BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 877
                                                                  Page  1

          SB 877 (Harman)
          As Amended August 2, 2010
          Majority vote 

           SENATE VOTE  :31-0  
           JUDICIARY           10-0                                        
          |Ayes:|Feuer, Tran, Brownley,    |     |                          |
          |     |Evans, Hagman, Huffman,   |     |                          |
          |     |Jones, Knight, Monning,   |     |                          |
          |     |Saldana                   |     |                          |
          |     |                          |     |                          |
          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  
          disciplinary jurisdiction of the State Bar of California.  

           FISCAL EFFECT  :  None

           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  


                                                                  SB 877
                                                                  Page  2

          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."

          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  

          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.  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.    

          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.  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.

          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  


                                                                  SB 877
                                                                  Page  3

          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 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 enacted.

          In order to ensure equality between out of state attorneys  
          appearing in arbitration and those appearing in litigation, the  
          bill is contingent upon another measure that will provide that  
          out of state attorneys appearing in arbitration pay the same fee  
          for that valuable privilege as those who appear in court, with  
          the funds to be designated for support of ADR programs under the  
          Dispute Resolution Programs Act.  

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

                                                                FN: 0005703