BILL ANALYSIS                                                                                                                                                                                                    



                                                                  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.








                                                                  AB 2617
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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  








                                                                  AB 2617
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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 


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