BILL ANALYSIS Ó
AB 2617
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2617 (Weber)
As Amended July 3, 2014
Majority vote
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|ASSEMBLY: |49-25|(May 28, 2014) |SENATE: |21-11|(August 21, |
| | | | | |2014) |
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Original Committee Reference: JUD.
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
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.
AB 2617
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The Senate amendments address a potential chaptering conflict
with AB 2634 of the current legislative session.
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
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
AB 2617
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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 Judicial Arbitration and
Mediation Services 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 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.
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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
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
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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: 0004335