BILL ANALYSIS Ó
AB 993
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Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
AB 993 (Linder) - As Amended: April 24, 2013
SUBJECT : Contractors: arbitration.
SUMMARY : Revises the laws relating to the Contractor's State
License Board (CSLB) arbitration program that provides for an
alternative dispute resolution process between consumers and
contractors for claims up to $50,000, including a prohibition on
awarding specific performance. Specifically, this bill :
1)Prohibits an arbitrator from requiring specific performance or
any other non-monetary remedy that is not authorized, but may
order the release of a mechanic's lien or the return of tools
or materials.
2)Provides that a party submitting 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
regarding the dispute.
3)Removes the current procedure for scheduling an arbitration
hearing and instead requires the arbitrator to fix the time,
date, and location of the hearing after considering the
responses of the parties' availability.
4)Prohibits an arbitrator from excluding a person other than the
direct party involved from attending an arbitration hearing
without good cause, consistent with the public nature of the
proceeding.
5)Provides that if a party chooses to make a recording of the
hearing, they shall supply a copy of that recording to the
arbitrator.
6)Clarifies that an arbitrator can reopen a hearing upon his own
motion only prior to the rendering of an award.
7)Requires the arbitrator to advise the parties that names of
industry experts may be obtained by requesting this
information from the registrar.
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8)Eliminates the involvement of the arbitrator with regards to
who is responsible for sending a certified letter containing
the award, or providing a copy of any appeal from the denial
or correction of an award, and requires such documentation to
be directed to and from the appointed arbitration association.
9)Shifts the responsibility of advising the parties of the names
of industry experts from CSLB to the arbitrators.
10)Makes other technical and clarifying changes.
EXISTING LAW :
1)Provides for the licensing and regulation of contractors by
the CSLB under the Contractors' State License Law (Law).
(Business and Professions Code (BPC) Section 7000 et al.)
2)Establishes an arbitration process administered by CSLB to
resolve disputes between contractors and consumers, as set
forth in Business and Professions Code Section 7085.5, that:
a) Authorizes an arbitrator to grant any remedy or relief
deemed just and equitable and within the scope of the
CLSB's referral to the arbitrator and the requirements of
CSLB, including costs and expenses;
b) Requires a procedure for scheduling the arbitration
hearing whereby CSLB or the appointed arbitration
association provides 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;
c) Provides that a recording of a hearing is not required,
but allows a party to pay for a recording to be made,
without obliging this party to share the recording with the
arbitrator;
d) Authorizes the hearing to be reopened on the
arbitrator's own motion, without specifying whether this
can be done prior to or after an award has been rendered;
e) Provides that service of any papers or process in
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connection with the proceedings shall be by personal
service or by regular mail on a party at the last known
address, but does not define when service is considered
complete; and,
f) Requires the registrar of contractors to advise the
parties that names of industry experts may be obtained by
requesting this information from the CSLB registrar. (BPC
7085-7085.9)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill makes non-controversial
revisions to the CSLB Arbitration Program, including a
prohibition on specific performance awards. This bill is
sponsored by the CSLB.
2)Author's statement . According to the author, "The CSLB's
Arbitration Program is governed by BPC 7085 - 7085.9. The
program provides an alternative dispute resolution process to
resolve consumer complaints equitably and efficiently.
Although the relevant law provides a detailed guide for the
arbitration process, there are practical changes that could
improve and clarify the process for both consumers and
contractors."
3)CSLB Arbitration Program . CSLB offers voluntary arbitration
for consumers to resolve disputes involving claims less than
$50,000 as a speedier, less costly alternative to litigation.
CSLB pays for the hearing, the arbitrator, and the services of
one state-appointed expert witness per complaint. For claims
less than $12,500, arbitration is mandatory for the contractor
if the consumer wishes to compel arbitration. For claims
between $12,500 and $50,000, both the consumer and the
contractor must consent to the arbitration process. The
arbitration itself is binding for both parties, which means
that both consumer and contractor are legally required to
comply with the arbitrator's decision.
4)Consumer case . This bill originated from a homeowner who had
negative experience with the current CSLB arbitration process.
After the arbitrator issued a decision in favor of the
contractor, the contractor sued the homeowner to recover
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attorney's fees, even though the intent of arbitration is to
prevent additional litigation. The judge subsequently awarded
attorney's fees to the contractor, stating that the original
contract with the homeowner included a clause that allowed the
contractor to sue for recovery of attorney's fees, and that
those rights were never waived upon entering into arbitration.
5)This bill's individual provisions . This bill is intended to
revise the CSLB arbitration program in the following ways:
a) Clarifies that arbitrators cannot award specific
performance as a remedy, except for release of a mechanic's
lien or the return of tools or materials. CSLB reports
that arbitration decisions that require a contractor to
complete additional work often lead to unsatisfactory
outcomes. In addition, it is difficult or impossible for
an arbitrator to supervise compliance with the award,
leading to continuation rather than resolution of the
problem;
b) Gives the arbitrator greater discretion to schedule the
date of the arbitration hearing, but requires that
arbitrator to take into account the availability of the
parties;
c) Does not require arbitration proceedings to be recorded,
but allows either party to record at their own expense.
This bill requires a party who records the proceedings to
provide a copy to the arbitrator;
d) Requires the CSLB registrar to advise parties of the
names of potential industry experts available to them.
However, since the CSLB is not directly involved in each
individual arbitration hearing, CSLB considered it more
appropriate for the arbitrator to assume this
responsibility, as reflected in this bill; and,
e) Clarifies that existing law regarding arbitrator
disclosures and arbitration company obligations applies to
these proceedings by adding various cross references to
other codes.
6)Arguments in support . According to the sponsor, CSLB, "AB 993
seeks to make several changes to CSLB's existing arbitration
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program, to clarify and improve the process for both consumers
and contractors.
"CSLB's arbitration program provides an alternative dispute
resolution process, the purpose of which is to resolve
consumer complaints equitably and efficiently. Although the
relevant law provides a detailed guide for the arbitration
process, there are practical changes that could improve and
clarify the process for both consumers and contractors.
"The Law is currently silent or lacks clarity on several
pertinent issues, including the authority of arbitrators, the
award of attorney fees and other civil remedies. Statutory
changes are needed to provide more explicit guidance for CSLB
Arbitration Program participants."
7)Previous Legislation . AB 611 (Nakanishi) of 2007, would have
increased the monetary cap on voluntary arbitrations under
CSLB from $50,000 to $100,000 and would have excluded
attorney's costs from an arbitrator's award. AB 611 was held
on the Senate Floor.
AB 2336 (Nakanishi) of 2008 was similar to AB 611 of 2007.
This bill was held in the Assembly Judiciary Committee.
SB 1112 (Business, Professions and Economic Development),
Chapter 280, Statutes of 2005, increased the threshold amount
of damages that can be awarded in a mandatory arbitration
under CSLB to $12,500 to correspond to the required
contractor's bond amount.
8)Double-referred . This bill was heard by the Assembly
Judiciary Committee on April 22, 2013 and approved by a 10-0
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Contractors' State License Board (sponsor)
Associated General Contractors
California Fence Contractors' Association
California Chapter of the American Fence Association
Engineering Contractors' Association
Flasher Barricade Association
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Marin Builders Association
Spa & Pool Industry Education Council
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301