BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 877 (Harman)
As Amended March 8, 2010
Hearing Date: May 4, 2010
Fiscal: No
Urgency: No
TW:jd
SUBJECT
Arbitration: Legal Representation
DESCRIPTION
This bill would remove the sunset provision from the
out-of-state attorney arbitration counsel program, making the
program permanent.
BACKGROUND
Many companies use in-house counsel to handle their legal needs,
including representing the company during arbitration
proceedings. In Birbrower v. Superior Court (1998) 17 Cal.4th
117, the court ruled that out-of-state attorneys were precluded
from representing their clients in California arbitrations. Due
to the financial burden imposed on out-of-state parties having
to locate in-state counsel and the resulting time burden on
parties and courts, the Legislature enacted AB 2086 (Keeley,
Chapter 915, Statutes of 1998), which created the Out of State
Attorney Arbitration Counsel Program (OSAAC) under Code of
Civil Procedure Section 1282.4 and Rules of Court Rule 9.43.
California courts allow out-of-state attorneys to appear pro hac
vice upon submitting an application to the court and serving
notice of the hearing on the application with the State Bar of
California. (Rules of Court Rule 9.40.) Similarly, under
OSAAC, out-of-state attorneys can represent parties in
California arbitrations once they have satisfied, among other
things, the following requirements: (1) file a certificate with
the arbitrator and State Bar of California; and (2) submit to
the disciplinary jurisdiction of the California State Bar.
(more)
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(Code Civ. Proc. Sec. 12824; Rules of Court Rule 9.43.) When it
was enacted in 1999, the bill contained a sunset date of two
years. A subsequent report prepared in 2000 by the State Bar
noted that some certificates contained no attorney of record on
file, and many were never filed. Accordingly, there was little
record of adequate compliance by both attorneys in filing the
certificates and by arbitrators in ensuring that the rules
adopted by the Supreme Court for the out-of-state attorney in
arbitration appearances were followed. SB 2153 (Schiff, Chapter
1011, Statutes of 2000), among other things, extended the sunset
to January 1, 2006. OSAAC was extended to January 1, 2007 by AB
415 (Harman, Chapter 607, Statutes of 2005). AB 2482 (Harman,
Chapter 357, Statutes of 2006) required the out-of-state
attorney to get the arbitrator's approval of certificate of
intent to appear in arbitration before the out-of-state attorney
filed it with the State Bar. AB 2482 also contained a reporting
requirement by the State Bar and extended the sunset provision
to January 1, 2011.
This bill seeks to remove the sunset provision of the OSAAC and
permanently allow out-of-state attorneys to appear on behalf of
their clients in California arbitrations as long as they have
met OSAAC requirements.
CHANGES TO EXISTING LAW
Existing law provides that a party to an arbitration has the
right to be represented by an attorney at any arbitration
proceeding or hearing. (Code Civ. Proc. Sec. 1282.4(a).)
Existing law authorizes an out-of-state attorney to appear on
behalf of a client in arbitration as long as the out-of-state
attorney files a certificate, as specified, and once the
certificate is approved by the arbitrator, the certificate must
be filed with the State Bar of California and served on all
parties to the arbitration. (Code Civ. Proc. Sec. 1282.4(b-e).)
Existing law provides that the out-of-state attorney
participating in an arbitration is subject to the disciplinary
jurisdiction of the State Bar of California. (Code Civ. Proc.
Sec. 1282.4(f).)
Existing law provides that the above-described provisions sunset
on January 1, 2011. (Code Civ. Proc. Sec. 1282.4(k).)
This bill would remove the sunset provision and make the
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out-of-state arbitration requirements permanent.
COMMENT
1. Stated need for the bill
The author writes:
This bill does not seek to remedy a deficiency; rather, it
seeks to acknowledge that a previously assigned deficiency has
been adequately and permanently addressed. The out-of-state
arbitration program is an effective, useful program that
should be a permanent fixture of California state law.
Accordingly, this bill seeks to implement the suggestion of
the State Bar that "consideration should be given to whether
the sunset provisions of CCP [Sec.] 1282.4 should be removed,
which would make the requirements for out-of-state attorneys
to appear in California arbitration proceedings permanent."
Further, the California Dispute Resolution Council (CDRC), a
supporter of the bill, notes that "[t]his statute has worked to
ensure that arbitrations can proceed smoothly in our state,
especially in those cases where out of state counsel are the
lawyers for the parties involved in the arbitration. This is
not an attempt by these lawyers to avoid becoming members of the
state bar but merely to perform their duties for their clients
when the arbitration occurs in the State of California."
2. OSAAC is working
In 2000, it was apparent that out-of-state attorneys applying to
appear on behalf of their clients under the OSAAC program were
not being effectively regulated. Accordingly, AB 2482 (Harman,
Chapter 357, Statutes of 2006) strengthened oversight of the
program and required the out-of-state attorney to obtain the
arbitrator's approval on the certificate of intent to appear in
arbitration before the out-of-state attorney filed the
certificate with the State Bar.
The "2009 Report of the State Bar of California to the
California Legislature in Accordance with AB 2482 (Harman)
(2006, Ch. 357) Relating to Arbitration Proceedings Conducted
Under California Code of Civil Procedure Section 1282.4" (the
Report) shows that the OSAAC program is sufficiently protecting
California litigants. During the two-year period covered in the
Report, only 1,192 out-of-state attorneys filed a certificate of
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arbitration appearance. The number of out-of-state attorneys
requesting to appear in arbitrations in 2007 and 2008 was lower
than out-of-state attorneys requesting to appear pro hac vice
(approximately 2,600 per year). The State Bar compiled a table
showing the number of out-of-state applicants and the
corresponding number of times they appeared in arbitrations
during the two years covered by the report as follows:
-------------------------------------------------------------------------------------------------------------
|# of | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|Appearanc| | | | | | | | | | |
|es | | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|# of | 676 | 104 | 33 | 10 | 10 | 2 | 2 | 2 | 6 |2 |
|Applicant| | | | | | | | | | |
|s | | | | | | | | | | |
-------------------------------------------------------------------------------------------------------------
As the table demonstrates, there are a number of out-of-state
attorneys making multiple appearances in California
arbitrations. The State Bar reports the following special
circumstances for which arbitrators accepted repeated
appearances by these out-of-state attorneys:
1. the arbitration is a collection case on behalf of a
major brokerage firm against registered representative
employees;
2. the out-of-state attorney represented the brokerage firm
nationwide;
3. the proceeding is in California because the claimant
resides in California and prefers to use an out-of-state
attorney because of his or her familiarity with the
subject; or
4. the applicant is in-house counsel or associated with
outside law firms who handle similar matters nationwide.
The State Bar reports that it did not receive any written
complaints about the OSAAC program during the reporting period
and it is not aware of any complaints or alleged violations of
Code of Civil Procedure Section 1282.4. Interested stakeholders
also have not reported any complaints. In fact, the CDRC notes
that "[t]he statute has been in effect for over ten years and
there is no evidence that the State Bar has permitted abuse of
the procedure by out of state attorneys."
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The State Bar recommends that the sunset provision should be
removed and the requirements for out-of-state attorneys
appearing in California arbitration proceedings should be made
permanent. Given that the dual step requirement of arbitrator's
approval and subsequent filing with the State Bar is providing
sufficient oversight over out-of-state attorneys and there have
been no complaints over this process, removing the sunset
provision from Code of Civil Procedure Section 1282.4 appears to
be appropriate.
Support : California Dispute Resolution Council
Opposition : None Known
HISTORY
Source : Securities Industry and Financial Markets Association
Related Pending Legislation : None Known
Prior Legislation :
AB 2482 (Harman, Ch. 357, Stats. 2006) (See Comment 2.)
AB 415 (Harman, Ch. 607, Stats. 2005) extended the sunset to
January 1, 2007.
SB 2153 (Schiff, Ch. 1011, Stats. 2000), among other things,
extended the sunset to January 1, 2006.
AB 2086 (Keeley, Ch. 915, Stats. 1998) permitted out-of-state
attorneys, upon the filing of a certificate disclosing required
information, to represent parties in California arbitrations.
This bill set a sunset date of January 1, 2001.
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