BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 877
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          Date of Hearing:   June 29, 2010

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                     SB 877 (Harman) - As Amended:  March 8, 2010

                    PROPOSED CONSENT (As Proposed To Be Amended)

           SENATE VOTE  :   31-0


           FISCAL EFFECT  :  As currently in print this bill is currently  
          keyed non-fiscal.

          This non-controversial bill would remove the sunset provision  
          from the out-of-state attorney arbitration counsel program,  
          making the program permanent.  Under this authority, attorneys  
          admitted to practice in other states are permitted to practice  
          law in California for the purpose of arbitration proceedings,  
          despite lacking a license to practice in California, similarly  
          to lawyers appearing in court proceedings.  It would also  
          provide parity between non-admitted attorneys appearing in  
          arbitration proceedings and those appearing in court proceedings  
          with respect to the fee charged for this valuable privilege.  

           SUMMARY  :  Permits out-of-state lawyers to practice in California  
          arbitration proceedings.  Specifically,  this bill  would remove  
          the current sunset provision and make permanent the  
          authorization for out-of-state lawyers to practice law in  
          arbitration proceedings despite lacking a license to practice  
          law in California.

           EXISTING LAW  provides that a party to an arbitration agreement  
          has the right to be represented by an attorney at any  
          arbitration proceeding or hearing and authorizes an out-of-state  
          attorney until January 1, 2011 to appear on behalf of a client  
          in arbitration as long as the out-of-state attorney files and  
          serves a certificate, as specified, and is subject to the  


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          disciplinary jurisdiction of the State Bar of California.  (Code  
          Civ. Proc. Sec. 1282.4.)

           COMMENTS  :  In support of the bill the author states that the  
          out-of-state arbitration program is an effective and useful  
          program that should be a permanent fixture of California state  

          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."

           Creation and Operation of the Current Program For Out-of State  
          Arbitration Counsel.   This bill is sponsored by the Securities  
          Industry and Financial Markets Association.  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 because it constituted the  
          unauthorized practice of law.  In response, the Legislature  
          enacted a statute creating the Out of State Attorney Arbitration  
          Counsel Program (OSAAC) under Code of Civil Procedure Section  
          1282.4 and Rule of Court 9.43.  

          California courts allow out-of-state attorneys to appear pro hac  
          vice upon submitting an application and fee to the court and  
          serving notice of the hearing and 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) obtaining the approval  
          of the arbitrator; (2) serving notice and a certificate on the  
          arbitrator and State Bar of California; and (3) submitting to  
          the disciplinary jurisdiction of the California State Bar.   
          (Code Civ. Proc. Sec. 12824; Rule of Court 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  


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          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.  Various measures  
          extended the sunset temporarily.  Most recently 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.

          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 during the two-year period covered in the  
          Report, 1,192 out-of-state attorneys filed a certificate of  
          arbitration appearance.  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.  While most applicants have only one or two  
          appearances, a few are engaging in a relatively high number of  
          matters.  By most accounts, a lawyer appearing in 10 trials in a  
          two-year period would be considered a busy lawyer, and certainly  
          one doing substantial professional work in the state.  The State  
          Bar reports the following special circumstances given by  
          arbitrators for allowing 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  


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             2.   the out-of-state attorney represented the brokerage firm  

             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.  At this time it appears  
          that the dual step requirement of arbitrator's approval and  
          subsequent filing with the State Bar is helping to provide  
          greater compliance among out-of-state attorneys.  Although the  
          study period has been relatively brief in the life of the  
          statute, it reflects some improvement on prior experience such  
          that elimination of the sunset may be appropriate in light of  
          the proposed amendments which, it is hoped, offer arbitrators  
          some added incentive to overcome their apparent prior resistance  
          and embrace their obligation to assure the voluntary compliance  
          upon which the program depends, particularly given that there  
          will be no further reports to the Legislature if this bill is  

           Author's Amendment.   In order to ensure equality between out of  
          state attorneys appearing in arbitration and those appearing in  
          litigation, the author and sponsor agree that out of state  
          attorneys appearing in arbitration shall pay the same fee for  
          that valuable privilege as those who appear in court.   
          Consistently with the nature of arbitration, these funds are to  
          be designated for support of ADR programs under the Dispute  
          Resolution Programs Act.  Procedurally, this bill will be  
          amended to make it contingent upon passage of another bill that  
          will so provide.


          Securities Industry and Financial Markets Association (sponsor)


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          California Dispute Resolution Council
          None on file

           Analysis Prepared by  :    Kevin G. Baker / JUD. / (916) 319-2334