BILL ANALYSIS Ó AB 2667 Page 1 ASSEMBLY THIRD READING AB 2667 (Thurmond) As Amended March 15, 2016 Majority vote ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Judiciary |7-3 |Mark Stone, Alejo, |Wagner, Gallagher, | | | |Chau, Chiu, Cristina |Maienschein | | | |Garcia, Holden, Ting | | | | | | | | | | | | ------------------------------------------------------------------ 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 AB 2667 Page 2 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 AB 2667 Page 3 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.) AB 2667 Page 4 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. AB 2667 Page 5 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, AB 2667 Page 6 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 AB 2667 Page 7 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