BILL ANALYSIS
AB 2656
Page 1
Date of Hearing: April 23, 2002
ASSEMBLY COMMITTEE ON JUDICIARY
Ellen M. Corbett, Chair
AB 2656 (Corbett) - As Amended: April 17, 2002
SUBJECT : CONSUMER ARBITRATION COMPANIES: DATA COLLECTION
KEY ISSUE: SHOULD PRIVATE JUDGING COMPANIES THAT CHOOSE TO HANDLE
MANDATORY CONSUMER ARBITRATIONS PROVIDE BASIC DATA REGARDING
THEIR PRIOR INVOLVEMENT IN SUCH CASES?
SYNOPSIS
In its February and March informational hearings, the Committee
heard repeated and troubling allegations that consumer
arbitrations may produce outcomes that are unfair to consumers.
This bill, requiring that private judging companies begin to
provide some basic information regarding their involvement in
consumer arbitrations, is designed to reduce incentives to favor
corporate parties, and to help address mounting public
skepticism about the fairness of such arbitrations.
SUMMARY : Seeks to begin to shed some sunshine on the consumer
arbitration industry. Specifically, this bill requires that
private judging companies collect and make available to the
public some basic data regarding their involvement in, and the
outcome of, mandatory consumer arbitrations.
EXISTING LAW :
1)Generally enforces a pre-dispute agreement to submit a future
legal controversy to binding arbitration. (Code of Civil
Procedure 1281. All further statutory references are to this
code unless otherwise noted.)
2)Permits the parties to select a method for the appointment of
an arbitrator, or to petition the court for the appointment of
an arbitrator if they cannot agree. (Section 1281.6.)
3)Allows private arbitrators to issue binding decisions that are
legally enforceable but essentially unreviewable by a court;
there is no appeal from an arbitrator's decision to a public
court, even if the arbitration agreement expressly provides
for judicial review. (Crowell v. Downey Community Hospital
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Foundation, 95 Cal. App. 4th 730 (2002).)
4)Allows arbitrators to conduct arbitrations without allowing
for discovery, complying with the rules of evidence, or
explaining their decisions in written opinions. (Sections
1283.1; 1282.2; 1283.4)
5)Permits arbitrations to be conducted in private with no public
scrutiny. (Ting v. AT&T, 192 F. Supp. 2d 902 (N.D. Cal.
2002).)
6)Permits arbitrators to disregard the law and/or the evidence
in rendering their decisions. Awards may be enforced by the
court, even if they are legally and factually erroneous.
(Moncharsh v. Heily & Blas? et al, 3 Cal.4th 1 (1992).)
7)Allows arbitrators substantial if not absolute immunity from
civil liability for acts relating to their decisions, even in
the case of bias, fraud, corruption or other violation of law.
(Baar v. Tigerman, 140 Cal. App. 3d 979 (1983).)
8)The only relief that a court may grant to an arbitral party,
no matter what misconduct has taken place in the arbitration,
is to vacate the award and return the parties to further
arbitration, perhaps with the same arbitrator or arbitration
company. The grounds on which an arbitrator's decision may be
vacated are narrow and the standards are high. (Section
1282.6.)
FISCAL EFFECT : As currently in print, this bill is keyed
non-fiscal.
COMMENTS : As the Committee heard in its February and March 2002
informational hearings, in contrast to the proceedings of public
courts, virtually all consumer arbitrations are conducted in
secret because the arbitration clauses or rules of the
designated provider impose secrecy. As the Committee also
heard, however, there is nothing inherent in the nature of
arbitration or the function of the arbitrator that requires such
secrecy. Indeed, the Office of the Independent Administrator
that overseers Kaiser health care arbitrations already publishes
some data regarding its process and results, and the Department
of Managed Health Care will soon be collecting more information
regarding all health care arbitrations because it feels such
openness is needed for the public.
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Moreover, barring the arbitration doors to any public scrutiny
only feeds apparently growing public skepticism that arbitration
is really as fair as its proponents claim. In order to address
these concerns and reduce any bias that may exist in favor of
corporate repeat-players in consumer arbitration, AB 2656
outlines some basic data that private judging companies must
keep and disclose when they choose to handle consumer
arbitrations. The author state that this data will be of
interest both to consumers, to businesses and to scholars and
policymakers who wish to study and evaluate how the arbitration
industry is working and whether there are differences among
individual private judging companies. According to the author,
this bill is not an end but a beginning in the state's effort to
start understanding what really is happening in the rapidly
growing private judging industry.
In support of the bill, Consumers Union states: "AB 2656
(Corbett) will provide greater accountability for arbitration
provider organizations by requiring them to plainly disclose to
the public information such as the number of arbitrations
handled for a particular business and the outcome of those
arbitrations. Consumers deserve to know how many other cases a
private judging company such as the American Arbitration
Association has handled for a particular business, such as a
bank, and whether the business or the consumer won most of those
cases.
Public disclosure of arbitration results is particularly
important because of the risk that a business which is a "repeat
player" in arbitration might receive more favorable treatment in
the arbitration than an individual consumer who may only have
one arbitration with a private judging company. This might occur
as a result of the manner in which the arbitration procedure is
structured."
The Consumer Attorneys of California add: "Consumer Attorneys
view AB 2656 as crucial to informing the public about the
currently very secretive nature of arbitration proceedings.
Currently, we do not have access to detailed information about
the arbitration process. Arbitrations are conducted in secret
and results are hidden from the public. Therefore, the public
may never become aware of patterns of illegal or deceptive
practices. We believe that such public information is a crucial
first step to shedding light on this backroom process."
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This bill has also merited special attention by the Los Angeles
Times, which editorialized on March 16, 2002, that "HMO leaders
and Sacramento legislators should embrace a package of bills
introduced this week that would ? require private judging
corporations to report the results of arbitration proceedings."
Preserving Privacy . Notwithstanding the substantial public
interest in the fairness of consumer arbitrations, it is
important that the privacy of arbitration parties be preserved.
Therefore, AB 2656 does not require the collection of any
personal or confidential data regarding individual or business
parties.
Because private judging companies may do a large volume of
mediation business with corporate clients which, like any other
revenue stream, may contribute to an incentive to favor
repeat-players in arbitration, this bill also provides that the
private judging company indicate the number of times that the
non-consumer party has been involved in mediations with the
private judging company. It may be contended that information
regarding prior involvement with a private judging company as a
party to a mediation is confidential. However, this argument
appears to rest on a potential misunderstanding of the mediation
confidentiality law. In order to foster open communication in
mediation, the statements made by parties during the mediation
are wisely privileged for the purpose of civil actions in court.
(Evidence Code section 1115 et seq.) Of course, there appears
to be no such policy justification, and therefore no needed
confidentiality protection regarding the simple fact that a
party has participated in mediation. Indeed, a party's
participation in family court mediation, for example, is
currently a matter of public record (though the statements made
in such proceedings are of course privileged).
Author's Amendments to Clarify Language. The author has
informed the Committee of some technical amendments to clarify
some of the language. The introductory paragraph of the bill
should read:
1281.96. Any private judging company that participates in
administers or is otherwise involved in, a consumer
arbitration shall collect, publish at least quarterly, and
make available to the public in a computer searchable format,
which shall be accessible at the Internet Web site of the
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private judging company, if any, and on paper upon request,
all of the following information regarding each consumer
arbitration:
Prior Related Legislation . SB 475 (Escutia), Ch. 362, Stats.
2001, established ethical obligations for private arbitrators.
Pending Related Legislation. AB 2504 (Jackson) regarding
judicial recruitment and employment by private judging
companies; AB 2574 (Harman) regarding financial conflicts of
interest between private judging companies and parties in
consumer arbitration; AB 3029 (Steinberg) regarding designated
private judging companies, consulting and solicitation; AB 3030
(Corbett) regarding immunity of private judging companies.
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association
Congress of California Seniors
Consumer Attorneys of California
Consumer's Union
Older Women's League of California
Opposition
None on file.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334