BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
SB 1007 (Wieckowski)
Version: April 13, 2016
Hearing Date: April 26, 2016
Fiscal: No
Urgency: No
RD
SUBJECT
Arbitration: transcription by certified shorthand reporter
DESCRIPTION
This bill would establish the right of a party to an arbitration
to have a certified shorthand reporter transcribe any
deposition, proceeding, or hearing, at the expense of the party
requesting the transcript, except as specified, and would
provide that the transcript shall be the official record of the
deposition, proceeding, or hearing. This bill would provide
that the refusal of this right is a ground for vacatur of the
arbitration award and would add a new provision to the existing
vacatur statute for that purpose.
BACKGROUND
Arbitration is a method of alternative dispute resolution where
the disputing parties present their disagreement(s) to one or
more neutral third-party arbitrators whose decisions are
generally final and binding, instead of litigating the issues in
courts.
While the arbitration of certain types of disputes may be
governed by specific statutes, the California Arbitration Act
(CAA), Sections 1280 et seq. of the Code of Civil Procedure,
provides for a comprehensive, all-inclusive statutory scheme
applicable to all written agreements to arbitrate disputes.
This law governs all aspects of a nonjudicial arbitration: from
the conduct of arbitrators, private arbitration companies, and
the arbitration proceedings, to the enforcement of arbitration
agreements and arbitration awards, as well as related judicial
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proceedings. Currently, the CAA is silent as to the right of
parties to court reporters in an arbitration.
Arbitration has been a topic of significant controversy over the
years as a form of alternative disputes resolution. Generally,
some advocates assert that private arbitration provides a
cheaper, faster, more efficient form of dispute resolution than
the overburdened courts. At the same time, other consumer and
employee advocates frequently raise issues with arbitration as
an unregulated industry, which can be costly, unreceptive, and
biased against consumers. These advocates assert that
boilerplate, or standardized, contracts forcing consumer and
employees into private arbitrations are problematic because
arbitrators can conduct arbitrations without allowing for
discovery, complying with the rules of evidence, or explaining
their decisions in written opinions (Code Civ. Proc. Secs.
1283.1, 1282.2, and 1283.4); and arbitrations may be conducted
in private with no public scrutiny (Ting v. AT&T, 182 F.Supp.2d
902 (N.D. Cal. 2002), affirmed, 319 F.3d 1126 (9th Cir. 2003)).
Critics' concerns are compounded by the fact that there are
little, if any, regulations or legal standards imposed on
arbitrators or their decisions. Regardless of the level or type
of mistake, or even misconduct, by the arbitrator, the grounds
on which a court will allow judicial review of an arbitration
are extremely narrow. As a result, arbitrators can disregard
the law and can issue binding decisions that are legally
enforceable but generally not reviewable by a court. (See
Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1 (holding that a
court is not permitted to vacate an arbitration award based on
errors of law by the arbitrator, except for certain narrow
exceptions).) As a matter of statutory law, the CAA's remedies
are limited to vacatur of the award under limited circumstances.
This bill would establish the right of any party to an
arbitration to request a court reporter, as specified, and would
provide that the refusal of an arbitrator to allow a court
reporter at the expense of the requesting party is grounds for
vacatur of the award.
CHANGES TO EXISTING LAW
Existing law , the California Arbitration Act (CAA), generally
governs private arbitrations in this state, including the
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enforcement of an arbitration agreement, the conduct of
arbitration proceedings, and the enforcement of arbitration
awards. (Code Civ. Proc. Sec. 1280 et seq.) Existing law
provides that a party to the arbitration has the right to be
represented by an attorney at any proceeding or hearing in
arbitration under this title. (Code Civ. Proc. Sec. 1282.4(a).)
Existing law provides that any party to an arbitration in which
an award has been made may petition the court to confirm,
correct or vacate the award, as specified. (Code Civ. Proc.
Sec. 1285.)
Existing law provides that if a petition or response under the
CAA is duly served and filed, the court shall confirm the award
as made, whether rendered in this state or another state, unless
in accordance with the CAA it corrects the award and confirms it
as corrected, vacates the award or dismisses the proceedings.
(Code Civ. Proc. Sec. 1286.)
Existing law requires that a petition to correct or vacate an
award, or a response requesting such relief, set forth the
grounds on which the request for such relief is based. (Code
Civ. Proc. Sec. 1285.8.)
Existing law provides, generally, that, subject to specified
procedural requirements, the court shall vacate the award if the
court determines any of the following:
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;
the arbitrators exceeded their powers and the award cannot be
corrected without affecting the merits of the decision upon
the controversy submitted;
the rights of the party were substantially prejudiced by the
refusal of the arbitrators to postpone the hearing upon
sufficient cause being shown therefor, by the refusal of the
arbitrators to hear evidence material to the controversy or by
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other conduct of the arbitrators contrary to the provisions of
the CAA; or
an arbitrator making the award either: (1) failed to disclose
within the time required for disclosure a ground for
disqualification of which the arbitrator was then aware; or
(2) was subject to disqualification upon specified grounds but
failed upon receipt of timely demand to disqualify himself or
herself as required by that provision. (Code Civ. Proc.
Sec. 1286.2(a).)
Existing law requires that all fees and costs charged to or
assessed upon a consumer party by a private arbitration company
in a consumer arbitration, exclusive of arbitrator fees, be
waived for an indigent consumer. For these purposes, "indigent
consumer" means a person having a gross monthly income that is
less than 300 percent of the federal poverty guidelines.
Existing law provides that nothing in this section shall affect
the ability of a private arbitration company to shift fees that
would otherwise be charged or assessed upon a consumer party to
a nonconsumer party. (Code Civ. Proc. Sec. 1284.3(b)(1).)
Existing law requires any consumer requesting a waiver of fees
or costs may establish his or her eligibility by making a
declaration under oath on a form provided to the consumer by the
private arbitration company for signature stating his or her
monthly income and the number of persons living in his or her
household. No private arbitration company may require a
consumer to provide any further statement or evidence of
indigence. (Code Civ. Proc. Sec. 1284.3(b)(3).)
This bill would provide that a party to an arbitration has the
right to have a certified shorthand reporter transcribe any
deposition, proceeding, or hearing. The transcript shall be the
official record of the deposition, proceeding, or hearing.
This bill would provide that if an arbitration agreement does
not provide for a certified shorthand reporter, the party
requesting the transcript shall incur the expense of the
certified shorthand reporter. This bill would further provide,
however, that in a consumer arbitration, a certified shorthand
reporter shall be provided upon request of an indigent consumer,
as defined under existing law, above, at the expense of the
nonconsumer party.
This bill would provide that if an arbitrator refuses to allow a
party to have a certified shorthand reporter transcribe any
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deposition, proceeding, or hearing pursuant to this section and
an award is made, the court shall vacate the award as specified.
This bill would add that the court shall vacate the award, if
the court determines that an arbitrator refused a party's
request, under the provisions above, for a certified shorthand
reporter.
This bill would make other technical, nonsubstantive changes.
COMMENT
1. Stated need for the bill
According to the author:
In arbitrations, as in all legal proceedings, the existence of
a reporter's transcript of a deposition, proceeding or hearing
can be absolutely essential to obtaining justice. In the
absence of such a transcript or a suitable substitute, a
reviewing court will conclude that an arbitration award, like
all judgments or orders of lower courts, are presumed to be
correct. Numerous appellate courts have refused to reach the
merits of an appellant's claims because no reporter's
transcript of a pertinent proceeding or a suitable substitute
was provided.
For this reason, the ability of a party or an arbitrator to
deny the other party's request to have, at the party's own
expense, a court reporter prepare a transcript of the
proceeding can substantially prejudice the rights of the
requesting party because no court report's transcript or
suitable substitute will be available for a reviewing court.
As a result, the reviewing court then has to assume that the
arbitration award is correct because no official record
exists. This is a denial of the fundamental due process right
to fairness of an arbitration hearing.
Although some of the major Alternative Dispute Resolution
(ADR) providers acknowledge the importance of the ability to
prepare a record of the proceedings, the practice is not
universal and abuse has occurred. Arbitrators can and will
deny parties the right to prepare a record of the proceedings.
Particularly in cases of mandatory arbitration and unequal
bargaining power between the parties, this can be a critical
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factor in the denial of justice.
2. Right to transcripts are vital to the administration of
justice
California law provides for the enforcement of private
arbitration agreements and governs the operation and conduct of
those nonjudicial proceedings under the California Arbitration
Act (CAA). As noted in the Background, the relief that a court
may grant to a party to the arbitration is limited to a
potential vacatur of the award under the CAA. Vacatur is
available, for example, if there was corruption or bias; the
party's rights were substantially prejudiced by a neutral
arbitrator's misconduct; or the party's rights were
substantially prejudiced by the arbitrator's refusal to postpone
the hearing where sufficient cause was shown, or by the
arbitrator's refusal to hear evidence material to the
controversy, or by other conduct of the arbitrators contrary to
the provisions of the CAA. Presumably, a party might need a
transcript of the original proceedings to successfully seek
vacatur or to otherwise seek judicial review. According to the
author and sponsor, however, even when a party seeks to have a
court reporter transcribe the proceedings at the party's own
expense, some arbitrators deny the party's request or make the
authorization contingent upon the other party's consent.
As a matter of public policy, having accurate, verbatim records
of proceedings is vital to the administration of justice for
multitudes of reasons: transcripts provide a record for appeal;
enable opposing counsel to impeach a witness (prior inconsistent
statements under oath); allow for the prosecution a person for
perjury; and ensure that court orders accurately reflect what
the judge actually ruled in court with respect to any range of
important issues such as visitation rights, or division of
property. Arguably, the importance of transcripts to the
American legal system is true regardless of whether the dispute
resolution proceedings are judicial or nonjudicial in nature.
This is perhaps even truer in a privatized, nonjudicial legal
system, where significant disputes between parties can be
resolved without enforcement of traditional rules of evidence,
opportunity for full discovery, in-depth written opinions,
opportunity for public proceedings, or opportunity for appeals.
Again, where the potential relief that a court may grant in
private under the CAA is largely limited to vacatur of the
award, it becomes that much more difficult for a party to ever
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prove that the arbitrator was biased, corrupt, acted in a manner
that substantially prejudiced one party, or engaged in some
other misconduct, if no record of the proceedings exist.
As such, this bill would establish the right of a party to have
a certified shorthand reporter, at the party's own expense, to
transcribe the proceedings. At the same time, consistent with
other public policy in this state authorizing court reporter
fees to be waived for indigent parties (see Gov. Code Secs.
68086(b), 68631-68633), this bill would require that a court
reporter be provided at no cost to any indigent consumer
requesting a reporter. In that scenario, the non-consumer party
would bear the expense.
3. Enforcement mechanism
To ensure that the right to a court reporter is enforced, this
bill would provide that if an arbitrator refuses to allow a
party to have a certified shorthand reporter transcribe any
deposition, proceeding, or hearing, as specified, and an award
is made, the court shall vacate the award, as specified.
Currently, when an award is vacated, the court may order a
rehearing before new arbitrators, or, in some cases, order a
rehearing before the original arbitrators. (Code Civ. Proc.
Sec. 1286.2.) As a matter of public policy, however, requiring
a party to wait until the award has been made to enforce their
right to a court reporter may not be preferable. At that point,
the parties have born significant time and expense to go through
the arbitration, only to have to begin new proceedings over the
same issues all over again. To ensure that the party is able to
enforce his or her right to a court reporter for all proceedings
in a more timely fashion, the author may wish to amend the bill
to strike the vacatur provisions of the bill and to, instead,
allow the party to petition the court for an order to compel the
arbitrator to grant the party's request. As a practical matter,
to avoid any calendaring issues and to ensure that parties
cannot use the provision to delay proceedings that are already
in progress, the author may wish to further amend the bill to
ensure that the right to request a court reporter shall be made
at the outset of the arbitration.
4. Opposition arguments
The Civil Justice Association of California writes in opposition
that:
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[C]urrent law sets standards for arbitration and requires a
court to vacate an arbitration award if it makes certain
findings, including:
" 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.
" The arbitrators exceeded their powers and the award
cannot be corrected without affecting the merits of the
decision upon the controversy submitted.
" The rights of the party were substantially prejudiced by
the refusal of the arbitrators to postpone the hearing upon
sufficient cause being shown therefor or by the refusal of
the arbitrators to hear evidence material to the
controversy or by other conduct of the arbitrators contrary
to the provisions of this title.
We do not believe that SB 1007 presents a comparable basis for
vacating an arbitration award. [ . . . ] We do not believe
that having a certified shorthand reporter should provide the
basis for vacating a permissible arbitration award.
Staff notes that the amendment suggested in Comment 3 would
arguably resolve these concerns.
Support : None Known
Opposition : Civil Justice Association of California
HISTORY
Source : Conference of California Bar Associations
Related Pending Legislation :
SB 1241 (Wieckowski, 2016) would provide that any contract
provisions that require a consumer or employee to litigate or
arbitrate in a different state or that require a different
state's law to govern a dispute that arose in California, as
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specified, are voidable by the consumer or employee.
SB 1078 (Jackson, 2016) would add specified rules relating to
marketing activities of private arbitration companies and
relating to the ability of arbitrators to enter into future
arrangements with one party to a pending arbitration. This bill
would also allow parties to recoup fees where an award has been
vacated or the arbitrator has been removed during an arbitration
for violations of ethical rules or disclosure requirements.
SB 1065 (Monning, 2016) would eliminate the existing law right
of appeal when a motion to compel arbitration has been denied,
if the case involves a claim under the Elder Abuse and Dependent
Adult Civil Protection Act and the senior has received a trial
preference under existing law due to age and health.
Prior Legislation : None Known
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