BILL ANALYSIS Ó
AB 2667
Page 1
ASSEMBLY THIRD READING
AB
2667 (Thurmond)
As Amended March 15, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
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| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Judiciary |7-3 |Mark Stone, Alejo, |Wagner, Gallagher, |
| | |Chau, Chiu, Cristina |Maienschein |
| | |Garcia, Holden, Ting | |
| | | | |
| | | | |
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SUMMARY: Limits, but does not prohibit, certain contractual
waivers of California's civil rights statutes. Specifically,
this bill:
1)Prohibits a person from requiring another person-as a
condition of entering into a contract for goods and
services-to waive any legal right, penalty, remedy, forum, or
procedure for a violation of the Unruh Civil Rights Act,
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 law enforcement agency, the
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Department of Fair Employment and Housing, or any court or
other governmental entity.
2)Prohibits a person from refusing 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 a
violation of the Unruh Civil Rights Act, 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 law enforcement agency, the Department of Fair
Employment and Housing, or any other governmental entity.
3)Provides that any waiver of any legal right, penalty, remedy,
forum, or procedure for a violation of the Unruh Civil Rights
Act that is required as a condition of entering into a
contract for goods or services shall be deemed involuntary,
unconscionable, against public policy, and unenforceable.
Additionally provides that nothing in this subdivision shall
affect the enforceability or validity of any other provision
of the contract.
4)Requires any waiver of any legal right, penalty, remedy,
forum, or procedure for a violation of the Unruh Civil Rights
Act to be knowing and voluntary, and in writing, and expressly
not made as a condition of entering into a contract for goods
or 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 law enforcement
agency, the Department of Fair Employment and Housing, or any
other governmental entity.
5)Provides that any person who seeks to enforce a waiver of any
legal right, penalty, remedy, forum, or procedure for a
violation of the Unruh Civil Rights Act shall have the burden
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of proving that the waiver was knowing and voluntary and not
made as a condition of the contract or of providing or
receiving the goods or services.
6)Provides that the foregoing protections apply to any agreement
to waive any legal right, penalty, remedy, forum or procedure
for a violation of the Unruh Civil Rights Act entered into,
altered, modified, renewed, or extended on or after January 1,
2017.
7)Provides that the foregoing provisions are severable, and that
injunctive relief and other remedies are available for
violations of these provisions.
8)Makes various legislative findings and declarations.
EXISTING LAW:
1)Establishes the Unruh Civil Rights Act (Unruh), which provides
that all persons in California are free and equal, regardless
of a person's sex, race, color, religion, ancestry, national
origin, disability, medical condition, genetic information,
marital status, sexual orientation, citizenship, primary
language, or immigration status, and everyone is entitled to
the full and equal accommodations, advantages, facilities,
privileges, or services in all business establishments.
(Civil Code Section 51.)
2)Establishes the California Arbitration Act which provides that
agreements to arbitrate shall be valid, irrevocable, and
enforceable, except such grounds as exist at law or in equity
for the revocation of any contract. (Code of Civil Procedure
Section 1280 et seq.)
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3)Similarly establishes the Federal Arbitration Act (FAA) which
provides that agreements to arbitrate shall be valid,
irrevocable, and enforceable, except such grounds as exist at
law or in equity for the revocation of any contract. (9
U.S.C. Section 1 et seq.)
4)Permits arbitrators to disregard the law and/or the evidence
in rendering their decisions. Awards may be enforced by the
court, even if they are legally and factually erroneous.
(Moncharsh v. Heily & Blase et al (1992) 3 Cal.4th 1.)
5)Allows private arbitrators to issue binding decisions that are
legally enforceable but essentially not reviewable by a court;
there is no appeal from an arbitrator's decision to a public
court unless the arbitration agreement expressly provides for
judicial review. (Crowell v. Downey Community Hospital
Foundation (2002) 95 Cal. App. 4th 730; Cable Connection, Inc.
v. DIRECTV, Inc., 44 Cal. 4th 1334 (2008).)
6)Allows arbitrators to conduct arbitrations without allowing
for discovery, complying with the rules of evidence, or
explaining their decisions in written opinions. (Code of
Civil Procedure Sections 1283.1, 1282.2, 1283.4.)
7)Provides that a court may vacate an arbitrator's decision if
the award was procured by corruption, fraud or other undue
means; there was corruption in any of the arbitrators; the
rights of the party were substantially prejudiced by
misconduct of a neutral arbitrator, or other specified
conditions. (Code of Civil Procedure Section 1286.2.)
FISCAL EFFECT: None.
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COMMENTS: The Unruh Civil Rights Act. California law has long
afforded its residents with broad protection against
unreasonable, arbitrary, or invidious discrimination based on
personal characteristics. Enacted in 1958, the Unruh Civil
Rights Act (Unruh Act) is a cornerstone of antidiscrimination
law in California that prohibits business establishments from
denying equal accommodations and services on the basis of sex,
race, color, religion, ancestry, national origin, disability,
medical condition, genetic information, marital status, sexual
orientation, citizenship, primary language, or immigration
status. Yet, the true scope of Unruh Act is even broader. The
Unruh Act has been consistently interpreted to cover all
arbitrary and intentional discrimination. In recent years, the
Legislature has enacted several bills amending the Unruh Act to
expressly cover new classifications: AB 1400 (Laird), Chapter
420, Statutes of 2005 added marital status and sexual
orientation; AB 887 (Atkins), Chapter 719, Statutes of 2011
added gender identity and gender expression; SB 559 (Padilla),
Chapter 261, Statutes of 2011 added genetic information; and
most recently, SB 600 (Pan), Chapter 282, Statutes of 2015 added
citizenship, primary language, and immigration status.
Consistent with California's goals of affording its residents
with broad protection against unreasonable, arbitrary, or
invidious discrimination, this bill bolsters the current
antidiscrimination statutory framework and imposes limits on
certain contractual agreements that seek to undermine the
state's statutory scheme that provides vital civil rights to
California residents. Simply put, this bill ensures that all
Californians enjoy the full benefit of the rights, penalties,
remedies, forums, and procedures established by the Unruh Act
and that individuals shall not be deprived of those rights,
penalties, remedies, forums, or procedures through the use of
involuntary or coerced waivers. This bill does not bar
arbitration or other waiver agreements. This bill merely
requires that waivers are knowing and voluntary. Additionally,
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this bill prohibits waivers that are required of the consumer as
a condition of entering into a contract for goods and services.
A recent three part New York Times series has highlighted the
harms that forced arbitration inflicts on Americans every single
day. The stories are based on thousands of court records,
interviews with lawyers, judges, arbitrators and the people who
have been affected by forced arbitration, in 35 states -
including California. Forced arbitration clauses are routinely
inserted into the fine print of contracts that people must sign
to buy a product or service or get a job.
Proponents of the bill contend that, in their experience,
private arbitration is an "anything-goes" private justice
industry which can be costly and unreceptive to consumers.
There is little, if any, regulation, oversight or legal
accountability of arbitrators to the parties, or the public.
Surprisingly to some, arbitrators are not regulated in any
fashion; they need not be trained in the law, or render a
decision consistent with the evidence presented to them, or even
apply the law in a particular dispute. Opponents assert that
the restrictions on waivers in this bill are likely preempted by
the FAA because the bill conflicts with the FAA's policy of
encouraging arbitration and disapproving special impediments to
the enforcement of arbitration contracts.
This bill essentially has an identical framework to AB 2617
(Weber), Chapter 910 which was signed by the Governor in 2014,
and has not been found to be preempted. In 2014, the Governor
signed AB 2617 which limits certain contractual waivers under
the Ralph Civil Rights Act and the Bane Civil Rights Act - a
statutory scheme designed to protect individuals from hate
crimes. This bill replicates the framework enacted under AB
2617. This Committee is unaware of any court decision that has
found AB 2617 to be preempted. Additionally, this Committee is
unaware of any pending litigation challenging AB 2617 on any
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grounds, including preemption.
This bill appears to be carefully crafted to focus on general
contract formation issues that are not subject to preemption
under the FAA. Enacted in 1947, the Federal Arbitration Act
generally provides that an arbitration agreement "shall be
valid, irrevocable and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract."
(9 United States Code Section 2.) Supporters and opponents
debate about whether this bill is pre-empted by the FAA. Based
on an analysis conducted by the Committee, it appears that the
bill does not interfere with the fundamental attributes of
arbitration, and thus, is unlikely to be preempted by the FAA,
as interpreted by the Supreme Court. Additionally, no court
decision has been brought to the attention of the Committee or
discovered in the Committee's own research that lends support to
such a far-reaching view of FAA pre-emption.
Analysis Prepared by:
Eric Dang / JUD. / (916) 319-2334 FN: 0002802