BILL ANALYSIS Ó SB 1007 Page 1 SENATE THIRD READING SB 1007 (Wieckowski) As Amended June 15, 2016 Majority vote SENATE VOTE: 26-10 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Judiciary |8-2 |Mark Stone, Alejo, |Wagner, Maienschein | | | |Chau, Chiu, | | | | |Gallagher, Cristina | | | | |Garcia, Holden, Ting | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Allows a party to an arbitration proceeding the right to have a court reporter during the arbitration proceeding. Specifically, this bill: 1)Provides 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 SB 1007 Page 2 record of the deposition, proceeding, or hearing. 2)Requires a party requesting a certified shorthand reporter to make the request in any of the following: a) A demand for arbitration, or in a response, answer, or counterclaim to a demand for arbitration. b) A pre-hearing scheduling conference where any deposition, proceeding, or hearing is being calendared. 3)Establishes 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. 4)Requires a certified shorthand reporter to be provided to an indigent consumer, upon request, at the expense of the nonconsumer party in a consumer arbitration. 5)Provides that if an arbitrator refuses to allow a party to have a certified shorthand reporter transcribe any deposition, proceeding, or hearing, the party may petition the court for anorder to compel the arbitrator to grant the party's request. 6)Further provides that a petition may include a request for an order to stay any deposition, proceeding, or hearing related to the arbitration pending the court's determination of the petition. SB 1007 Page 3 7)States that this act does not add grounds for vacating an arbitration award or for correcting an arbitration award. FISCAL EFFECT: None. COMMENTS: Justice Brennan once said that, "courts are the central dispute-setting institutions of our society. They are bound to do equal justice under the law, to rich and poor alike." It comes as no surprise then that the phrase, "Equal Justice Under Law," is engraved above the entrance to our nation's highest court. And so it seems, we put a great deal of faith in our courts - but would we expect any less? We anticipate our courts to apply the law in a fair, neutral, and open manner. We hold judges to high standards, and ask that they avoid even the appearance of impropriety. We count on our judiciary to advance the law, issue orders, and render written opinions. And yet, we acknowledge that our system isn't perfect and that despite their best efforts, courts sometimes get it wrong. Acknowledging the imperfection of our justice system is undoubtedly one reason why it has safeguards. We remember that decisions of courts are reviewed by appellate courts and indeed, reviewed by our elected branches. In order to facilitate the right to appeal, we provide a record of the proceedings, in criminal matters at least. And so, when our families, friends, and neighbors are injured, wronged, or have a dispute, we rely upon that faith that our courts-the institution we trust upon to promote fairness-will deliver equal justice under the law. Arbitration is a form of alternative dispute resolution held outside of courts where a third-party (rather than a judge) makes a binding (and rarely appealable) award. Because most arbitration is created by entering into a contract (usually a contract that is adhesive or take-it-or-leave-it), the arbitration agreement will lay-out the procedures that will be followed during the arbitration hearing. For example, the terms of the arbitration agreement may stipulate that the award need SB 1007 Page 4 not be written or justified (unlike in court), and that the entire process be kept in secret (rather than in public view). Arbitrators do not need to be lawyers, nor do they need to be trained in the law. Arbitrators who issue favorable awards to a particular company can be repeatedly-hired by that same company to serve as the arbitration-neutral without ever notifying the public about that award-history. Arbitrators do not need to be trained in the law, or even apply the law, or render a decision consistent with the evidence presented to them. What evidence is presented may, in fact, be incomplete because parties in arbitration have no legal right to obtain evidence in support of their claims or defenses, or the claims or defenses of the other party, contrary to the longstanding discovery practice in public courts. Advocates continue to debate about the benefits and harms of mandatory-arbitration. Proponents of arbitration say that arbitration produces quicker results and reduces litigation costs. Opponents argue that arbitration harms consumers and workers because arbitration proceedings render unfair awards. What happens after an arbitrator issues an award? When a court renders a final judgment, parties in an action have the right to appeal the court's judgment for appellate review. The same is not true for arbitration. When an arbitrator issues an award, the award is usually binding and final. Although the parties may move to correct or vacate the award, the grounds for correction or vacatur (vacating an award) are limited. For instance, an award may be vacated if: 1) the award was procured by corruption or fraud; 2) the rights of the party were substantially prejudiced by the arbitrator's misconduct; 3) the arbitrator exceeded his or her powers and the award cannot be corrected without affecting the merits of the decision; or 4) the arbitrator failed to disclose certain matters to the parties. Parties seeking vacatur under these limited grounds must provide evidence to the court to prove that an award should be vacated. However, because arbitration awards do not need to be written or justified (unlike in court), and the entire process may be kept in secret (rather than in public view), parties have a difficult time proving that an arbitrator has SB 1007 Page 5 engaged in prejudicial misconduct. This bill seeks to remedy this problem by allowing litigants to obtain an official record of an arbitration or arbitration-related proceeding to not only serve as a record of the proceeding, but also as a check on the arbitrator and the other parties during the proceedings. Summary of the bill: This bill would establish that a party to an arbitration proceeding has the right to have a certified shorthand reporter (i.e. a court reporter) in any arbitration deposition, proceeding, or hearing. This bill also provides that if an arbitrator denies a party's request for a court reporter, the party may petition the court for an order to compel the arbitrator to grant the party's request. Access to an official transcript for any adjudicatory proceeding is an important component of access to justice. Without an official record of what transpired at an arbitration proceeding, litigants may be unable to draft effective petitions to a court and will be unable to recount what actually happened during proceedings with any degree of accuracy. This bill reasonably allows a party the right to request a court reporter during the arbitration proceedings, at the expense of the requesting party, without interfering with the arbitration process. In order to provide access to justice for indigent litigants, this bill also provides that a court reporter shall be provided to an indigent consumer at the expense of the nonconsumer party. To prevent gamesmanship, this bill requires parties to an arbitration proceeding to request a shorthand reporter in a timely manner. To address the concern that this act would allow parties to use a request for shorthand reporters to cause delay, this bill requires a party to make a request for a certified shorthand reporter either in the initial demand for arbitration (or in the response or answer to the demand), or during a scheduling conference between the parties. Although most arbitration proceedings only have one initial pre-hearing SB 1007 Page 6 scheduling conference, this bill also envisions that there may be multiple scheduling conferences before the arbitration hearing. Accordingly, as long as a request for a shorthand reporter is made at the scheduling conference when a deposition, proceeding, or hearing is being calendared, the request would appear to satisfy the parameters for timeliness under this bill. A party may petition the court to enforce his or her right to have a court reporter in arbitration under this bill. To ensure that this important right can be enforced, this bill allows a party to petition the court to compel the arbitrator to allow the party to have a court reporter in the event that an arbitrator denies a request. This bill additionally allows a party to petition the court to stay the arbitration proceeding while the court reviews the petition to compel. Although this bill allows parties to have the right to have a court reporter in an arbitration proceeding, the state of arbitration law theoretically would allow a party to contract away this right - even though such a contract provision would appear to violate the public policy of this state. The Legislature, in the future, may wish to consider whether it should adopt a measure to prevent this type of unscrupulous conduct by making such contractual provisions void as against public policy. Analysis Prepared by: Eric Dang / JUD. / (916) 319-2334 FN: 0003502 SB 1007 Page 7