MINUTES OF THE SENATE COMMITTEE ON JUDICIARY Sixty-eighth Session May 16, 1995 The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 8:00 a.m., on Tuesday, May 16, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Mark A. James, Chairman Senator Jon C. Porter, Vice Chairman Senator Maurice Washington Senator Mike McGinness Senator Ernest E. Adler Senator Dina Titus Senator O. C. Lee STAFF MEMBERS PRESENT: Allison Combs, Senior Research Analyst Lori M. Story, Committee Secretary OTHERS PRESENT: Dean Heller, Secretary of State Carol Lefcourte, Deputy Secretary of State John P. Fowler, Chairman, Executive Committee, Business Law Section, Nevada State Bar Marsha Berkbigler, Lobbyist, Nevada State Medical Association Ben Graham, Chief Deputy, Clark County District Attorney, Lobbyist, Nevada District Attorneys Association Nancy Tiffany, Unit Manager, Division of Parole and Probation, Department of Motor Vehicles and Public Safety Fred L. Hillerby, Lobbyist, Nevada Society of CPAs Bill Bradley, Lobbyist, Nevada Trial Lawyers Association Gary L. Stagliano, Chief, Investigations and Recovery Services, Welfare Division, Department of Human Resources Anne Cathcart, Senior Deputy Attorney General, Litigation Division, Office of the Attorney General George Weeks, Assistant Director, Department of Prisons The first order of business was a request for committee introduction of a bill draft request. BILL DRAFT REQUEST 1-1842: Requires attorneys who unreasonably extend proceedings in any action to pay excessive costs incurred. Senator James explained the purpose of the bill as codifying a rule similar to 28 U.S.C. 1927, which gives federal courts the same power. It is a positive move in tort reform, the senator opined and called for a motion for committee introduction. SENATOR McGINNESS MOVED TO INTRODUCE BILL DRAFT REQUEST 1-1842. SENATOR WASHINGTON SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.) ***** SENATE BILL 433: Makes various changes relating to corporations, limited-liability companies and partnerships. SENATE BILL 462: Makes various changes to provisions governing corporations and other business associations. Senator James opened the hearing on Senate Bill (S.B.) 433, but noted the first speaker, Dean Heller, Secretary of State, wished to address his remarks to both S.B. 433 and S.B. 462. The secretary of state noted his support for both bills. He stated his deputy would offer more in-depth discussion of the bills. These changes to the corporate laws, especially S.B. 462, does three things he reported. The bill clarifies some wording; standardizes the language; and standardizes the fees imposed. Mr. Heller introduced his deputy, Carol Lefcourte, Deputy Secretary of State, noting she would represent his office as sponsor of the bill. Senator James asked the secretary if the fee revisions would impact the budget in any way. Mr Heller replied he did not anticipate any real change, offering examples as making the fees the same for corporate entities and limited partnerships to receive certificates of good standing. The secretary stepped down. The chairman next called John P. Fowler, Attorney, Chairman, Executive Committee, Business Law Section, Nevada State Bar, to explain the various aspects of the bill. Mr. Fowler prefaced his remarks with the proviso that while the individual members of the Business Law Section of the Nevada State Bar support the bill, due to a recent court ruling in California, the Nevada State Bar itself, or any section thereof cannot voice support for any particular piece of legislation, or make any representation of endorsement on behalf of the state bar. Senator James asked how a California court decision would impact the activities of the Nevada State Bar. Mr. Fowler explained the concept of a unified state bar with all state attorneys required to belong and all members required to pay dues. This results in a possible conflict if funds of the bar are used to offer support for particular interests. Mr. Fowler provided the committee with a prepared statement which included an in-depth review of the various sections of the bill (Exhibit C). He apologized for not providing the outline earlier, noting the extensiveness of the document. He characterized the bill as "technical changes that are contained in S.B. 433. Mr. Fowler noted that many aspects of S.B. 433 and S.B. 462 overlap in many respects. He offered to work with the committee and the representative from the secretary of state's office to work out any overlaps or slight variations in language so the two bills are congruent. Senator James agreed he should coordinate with the secretary of state's office to work out the overlaps, without the assistance of the committee. Senator Adler asked if both the bills are based on the Revised Model Business Corporation Act, 1984 (Model Act). Mr. Fowler replied there are portions that are based on the Model Act, specifically in the merger and dissenter's rights areas. There the members of the drafting committee recommended a new chapter be created to deal with those two issues, he told, because a new chapter would allow many different kinds of entities to merge with each other. Much of the wording in the existing merger chapter comes from the Model Act, Mr. Fowler stated, and it was used to draft the new merger chapter. He referred to pages 2 and 3 of Exhibit C, stating the chart ties the bill, existing statutes, and sections of the Model Act together. At this point, Mr. Fowler offered to go over the bill, and his prepared text, section by section or however the committee prefers. Senator James asked him to explain the general intent of the bill and to provide a "thumbnail" of each section. Mr. Fowler agreed, and proceeded to offer a summarization of Exhibit C. Senator James asked if the bill covers mergers of two general partnerships, noting existing law does not address such mergers. Mr. Fowler agreed the law does not currently address such mergers, leaving it unclear whether they could merge, under Nevada law. There is nothing said about such mergers in the Uniform Partnership Act, which is the only statute about partnerships. Mr. Fowler opined this has caused it to be unclear whether general partnerships could merge. He explained that mergers are "statutory creatures" and corporations were unable to merge until statutes were created to allow it. In the early part of the century the first merger statutes were passed, he told, and case law was created which identifies mergers as statutory creatures that are defined and controlled by statute. This bill causes the Legislature to affirmatively make mergers of general partnerships a statutory "thing," the chair observed, questioningly. Mr. Fowler noted if the partnership agreement does not say anything, then it is not a statutory creature; however, if the agreement does allow mergers, setting out "skeletal details," it is determined the agreement is enforceable. The senator wondered if an agreement prohibits mergers, would it also be enforceable. Mr. Fowler concurred. Senator James maintained the bill would make such mergers between general partnerships a creature of statute, and asked is this "a good idea?" He observed that general partnerships are usually formed in situations where the parties want to avoid becoming involved with filings with the secretary of state, and simply want to get together "to do a business deal." In the common law it is understood that parties are sharing the liability, etc., he explained. The chairman asserted the change proposed by the bill will only complicate what is now a simple process, by getting the government involved. Mr. Fowler did not agree. The senator asked if a merger could be voided by a claim that mergers were not covered in the partnership agreement. Then reconsidering, he speculated it would be easy enough to insert language allowing a merger. Mr. Fowler observed it would also be possible to dissolve the original partnership and create a new one, transferring the assets, drafting a new agreement, etc. He reminded the senator there is no set procedure for merging general partnerships, the bill will simply permit general partnership agreements to contain provisions allowing mergers. Mr. Fowler stressed: The whole idea was not to disturb the really contractual, consensual nature of a partnership, as you've described. It just clarifies that, just because merger has been ruled in various corporate cases over the years to be a peculiarly statutory creature, simply because there is no statute on it, no longer means that there is...that merger is forbidden for partnerships. We clarified that if you want to do it, you can do it. Basically, you have to do it by agreement, but you can do it. Senator James asked if the common law says that any time there is a major change in a partnership, if one partner leaves or a new one comes in, the partnership is dissolved and a new one is formed. Mr. Fowler agreed that is the common rule. This bill would change this rule, because a merger would not automatically cause the dissolution of a partnership. Senator James opined this change is not beneficial, that perhaps the Legislature should avoid disturbing the status quo on general partnerships. He stated partnerships should not be "lumped in with all these others" because people desiring to be partners should be allowed to do so without interference of the government. Mr. Fowler observed it would be possible, but there would be a loss of the ability for other entities to merge into general partnerships, or vice versa. This is because the other entities would require statutory authorization to merge with a general partnership. There are tax advantages to allow mergers of this type such as retaining the tax year of the original entity, he told. The chairman conceded if the merger is desired between a general partnership and another type of entity, it is important to have a statutory allowance, but if the merger is simply between two general partnerships, the statute should not govern this activity. Mr. Fowler emphasized the bill only states "if the agreements so provide" they can merge. The chair asked if case law makes this possible. Mr Fowler stated he was unaware of any case law applicable to the issue. The proposed statute would delineate that if partnership agreements allow it, it can be done, without going any further on the subject, he asserted. Senator James retained his stand that the provision should be removed, noting this is his personal opinion and he was not speaking for the rest of the committee. Mr. Fowler continued, starting with page 8 of Exhibit C, Resident Agents. Senator Adler interrupted the witness's testimony to note he receives many complaints about resident agents. The main complaint is that some of these resident agents attempt to appear to be the actual place of business for the company they represent. This ruse is used to benefit was is really an out-of-state business, he said. The senator asked if provisions have been made in the bill to allow some type of penalty for this misrepresentation. Mr. Fowler agreed this is a problem, however, no provision currently exists in this bill. Senator Adler asked if language could be inserted which indicates it is a violation of the Nevada Revised Statutes (NRS) for a resident agent to represent that there is an ongoing business at the resident agent address, when there is none. This would be grounds for removing the resident agent from that capacity. Admitting there might not be a need for a resident agent regulation statute, the senator asserted it is important to make an affirmative statement that it is illegal to misrepresent there is an ongoing business at the resident agent's address and such misrepresentation will result in the resident agent losing that status. Mr. Fowler recommended the senator contact the secretary of state's office to determine what statutes they have in place to regulate the behavior of such agents. The witness told there is another problem having to do with resident agents and that is the situation where a phone number exists for the company, they have a business license in Nevada, there is space rented on an hourly basis, all of which is designed to give the income tax authorities of other states the impression the company does business in Nevada. Senator Adler asked if this situation constitutes fraud. Mr. Fowler replied, "Is it the place of the Nevada Legislature to make a decision as to what is... fraud for the California Franchise Tax Board...?" Senator Adler opined that some of the schemes that are perpetrated in Nevada make the state look culpable. Mr. Fowler reiterated the committee of attorneys who put the bill together had not thought to include any "legislation of that nature [as proposed by Senator Adler] in Title VII of the NRS. He agreed it might be a place to put it, but the proposed changes to the resident agent statutes do not seek to address this particular kind of problem. Senator Adler stated he would like some affirmative statement in the definitional section of the statute. Mr. Fowler opined it might require a licensing scheme for resident agents. Senator James asked if such legislation should be carried in a separate bill. Mr. Fowler resumed his presentation, starting again in the resident agent section. When he reached the section which allows resident agents to be natural persons, corporations, or any other entity, Senator Adler strenuously disagreed with Mr. Fowler's assertion the change would make no difference under the law. The senator speculated the change would allow people not only to run fraudulent schemes, but to do so through a "shell corporation." Senator James asserted a corporation can act as a resident agent currently. He added Senator Adler is rightly concerned about the actions and representations of resident agents, but opined there may be another way to address it. The witness continued. Senator McGinness asked him if anyone can go to the secretary of state's office and change the officers in a corporation. Mr. Fowler agreed this is possible, as far as filing an amended list of officers and directors. This does not make it so, however, he said. This can happen because there is no way to confirm the filing is accurate, expect through a direct contact with the corporation to confirm the truth. As it stands, he noted, the change will be picked up eventually by the corporation or secretary of state when the corporation makes its annual filing. The senator noted these kinds of actions would most likely occur in small family corporations, within internal disputes. Again, Mr. Fowler resumed his presentation, starting on page 10 of Exhibit C. This section refers to a provision for corporations to issue a blank check for preferred stocks, along with the ability to amend the blank check agreement prior to finalization of the stock issuance. Senator James asked what purpose a corporation would have for issuing such a blank check. Mr Fowler stated it is "in essence" a substitute for a loan, a way to obtain money from financial institutions by issuing preferred stock, which provides for dividend payments prior to those of common stock holders. The chairman asked when common stock holders would have a say about the preferred stock blank check. Mr. Fowler noted they would not have any say, pointing out the customer buys common stock with full knowledge of the articles of incorporation which set out that preferred stock exists, and even that a blank check provision exists. Next, section H of the exhibit addresses the ability to revive the articles of incorporation, Mr. Fowler told. The chairman raised a concern that such revival would interfere with the statute of repose, and reactivate the liabilities of the stockholders. He offered an example to illustrate his concern, where a corporation goes defunct, with liabilities outstanding. The 2-year period passes and the statute of repose "kicks in" and everybody is "off the hook," he explained, then..one of the officers or directors, without the stockholders' approval, revives the corporation. "Boom" everybody is again exposed to the previous liability, he opined. Mr. Fowler explained the statute of repose would be against the corporation and not against the stockholders. He continued noting the revival issue arises where the corporation owns real property which could be very valuable at some future time. If there are no stockholders remaining who can authorize the sale of the property, the change would allow the officers or director to do so, on behalf of the stockholders. The revenue would then be disbursed through dividends, etc., he told. Senator James asserted this provision allows no finality to the stockholders of corporations that become defunct. Senator Washington referred to the wording of section 72, line 40 of the bill. He noted it says when a corporation is revived "all the preexisting debts, duties, and liabilities secured or imposed by its original charter," are also revived. He asked if the stockholders would be liable for the preexisting debts or liabilities. Mr. Fowler opined the language actually means all the rights, duties, and liabilities of stockholders under the old articles of incorporation "spring into being when you revive the corporation pursuant to this statute." He continued stressing the idea is not to revive all the preexisting debts, but only those imposed by the original charter. Senator James attempted to explain that liability of the shareholders would not come from the language referred to by Senator Washington, but rather from the law which says if a corporation cannot pay its debts, the stockholders are liable for them. He continued, noting the continuation of the section may assuage his concerns because it says "if there are no stockholders." Mr. Fowler stated this phrase means if the stockholders can not be located, are dead, or seem non- existent, after a reasonable search. Mr. Fowler resumed his overview of Exhibit C, on page 10, section J. He concluded his presentation with no further comments or questions from the committee. Senator James and the speaker briefly reviewed the concerns that were raised by the committee during the presentation. It was decided these include the merger of general partnerships, concerns over resident agents, as well as the revival of articles of incorporation. When the discussion concluded Senator Adler asked if the fees were going to be adjusted and if a ceiling should be implemented which would cap the penalties accrued by a corporation. He opined if a cap were in place it might reduce the number of corporations that become defunct simply to be reorganized in order to avoid paying the high penalties. Mr. Fowler agreed with the senator, but noted there are some situations, where a corporation has been defunct for a long period, that many changes have occurred and it would be better to allow them to form a new corporation. The chair asked Mr. Fowler if he had indicated all the areas that are being repealed by the bill. Mr. Fowler noted he had, reiterating most of the repeals are the merger statutes and the dissenters' rights statutes, which are really being rolled over into the new merger chapter. There was no further discussion and the hearing on S.B. 433 was closed. The chairman then opened the hearing on S.B. 462. Carol Lefcourte, Deputy Secretary of State, offered the secretary of state's bill and an explanation. She stated Mr. Fowler had already covered the majority of the points she was prepared to address on S.B. 462. The purpose of the bill, she explained, is to standardize the language dealing with the nine different types of business entities governed by Title VII. This includes bringing into uniformiy the fees and procedures, she added. Ms. Lefcourte stated most of the secretary of state's concerns regarding the different chapters in Title VII have been addressed by S.B. 433. She did express a desire to work with the bar association representatives in order to coordinate language acceptable to all parties. She offered to give an overview of the entire bill or only those areas unique to S.B. 462. The chair indicated it would be sufficient to go over the sections that are unique and asked the witness to work with Mr. Fowler to amend the bills so they work together. He asked the changes be brought to him upon completion. Ms. Lefcourte provided Exhibit D which is an overview of all the sections of S.B. 462. The sections addressed by Ms. Lefcourte are preceded by a star on the exhibit. When the speaker reached section 21 of the exhibit Senator Washington interjected a question. He asked if the default fee also applies to nonprofit corporations. Ms. Lefcourte replied in the affirmative. She continued. After section 40, Senator Porter inquired about the fees generally. He asked the witness to give a simple explanation of the fees charged. Ms. Lefcourte offered the current fees vary depending on what kind of entity is applying. She told, the proposal is to standardize the charges for all entities throughout the chapter, noting some fees have been raised, and some lowered. Ms. Lefcourte resumed her overview of the changes proposed in S.B. 462, starting again at section 41. At the conclusion, the chair again asked Ms. Lefcourte to meet with Mr. Fowler about coordinating their respective bills. He then closed the hearing on S.B. 462, as there was no further testimony. A work session was called. SENATE BILL 130: Limits civil liability of providers of health care who volunteer their services for certain organizations. Marsha Berkbigler, Lobbyist, Nevada State Medical Association, apologized for not having a typed version of her proposed amendment to S.B. 130. She explained the proposal is to delete all new language in section 1, page 1, lines 3-20, inclusive. Additionally, at line 14, "volunteer means officer, director, trustee..." the proposal would add "...trustee, physician or physician not in active practice for pay.." The chairman interjected "...retired physician not otherwise practicing medicine for remuneration...." Ms. Berkbigler agreed this is the proposed language, explaining that the Nevada Trial Lawyers Association believed retired physicians are already covered under the current law, while the retired physicians were concerned there is a need for clarification in the law. The chair called for questions. There were none; he called for a motion to amend and do pass S.B. 130. SENATOR LEE MOVED TO AMEND AND DO PASS S.B. 130. SENATOR PORTER SECONDED THE MOTION. Senator Porter asked for clarification about what parts were being deleted from the bill. It was explained that all new language proposed in section 1 of the bill was to be deleted. Senator Adler asked to make clear that the wording "and other persons who perform service without compensation" does include nurse practitioners, and other types of medical staff. Senator James suggested the wording be "including, but not limited to,..." Senator Adler concurred. Senator Porter reminded the committee of the original hearing of the bill on March 14, 1995, at which time he declared a conflict of interest due to his business interests. He stated he would have to withdraw his second to the motion made by Senator Lee and would not vote on the motion. The chair noted the motion made by Senator Lee. SENATOR ADLER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR PORTER ABSTAINED FROM THE VOTE.) ***** SENATE BILL 312: Makes various changes to provisions relating to parole. SENATE BILL 192: Makes various changes in provisions pertaining to sexual deviants. S.B. 312 was the next bill addressed by the committee. The bill, sponsored by Senator Lawrence Jacobsen, deals with community notification of sex offender releases. The chairman noted S.B. 312 is duplicative in some ways and conflicting in other ways with S.B. 192. Because of this, Senator James explained, he discussed the bill with the sponsor. As a result of this discussion, it is proposed to amend the bill as follows: remove all of section 1 and section 2; on section 3 the requirements of board members would be made flexible. The senator proposed various ways to accomplish the flexibility requested by Senator Adler. He asked Senator Adler to choose his preferred change. Senator Adler opined a member should have background in one of those areas, leaving the appointment to the discretion of the Governor, who should consider the experience of the candidates in the areas indicated. Senator Titus offered her support for this change, noting the Legislature should indicate the kinds of experience to be sought, but leaving it flexible for the appointment. SENATE BILL 416: Makes various changes regarding sentencing of persons convicted of felonies. Senator James asked the committee members' view on raising the number of board members from six to seven. He reminded them of the concomitant fiscal note of more than $50,000, continuing over time. Senator Titus asked why the increase was proposed. Discussion concluded it was to increase the speed of case handling, and to spread the work load over more people. Senator Titus observed there may not be as many people coming up on parole if the truth-in-sentencing bill (S.B. 416) passes. She suggested retaining the membership at six. There was a consensus. On line 45 of page 2, where the bill says, "who committed, attempted to commit or conspired to commit..." it was opined by Senator Adler the language is too broad. The chair asked if he wished to eliminate those conditions. Senator Adler responded, noting committed the offense is fine, but the other two (attempting and conspiring) are too oppressive. Senator James suggested taking out the conspiracy, but leaving the committed and the attempt, noting attempt is "at least a substantial step" toward commission. Senator Adler remained uncomfortable with the wording, stating in his mind the bill calls for an attempt to attempt to commit, when combining the attempting to commit with the threatened use of force. Ben Graham, Chief Deputy, Clark County District Attorney, Lobbyist, Nevada District Attorneys Association, came to the witness table in an effort to clear up the wording of the bill. He opined a threatened use of force would be an assault, verbal or physical (brandishing of a firearm). Senator Adler asked how one could attempt to do such a thing. No one on the committee could visualize the situation. In an attempt to save time, Senator James asked the sentiments of the committee regarding the remainder of the provision being discussed, (i.e., the requirement for a larger quorum to pass the vote, along with the requirement that one of the assenting votes must be the chairman's). At this point, the committee realized the discussion of attempting to threaten was a wasted effort because there is no support for the entire provision. Therefore, the proposal offered by the chair was to eliminate the changes in subsection 5 of section 3. Senator Titus called attention to subsection 4 of section 3, which changes the passing vote from two to four members. She asked if this change would stand. Senator James opined if a change is desired it should be to three member, rather than four members. Senator Titus asked if the change is really needed. It was decided to leave the section in its original form, requiring only two votes to pass. Senator Titus asked about the change from appointing the chairman of the board by the Governor to an election by the members of the board. The chairman opined a selection by the board members would be appropriate. There was no testimony or opposition offered by the Governor's Office, Senator James observed. Senator Titus speculated comment would be forthcoming. Senator Lee asked if this appointment was unique. Senator James replied in the negative, noting it varies depending on the board. It was agreed the board should select their own chairman. Senator James read over the remaining changes noting their appropriateness, until he reached subsection 6 of section 6. This will be removed from the bill, the chairman stated, noting the provision was covered, differently, in another piece of legislation. Section 7 contains an important provision about information regarding the parolee's anticipated residence. This would be retained, he reported, unless there is serious opposition. Moving to section 9, which deals with detention of any person by any peace officer who suspects the person is violating or about to violate their parole. Senator James pointed out there is a provision currently in existence which allows "any peace office [to] detain any person whom the officer encounters under circumstances which reasonably indicate that the person has committed, is committing, or is about to commit a crime." The chairman asked Mr. Graham if this provision is constitutional. Mr. Graham replied there must be probable cause. Senator James asked Mr. Graham to explain a court decision handed down in Terry v. Ohio. Mr. Graham told the committee it is a "stop and frisk" ruling, which is below probable cause for arrest. Senator James noted there must be a reason. Mr. Graham agreed there is a need to have explainable circumstances that would lead a reasonable person to believe a crime was going to be committed. This ruling allows a stop and frisk, to ask what the person is doing there. The senator asserted the decision is to protect the officer's safety. Mr. Graham agreed this applies to the frisk part of the decision. However, a peace officer can stop someone without frisking them. Senator James opined this ability seems a little oppressive. Mr. Graham pointed out there is a need to have an explainable reasons, and the Terry case involved an officer with 36-years experience who observed three men in front of a jewelry store in the summer, wearing long coats. The officer thought something was amiss and he stopped to ask the men what they were doing in the summer with long coats on. Additionally, the officer guessed the men were robbers, he patted them down and found a gun. Returning to the section on temporary detention, Senator Adler suggested the wording should be "sheriffs' deputy, highway patrolman..." Mr. Graham agreed the wording is very broad. Senator James observed a crime is one thing, but a parole violation might be something as simple as drinking a beer, or entering a bar. The scenario could cover any number of situations. Senator Adler noted the person would have to be on probation, but Senator James countered the bill does not say that. After further fruitless discussion, Senator Titus suggested the provision be deleted. Senator Adler cited an exception where the officer actually knows the person is on parole. Senator Titus asked if stopping a parolee is allowed already. Senator James voiced his support for deleting the provision. Senator James recollected there was no strong support from parole and probation for the bill. Senator Adler agreed. From the audience Nancy Tiffany, Unit Manager, Division of Parole and Probation, Department of Motor Vehicles and Public Safety (DMV & PS) spoke up. She took the floor and noted the division had testified in support of the section. Senator Adler asked her how the division wishes it to read, and Senator James wondered by it should be any peace officer. Ms. Tiffany testified the problem for the division is their probationers live all over the state, some in very remote areas. When a probationer is suspected of violating, the division can use all the help they can get to check on these individuals, including from the sheriff's office, or a police officer in Searchlight. Although the committee speculated a parole violation might only be a beer, but many of them do serious things, like hanging around school yards when they should not, or stalking family members, Ms. Tiffany said. The probation officers could be some distance from the violator, and the local peace officer can be very helpful in detaining them until the division can arrive. Senator James agreed that committing a crime infringes on public safety, but a mere violation of probation, not constituting a crime, simply impacts their own rehabilitation. These situations cross over, Ms. Tiffany explained, citing an example of a pedophile who is having contact with young children. While this is not a crime, it can be very dangerous for the children, she insisted. Ben Graham suggested the wording "...or is about to violate..." might really be the stickler for the committee. Ms. Tiffany agreed the concern is really when they have violated their probation. The chairman called to remove the phrase "or about to violate their probation...." Senator Lee voiced concern with the broad group covered by "peace officer," noting it could apply to brand inspector or taxicab authority. Mr. Graham wondered if they should be "sworn" officers. Senator Lee still feared the category would be too broad. Senator Washington asked if there would be a conflict with this bill and the one proposed for the aggravated circumstances bill, where the meaning was broadened. He stated a fear there would be an inconsistency in the law. Senator James opined there would be no conflict, and noted the division is seeking the assistance of any peace officer in the area of a probation violator. He speculated if the provision is narrowed to specific officers, the effect would be nullified. Ms. Tiffany agreed. Mr. Graham stated he could understand the senator's concern about the broad definition of peace officer, but, he opined, maybe the issue is only a potential problem, and not a real one. Senator Adler stated he did not expect the division to call the local brand inspector to check on a probationer. He agreed it is not really a valid concern. The chairman asked for a consensus on the section. He noted the communities and the citizens rely on the division of parole and probation a lot, because they provide a great assistance to the prisons and criminal justice system. Based on this observation, he suggested the "about to violate" be deleted and the "peace officer" be retained. Senator Adler concurred, noting with all the house arrest programs being implemented, the division will have to rely on the local law enforcement more and more. Discussion moved to section 10, which was found to be acceptable. The chairman called for concerns regarding the changes to the bill. He called for a motion. SENATOR WASHINGTON MOVED TO AMEND AND DO PASS S.B. 312. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LEE VOTED NO.) ***** SENATE BILL 235: Provides that persons convicted of certain offenses related to sex are not eligible for probation, parole or credits against their term of imprisonment. The chairman explained the purpose of the bill, noting the provisions about parole and credits against the term of imprisonment were invalidated by provisions in S.B. 416. This leaves only the question of whether to eliminate probation for sex offenders. Senator Washington opined the longer a sex offender is incarcerated, the better he (the senator) likes it. This bill would remove judicial discretion in any cases where the defined offenses were charged, Senator James noted, asking if the definition in the present bill and in S.B. 192 coincide. He noted the request of Senator Raymond Rawson to bring the bill to the committee, along with his understanding that the bill duplicates efforts with some of the judiciary committee bills. Senator James observed that dangerous sex offenders almost never receive probation, and judges are reticent to allow sex offenders to avoid incarceration. Additionally, they receive much longer sentences, he said. He noted, with all the other inroads made against sex offenders so far in the session, it might not be wise to eliminate the option of probation for every sex offense. Senator Porter reminded the committee of the statistics provided by Senator Rawson as to the recidivism rates of sex offenders. He offered his concurrence with Senator Washington. Senator Adler noted he cannot recall a pedophile in Nevada ever receiving probation. He opined the definitions of the bill are very broad, including "flashers" on up. Senator Titus asked the chairman if he was going to propose an interim study on sexual offenses and treatment of them. The chairman replied in the affirmative, noting he was also going to look at criminal insanity. Senator Titus wondered if the question of probation for sex offenders could be a subject of that study. The chair concurred. He asked Ms. Tiffany if she was aware of any statistics regarding probation of sex offenders. Ms. Tiffany replied she could get the figures, but she did not have them "off-hand." Senator James asked someone to retrieve the division's report from his office, hoping the statistics would be there. In the interim he noted he had received a letter from Maureen Kanka, Megan Kanka's mother. S.B. 192 is an adaptation of Megan's Law. Ms. Kanka is writing to various state legislators encouraging their passage of such laws. Ms. Tiffany testified she had personally supervised sex offenders, some of whom were fairly dangerous. In these instances, the original charge was pled down to something that did not seem as serious. She speculated there are not many, but there are some dangerous "folks" getting out on probation. Senator Titus asked if the crime is negotiated down, it would not fall under the category of sex offender anyway. Ms. Tiffany noted the offense was still a sex crime. She offered an illustrative example, which the committee found quite convincing. Senator Titus offered her own example of a harmless "mooning" of a high school teacher by some celebrating graduates. This could be considered a sex offense, and they would be ineligible for parole. Ms. Tiffany suggested the committee might want to examine the definitions, and exclude those acts that seem much less serious. Senator Washington reviewed some statistics and suggested the committee amend the bill to incorporate sexual assaults, lewdness with a child, and general lewdness. Senator James suggested the bill be amended to use the same definitions as those in S.B. 192, and then request a fiscal note on the impact for the prisons. There were no further comments, except the chairman noting there is no probation allowed for some other crimes, thus this move is not unprecedented. SENATOR WASHINGTON MOVED TO AMEND AND DO PASS S.B. 235 TO INCORPORATE THE SAME CRIMES AS DEFINED IN S.B. 192 AND ELIMINATING PROBATION FOR THOSE CRIMES. SENATOR TITUS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** SENATE BILL 317: Provides that breast feeding of infant does not violate certain statutes pertaining to decency and morals. The chairman requested the fiscal note be brought to the committee before the bill is carried to the floor. Additionally, he noted there might be required a conflict amendment on the bill because it is in conflict with S.B. 317. SENATE BILL 347: Provides additional means of limiting liability of business organizations. Fred L. Hillerby, Lobbyist, Nevada Society of CPAs, addressed the committee, referring to amendments to S.B. 347, as contained in Exhibit E. Most of the amendments are a result of the previous hearing, including those requested by the secretary of state's office to ensure consistency with other filings in that office. There are some substantive changes, he reported, that are a result of committee members' questions or concerns. He walked through the amendments as outlined in Exhibit E. Senator James asked about section 12 of the bill, wondering if any changes were proposed to deal with omission. Mr. Hillerby replied the decision was that it is best not to change tort law in an attempt to address ommissions specifically in limited- liability partnerships. He added there was no case law found to address "active knowledge" without action, an aspect which caused Senator Adler concern. Senator Adler referred to page 9, subsection 5 which refers to professional services. He asked if the wording "other legal authorization" might be too broad in reference to professionals. Senator James suggested simply using the word "license" alone is more clear. Mr. Fowler responded to the senator's concern, noting the definition was taken directly out of chapter 89 of the NRS. He stated the senator may be right in his concern about legal authorization, agreeing that "license or certificate of registration" would probably cover the subject and it would indicate an official action is required to allow the professional activity. The chairman summarized the section as allowing a limited-liability partnership for "any profession," but not for nonprofessionals. Mr. Fowler agreed. The senator asked if the language does what it is intended to do. Mr. Fowler stated his belief it does, noting page 9, subsection 7 of the exhibit, which defines a registered limited-liability partnership. Mr. Hillerby wanted it clear that attorneys are included in the definition of professional, noting Title 53 does not address them. He restated the suggested change to "only pursuant to a license or certificate of registration." Senator Adler agreed that is his desire. Bill Bradley, Lobbyist, Nevada Trial Lawyers Association (NTLA), also spoke regarding S.B. 347. He referred to a letter addressed to the chairman from Wm. Patterson Cashill, dated May 11, 1995 (Exhibit F). Mr. Bradley reported the letter identifies the association's concerns regarding accountability, notice, and identification of persons "coming into the state of Nevada, primarily in the accounting field." Mr. Bradley illustrated his concern with an example of some out-of-state partners who "cook the books" in their initial offering, rip-off some senior citizen, and then are unable to be located. The goal is to be able to identify the people who come into the state to perform the professional services. Mr. Bradley noted under a limited-liability company, the partnership is liable, but the managing partner is not liable, unless he or she is exercising direct supervision. The witness claimed direct supervision is an ambiguous term. The NTLA would propose to register the members of the limited-liability company, and/or temporarily register visiting professionals who come into the state to practice their profession or offer their services, Mr. Bradley asserted. Senator James pointed out the names of the managing partners are available in Nevada, with the language as it stands. If a problem arises, he speculated it would be possible to go through them to get the information on everyone else. Mr. Bradley opined it would be necessary to file a suit, naming the managing partner, adding additional names as they become available. This slows things down, considerably, he stated. The chairman noted Mr. Cashill's letter requests that all partners or members be registered. Mr. Bradley suggested a compromise might be to require the information on only those partners who are in the state or plan on working in the state. Senator James asked if the compromise suggested by Mr. Bradley would address the concern under section 2. Mr. Bradley requested the names of partners who anticipate coming to Nevada also be included, since they are the ones who present the problem. He noted if these companies are currently acting as professional corporations, they are currently filing the names, and it does not seem like an onerous burden to continue that requirement. Mr. Fowler responded to the last point raised by Mr. Bradley. He pointed out that professional corporations are now required each year to list all their employees and shareholders, additionally they must all be licensed in the state of Nevada. This prevents the large accounting firms the use of the professional corporation entity because it would require them all to be licensed in Nevada. Responding to the question of being able to identify the people who work on the prospectus of the initial public offering, Mr. Fowler speculated this could be dealt with through "John Doe" allegations in a suit. Senator James asserted to Mr. Bradley the only persons liable for damages are those who actually caused harm, who exercised supervisory control over someone who caused harm. Mr. Bradley emphasized the language requires direct supervision. He was concerned the managing partner will claim ignorance of every member or employee of the professional corporation or limited-liability partnership. He added, it is his experience that "John Doe" pleadings are "not as accessible today as they were 5 years ago, especially in the federal courts. Mr. Hillerby stated an example of a large professional corporation could have as many as 1800 partners, nationwide, with daily changes. This is why such large groups resist filing all the partnership information. He agreed it would be possible to list the managing partners in Nevada, as well as having any foreign limited- liability professional partnership register with the secretary of state. Senator James agreed having the names of the managing partners in Nevada should be sufficient initial information, and would allow uncovering further parties through discovery. The chairman asked Mr. Bradley for other concerns. Noting those above were the primary ones, he asked that out-of-state professional be required to acquire a temporary license with the state accounting board, as a visiting attorney is required to register with the state bar. Senator James insisted having the name of the managing partner should be sufficient. Mr. Bradley could not agree. Senator James asserted there would be grounds for a claim of omission if the managing partner claimed he was not supervising visiting professionals. After further discussion, it was agreed the name of the managing partner would be at least sufficient. There was no further discussion and the chairman called for a motion to amend and do pass S.B. 347. SENATOR McGINNESS MOVED TO AMEND AND DO PASS S.B. 347 AS OUTLINED IN EXHIBIT E, AND AS AGREED ABOVE. SENATOR WASHINGTON SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** SENATE BILL 424: Revises provisions governing deposits held in joint tenancy. Senator James moved the work session to S.B. 424. He asked if John Sande was present to speak about the bill. He was not. Gary L. Stagliano, Chief, Investigations and Recovery Services, Welfare Division, Department of Human Resources, did take the floor to speak once again regarding the possible fiscal impact to the Welfare Division. He reported he has had conversations with Mr. Sande, noting there has been an agreement between them; Mr. Sande and the banking association will support the Welfare Division's pending legislation and the Welfare Division agrees to support S.B. 424. Senator James asked where the fiscal impact will come in. Mr Stagliano stated the modification of joint tenancy language for banking purposes would "disallow" the division from pursuing estate recovery cases. Currently, joint accounts do not have the luxury of a joint tenancy protection, he observed, but this bill will provide that protection. The chairman observed the intent of the bill is to clarify when an account is held jointly, there are survivorship rights, unless language to the contrary is specified in the account. This bill is necessary as a result of a supreme court decision, he noted. Mr. Stagliano agreed, noting because of the decision the Welfare Division can pursue the accounts for Medicaid estate recovery purposes, up to the total interest in the account that was held by the decedent. There were no questions, nor proposed amendments. The chair called for a motion to do pass S.B. 424. SENATOR ADLER MOVED TO DO PASS S.B. 424. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** SENATE BILL 392: Revises provisions governing employment of offenders, accounting of money of offenders and forfeiture of good- time credits. Anne Cathcart, Senior Deputy Attorney General, Litigation Division, Office of the Attorney General, brought a proposed amendment to S.B. 392. She handed the committee copies of a letter she had offered at a previous hearing, to which she made the proposed changes (Exhibit G). Ms. Cathcart went over the proposed changes. In section 5 of the bill, the director sets an indigence level that applies to every inmate. In section 6, there is a statement which clarifies the provisions of the chapter do not create any right on behalf of any offender to any minimum wage. Next, the priority of claims against monies in the inmates' accounts is listed on the final two pages of the exhibit. Ms. Cathcart thanked Senator Adler for his assistance with the matter. She credited him with the idea to divide the inmates into three separate categories as well as other aspects of the proposal. She referred further explanation of the changes to George Weeks, Assistant Director, Department of Prisons. Senator Adler noted the percentages on the right column of the chart (last two pages of Exhibit G) are going to be set within the regulations of the Department of Prisons. The bill will only address the prioritization of the deductions. He explained the three classifications of prisoners are: inmates that earn minimum wage and above (approximately 350 inmates of 7700 total); inmates that earn less than minimum wage; and finally, those who only receive deposits in their accounts. Senator Adler reported there are 4,711 inmates (61 percent of the total prison population) whose average daily balance in their account is $1.31. 775 inmates (10 percent) have an average daily balance of $10-$25. Those with $1,000- $2500 make up only 1.3 percent of the prison population (102 inmates). He admitted the balances of accounts will not realistically result in collections of any great amount. Ms. Cathcart pointed out the department of prisons will not issue checks in minuscule amounts. The small amounts will accrue until a total of $25 is collected, at which point a check will be issued by the department to the various parties who are owed funds. She also commented that on the surface this may appear to be unimportant, but there is a small chance an inmate will come into a substantial amount of money which can then be disbursed according to the plan. Senator Adler added the accrual of a total of $25 before the department cuts a check will save them money, as currently they write checks for as little as $1. Senator Titus stated she agrees with almost all of the proposal, but wondered why the priorities are set as they are. Specifically, she is concerned about the placement of child support obligations after funding new prison industry facilities. Mr. Weeks explained that statute requires anyone working for prison industries to contribute 5 percent of their wages to the prison industries construction fund. Senator Titus asked if this held for the other entries ahead of child support. Mr. Weeks replied items 1 and 2 are covered by statute; item 3 is a direct deposit into the inmate's account from his wages, as an incentive for working; item 4 covers room and board charges, being higher for restitution centers than non-restitution centers. Returning to item 2, Mr. Weeks explained, the deduction only applies to inmates working in the prison industries jobs. Item 5 is to pay costs incurred by the prison on behalf of the inmate, he continued, such as postage or copy charges or damage charges. Mr. Weeks pointed out the different deductions taken from the three different categories of prisoners (Exhibit G). Additionally, a new deduction will be a deposit into a forced savings account for those who do not work. It was the intent of the committee to provide for a savings program for all inmates in order to help defer their expenses at discharge. Senator Titus noted her understanding and suggested that item 7, child support, be moved to item 5, pushing the others down one place in priority. Senator Adler responded that a lot of the inmates voluntarily pay child support, while this would be a mandatory deduction. Senator Titus explained her concern lies with the proliferation of "dead beat dads," and if the Department of Prisons will only receive a small amount, it would be better to benefit the inmate's children. Senator Adler noted child support payments could wipe out the entire account. Senator Titus replied it would be possible to only take a certain percentage of the deposit, as is proposed for all the other deductions. Mr. Weeks asserted there is "lots of legislation and so forth that will fall under category 5, such as medical co- payments, and that sort of thing" in an attempt to make inmates pay their own expenses. Senator Adler opined it would be difficult to move the other items higher on the list, due to legislation requiring reimbursement to the department. Ms. Cathcart observed there was an idea proposed to consider incentives for inmates who are earning money to pay child support. This idea is in an embryonic stage, with the details not worked out, she noted. Senator Porter pointed out that when the percentages are totaled they exceed 100 percent. Mr. Weeks explained not all inmates would have all the deductions, and when 100 percent is met, the deductions end. Also, the percentages are not yet firmly determined, he said. Mr. Weeks explained the inmates at restitution centers are making much higher wages. Senator James asked if victim compensation funds are different than the victim restitution. Mr. Weeks agreed the senator is correct. Senator Titus, when asked, expressed her view that child support should be higher on the list than inmate non-interest bearing savings accounts or costs incurred by the Department of Prisons. Senator Adler reminded the committee the child support not paid would accumulate in arrearage. Senator James observed that does not assist the child any. The consensus was to move child support to position 5 on the priority list. Ms. Cathcart referred to item 2 on the deductions list, noting there has been some discussion of changing the percentage from 5. Senator James suggested leaving it as is. Ms. Cathcart explained this creates a problem from an accounting standpoint. Mr. Weeks noted the statute requires 5 percent, which limits the flexibility of the director or prison board. Senator Adler explained items 1 and 2 are statutorily determined, the remainder of the items will be determined by the prison director and board. There were no objections to making this change. The chairman called for a motion on S.B. 392. SENATOR ADLER MOVED TO AMEND AND DO PASS S.B. 392 AS PROPOSED AND DISCUSSED ABOVE. SENATOR TITUS SECONDED THE MOTION. Senator Adler jokingly commented there is a need to find wealthier inmates in order to meet these deduction requirements. THE MOTION CARRIED UNANIMOUSLY. ***** SENATE BILL 40: Increases penalty for certain convicted habitual criminals. The chairman noted S.B. 40's provisions have been incorporated into S.B. 416. He asked for a motion to indefinitely postpone the bill. SENATOR ADLER MOVED TO INDEFINITELY POSTPONE S.B. 40. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** SENATE BILL 245: Prohibits state board of pardons commissioners from commuting sentence of death or life imprisonment without possibility of parole to sentence allowing parole. S.B. 245 is another bill which has its provisions incorporated into S.B. 416, Senator James noted. Mr. Graham had requested the bill be held for a period of time, in hopes of reviving some of the provisions which remained. He rescinded that request. The chair called for a motion to indefinitely postpone S.B. 245. SENATOR TITUS MOVED TO INDEFINITELY POSTPONE S.B. 245. SENATOR LEE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** ASSEMBLY BILL 256: Increases penalty for abuse, neglect or endangerment of child where substantial bodily or mental harm results. There was further discussion among the committee members about various bills including A.B. 256. Senator James noted the Legislative Counsel Bureau advises it is possible to pass the bill. The chairman called for a motion to do pass the bill. Senator Adler explained he is waiting for an amendment to the bill, it is a provision which directs the courts to not return the child to the home unless there is a preponderance of evidence the child will be safe. The chairman agreed to hold the bill for further action. The chair asked the subcommittees to report back within the week. He also gave notice the committee members should inform him about their pending bills, and the action the sponsors wish. There was no further business and the hearing adjourned at 11:40 a.m. RESPECTFULLY SUBMITTED: Lori M. Story, Committee Secretary APPROVED BY: Senator Mark A. James, Chairman DATE: Senate Committee on Judiciary May 16, 1995 Page