BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
SB 1065 (Monning)
Version: March 28, 2016
Hearing Date: April 26, 2016
Fiscal: No
Urgency: No
RD
SUBJECT
Dismissal or denial of petitions to compel arbitration: appeals
DESCRIPTION
Existing law provides that an appeal may be taken from an order
dismissing or denying a petition to compel arbitration.
This bill would create an exception to the above to prevent a
party from taking an immediate appeal from an order dismissing
or denying a petition to compel arbitration if the opposing
party has filed a claim pursuant to the Elder and Dependent
Adult Civil Protection Act and that opposing party has been
granted a trial preference pursuant to existing law, as
specified.
BACKGROUND
As a general matter, arbitrations provide an alternative method
of dispute resolution, outside of the courts, wherein a neutral
third party, known as the arbitrator, renders a decision after a
hearing to which both parties have had an opportunity to be
heard. Under California law, there are two distinguishable types
of arbitration: judicial arbitration (also known as
court-annexed arbitration, governed under Code of Civil
Procedure Sections 1141.10 -1141.31) and private arbitrations
(also commonly known as "contractual," "voluntary," or
"nonjudicial" arbitrations; governed under the California
Arbitration Act, Code of Civil Procedure Section 1280 et seq.).
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On March 1, 2016, the Senate Judiciary Committee held an
informational hearing on the topic of private or contractual
arbitration agreements, entitled The Federal Arbitration Act,
the U.S. Supreme Court, and the Impact of Mandatory Arbitration
on California Consumers and Employees. In that hearing, many
issues facing consumers and employees who are subject to
arbitration clauses contained in standardized,
take-it-or-leave-it, or "adhesive" contracts were brought to
light. That hearing also brought to light the various
difficulties facing the State in addressing some of the
underlying, fundamental harms faced by consumers and employees
as a result of federal preemption and U.S. Supreme Court
precedent interpreting the Federal Arbitration Act. A package
of arbitration bills, of which this bill is one, arose out of
the hearing, seeking to address various fairness issues
surrounding the rules that govern the conduct and operation of
arbitrators and arbitrations in this state.
Of particular relevance to this bill, California law provides
that, as a general rule, appeals may only be taken from such
judgments or orders as are made appealable by statute. In turn,
Section 904.1 of the Code of Civil Procedure, governing the
right to appeal in a civil action, generally provides that the
right of appeal exists only upon a judgment, except there may be
an appeal from an interlocutory judgment that is made final and
conclusive. A "judgment," as referenced here, is the final
determination of the rights of the parties in an action or
proceeding. (Code Civ. Proc. Sec. 577.) Accordingly, this
"final judgment rule" seeks to limit the number of appeals
possible in light of the court's interests in expediency,
efficiency, and economy.
Appeals in arbitration matters, however, are specifically
governed under a provision of the California Arbitration Act,
and the CAA diverges from the above final judgment rule with
respect to the appealability of orders dismissing or denying a
petition to compel arbitration. Under the CAA, if a party to a
contractual arbitration agreement seeks instead to file suit in
court or refuses to submit the dispute to arbitration, disputing
either the validity or applicability of the arbitration
agreement, the other party to the arbitration agreement may seek
to enforce the arbitration by way of a motion to compel
arbitration. Generally, the court must order the parties to
arbitration unless: (1) grounds exist for the revocation of the
agreement; (2) the right to compel arbitration has been waived
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by the petitioner; or (3) a party to the arbitration agreement
is also a party to a pending court action or special proceeding
with a third party, arising out of the same transaction or
series of related transactions and there is a possibility of
conflicting rulings on a common issue of law or fact. (Code
Civ. Proc. Sec. 1281.2.) If, however, the court does ultimately
deny the motion to compel arbitration, the CAA provides for a
statutory right to immediately appeal that decision by the party
seeking to force arbitration, thus staying the trial until the
appeal of the order denying or dismissing the arbitration can be
heard and decided. (Code of Civ. Proc. Sec. 1294(a).)
This bill would preclude a party from taking an immediate 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.
CHANGES TO EXISTING LAW
Existing law , the California Arbitration Act, governs
arbitrations in California, including the enforcement of
arbitration agreements, rules for neutral arbitrators, the
conduct of arbitration proceedings, and the enforcement of
arbitration awards. (Code Civ. Proc. Sec. 1280 et. seq.)
Existing law provides that a written agreement to submit to
arbitration an existing controversy or a controversy thereafter
arising is valid, enforceable and irrevocable, save upon such
grounds as exist for the revocation of any contract. (Code Civ.
Proc. Sec. 1281; see also Federal Arbitration Act, 9 U.S.C. Sec.
2.)
Existing law provides that on a petition of a party to an
arbitration agreement alleging the existence of a written
agreement to arbitrate a controversy, if a party thereto refuses
to arbitrate such controversy, the court shall order arbitration
of the controversy if it determines that an agreement to
arbitrate the controversy exists, unless it determines any of
the following:
the right to compel arbitration has been waived by the
petitioner;
grounds exist for the revocation of the agreement; or
a party to the arbitration agreement is also a party to a
pending court action or special proceeding with a third party,
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arising out of the same transaction or series of related
transactions and there is a possibility of conflicting rulings
on a common issue of law or fact. (Code Civ. Proc. Sec.
1281.2(a)-(c).)
Existing law provides that an aggrieved party may appeal from
the following:
an order dismissing or denying a petition to compel
arbitration;
an order dismissing a petition to conform, correct or vacate
an award;
an order vacating an award unless a rehearing in arbitration
is ordered;
a judgment entered pursuant to this title; or
a special order after final judgment. (Code Civ. Proc. Sec.
1294(a)-(e).)
Existing law provides that a writ of mandate may be issued by
any court to any
inferior tribunal, corporation, board, or person, to compel the
performance of an act which the law specially enjoins, as a duty
resulting from an office, trust, or station, or to compel the
admission of a party to the use and enjoyment of a right or
office to which the party is entitled, and from which the party
is unlawfully precluded by that inferior tribunal, corporation,
board, or person. (Code Civ. Proc. Sec. 1085(a).)
Existing law provides that a party may not appeal an order
compelling arbitration until after final judgment, but may,
under extraordinary circumstances, seek a writ of mandate to
request review of the ruling by the court of appeal in advance
of the arbitration hearing. (Laufman v. Hall-Mack Co. (1963)
215 Cal.App.2d 87; United Firefighters of Los Angeles v. City of
Los Angeles (1991) 231 Cal.App.3d 1576; Mid-Wilshire Associates
v. O'Leary (1992) 7 Cal.App.4th 1450.)
Existing law , Section 36 of the Code of Civil Procedure,
provides that a party to a civil action who is over 70 years of
age may petition the court for a (trial) preference, which the
court shall grant if the court makes both of the following
findings:
the party has a substantial interest in the action as a whole;
and
the health of the party is such that a preference is necessary
to prevent prejudicing the party's interest in the litigation.
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(Code Civ. Proc. Sec. 36(a).)
Existing law provides that the court, in its discretion, may
also grant a motion for preference that is accompanied by clear
and convincing medical documentation that concludes that one of
the parties suffers from an illness or condition raising
substantial medical doubt of survival of that party beyond six
months, and that satisfies the court that the interests of
justice will be served by granting the preference. Furthermore,
existing law provides that, notwithstanding any other provision
of law, the court may in its discretion grant a motion for
preference that is supported by a showing that satisfies the
court that the interests of justice will be served by granting
this preference. (Code Civ. Proc. Sec. 36(d), (e).)
Existing law provides that upon the granting of such a motion
for preference, the court shall set the matter for trial not
more than 120 days from that date and there shall be no
continuance beyond 120 days from the granting of the motion for
preference except for physical disability of a party or a
party's attorney, or upon a showing of good cause. Any
continuance shall be for no more than 15 days and no more than
one continuance for physical disability may be granted to any
party. (Code Civ. Proc. Sec. 36(f).)
Existing law , the Elder Abuse and Dependent Adult Civil
Protection Act (EADACPA), generally provides civil protections
and remedies for victims of elder and dependent adult abuse and
neglect. (Welf. & Inst. Code Sec. 15600 et seq.)
This bill would provide that if a party has filed a claim
pursuant to the EADACPA and has been granted a preference
pursuant to this statute, an opposing party shall not appeal
from an order dismissing or denying a petition to compel
arbitration pursuant to Section 1294, above, arising from that
claim. This bill would create a limited exception to Section
1294's immediate right of appeal from the denial of a motion to
compel arbitration for these purposes.
COMMENT
1. Stated need for the bill
As stated by the author:
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SB 1065 eliminates the automatic right of appeal that a
defendant has when it loses a motion to compel arbitration,
but only (1) in Elder Abuse and Dependent Adult Civil
Protection Act cases and (2) only where the senior has
received a trial preference under [Code of Civil Procedure
Section] 36 due to age and health.
California's elder abuse statute, the Elder Abuse and
Dependent Adult Civil Protection Act (EADACPA), was enacted to
protect elderly and dependent adults from abuse. [ . . . ] It
defines civil elder abuse to mean physical abuse, neglect,
financial abuse, abandonment, isolation, abduction, or other
treatment resulting in physical harm or pain or mental
suffering. (Welfare & Institutions Code [Sec.] 15610.07).
Other than financial elder abuse, these claims all require the
higher standard of "clear and convincing" proof and are thus
difficult to pursue.
Under current law, trial courts may grant victims of elder
abuse a speedy trial in light of their age and failing health.
(Code Civ. Proc. Sec. 36(a).) [ . . . ] Although the exact
number of [Section] 36 preferences granted to victims of elder
abuse each year is unknown, practitioners report that the
number is small as not many elders meet the onerous
requirements of Section 36.
Additionally, under current law, [ . . . if] the court denies
[a defendant's] motion to compel the case to arbitration
because the arbitration agreement is found to be
unconscionable, [Code of Civil Procedure] Section 1294(c)
gives the defendant the automatic right to appeal that
decision, even if the elderly plaintiff has already been
granted the right to a speedy trial under [Code of Civil
Procedure] Section 36(a).
Therefore, under the current law, a defendant who tries (and
fails) to force these elderly victims into arbitration can
nonetheless override the court's order for a preferential
trial date and delay the elder's trial another 1-3 years by
filing an appeal. The elderly victims have no similar
rights-if a defendant succeeds in forcing them into
arbitration, the victims may not delay and must proceed
straight to arbitration.
The author asserts that "[t]he delay caused by the appeal is
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done in the hope that the elder will not survive long enough for
the appeal to be decided, thereby reducing the defendant's
liability if the victim dies before trial" and provides several
examples of appeals that successfully delayed the trial by over
a year. In one case, the author cites, a 90-year-old stroke
victim brought an elder abuse action against the defendant
nursing home after she was sexually assaulted at the facility
and contracted a sexually transmitted disease. The victim
succeeded both in obtaining a trial preference and in
challenging the defendant's motion to compel arbitration, but
the nursing home appealed the denial. The Sixth Circuit Court
of Appeal ultimately heard and ruled 3-0 for the victim, finding
that the arbitration agreement could not be enforced against
her. (Young v. Horizon West, Inc. (2013) 220 Cal.App.4th 1122).
The author notes that the appeal "took almost a year and a half,
and that was even an expedited process (after the court of
appeal granted preference). Fortunately, Mrs. Young outlived
this tactic, and was able to get her case resolved. Many others
in her position do not live to see a resolution of the case."
The author cites another case, Bush v. Horizon West (2012) 205
Cal.App.4th 924, where "the victim did not survive the nearly 2
years it took to get the favorable appellate opinion allowing
the case to get back on the Court's trial calendar."
2. The immediate right of appeal of a motion to compel
arbitration under existing law only applies to the party who
is denied the order to compel arbitration
Prior to 1961, California courts widely held that neither an
order compelling arbitration, nor an order denying a petition to
compel arbitration is an appealable order. These cases relied
on U.S. Supreme Court cases that held a ruling as to the right
to arbitration is interlocutory and not appealable as a final
judgment, and the fact that such orders were not enumerated
among those made appealable under then-Section 1293, the
precursor to today's Section 1294. (Sjoberg v. Hastrof (1948)
33 Cal.2d 116, 118-119, citing Shanferoke Co. v. Westchester Co.
(1935) 239 U.S. 449 and Schoenamsgruber v. Hamburg Line (1935)
294 U.S. 454; Jardine-Matheson Co., Ltd. v. Pacific Orient Co.
(1929) 100 Cal.App. 572; Fischer v. Superior Court (1930) 105
Cal.App. 466.) As a result, whether or not the court granted or
denied a party's petition to compel arbitration, parties on both
sides of the issue were limited to appealing the order after
judgment - either from the award made in arbitration, or from
the judgment entered from the trial.
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The Legislature changed the law in 1961, based on the
recommendations of a California Law Revision Commission (CLRC)
report examining California laws on arbitration. The CLRC
recommended that California law provide for an appeal of an
order denying a motion to compel arbitration in order to "be in
conformity with the present spirit of the statute and with the
similar provision in Section 19 of the Uniform Arbitration Act."
The resulting law, Section 1294 of the Code of Civil Procedure,
currently provides for a statutory right to immediately appeal
the dismissal or denial of a petition to compel arbitration. It
does not, however, provide for a parallel right of immediate
appeal if motion to compel has been granted. (Code Civ. Proc.
Sec. 1294(a).)
In other words, under existing law, when a plaintiff files an
action in court and the defendant's petition to compel
arbitration is denied or dismissed, the defendant has the
ability to immediately appeal the order as a matter of right and
does not have to await final judgment in the matter. In
contrast, the plaintiff who opposes the validity or the
applicability of the arbitration agreement in that dispute and
who wishes to proceed to trial is not allowed to immediately
appeal an order compelling arbitration and must wait until after
arbitration is complete to appeal from the final judgment. At
best, the plaintiff, under extraordinary circumstances, may seek
a writ of mandate to obtain interlocutory appellate review of
the matter before proceeding to arbitration pursuant to the
court order. A writ of mandate, unlike an appeal that is a
matter of right, is discretionary; a court has the discretionary
power to issue a writ only in those exceptional circumstances
that warrant such interlocutory review.
In 2011, AB 1062 (Dickinson, 2011) would have addressed this
uneven playing field between defendants and plaintiffs by
largely reducing the ability to appeal a dismissal or denial of
petition to compel arbitration on an interlocutory basis. That
bill would have generally required both parties to await final
judgment to appeal the motion. This bill takes a much narrower
approach by addressing only the specific harm that arises for
elderly individuals who have been granted a trial preference
under other applicable law, and who bring claims under the Elder
and Dependent Adult Civil Protection Act.
3. Bill narrows right of immediate appeal of an order denying
a motion to compel arbitration for elder abuse victims who
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have otherwise received a trial preference
California law, the Elder Abuse and Dependent Adult Civil
Protection Act (EADACPA), generally provides civil protections
and remedies for victims of elder and dependent adult abuse and
neglect. (Welf. & Inst. Code Sec. 15600 et seq.) State law
also provides certain individuals with a trial preference,
allowing them to have their case heard in a more expedient
fashion. Specifically, this trial preference statute, Section
36 of the Code of Civil Procedure, provides that a party to a
civil action who is over 70 years of age may petition the court
for a trial preference, which the court shall grant if the court
finds both: (1) that the health of the party is such that a
preference is necessary to prevent prejudicing the party's
interest in the litigation; and (2) that the party has a
substantial interest in the trial as a whole. The court may
also, in its discretion, grant a motion for preference that is
accompanied by clear and convincing medical documentation that
concludes that one of the parties suffers from an illness or
condition raising substantial medical doubt of survival of that
party beyond six months, and that satisfies the court that the
interests of justice will be served by granting the preference.
Under this trial preference statute, the court is required to
set the matter for trial not more than 120 days from that date
and there shall be no continuance beyond 120 days from the
granting of the motion for preference except for physical
disability of a party or a party's attorney, or upon a showing
of good cause stated in the record. (Code Civ. Proc. Sec.
36(a), (d), (f).)
Currently, California law presents an interesting dilemma when
an elder victim has obtained a trial preference but is otherwise
potentially subject to an arbitration agreement. During the
informational hearing on the topic of arbitration in March, this
Committee heard testimony that all nursing home contracts in the
state of California have an arbitration clause, and, as a matter
of course, those clauses are inserted half way into a lengthy
contract which an elder or his or her family member is
anticipated to sign upon arrival at the nursing home, often
under stressful circumstances. These contracts are
take-it-or-leave-it contracts, and as reported at that hearing,
families often have no practical option but to take it.
According to the author, in cases brought under EADACPA,
"[w]here there is elder abuse by a nursing home or elder
facility and an elder abuse victim is granted a speedy trial
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preference, it is routine for a defendant nursing home who wants
to avoid a jury trial or to stall the proceedings to file a
motion to enforce an arbitration provision, which the facility
drafted and then coerced the victim into signing at enrollment."
The nursing home is able to stall, by way of the arguably
inequitable immediate right of appeal, discussed in Comment 2
above.
Notably, the instances in which an elder victim challenging a
motion to compel arbitration is successful are presumably few
and far between. Under the Federal Arbitration Act, and as
affirmed by the U.S. Supreme Court interpreting that act, valid
contractual arbitration agreements generally have to be enforced
by their terms, unless contract defenses exist at law or in
equity for the revocation of the contract. Such defenses can
include, for example, duress, fraud, or unconscionability. That
the agreement was buried halfway through a multi-page contract
signed by the senior or his or her family member at the time
that the senior was admitted into a facility is not, in and of
itself, enough for the courts to invalidate an agreement for
reasons of unconscionability, as unconscionability requires both
substantive and procedural unconscionability, and such
circumstances while proof of some procedural unconscionability
is not dispositive of the issue.
Nonetheless, as explained by the author, "[i]f the trial court
finds that the agreement's terms are unconscionable and
unreasonably one-sided, it may deny the defendant's motion to
compel arbitration, allowing the elder to proceed to a jury
trial in regular court. [ . . . ] At this point, ONLY after
showing [that] the senior is entitled to trial preference and
[upon proving] to the court that the arbitration provision was
unconscionable, the senior should be able to proceed to the
speedy court hearing that was originally ordered by the court.
But under the current archaic law, the abuse victim cannot."
This bill would not completely remove appellate rights for the
party seeking to compel arbitration. Instead, it would limit
the party's interlocutory rights to the same rights available to
the opposing party when the motion to compel arbitration is
granted: a writ of mandamus. As a matter of public policy, this
bill would arguably enhance fairness in arbitrations as it
places parties in these most dire of cases on equal footing with
respect to their right to appeal an order granting or denying a
motion to compel arbitration.
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4. Opposition arguments
The Civil Justice Association of California writes in opposition
to the bill that SB 1065 "is contrary to California's strong
public policy favoring arbitration and the enforcement of valid
arbitration agreements. It is also unnecessary to expedite
resolution of the complaint. California Rules of Court Rule
8.240 allows a party to seek an expedited appeal schedule on the
same grounds that satisfy Code of Civil Procedure [Section] 36.
If a litigant has been granted a preference by the trial court,
she should have no difficulty obtaining calendar preference from
the appeals court." CJAC also writes:
In Louise Laswell v. AG Seal Beach LLC., 189 Cal.App.4th 1399,
California's Second District Court of Appeal heard an appeal
of a trial court order denying a petition to compel
arbitration in a case involving allegations of elder abuse and
other misconduct. The court held that the patient's trial
preference due to age and terminal illness did not support
denial of arbitration. One of the reasons cited for the trial
court's denial of the petition to compel arbitration was that
she had been granted a trial preference and the case would
proceed just as expeditiously in court as in arbitration. In
overturning the trial court's decision, the appeals court
wrote that the patient's age and trial court preference had no
relevance as to whether the agreement to arbitrate was
enforceable, but that her advanced age should be considered by
the trial court, the parties and the arbitrator in scheduling
proceedings on remand.
Arbitration is a faster, more cost-effective means of
resolving disputes than litigation in court, and is supported
by statutes requiring the enforcement of valid arbitration
agreements. An order denying enforcement of such an agreement
is appealable under current law and should remain so, even for
litigants who have been granted priority under Code of Civil
Procedure [Section] 36.
In response, the author and co-sponsor CAOC argue that CJAC's
claim that the bill is contrary to California's strong public
policy favoring arbitration and the enforcement of valid
arbitration agreements, "ignores that California also has a
strong public policy interest in protecting its elders, a public
policy that is embodied in the enactment of the elder abuse
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statute, the Elder and Dependent Adult Civil Protection Act.
Thus, the bill is not, as CJAC claims, simply 'contrary' to
California's public policy on arbitration but[, instead,] the
bill seeks to fairly balance the competing public policy
interests of favoring arbitration and protecting against elder
abuse." The author and sponsor also reject the claim that a
litigant should have no difficulty obtaining calendar preference
from the appellate court for two reasons: "(1) That litigants
'should' get calendar preference does not mean that they will [
. . . ] and (2) Even if the appellate court does grant
preference, even an expedited appeal will take about a year or
more."
Lastly, the author and sponsor refute the assertion that
arbitration is a "faster, more cost-effective means of resolving
disputes than litigation in court." Nonetheless, they assert
that those same goals are supported by SB 1065 because the
minimum appeal time of a year will be avoided, litigants can
move swiftly toward a trial, and the parties will not have
unnecessarily expended any resources in appealing order that is
likely to be affirmed. Lastly, the author and sponsor emphasize
that this bill does not affect all cases wherein a party refuses
to submit to a motion to compel arbitration; rather "[t]his bill
affects only those cases where a judge has already determined
that there is not a valid arbitration agreement or that the
agreement is unenforceable."
Support : California Alliance for Retired Americans; Consumer
Federation of California
Opposition : Civil Justice Association of California
HISTORY
Source : California Advocates for Nursing Home Reform; Consumer
Attorneys of California (CAOC); Congress of California Seniors
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
specified, are voidable by the consumer or employee.
SB 1078 (Jackson, 2016) would add specified rules relating to
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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 1007 (Wieckowski, 2016) 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. The
refusal of this right would be a ground for vacatur of the
arbitration award.
Prior Legislation : AB 1062 (Dickinson, 2011), See Comment 2.
AB 1062 was eventually gutted and amended into a different
topic.
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