Wednesday, April 27, 2016
Legislative Committees Approve Bills Limiting Arbitration
By KENNETH OFGANG, Staff Writer
The state and Assembly judiciary committees yesterday approved four bills limiting the enforceability of compulsory arbitration agreements.
The bills, which are supported by Consumer Attorneys of California and opposed by the California Civil Justice Association, are:
•SB 1065, by Sen. Bill Monning, D-Santa Cruz, which would make orders denying petitions to compel arbitration non-appealable when the plaintiff raises a statutory elder abuse claim and has been granted a trial preference on the ground that he or she is over 70 years of age or terminally ill.
•SB 1078, by Sen. Hannah-Beth Jackson, D-Santa Barbara, the committee chair, would prohibit an arbitrator from considering offers of employment or to form other professional relationships from a party to a pending arbitration before that arbitrator or from the attorney for any such party. It would also bar a private arbitration company from soliciting business from parties with cases before it or from an attorney from any such party.
•SB 1241, by Sen. Bob Wieckowski, D-Fremont, which would bar provisions in employment or consumer contracts that would require a plaintiff to litigate or arbitrate a claim outside California or subject such a claim to foreign law.
•AB 2667, by Assemblymember Tony Thurmond, D-Richmond, which would bar agreements compelling arbitration of claims brought under the Unruh Civil Rights Act unless the party seeking to enforce an arbitration clause proves that the waiver was voluntary and not made a condition of entering into a contract for goods or services.
Monning, in his statement to the committee, said the requirements to obtain a preference under Code of Civil Procedure section 36 are “onerous.” Current law compounds the difficulties plaintiffs in elder abuse cases face, because a defendant whose arbitration agreement is found unenforceable “can nonetheless override the court’s order for a preferential trial date and delay the elder’s trial another 1-3 years by filing an appeal.”
CJAC argued in its letter of opposition that the bill “is contrary to California’s strong public policy favoring arbitration and the enforcement of valid arbitration agreements” and that the bill was unnecessary because a plaintiff can seek an expedited appeal.
Jackson said SB 1078 will build upon California’s groundbreaking, decade-old ethical standards for contractual arbitrators. The ban on arbitrators’ forming professional relationships with parties or attorneys with cases before them would codify an existing ethical rule, she said, while the new solicitation ban “strengthens current rules relating to targeted marketing activities of private arbitration companies as well as rules relating to the ability of arbitrators to enter into future arrangements with one party to a pending arbitration.”
CAOC added in its letter of support that private arbitration firms “often operate with defendant companies on a regular basis without disclosing a conflict of interest to the consumer plaintiff.”
CJAC wrote in opposition:
“Because some arbitration companies offer dozens or hundreds of neutrals, any one of whom could be providing service as a neutral at any time for a party that frequently uses arbitration, SB 1078 will operate as a ban on solicitation by arbitration companies of their most frequent users. SB 1078 will also prohibit an arbitrator, during an arbitration, from entertaining any offers of employment as a dispute resolution neutral from a party to the arbitration. If a party to an ongoing arbitration is a frequent user of arbitration, this ban constitutes a practical barrier to the arbitrator scheduling subsequent work, and will complicate the logistical challenge faced by arbitration companies as they try to keep track of which neutrals are available.”
The California Dispute Resolution Council also wrote in opposition, saying the existing rules are working well, because an arbitrator who discloses that he or she will accept solicitations as a neutral while the arbitration is pending can be disqualified by a party up to 15 days after disclosing.
‘Forced Arbitration Everywhere’
Wieckowski, in support of his bill, said it was time for the Legislature to react to the fact that “forced arbitration clauses are everywhere,” and particularly in the fine print of consumer contracts.
“SB 1241 focuses in on two of the worst clauses that can appear in a consumer [or employment] contract,” he wrote, those that force a Californian to arbitrate or sue in another state, and foreign choice-of-law clauses.
CJAC noted that similar bills were vetoed by then-Gov. Arnold Schwarzenegger in 2007 and 2009 and by Gov. Jerry Brown in 2011, and said the bill is unnecessary because courts already have the power to reject choice-of-law and venue clauses if they find them unconscionable. Wieckowski responded by citing several state and federal decisions that have forced California workers to bring their claims outside the state, including a 1991 Ninth Circuit decision upholding Saudi Arabia as the proper venue in which to bring an age discrimination action.
Thurmond wrote that his bill, which is backed by the state NAACP in addition to CAOC, said the bill would assure that the right to be free from discrimination is not abrogated “through the use of involuntary or coerced waivers.”
CJAC and other opponents, including the California Chamber of Commerce, argued that the bill is likely preempted by the Federal Arbitration Act and said the bill would hurt the state’s economic recovery by driving up litigation costs. They also said the bill would hurt consumers by forcing them “to wait years for a resolution ”in the state’s “overburdened judicial system.”
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