Amended in Senate May 10, 2016

Amended in Senate April 14, 2016

Amended in Senate April 4, 2016

Senate Bill No. 1078

Introduced by Senator Jackson

February 17, 2016

An act to amend Sections 1281.85 and 1281.9 of, and to add Section 1281.65 to, the Code of Civil Procedure, relating to arbitration.

LEGISLATIVE COUNSEL’S DIGEST

SB 1078, as amended, Jackson. Civil procedure: arbitration.

Existing law governs arbitration in civil proceedings. Under existing law, a neutral arbitrator is defined as one who is selected jointly by the parties or by the parties’ arbitrators, or is appointed by the court if the parties or their arbitrators cannot jointly select an arbitrator. Existing law requires a person selected to serve as a neutral arbitrator to disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt as to the proposed neutral arbitrator’s impartiality. Existing law requires the disclosure to include, among other things, whether or not the proposed neutral arbitrator has a current arrangement concerning prospective employment or other compensated service as a dispute resolution neutral with a party to the proceeding, or is participating in, or has participated within the last 2 years in, discussions regarding such prospective employment or service.

This bill, in a consumer arbitration case, would also require the disclosure of any solicitation made within the last 2 years by, or at the direction of, a private arbitration company to a party or lawyer for a party. The bill would prohibit the solicitation of a party or lawyer for a party during the pendency of the arbitration. The bill would also prohibit an arbitrator, from the time of appointment until the conclusion of the arbitration, from entertaining or accepting any offers of employment, offers of new professional relationships, or offers of employment as a dispute resolution neutral in another case from a party or lawyer for a party in the pending arbitration.

Existing law requires a court to vacate an arbitration award if it determines begin delete certain that a specified circumstance exists. end delete begin insert that certain circumstances exist. end insert

This bill would authorize a party to recover arbitration proceeding costs from a private arbitration company begin insert or arbitrator end insert if the arbitration award is vacated by the court based on a determination begin delete of the existence of one of these circumstances. The bill would also authorize a party to petition the court to recover arbitration proceeding costs from a private arbitration company if the arbitrator is dismissed during the pendency of the arbitration because of a violation of the Judicial Council ethical standards or a violation of the disclosure requirements described above. end delete begin insert that there was corruption in any of the arbitrators, the rights of the party were substantially prejudiced by misconduct of a neutral arbitrator, or the arbitrator making the award either failed to timely disclose a ground for disqualification, as specified, or the arbitrator was subject to disqualification, as specified, but failed to disqualify himself or herself after receiving end insert begin insert a timely demand to disqualify. end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1281.65 is added to the Code of Civil
Procedure, to read:

1281.65.  

From the time of appointment until the conclusion
of the arbitration, an arbitrator shall not entertain or accept either
of the following:

(a) Any offers of employment or new professional relationships
as a lawyer, expert witness, or consultant from a party or lawyer
for a party in the pending arbitration.

(b) Any offers of employment as a dispute resolution neutral in
another case involving a party or lawyer for a party in the pending
arbitration unless all parties to the pending arbitration, including
the lawyers in the arbitration, have conferred and agreed in writing,
before any solicitation of the arbitrator, to allow offers of future
employment as a dispute resolution neutral to be made to the
arbitrator.

SEC. 2.  

Section 1281.85 of the Code of Civil Procedure is
amended to read:

1281.85.  

(a) Beginning July 1, 2002, a person serving as a
neutral arbitrator pursuant to an arbitration agreement shall comply
with the ethics standards for arbitrators adopted by the Judicial
Council pursuant to this section. The Judicial Council shall adopt
ethical standards for all neutral arbitrators effective July 1, 2002.
These standards shall be consistent with the standards established
for arbitrators in the judicial arbitration program and may expand
but shall not limit the disclosure and disqualification requirements
established by this chapter. The standards shall address the
disclosure of interests, relationships, or affiliations that may
constitute conflicts of interest, including prior service as an
arbitrator or other dispute resolution neutral entity,
disqualifications, acceptance of gifts, and establishment of future
professional relationships.

(b) Subdivision (a) does not apply to an arbitration conducted
pursuant to the terms of a public or private sector collective
bargaining agreement.

(c) The ethics requirements and standards of this chapter are
nonnegotiable and shall not be waived.

begin delete

(d) A party may recover costs incurred in an arbitration
proceeding from a private arbitration company if the arbitration
award is vacated pursuant to Section 1286.2. A party may also
petition the court to recover costs incurred in an arbitration
proceeding from a private arbitration company if the arbitrator is
dismissed during the pendency of the arbitration because of a
violation of the ethical standards adopted by the Judicial Council
pursuant to this section or a violation of the disclosure requirements
established by this chapter.

end delete begin insert

(d) If an arbitration award is vacated pursuant to paragraph
(2), (3), or (6) of subdivision (a) of Section 1286.2 because of a
violation of the ethical standards adopted by the Judicial Council
pursuant to this section or a violation of the disclosure
requirements established by this chapter, a party may recover any
costs incurred in the arbitration proceeding from the private
arbitration company or from the arbitrator to whom the costs were
paid. For purposes of this paragraph, “costs” include filing fees,
administrative costs, arbitrator fees, or any other fees paid to the
private arbitration company or arbitrator.

end insert

SEC. 3.  

Section 1281.9 of the Code of Civil Procedure is
amended to read:

1281.9.  

(a) In any arbitration pursuant to an arbitration
agreement, when a person is to serve as a neutral arbitrator, the
proposed neutral arbitrator shall disclose all matters that could
cause a person aware of the facts to reasonably entertain a doubt
that the proposed neutral arbitrator would be able to be impartial,
including all of the following:

(1) The existence of any ground specified in Section 170.1 for
disqualification of a judge. For purposes of paragraph (8) of
subdivision (a) of Section 170.1, the proposed neutral arbitrator
shall disclose whether or not he or she has a current arrangement
concerning prospective employment or other compensated service
as a dispute resolution neutral or is participating in, or, within the
last two years, has participated in, discussions regarding such
prospective employment or service with a party to the proceeding.

(2) Any matters required to be disclosed by the ethics standards
for neutral arbitrators adopted by the Judicial Council pursuant to
this chapter.

(3) The names of the parties to all prior or pending noncollective
bargaining cases in which the proposed neutral arbitrator served
or is serving as a party arbitrator for begin delete any end delete begin insert a end insert party to the arbitration
proceeding or for a lawyer for a party and the results of each case
arbitrated to conclusion, including the date of the arbitration award,
identification of the prevailing party, the names of the parties’
attorneys, and the amount of monetary damages awarded, if any.
In order to preserve confidentiality, it shall be sufficient to give
the name of any party who is not a party to the pending arbitration
as “claimant” or “respondent” if the party is an individual and not
a business or corporate entity.

(4) The names of the parties to all prior or pending noncollective
bargaining cases involving begin delete any end delete begin insert a end insert party to the arbitration or lawyer
for a party for which the proposed neutral arbitrator served or is
serving as neutral arbitrator, and the results of each case arbitrated
to conclusion, including the date of the arbitration award,
identification of the prevailing party, the names of the parties’
attorneys and the amount of monetary damages awarded, if any.
In order to preserve confidentiality, it shall be sufficient to give
the name of any party not a party to the pending arbitration as
“claimant” or “respondent” if the party is an individual and not a
business or corporate entity.

(5) Any attorney-client relationship the proposed neutral
arbitrator has or had with begin delete any end delete begin insert a end insert party or lawyer for a party to the
arbitration proceeding.

(6) Any professional or significant personal relationship the
proposed neutral arbitrator or his or her spouse or minor child
living in the household has or has had with begin delete any end delete begin insert a end insert party to the
arbitration proceeding or lawyer for a party.

(7) For a consumer arbitration case, any solicitation made within
the last two years by, or at the direction of, the private arbitration
company to a party or lawyer for a party to the consumer
arbitration. During the pendency of the consumer arbitration, no
solicitation shall made of a party to the arbitration or of a lawyer
for a party to the arbitration. For purposes of this paragraph,
“solicitation” includes an oral or written request for arbitration
business, but does not include advertising directed to the general
public or communications indicating a general willingness to serve
as an arbitrator or private arbitration company.

(b) Subject only to the disclosure requirements of law, the
proposed neutral arbitrator shall disclose all matters required to
be disclosed pursuant to this section to all parties in writing within
10 calendar days of service of notice of the proposed nomination
or appointment.

(c) For purposes of this section, “lawyer for a party” includes
any lawyer or law firm currently associated in the practice of law
with the lawyer hired to represent a party.

(d) For purposes of this section, “prior cases” means
noncollective bargaining cases in which an arbitration award was
rendered within five years begin delete prior to end delete begin insert before end insert the date of the proposed
nomination or appointment.

(e) For purposes of this section, “any arbitration” does not
include an arbitration conducted pursuant to the terms of a public
or private sector collective bargaining agreement.