The passage of AB 2244 in 2016 has been hailed as a ringing success for CALSPro and the process serving industry. I take issue with that.
CALSPro’s support for AB 2244 has concerned me all year. The Coalition for Improving Court Access was formed as a separate entity and hired CALSPro’s lobbyist to facilitate access to the court and shepherd this bill through the legislative process, primarily because of inconsistent applications of the efiling rules. It was intended to level the playing field for efiling companies and to facilitate more universally accepted platforms.
The CALSPro Board unanimously agreed to participate as a member of the coalition. They were joined by 17 other individual members and companies.
What bothered me about this CALSPro’s participation, on behalf of ALL its members, is whether it really benefited the membership as a whole. I feel that this legislation really only benefited a few of our members and non-members who operate or work for efiling companies. It does little for process servers.
This is intended to explain why.
First of all, it must be acknowledged that participation by the Coalition and CALSPro substantially assisted the legislature and Judicial Council in its understanding of how the whole process worked. Based upon the presentations made at the 2016 CALSPro Conference, and private conversations I had with members in the know, CALSPro and the Coalition clarified in real life examples how efiling worked and explained how excess charges that were being assessed to litigants.
The decision makers in the legislative committees and Judicial Council expressed sincere appreciation for that effort.
In earlier discussions, a white paper was distributed and the progenitors of the Coalition gave valuable input to the standards for efiling and eservice. For instance, the paper made no distinction between primary and secondary service when eservice was addressed. Not doing so could have easily introduced eservice of primary service (service of a summons) into efiling standards.
Nevertheless, the Coalition and CALSPro’s participation was instrumental in the passage of AB 2244, but the result benefited the efiling companies – not the rest of the members in CALSPro or process servers.
What Does AB 2244 do?
Convenience fees for court costs
CCP § 1010.6 is amended to allow the Court, Electronic Filing Manager (EFM), or EFSP to collect a “convenience fee” for processing a payment of a filing or other fee when required to complete the filing. The convenience fee is limited to the actual costs for processing the transaction. That means fees for using a credit card, or any other form of payment that is normally charged to the merchant in a transaction can be legally passed on to the end user. Those fees may range between 2% and 3.5%. This is expected to bring it closer to 2%.
The reason for this restriction was implemented to address the practice of a prominent EFM, a third party vendor that creates the portal through which an EFSP electronically files documents into the court’s case management system, that was routinely charging a 3.5% fee for these court fees. The EFM dictated that the court fee be paid specifically by credit card.
This amendment benefits the EFSPs by allowing them to pass on convenience fees to the end user. It also locks the fees to the actual cost, not an apparent arbitrary fee charged by the Court or EFM. Fees charged are subject to audit.
Fees for efiling
The amendment requires that the EFSP’s fees for e-filing to be “reasonable.” It also requires the EFSP to charge no fee for litigants who have a fee waiver in place, or in instances when the court deems a waiver of fees is appropriate.
CCP § 1033.5 is being amended to make the costs for electronic filing recoverable for the prevailing party.
The legislation authorizes that the fee paid for efiling and eservice to an Electronic Filing Service Provider (EFSP) may be a recoverable cost, if the particular court mandates efiling. This legislation results in a “sea change” for the awarding of recoverable costs to the prevailing party for efiling charges.
Heretofore, a filing with the court was accomplished by
- signing them
- printing the documents and making copies to be conformed by the court after the original was filed, and perhaps an internal file copy
- serving them.
Then, getting the documents to the court
- walking them into the court by the lawyer or staff
- Federal Express or courier
- internal or out-sourced daily court runner, or
- on-demand process server
All added to the cost of filing. None of these fees were ever recoverable costs, and “postage, telephone, and photocopying charges, except for exhibits” were expressly not allowed by statute. These costs were absorbed by the litigant. Filing over-the-counter with a daily court runner, whether in-house or through a monthly retainer agreement with a service provider, or an on-demand special filing by courier was never considered a recoverable cost.
Since all parties must efile in courts that require it, each are incurring efiling costs, this could increase more litigation if a motion to tax costs is filed challenging excessive efiling and eservice fees.
For instance, there are a variety of add-ons to a bill from an EFSP: rush fees, special handling fees, copies made, deliveries to the department, or even personal service on opposing counsel are all potentially line item charges. One prominent efiling company offered $50 “Loyalty Program” gift certificates to law firm secretaries for frequent filings and expensive, perhaps unnecessary, services. The more rushes, needed or not, and the more efilings pushed through the system benefited both the EFSP and the secretaries. These bills, of course, were passed onto the client. The lawyers used that benefit to funnel indirect raises to their staff.
The question, subject to a motion to tax costs, is what is a “reasonable fee” charged by the EFSP? Were the add-on fees necessary? Were they reasonable? Given that fees charged by an EFSP range from free to around $10, a benchmark “reasonable fee” will vary considerably.
Unlike the recoverable fee for service by a registered process server that has been matched with a statutory fee for service by the sheriff (currently $40), efiling fees have no analogy. The fee is established by private industry, which in turn, is set by demand and competition.
The EFSP as an agent of the Court
Gov’t Code § 6159 is amended to say that the EFSP is an agent of the court, and mandates that they must periodically report its actual costs for processing court filing fees. They are subject to audit by the Judicial Council, and permit access to its premises for interviewing employees, and inspect and copy relevant records. Records must be maintained for at least four years.
An EFSP is prohibited from collecting filing fees or court fees from a party whose fees have been waived.
The law is being amended to limit the fee to the “actual cost” for processing the transaction for court fees charged by the Court, EFM and the EFSP. It will mandate the court or the EFM to accept other forms of payment such as electronic fund transfers, Automated Clearing House (ACH), and payment methods that do not charge a transaction cost, such as an electronic check.
Unfortunately, history has demonstrated that EFSPs have not been acting like an agent of the court. They have been acting like private companies (which of course they are), and have made huge investments and are currently scrambling for market share. During the formative years of efilng, EFSPs refused to allow process servers to efile through their portals into the court. One major EFSP continues to restrict efiling by litigants themselves, foreclosing any ability for a process server to participate in efiling in a court that approved them as a preferred vendor. EFSPs have deliberately arranged unannounced secret meetings with the courts, and made invitation only, exclusive presentations to the legal community to capture market share of the efiling business destined to the court.
Once the EFSP is in place in a court, they provide a court portal which displays not only their efiling and eservice, but a variety of other service – process serving – local, nationwide, and international – court reporting, investigations, mobile photocopy, records searches, etc.
This has been my initial primary objection to EFSPs and the courts’ apparent acquiescent relationship to them.
Who are Electronic Filing Service Providers (EFSPs)?
There are about 20, give or take, EFSPs in California that have the ability to directly file documents into a court through an EFM. Not all EFSPs have arrangements with all courts to file electronically. Due to the accident of history, the California Judicial Council blew half a billion dollars on a failed effort to develop a statewide e-filing system, and the state legislature cut the funding. As a result, each county court was forced to look to private industry to implement efiling, and make exclusive contracts with one or a few EFSP vendor.
There are several other companies, primarily process servers or process serving agencies, which have contracts with those EFSPs providers that contract with the particular court. The EFSP charges a retail end user between free and $10. The companies that are not EFSPs market this service and file through an EFSP are charged an amount as the end user, depending on the relationship, volume, handling, etc., and mark the fee up to their clients ranging from $9 to $45.
Process serving companies facilitate the process so that their existing clients can efile through their website without using an EFSP directly. After all, the EFSP is a competitor, and if contacted directly by the client, it makes it easier to capture just the efiling assignment, but then convert it into a process service or investigative assignment.
Costs vary considerably for a process serving agency not already in the efiling business to set up an arraignment for a seamless portal that passes efilings through to an EFSP. One EFSP will build a portal on a process server’s website for free. One company will do it for $10,000. Another will do so for a fee, but bundles the build with an integrated process serving program for generating service instructions, proofs of service, declarations for the server, billing and statements, and online statuses, and with the setup fee, will take a fee for each and every invoice generated during the term of the contract.
A lawyer or law firm may efile through the branded portal on their website, or the process server may file for the client through an EFSP. Does that make the process serving agency an EFSP also? There are several inferences throughout CCP § 1010.6 that refer to the EFSP as the entity that files electronically through the EFM. There is apparently no definition of an EFSP in either the law or court rule.
At the very least, process servers to file through an EFSP are an agent of the EFSP, and hence, a sub-agent of the court. To distinguish these, hereinafter in this article I will refer to them as an Electronic Filing Service Provider Agent (EFSPA). Local courts make no distinction between an EFSP and an EFSPA.
- Is an EFSPA bound by these changes in the law?
- Is an EFSPA subject to audit by the Judicial Council?
- Is an EFSPA obligated to file at no charge for parties that have obtained a fee waiver?
- Is an EFSPA able to pass on an additional “convenience fee” if they pay an EFSP with a credit card, resulting in 2 “convenience fees”?
- Is an EFSPA’s add-on markup fee for efiling through an EFSP a “reasonable cost”, subject to recovery?
- If not, could these charges be subject to challenge with a motion to tax costs?
Most of the owners of the EFSPAs I spoke to at the CALSPro conference in October, 2016 who have entered into this arrangement have yet to break even.
So here are my questions. CALSPro devoted considerable resources, time, energy, and support to this bill. Did this effort benefit the membership and process servers? If so, how?