BILL ANALYSIS Ó
AB 802
Page 1
ASSEMBLY THIRD READING
AB 802 (Wieckowski)
As Amended May 23, 2013
Majority vote
JUDICIARY 7-2
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|Ayes:|Wieckowski, Alejo, Chau, | | |
| |Dickinson, Garcia, | | |
| |Muratsuchi, Stone | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Maienschein | | |
| | | | |
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SUMMARY : Clarifies existing consumer arbitration data
disclosures by private arbitration companies. Specifically,
this bill :
1)Requires that private arbitration companies provide the
currently-required disclosures in a sortable database format,
rather than simply a "searchable" format.
2)Specifies further information to be provided in order to
permit more accurate and comprehensive analysis and
comparison, such as the identity of the initiating party, the
assertion of counterclaims, specification of case types, and
the location of the proceeding.
3)Provides that a material violation of the statute may be
redressed solely by an action for injunctive relief.
FISCAL EFFECT : None
COMMENTS : The need for this bill was demonstrated at the
Assembly Judiciary Committee's March 18, 2013, oversight hearing
examining compliance by private arbitration companies with
existing obligations to disclose certain basic information
regarding consumer arbitrations. (See Assembly Judiciary
Committee, Mandatory Consumer Arbitration: Has Compliance With
California's Landmark Data Transparency Law Been Sufficient to
Accomplish the Legislature's Goals? (available at
http://ajud.assembly.ca.gov/reports.))
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Code of Civil Procedure (CCP) Section 1281.96 requires private
arbitration companies to periodically publish on their Internet
Web sites a handful of data points regarding their consumer
arbitration proceedings. With the goal of improving the
availability of hard data and the promotion of reasoned debate -
and by transparency to deter any potential abuses - CCP Section
1281.96 was designed to provide sunshine on the process and
outcomes in these cases to better allow researchers and
policymakers to evaluate the competing contentions; to deter
potential abuses; determine what if any oversight might be
needed to ensure that consumer arbitrations are fair and accord
with established notions of due process; to reduce any potential
incentives to favor business parties; and, to help address
mounting public skepticism about the integrity of the
arbitration process. (See Assembly Judiciary Committee report
on AB 2656 (Corbett) of 2002.)
Ten years after enactment of that law, the Assembly Judiciary
Committee heard that when consumer arbitration data has been
properly reported pursuant to the law, the statute has
facilitated a robust debate about outcomes in these arbitration
proceedings. Nevertheless, research reveals only two studies in
the past 10 years that rely on the reported data. As experts
have noted, the paucity of research appears to reflect that the
data is not sufficiently complete or reliable to offer
researchers a useful source of information from which to analyze
the consumer arbitration process.
A new study by the Public Law Research Institute at UC Hastings
College of Law shows that the longstanding and pervasive issues
of arbitration company compliance with the consumer data law
appear to persist. (Jung, et al, Reporting Consumer Arbitration
Data in California (March 15, 2013) (available at
http://gov.uchastings.edu/public-law/index.php.))
1)Roughly half of the private arbitration companies that appear
to be conducting business in California fail to post any of
the required information. (Report, pages 5-7.)
2)Of the remaining half, no arbitration company complies fully.
(Report, page 1.)
3)Of the reporting companies, 90% fail to disclose the amount of
the claim - an important factor in evaluating the outcome of
the arbitration process. (Report, pages 11-12.)
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4)No company conducting employment arbitrations fully complies
with the requirement to identify the employee's salary range -
an important factor in evaluating whether arbitration outcomes
potentially vary based on the wealth of the claimant.
(Report, pages 12-13.)
5)Approximately half of the reporting companies do not, or do
not consistently, report the frequency with which the business
party has used the arbitration company previously - an
important factor in evaluating potential "repeat-player" bias.
Two of the noncomplying companies have apparently been in
business throughout the 10-year life of the statute because
they were identified as failing to provide this information in
a 2004 study; they have apparently failed to comply from the
very outset of the statute. (Report, pages 14-16.)
6)While most of the reporting companies report the type of
disposition (e.g., settled, withdrawn, award made) at the
conclusion of the case, many companies do not report the type
of disposition in the terms required by the statute. (Report,
pages 21-22.)
7)A number of reporting companies fail to state or to indicate
clearly which party prevailed - a basic factor by which to
evaluate outcomes. (Report, pages 19-20.)
8)A number of companies do not fully comply with the requirement
to report the fees charged by the arbitrator, or the
allocation of those fees to the parties - a key question in
the debate over the cost of mandatory consumer arbitration.
(Report, pages 26-27.)
9)Most companies fail to report any information regarding other
relief granted. (Report, page 19.)
10)Only one reporting company publishes its information in a
spreadsheet format, making it useful for reviewers. The other
reporting companies simply publish a text file (PDF format),
some of which run to nearly 80,000 cases, which are virtually
useless to researchers because they do not allow data to be
sorted by field. (Report, pages 22-24.)
11)Of the reporting companies, approximately one-third post
outdated information. (Report, page 8.)
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Unfortunately, the significant omission of required data may
continue to foster skepticism of mandatory consumer arbitration.
In addition - apart from the problem of tolerating violations of
a legal obligation - the failure of arbitration companies to
provide the legally required data may also have the effect of
skewing the conduct of consumer arbitrations by permitting
unscrupulous arbitration companies to gain an unfair competitive
advantage over their law-abiding competitors. Like other
providers of services, arbitration companies compete with each
other to attract business. This competition can take a variety
of forms, giving rise to the criticism that it gives arbitration
companies an incentive to structure the arbitration process to
favor businesses, which are more likely than consumers and
employees to be repeat players in arbitration. Some observers
contend that self-regulation may be a valuable constraint
against the perceived incentive for arbitration companies to
favor business parties who offer the promise of repeat business.
However, the value of self-regulation would appear to be
largely lost, or at least unascertainable, without transparency.
For example, the American Arbitration Association (AAA) has
adopted important due process safeguards for consumer cases, and
reportedly will refuse to handle any case that does not meet its
standards. Businesses that fall below this standard may seek to
move their arbitrations to a less-demanding arbitration company,
a phenomenon that would go unnoticed if that arbitration company
were permitted to disregard the data reporting law, as they
evidently have been.
The statute seeks basic information about the time, cost and
outcome of consumer arbitrations in a "computer-searchable"
format. Unfortunately, many private arbitration companies -
with the notable exception of the AAA have interpreted "computer
searchable" to mean a simple text file, which many commenters
have noted is virtually useless for research purposes.
Amending the statute to clarify that a sortable spreadsheet
format, such as that used by the AAA, would provide
significantly greater transparency and utility according to
witnesses who testified at the hearing, including both
supporters and critics of mandatory arbitration. Because at
least one private arbitration company now publishes its
disclosures in a sortable spreadsheet format, this clarifying
amendment would appear to be highly practicable.
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In order to address the longstanding problem of non-compliance,
the bill also provides that a violation of the statute may be
corrected by an action for injunctive relief to obtain
compliance with the statute. This is the same enforcement
mechanism as in other states that have similar laws, which have
apparently been effective and have not given rise to frivolous
or abusive law suits based on the testimony received at the
Assembly Judiciary Committee's oversight hearing. It is also
equivalent to the public interest enforcement arrangement that
existed when this statute was initially enacted, and which
proved effective in helping to correct violations without
causing improper litigation. Finally, the bill provides for
some additional data points suggested by scholars and experts to
permit better analysis and comparison, consistently with the
testimony at the Judiciary Committee's oversight hearing.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
FN: 0000688