BILL ANALYSIS SB 877 Page 1 SENATE THIRD READING 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 law. 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 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. 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