BILL NUMBER: AB 3029 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 26, 2002
AMENDED IN SENATE JUNE 20, 2002
AMENDED IN ASSEMBLY MAY 14, 2002
AMENDED IN ASSEMBLY APRIL 17, 2002
INTRODUCED BY Assembly Member Steinberg
MARCH 12, 2002
An act to amend Sections 1280 and 1281.6 of, and to add Sections
1281.89 and 1281.93 to, the Code of Civil Procedure, relating to
arbitration.
LEGISLATIVE COUNSEL'S DIGEST
AB 3029, as amended, Steinberg. Consumer arbitration agreements:
private arbitration companies.
Existing law provides for the enforcement of arbitration
agreements and requires a court to vacate an arbitration award in
specified circumstances.
This bill would define attorney for a party, consumer arbitration,
consumer party, neutral arbitrator, and private arbitration company
for these purposes. The bill would specify that if a consumer
arbitration agreement, entered into or renewed on or after January 1,
2003, designates one or more specific arbitrators or private
arbitration companies or incorporates the arbitration rules of a
private arbitration company, the consumer party shall have the
option, as specified, after a dispute arises, to choose a different
arbitrator or private arbitration company, and the arbitration
agreement shall plainly notify the consumer of this right, as
specified, as well as the right to obtain information about private
arbitration companies, as specified. The bill would prohibit an
arbitrator or private arbitration company from administering or
otherwise participating in a consumer arbitration, unless the
agreement complies with these requirements and the consumer chooses
the arbitrator or private arbitration company after the dispute
arises. The bill would also prohibit a private arbitration company
from administering a consumer arbitration if, on or after January 1,
2003, it provides specified services or products to a party or
attorney for a party to arbitration. The bill would specify the
remedies for these violations.
The bill would also prohibit certain solicitations, as specified,
regarding consumer arbitration cases, and prohibit a private
arbitration company from making certain representations regarding
consumer arbitration, adopting or enforcing specified rules governing
consumer arbitration, or giving or receiving remuneration for
referrals, as specified. The bill would specify that it applies to
all consumer arbitration proceedings subject to the provisions of the
bill or conducted in California. The bill would also specify that
the application of certain provisions of the bill to health care
service plans shall become operative on January 1, 2004.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1280 of the Code of Civil Procedure is amended
to read:
1280. As used in this title:
(a) "Agreement" includes but is not limited to agreements
providing for valuations, appraisals and similar proceedings and
agreements between employers and employees or between their
respective representatives.
(b) "Attorney for a party" includes any attorney actually
representing a party and any attorney currently associated in the
practice of law with an attorney hired to represent a party.
(c) "Award" includes but is not limited to an award made pursuant
to an agreement not in writing.
(d) "Consumer arbitration" means an arbitration that is binding on
the consumer and conducted under a predispute arbitration provision
contained in a contract that meets both of the following criteria:
(1) The contract is with a "consumer party."
(2) The arbitration provision is contained in a printed form
agreement or was drafted by or on behalf of, or inserted by or on
behalf of, the nonconsumer party.
(e) "Consumer party" means a party to an arbitration agreement
who, for the purpose of that agreement, is any of the following:
(1) An individual who seeks or acquires, including by purchase,
lease, or license, any goods or services primarily for personal,
family, or household purposes, including financial services,
insurance, and other goods and services, as defined in Section 1761
of the Civil Code.
(2) An individual who is an enrollee, a subscriber, or an insured
under a health care service plan, within the meaning of Section 1345
of the Health and Safety Code, or a health care insurance plan,
within the meaning of Section 106 of the Insurance Code.
(3) An individual with a medical malpractice claim that is subject
to arbitration pursuant to a predispute arbitration agreement.
(4) An employee or applicant for employment in a dispute arising
out of, or relating to, his or her employment or prospective
employment, except a dispute under or arising out of a collective
bargaining agreement between an employer and its employees or between
their respective representatives.
(f) "Controversy" means any question arising between parties to an
agreement whether the question is one of law, of fact, or both.
(g) "Neutral arbitrator" means an arbitrator who is selected or
appointed by one of the following methods:
(1) Jointly by the parties or by the arbitrators selected by the
parties.
(2) By the court when the parties or the arbitrators selected by
the parties fail to select an arbitrator who was to be selected
jointly by them.
(3) By a private arbitration company, under an agreement of the
parties or applicable rules.
(h) "Party to the arbitration" means a party to the arbitration
agreement:
(1) Who seeks to arbitrate a controversy pursuant to the
agreement;
(2) Against whom the arbitration is sought pursuant to the
agreement; or
(3) Who is made a party to the arbitration by order of the
neutral arbitrator upon the party's application, upon the
application of any other party to the arbitration or upon the neutral
arbitrator's own determination.
(i) "Private arbitration company" means any nongovernmental entity
or individual that holds itself out as managing, coordinating, or
administering arbitrations, or providing the services of neutral
arbitrators, or making referrals or appointments to, or providing
lists of, neutral arbitrators. "Private arbitration company" includes
any entity owned, in whole or in part, by any individual or
affiliated with, a private arbitration company, but does not include
individuals who self-administer cases in which they are
appointed individuals appointed to serve as the
arbitrator , ; entities that
administer, make referrals or appointments to, or provide lists of
arbitrators in, fewer than five consumer arbitration cases per year
, ; or any self-regulatory
organization (SRO) as defined in the Securities and Exchange Act of
1934 (15 U.S.C. 78c(a)(26)) or the federal Commodity Exchange
Act (7 U.S.C. 1 et seq.) and regulations adopted in implementation of
that act .
(j) "Written agreement" shall be deemed to include a written
agreement which has been extended or renewed by an oral or implied
agreement.
SEC. 2. Section 1281.6 of the Code of Civil Procedure is amended
to read:
1281.6. (a) Except as provided in subdivision (b), if the
arbitration agreement provides a method of appointing an arbitrator,
that method shall be followed.
(b) If a consumer arbitration agreement entered into or renewed on
or after January 1, 2003, designates one or more exclusive
arbitrators, private arbitration companies, or SROs, or incorporates
the arbitration rules of a private arbitration company or SRO, the
consumer party shall have the option, after a dispute arises, to
choose a different arbitrator, private arbitration company, or SRO,
as the case may be, and the arbitration agreement shall plainly
notify the consumer of this right, as well as of the right to obtain
information about private arbitration companies as provided by
Section 1281.96 in the arbitration clause. This notice shall also be
provided to the consumer party by the private arbitration company in
the first communication from the private arbitration company to the
consumer party regarding the arbitration, and in the rules of
procedure governing the arbitration. The option to choose a
different arbitrator or private arbitration company may be exercised
by the consumer party within 75 days from the date the consumer
party serves a demand for arbitration, the nonconsumer party serves a
demand for arbitration specifying an arbitrator, private arbitration
company, or SRO, or a court issues an order compelling arbitration.
No consumer arbitration may be self-administered by a party. No
arbitrator or private arbitration company may administer or otherwise
participate in a consumer arbitration unless the arbitration
agreement complies with this subdivision and the consumer chooses the
arbitrator, private arbitration company, or SRO after the dispute
arises, or fails to timely exercise the option to choose another
arbitrator, private arbitration company, or SRO. Any arbitration
award rendered in violation of this section shall be vacated at the
request of the consumer party pursuant to Section 1286.2. This
subdivision shall apply to all consumer arbitration agreements
subject to this article, and to all consumer arbitration proceedings
conducted in California.
(c) If the arbitration agreement does not provide a method for
appointing an arbitrator, the parties to the agreement who seek
arbitration and against whom arbitration is sought may agree on a
method of appointing an arbitrator and that method shall be followed.
(d) In the absence of an agreed method, or if the agreed method
fails or for any reason cannot be followed, or if an arbitrator
appointed fails to act and his or her successor has not been
appointed, the court, on petition of a party to the arbitration
agreement, shall appoint the arbitrator.
(e) If a petition is made to the court to appoint a neutral
arbitrator, the court shall nominate five persons from lists of
persons supplied jointly by the parties to the arbitration or
obtained from a governmental agency concerned with arbitration or a
private disinterested association concerned with arbitration. The
parties to the agreement who seek arbitration and against whom
arbitration is sought may within five days of receipt of notice of
the nominees from the court jointly select the arbitrator whether or
not the arbitrator is among the nominees. If the parties fail to
select an arbitrator within the five-day period, the court shall
appoint the arbitrator from the nominees.
SEC. 3. Section 1281.89 is added to the Code of Civil Procedure,
to read:
1281.89. (a) A solicitation regarding an existing or future
consumer arbitration case may not be made by or on behalf of a
private arbitration company to any party, prospective party, or
attorney for a party or prospective party, unless the solicitation is
protected from abridgment by the Constitution of the United States
or by the Constitution of the State of California.
(b) For the purpose of this section, solicitation includes an oral
or written request for arbitration business. Nothing in this
section prohibits a private arbitration company from indicating a
general willingness to serve as a private arbitration company.
(c) A private arbitration company may not make any representation
regarding consumer arbitration that promises or implies specific
results or favoritism towards one party or prospective party or one
type of disputant or industry.
(d) A private arbitration company may not adopt or enforce any
rule governing consumer arbitration that is inconsistent with any
statement of principle, guideline, protocol, or other nonbinding
policy representation regarding consumer arbitration made or adopted
by the private arbitration company. A private arbitration company
may not adopt any statement of principle, guideline, protocol, or
other nonbinding policy statement regarding consumer arbitration that
is inconsistent with the rules under which consumer arbitration is
actually conducted or administered by the private arbitration
company.
(e) A private arbitration company may not give or receive any
commission, rebate, or other remuneration for the referral of
consumer arbitration cases, prospective consumer arbitration cases,
consumer arbitration parties, or prospective consumer arbitration
parties.
(f) This section applies to all consumer arbitration agreements
subject to this article, and to all consumer arbitration proceedings
conducted in California.
SEC. 4. Section 1281.93 is added to the Code of Civil Procedure,
to read:
1281.93. (a) A private arbitration company may not administer a
consumer arbitration if, on or after January 1, 2003, it has provided
any paid or unpaid consulting, management, or other business service
or product to any party to the consumer arbitration or to any
attorney for a party in the arbitration, other than arbitration,
mediation, or other methods of resolving specific, identified
disputes. Nothing in this section prohibits a private arbitration
company from conducting training programs regarding the arbitration
or mediation process in general , provided that these
programs do not create the appearance of a potential conflict of
interest. .
(b) Any arbitration award rendered in an arbitration administered
by a private arbitration company in violation of this section shall
be vacated at the request of the consumer party pursuant to Section
1286.2.
(c) This section applies to all consumer arbitration agreements
subject to this article, and to all consumer arbitration proceedings
conducted in California.
SEC. 5. The exclusion of self-regulatory organizations from the
definition of private arbitration company in Section 1280 of the Code
of Civil Procedure is not intended to affect the application to SROs
of the arbitrator ethics standards promulgated by the Judicial
Council pursuant to Section 1281.85 of the Code of Civil Procedure,
because this act does not relate to those issues. This act may not
be given retroactive effect with respect to the definitions set forth
in Section 1280 of the Code of Civil Procedure.
SEC. 6. The obligation under Section 1281.6 of the Code of Civil
Procedure to notify consumers of their rights in the arbitration
agreement shall become operative on January 1, 2004, as to
health care service plans regulated by the Department of Managed
Health Care on January 1, 2004 .