisites that the Legislature eventually shut down via a budget threat was the adminstrative office practice of paying its top 30 executives an enormous 22 percent, no-match pension payment on top of their already rich salaries.
As the California courts move out from the shadow of that disastrous undertaking in technology, the staff and the council committees have handled the chaotic move to free enterprise in court software with mixed success. But both the earlier Judicial Council policy allowing multiple e-file managers at individual courts and the pending bill controlling the convenience fees charged by the e-file managers are widely seen as positive steps in the effort to move the California courts into the digital world
Earlier this week, the Senate Appropriations Committee moved AB 2244 onto the “suspense file” by a 7-0 vote. That means in essence the bill is ready to be included or excluded from the omnibus round of horse trading that comes at the end of this month as California’s lawmakers decide the fate of hundreds of bills without public discussion.
But AB 2244 has run into little if any opposition and is likely to be included in the budget negotiations and become law sometime later this year.
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