BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2667


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          ASSEMBLY THIRD READING


          AB  
          2667 (Thurmond)


          As Amended  May 19, 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 (Unruh 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 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 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.  Provides that this  
            does not affect any legal right, penalty, forum, or procedure  
            which state or federal law prohibits waiver.  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 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, so long as those rights, penalties,  
            forums, or procedures are waivable under state or federal law.










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          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 Act shall have the burden 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 Act entered into, altered,  
            modified, renewed, or extended on or after January 1, 2017.


          7)Clarifies that nothing in this act prohibits a person from  
            knowingly and voluntarily entering into binding arbitration.


          8)Provides that the foregoing provisions are severable, and that  
            injunctive relief and other remedies are available for  
            violations of these provisions.


          9)Makes various legislative findings and declarations.


          EXISTING LAW:


          1)Establishes the Unruh Act, 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.)









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          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.) 


          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  
            United States Code 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  








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            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.


          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 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,  








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          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.  Indeed, this bill has  
          been amended to clarify that nothing in the bill prohibits a  
          person from knowingly and voluntarily entering into binding  
          arbitration.  This bill merely requires that waivers knowing and  
          voluntary, so long as those rights, penalties, forums, or  
          procedures are waivable under state or federal law.   
          Additionally, 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 Federal Aviation Administration (FAA) because this bill  
          conflicts with the FAA's policy of encouraging arbitration and  
          disapproving special impediments to the enforcement of  
          arbitration contracts.








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          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  
          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 Assembly Judiciary Committee  
          (Committee), it appears that this 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: 0003003










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