BILL ANALYSIS Ó AB 2617 Page 1 ASSEMBLY THIRD READING AB 2617 (Weber) As Amended April 30, 2014 Majority vote JUDICIARY 7-2 ----------------------------------------------------------------- |Ayes:|Wieckowski, Alejo, Chau, | | | | |Dickinson, Garcia, | | | | |Muratsuchi, Stone | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Wagner, Gorell | | | | | | | | ----------------------------------------------------------------- SUMMARY : Restricts contractual waiver of certain civil rights statutes. Specifically, this bill : 1)Provides that no person shall require another person to waive any legal right, penalty, remedy, forum, or procedure for violation of the Ralph Civil Rights Act or the Bane Civil Rights Act as a condition of entering into a contract for the provision of goods and services, including the right to file and pursue a civil action or complaint with or otherwise notify the Attorney General or any other public prosecutor or any law enforcement agency, the Department of Fair Employment and Housing (DFEH), or any court or other governmental entity. 2)Provides that no person shall refuse to enter into a contract with, or refuse to provide goods or services to, another person on the basis that the other person refuses to waive any legal right, penalty, remedy, forum, or procedure for violation of these civil rights acts. 3)Provides that the exercise of a person's right to refuse to waive any legal right, penalty, remedy, forum or procedure for a violation of these civil rights laws shall not affect any otherwise legal terms of a contract or an agreement. 4)Requires that any waiver of any legal right, penalty, remedy, forum, or procedure for violation of these civil rights acts shall be knowing and voluntary, and in writing, and expressly not made as a condition of entering into the contract or as a AB 2617 Page 2 condition of providing or receiving goods and services, and that any person who seeks to enforce such a waiver shall have the burden of proving that it was knowing and voluntary and not made as a condition of the contract or of providing or receiving the goods or services. FISCAL EFFECT : None COMMENTS : The author explains the reason for the bill as follows: While voluntary arbitration agreements are appropriate in many instances, pre-emptively forcing a person to give up their rights to have violations of their civil rights case heard in court as a condition of a contract for employment, housing or education or goods and services is involuntary and coercive. Illustrative of the problem is the case of the high school student who received death threats from classmates. On the advice of law enforcement, he withdrew from the private school and moved to another part of the state. His parents decided to hold the school accountable for inaction on disciplining the perpetrators and for revealing the student's new school. Like any victim of hate crimes and violation of civil rights, he deserved his day in court, yet was denied because of a mandatory arbitration clause in the enrollment contract. There is no right without a remedy and the remedy for violations in these cases is best adjudicated under the state's civil rights statutes and enforced by the courts. Mandatory arbitration preemptively forces victims to submit to arbitration proceedings conducted behind closed doors where arbitrators are not required to adhere to the state's civil rights statutes or existing case law, yet their decisions are still binding and enforced by the courts. AB 2617 is about choice: when a dispute arises - or even before - this bill leaves the option open to go to court or to go to arbitration as long as both parties voluntarily agree and it is not imposed as a AB 2617 Page 3 condition of a contract. When a person is given no choice but to waive his or her rights for legal redress under the state's civil rights statutes in order to get a job, a home or essential services, the effectiveness of civil rights protections is seriously undermined. The impetus for the bill is the controversy arising out of a recent incident involving alleged threats of violence against a young man identified by his initials, "D.C.," who was a student at Harvard-Westlake School, a private educational institution in Los Angeles. With his parents, D.C. attempted to sue Harvard-Westlake and others under the hate crimes law. According to the facts recited in the court opinion, several students at Harvard-Westlake, using its computers, went to D.C.'s Web site and posted death threats against D.C. and made derogatory comments about him. The school newspaper, The Chronicle, ran more than one article on the matter. When D.C.'s father read the threats on the Web site, he immediately informed Harvard-Westlake of the problem, believing that some of its students were responsible. The father also contacted the Los Angeles Police Department, which, in turn, notified the Federal Bureau of Investigation. On the advice of the police, D.C. withdrew from Harvard-Westlake. He and his family moved to another part of California, where he went to a different educational institution. The Chronicle ran an article disclosing D.C.'s new residential location and the name of the school he was attending. The article also disclosed that postings on the Web site had referred to D.C. as a "faggot." The faculty advisor to the staff of The Chronicle approved the article before publication. Harvard-Westlake did not suspend or expel any of the students who admitted to posting the threats. In response to the suit by D.C. and his parents, the school filed a petition to compel arbitration of all claims. The trial court granted the petition to compel arbitration, the case went to a private arbitrator retained by JAMS as specified in the enrollment contract, the arbitrator found for the school on all counts, and the arbitrator ordered the parents to pay the school over half a million dollars in attorney's fees and arbitration costs. The school then filed a petition to confirm the arbitrator's award - in essence, to convert it from a private agreement into a court order. The court upheld the order to AB 2617 Page 4 arbitrate and confirmed the arbitrator's award in favor of the school, although the arbitrator's order to force D.C.'s parents to pay money to the school was reversed by the court. Arbitration's dramatic differences from the public justice system are believed to be appropriate where parties with relatively equal bargaining power have voluntarily chosen to have their dispute and legal rights resolved by a method other than the courts. For example, the use of binding arbitration has a long and honored history in the resolution of labor-management disputes where both parties are repeat-players to whom arbitrators must be equally accountable in order to enjoy repeat employment. By the same token, parties to a contract might choose to simply flip a coin to resolve their disputes, and public policy may favor holding them to that bargain. Private arbitration becomes more controversial, however, when it is imposed by more powerful parties without negotiation or the right to withhold consent to unfair terms. Not only is private arbitration effectively unregulated, it has caused concerns because it is a revenue-driven system where, critics contend, "repeat players" have unfair advantages when they are involved in mandatory arbitration against "one-shot" users, such as individual consumers. The favorable reputation arbitration has long enjoyed largely grows out of its use in the resolution of labor disputes in the first part of the 20th Century. In the labor-management context, where the parties mutually choose the arbitrator from among a small group of specialists, the arbitrator has an incentive to be perceived as fair by both sides over the long term. By contrast, critics contend, arbitrators have far less incentive to be fair to both sides when they owe their engagement (and future work) to the business that pre-selected the arbitration company in the contract and who will repeatedly appear before them, unlike the consumer party who did not choose the arbitration company and is not likely to be the source of future work for the arbitrator. This reluctance to offend the source of repeat business may be particularly true where the dispute involves stigmatizing allegations, such as the hate-crimes charges at issue in this bill. The court in DC v Harvard-Westlake School, 176 Cal. App. 4th 836 (2009), recognized the fundamental public nature of the hate crimes statutes in holding that the rights they establish should AB 2617 Page 5 not be subject to waiver by private contracts. However, the court disregarded the effect of the arbitration clause by failing to acknowledge that it required the waiver of the right to have the allegations resolved by the court system, with public judges and juries and all of the other values established by that system for the guarantee of fairness and due process and the protection and prosecution of civil rights, including the right to appeal. In other words, requiring a party to allow a private arbitrator to decide hate crimes violations are, inherently, a waiver of rights and procedures provided by the statutes. Moreover, by mandating the arbitration of any issue involving the parties, such as the contract clause in the DC case, private arbitration may block not only individual access to the courts but also public prosecution by the Attorney General or other prosecutors or a complaint to the DFEH. It should be noted that a fundamental feature of the hate crimes enforcement scheme is that immediate protective and/or restraining orders may often be needed to prevent further abuse. Even if an arbitrator were to believe that immediate intervention was necessary, private arbitration does not allow for such orders. For an arbitrator's order to be legally enforceable, it must be confirmed by a court judgment - a time consuming process that does not lend itself to immediate injunctive relief. Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334 FN: 0003238