BILL NUMBER: AB 1714 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JANUARY 12, 2004
INTRODUCED BY Committee on Judiciary (Corbett (Chair), Hancock,
Jackson, Laird, Longville, Montanez, Steinberg, and Vargas)
FEBRUARY 26, 2003
An act to amend Section 1281.6 of, and to add Section
1281.83 to, 1281 of the Code of Civil Procedure,
relating to arbitration.
LEGISLATIVE COUNSEL'S DIGEST
AB 1714, as amended, Committee on Judiciary. Arbitration:
consumer arbitration agreements.
Existing law provides for the enforcement of arbitration
agreements and requires a court to vacate an arbitration award in
specified circumstances.
Existing law provides that a written agreement to submit a dispute
to arbitration is valid and irrevocable except upon the grounds that
exist for revocation of a contract.
This bill would revise the provisions regarding the revocability
of a written agreement to arbitrate, described above, to provide that
these agreements may not be revoked except upon the grounds that
exist for rescission of a contract.
This bill would specify that if a consumer arbitration agreement
entered into or renewed on or after January 1, 2004, designates one
or more exclusive private arbitration companies or SROs, or
incorporates the arbitration rules of a private arbitration company
or SRO, the consumer party has the option, after a dispute arises, to
choose a different neutral private arbitration company or SRO. The
bill would specify that if the agreement is entered into or renewed
on or after January 1, 2004, the arbitration agreement shall plainly
notify the consumer of this right, as specified, as well as of the
right to obtain information about private arbitration companies. The
bill would prohibit an arbitrator or private arbitration company
from administering or otherwise participating in a consumer
arbitration in violation of these provisions.
This bill would also 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.
This bill would specify that its provisions apply to all consumer
arbitration proceedings subject to the law governing the enforcement
of arbitration agreements and to all consumer arbitration proceedings
conducted in California.
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 1281.6 of the Code of Civil Procedure
SECTION 1. Section 1281 of the Code of Civil Procedure is amended
to read:
1281. A written agreement to submit to arbitration an existing
controversy or a controversy thereafter arising is valid, enforceable
and irrevocable, save upon such the
grounds as that exist for the
revocation rescission of any contract.
is amended to read:
1281.6. (a) The Legislature finds and declares that the public
confidence in the integrity and fairness of private contractual
arbitration is fundamental to the continued vitality and success of
the process. Accordingly, it is in the public interest to promote
competition, truthfulness, and neutrality among arbitration
companies, along with voluntary and knowing party choice in the
selection of arbitration administrators. Consumer arbitration
provided by a private arbitration company that is predesignated by a
nonconsumer party without a meaningful opportunity for the consumer
to participate in the selection of the arbitration administrator
after the dispute arises is unconscionable and contrary to public
policy.
(b) Except as provided in subdivision (c), if the arbitration
agreement provides a method of appointing an arbitrator, that method
shall be followed.
(c) (1) If a consumer arbitration agreement entered into or
renewed on or after January 1, 2004, designates one or more exclusive
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 neutral private arbitration company or SRO, as the
case may be.
(2) If a consumer arbitration agreement entered into or renewed on
or after January 1, 2004, designates one or more exclusive private
arbitration companies or SROs, or incorporates the arbitration rules
of a private arbitration company or SRO, the arbitration agreement,
in its arbitration clause, shall plainly notify the consumer of the
right to choose a different private arbitration company or SRO, as
the case may be, within the time period provided by paragraph (3), as
well as of the right to obtain information about private arbitration
companies as provided by Section 1281.96. 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.
(3) The option to choose a different neutral private arbitration
company may be exercised by the consumer party, within 75 days from
either the date the consumer party serves a demand for arbitration,
the date the nonconsumer party serves a demand for arbitration
specifying a private arbitration company or SRO, or the date a court
issues an order compelling arbitration. No administration of the
consumer arbitration shall be conducted prior to the exercise of the
consumer's right to choose a different private arbitration company or
SRO, or the expiration of the period in which the consumer may
exercise the right to choose a different private arbitration company
or SRO, whichever comes first. If the consumer exercises the option
to choose a different private arbitration company or SRO, the parties
may agree on an alternative private arbitration company or SRO, or
either party may petition the court for appointment of an arbitrator
pursuant to this section.
(4) No consumer arbitration may be self-administered by a party or
the parent, subsidiary, or other legal affiliate of a party.
(5) No arbitrator or private arbitration company may administer or
otherwise participate in a consumer arbitration in violation of this
section. Any arbitration award rendered in violation of this section
may be vacated at the request of the consumer party pursuant to
Section 1286.2.
(6) This subdivision shall apply to all consumer arbitration
agreements subject to this article, and to all consumer arbitration
proceedings conducted in California.
(d) 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.
(e) 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.
(f) 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. 2. Section 1281.83 is added to the Code of Civil Procedure,
to read:
1281.83. (a) 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.
(b) 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.
(c) 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.
(d) This section applies to all consumer arbitration agreements
subject to this article, and to all consumer arbitration proceedings
conducted in California. ____
CORRECTIONS Heading -- Line 1. ____