Amended in Senate June 10, 2013

Amended in Assembly April 24, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 993

Introduced by Assembly Member Linder

February 22, 2013

An act to amend Section 7085.5 of the Business and Professions Code, relating to contractors.

LEGISLATIVE COUNSEL’S DIGEST

AB 993, as amended, Linder. Contractors: arbitration.

The Contractors’ State License Law provides for licensing and regulation of contractors by the Contractors’ State License Board. Existing law establishes an arbitration process administered by the board to resolve disputes between contractors and consumers. Existing law requires that if a dispute goes to arbitration, the arbitrator or arbitrator association be approved by the board.

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Existing law imposes certain duties and requirements on private arbitration companies that conduct arbitration proceedings, including, among other things, a prohibition against administering a consumer arbitration if the company has a financial interest in any party or attorney for a party to the proceedings, as specified.

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The bill would apply these provisions to an appointed arbitration association handling disputes between consumers and contractors, as specified.

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Existing law prohibits a person from serving as an arbitrator for contractor complaints in which that person has any financial or personal interest in the result of the arbitration.

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This bill would require a prospective arbitrator to comply with certain disclosure requirements prior to accepting an appointment as an arbitrator and would specify grounds upon which an arbitrator may be disqualified.

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Existing law authorizes an arbitrator to grant any remedy or relief deemed just and equitable and within the scope of the board’s referral to the arbitrator and the requirements of the board, including costs and expenses.

This bill would begin delete prohibit the arbitrator from awarding specific performance of any project, but would authorize the release of a mechanics lien or the return of tools or materials. The bill would also end delete provide that a party that submits a dispute to arbitration waives any right to recover attorney’s fees or to challenge an arbitrator’s award of attorney’s fees in a civil action related to the dispute.

Existing law requires the board or appointed arbitration association to provide the parties with a list of the times, dates, and locations of the hearing to be held, and requires the parties to notify the arbitrator of the convenient times and dates begin insert within 7 calendar days of the mailing of the list end insert . begin delete A record is not required to be taken of the hearing proceedings. end delete begin insert Existing law requires the arbitrator to fix the time, place, and location of the hearing, if the parties fail to respond within that timeframe. A record is not required to be taken of the hearing proceedings. end insert

This bill would instead require the parties to notify the arbitrator of times, dates, and locations convenient to each party, as specified, and require the arbitrator to fix the time, begin delete place, end delete begin insert date, end insert and location of the hearing after considering the responses of the parties. begin delete The bill would require a party making a recording of a hearing to supply the recording to the arbitrator at the party’s expense. end delete

Existing law provides that any person having a direct interest in the arbitration is entitled to attend the hearing, but that it shall be discretionary with the arbitrator to determine the propriety of the attendance of any other person.

This bill would provide that the arbitrator shall not exclude any other person from attendance at the hearing without good cause, consistent with the public nature of the proceeding.

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Under existing law, any party to the proceeding may have a record made at its own expense.

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This bill would require a party making a recording of a hearing to supply that recording, at its own expense, to the auditor.

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Existing law authorizes the hearing to be reopened on the arbitrator’s own motion, and provides that service of any papers or process in connection with these proceedings shall be by personal service or by regular mail on a party at the last known address.

This bill would authorize the hearing to be reopened on the arbitrator’s motion prior to the rendering of an award, and would provide that service by first class mail is complete upon deposit into specified mail receptacles.

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Existing law requires the registrar of contractors to advise the parties that names of industry experts may be obtained by requesting this information from the registrar.

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This bill would instead require the arbitrator to advise the parties that the names of industry experts may be obtained by requesting this information from the registrar.

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The bill would make other related changes.

Vote: majority. Appropriation: no. Fiscal committee:  begin delete yes end delete begin insert no end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 7085.5 of the Business and Professions
Code is amended to read:

7085.5.  

Arbitrations of disputes arising out of cases filed with
or by the board shall be conducted in accordance with the following
rules:

(a) All “agreements to arbitrate” shall include the names,
addresses, and telephone numbers of the parties to the dispute, the
issue in dispute, and the amount of monetary damages sought. begin delete The
arbitrator shall not order or provide for the specific performance
of any project, including, but not limited to, the completion of
work, repairs, or corrections, but may order the release of a
mechanics lien or the return of tools or materials. end delete The appropriate
fee for arbitration services shall be paid to the appointed arbitration
association by the board from the Contractors’ License Fund. begin delete The
appointed arbitration association shall comply with all of the duties
and requirements applicable to private arbitration companies
pursuant to Title 9 (commencing with Section 1280) of Part 3 of
the Code of Civil Procedure. end delete

(b) (1) The board or appointed arbitration association shall
appoint an arbitrator in the following manner: immediately after
the filing of the agreement to arbitrate, the board or appointed
arbitration association shall submit simultaneously to each party
to the dispute, an identical list of names of persons chosen from
the panel. Each party to the dispute shall have seven days from
the mailing date in which to cross off any names to which it objects,
number the remaining names to indicate the order of preference,
and return the list to the board or appointed arbitration association.
If a party does not return the list within the time specified, all
persons named in the list are acceptable. From among the persons
who have been approved on both lists, and in accordance with the
designated order of mutual preference, the board or appointed
arbitration association shall appoint an arbitrator to serve. If the
parties fail to agree on any of the parties named, if acceptable
arbitrators are unable to act, or if, for any other reason, the
appointment cannot be made from the submitted lists, the board
or appointed arbitration association shall have the power to make
the appointment from among other members of the panel without
the submission of any additional lists. Each dispute shall be heard
and determined by one arbitrator unless the board or appointed
arbitration association, in its discretion, directs that a greater
number of arbitrators be appointed.

(2) In all cases in which a complaint has been referred to
arbitration pursuant to subdivision (b) of Section 7085, the board
or the appointed arbitration association shall have the power to
appoint an arbitrator to hear the matter.

(3) The board shall adopt regulations setting minimum
qualification standards for listed arbitrators based upon relevant
training, experience, and performance.

(c) A person shall not serve as an arbitrator in any arbitration
in which that person has any financial or personal interest in the
result of the arbitration. Prior to accepting an appointment, the
prospective arbitrator shall begin delete comply with Sections 1281.9 and
1281.95 of the Code of Civil Procedure. An arbitrator shall be
subject to disqualification pursuant to Sections 1291.91 and
1281.95 of the Code of Civil Procedure. end delete begin insert disclose to the appointed
arbitration association any circumstances likely to prevent a
prompt hearing or to create a presumption of bias. Upon receipt
of that information, the board or appointed arbitration association
shall immediately replace the arbitrator or communicate the
information to the parties for their comments. Thereafter, the board
or appointed arbitration association shall determine whether the
arbitrator should be disqualified and shall inform the parties of
its decision, which shall be conclusive. end insert

(d) The board or appointed arbitration association may appoint
another arbitrator if a vacancy occurs, or if an appointed arbitrator
is unable to serve in a timely manner.

(e) begin insert   end insert begin insert (1) end insert  The board or appointed arbitration association shall
provide the parties with a list of the times, dates, and locations of
the hearing to be held. The parties shall notify the arbitrator of the
times, dates, and locations convenient to each party within seven
calendar days of the mailing of the list. The arbitrator shall fix the
time, date, and location of the hearing after considering the
responses of the parties. Any party that fails to respond to the
arbitrator within the seven-day period waives any objection to the
time, date, and location of the hearing. An arbitrator may, at the
arbitrator’s sole discretion, make an inspection of the construction
site that is the subject of the arbitration. The arbitrator shall notify
the parties of the time and date set for the inspection. Any party
who so desires may be present at the inspection.

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(2) The board or appointed arbitration association shall fix the
time, date, and location of the hearing for all cases referred to
arbitration pursuant to subdivision (b) of Section 7085. An
arbitrator may, at the arbitrator’s sole discretion, make an
inspection of the construction site that is the subject of the
arbitration. The arbitrator shall notify the parties of the time and
date set for the inspection. Any party who desires may be present
at the inspection.

end insert

(f) A person having a direct interest in the arbitration is entitled
to attend the hearing. The arbitrator may exclude any witness,
other than a party or other essential person, during the testimony
of any other witness. The arbitrator shall not exclude any other
person from attendance at the hearing without good cause,
consistent with the public nature of the proceeding.

(g) A hearing shall be adjourned by the arbitrator only for good
cause.

(h) A record is not required to be taken of the proceedings.
However, any party to the proceeding may have a record made at
its own expense. A party making a recording of a hearing shall
supply the recording to the arbitrator at the party’s own expense.
The parties may make appropriate notes of the proceedings.

(i) The hearing shall be conducted by the arbitrator in any
manner that will permit full and expeditious presentation of the
case by both parties. Consistent with the expedited nature of
arbitration, the arbitrator shall establish the extent of, and schedule
for, the production of relevant documents and other information,
the identification of any witnesses to be called, and a schedule for
any hearings to elicit facts solely within the knowledge of one
party. The complaining party shall present its claims, proofs, and
witnesses, who shall submit to questions or other examination.
The defending party shall then present its defenses, proofs, and
witnesses, who shall submit to questions or other examination.
The arbitrator has discretion to vary this procedure, but shall afford
full and equal opportunity to the parties for the presentation of any
material or relevant proofs.

(j) The arbitration may proceed in the absence of any party who,
after due notice, fails to be present. The arbitrator shall require the
attending party to submit supporting evidence in order to make an
award. An award for the attending party shall not be based solely
on the fact that the other party has failed to appear at the arbitration
hearing.

(k) The arbitrator shall be the sole judge of the relevancy and
materiality of the evidence offered, and conformity to legal rules
of evidence shall not be required.

(l) The arbitrator may receive and consider documentary
evidence. Documents to be considered by the arbitrator may be
submitted prior to the hearing. However, a copy shall be
simultaneously transmitted to all other parties and to the board or
appointed arbitration association for transmittal to the arbitrator
or board appointed arbitrator.

(m) The arbitrator shall specifically inquire of the parties
whether they have any further proofs to offer or witnesses to be
heard. Upon receiving negative replies, the arbitrator shall declare
the hearing closed and minutes thereof shall be recorded. If briefs
are to be filed, the hearing shall be declared closed as of the final
date set by the arbitrator for the receipt of briefs. If documents are
to be filed as requested by the arbitrator and the date set for their
receipt is later than that set for the receipt of briefs, the later date
shall be the date of closing the hearing. The time limit within which
the arbitrator is required to make the award shall commence to
run, in the absence of other agreements by the parties, upon the
closing of the hearing.

(n) The hearing may be reopened on the arbitrator’s own motion
prior to the rendering of an award.

(o) A party who proceeds with the arbitration after knowledge
that any provision or requirement of these rules has not been
complied with, and who fails to state his or her objections to the
arbitrator in writing, within 10 calendar days of close of the
hearing, shall be deemed to have waived his or her right to object.

(p) (1) Except as provided in paragraph (2), any papers or
process necessary or proper for the initiation or continuation of an
arbitration under these rules, and for any court action in connection
therewith, or for the entry of judgment on an award made
thereunder, may be served upon a party by first-class mail
addressed to that party or his or her attorney at the party’s last
known address, or by personal service. Service by first-class mail
is complete upon deposit in a post office, mailbox, subpost office,
substation, or mail chute, or other like facility regularly maintained
by the United States Postal Service in a sealed addressed envelope,
with postage paid.

(2) Notwithstanding paragraph (1), in all cases referred to
arbitration pursuant to subdivision (b) of Section 7085 in which
the contractor fails or refuses to return an executed copy of the
notice to arbitrate within the time specified, any papers or process
specified in paragraph (1) to be sent to the contractor, including
the notice of hearing, shall be mailed by certified mail to the
contractor’s address of record.

(q) The award shall be made promptly by the arbitrator. Unless
otherwise agreed by the parties, the award shall be made no later
than 30 calendar days from the date of closing the hearing, from
closing a reopened hearing, or if oral hearing has been waived,
from the date of transmitting the final statements and proofs to the
arbitrator.

The arbitrator may for good cause extend any period of time
established by these rules, except the time for making the award.
The arbitrator shall notify the parties of any extension and the
reason therefor.

(r) (1) The arbitrator may grant any remedy or relief that the
arbitrator deems just and equitable and within the scope of the
board’s referral and the requirements of the board. The arbitrator,
in his or her sole discretion, may award costs or expenses.

(2) An arbitrator may award all direct costs and expenses for
the completion or repair of the project.

(3) A party that submits a dispute to arbitration pursuant to this
section waives any right to recover attorney’s fees, or to challenge
an arbitrator’s award of attorney’s fees, in a civil action regarding
the dispute.

(s) (1) The award shall become final 30 calendar days from the
date the arbitration award is issued. The arbitrator, upon written
application of a party to the arbitration, may correct the award
upon the following grounds:

(A) There was an evident miscalculation of figures or an evident
mistake in the description of any person, things, or property
referred to in the award.

(B) There is any other clerical error in the award, not affecting
the merits of the controversy.

(2) An application for correction of the award shall be made
within 10 calendar days of the date of service of the award by
serving a copy of the application on the arbitrator, and all other
parties to the arbitration. A party to the arbitration may make a
written objection to the application for correction by serving a
copy of the written objection on the arbitrator, the board, and all
other parties to the arbitration, within 10 calendar days of the date
of service of the application for correction.

(3) The arbitrator shall either deny the application or correct
the award within 30 calendar days of the date of service of the
original award by mailing a copy of the denial or correction to all
parties to the arbitration. Any appeal from the denial or correction
shall be filed with a court of competent jurisdiction and a true copy
thereof shall be filed with the appointed arbitration association
within 30 calendar days after the award has become final. The
award shall be in writing, and shall be signed by the arbitrator or
a majority of them. If no request for correction is filed within the
30-calendar day period, it shall become a final order of the registrar.

(t) Service of the award by certified mail shall be effective if a
certified letter containing the award, or a true copy thereof, is
mailed by the arbitration association to each party or to a party’s
attorney of record at their last known address, address of record,
or by personally serving any party. Service by certified mail is
complete upon deposit in a post office, mailbox, subpost office,
substation, or mail chute, or other like facility regularly maintained
by the United States Postal Service in a sealed addressed envelope,
with postage paid.

(u) (1) The board shall pay the expenses of one expert witness
appointed by the board if both of the following apply:

(A) The services of an expert witness are requested by either
party involved in arbitration pursuant to this article.

(B) The case involves workmanship issues that are itemized in
the complaint and have not been repaired or replaced.

(2) A party that chooses to present the findings of another expert
witness as evidence shall pay for those services. Payment for expert
witnesses appointed by the board shall be limited to the expert
witness costs for inspection of the problem at the construction site,
preparation of the expert witness’ report, and expert witness fees
for appearing or testifying at a hearing. All requests for payment
to an expert witness shall be submitted on a form that has been
approved by the registrar. All requests for payment to an expert
witness shall be reviewed and approved by the board prior to
payment. The begin delete arbitrator end delete begin insert registrar end insert shall advise the parties that names
of industry experts may be obtained by requesting this information
from the registrar.

(v) The arbitrator shall interpret and apply these rules insofar
as they relate to his or her powers and duties.

(w) The following shall apply as to court procedure and
exclusion of liability:

(1) The board, the appointed arbitration association, or any
arbitrator in a proceeding under these rules is not a necessary party
in judicial proceedings relating to the arbitration.

(2) Parties to these rules shall be deemed to have consented that
judgment upon the arbitration award may be entered in any federal
or state court having jurisdiction thereof.

(3) The board, the appointed arbitration association, or any
arbitrator is not liable to any party for any act or omission in
connection with any arbitration conducted under these rules.