Amended in Assembly June 14, 2016

Amended in Senate May 10, 2016

Amended in Senate April 14, 2016

Amended in Senate April 4, 2016

Senate BillNo. 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.begin insert The bill would only require disclosure of solicitations made after January 1, 2017.end insert 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 ofbegin delete employment,end deletebegin insert employment orend insert offers of new professional relationships,begin delete orend deletebegin insert and, in a consumer arbitration case, would prohibit the arbitrator from entertaining or accepting anyend insert 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 that certain circumstances exist.

Thisbegin delete billend deletebegin insert bill, in a consumer arbitration case,end insert would authorize a party to recover arbitration proceeding costs from a private arbitration company or arbitrator if the arbitration award is vacated by the court based on a determination 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 a timely demand tobegin delete disqualify.end deletebegin insert disqualify because of a violation of specified ethics standards or disclosure requirements. The bill would only allow the recovery of costs after the private arbitration company or arbitrator is provided notice and an opportunity to be heard only on the issue of whether there was a violation of the ethics standards or disclosure requirements. The bill would prohibit the recovery of costs if the arbitration award is vacated solely on the basis of a harmless errorend insertbegin insert.end insert

begin insert

This bill would exempt specified self-regulatory organizations from the application of the bill.

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:

P2    1

SECTION 1.  

Section 1281.65 is added to the Code of Civil
2Procedure
, to read:

3

1281.65.  

begin insert(a)end insertbegin insertend insert From the time of appointment until the
4conclusion of the arbitration, an arbitrator shall not entertain or
5accept either of the following:

begin delete

P3    1(a) Any

end delete

2begin insert(1)end insertbegin insertend insertbegin insertAnyend insert offers of employment or new professional relationships
3as a lawyer, expert witness, or consultant from a party or lawyer
4for a party in the pending arbitration.

begin delete

5(b) Any

end delete

6begin insert(2)end insertbegin insertend insertbegin insertIn a consumer arbitration case, anend insertbegin insertyend insert offers of employment
7as a dispute resolution neutral in another case involving a party or
8lawyer for a party in the pending arbitration unless all parties to
9 the pending arbitration, including the lawyers in the arbitration,
10have conferred and agreed in writing, before any solicitation of
11the arbitrator, to allow offers of future employment as a dispute
12resolution neutral to be made to the arbitrator.

begin insert

13
(b) This section does not apply to an arbitration conducted or
14administered by a self-regulatory organization, as defined by the
15federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a) or
16regulations adopted under that act.

end insert
begin insert

17
(c) For purposes of this section, “lawyer for a party” has the
18same definition as that term is defined in Section 1281.9.

end insert
19

SEC. 2.  

Section 1281.85 of the Code of Civil Procedure is
20amended to read:

21

1281.85.  

(a) Beginning July 1, 2002, a person serving as a
22neutral arbitrator pursuant to an arbitration agreement shall comply
23with the ethics standards for arbitrators adopted by the Judicial
24Council pursuant to this section. The Judicial Council shall adopt
25begin delete ethicalend deletebegin insert ethicsend insert standards for all neutral arbitrators effective July 1,
262002. These standards shall be consistent with the standards
27established for arbitrators in the judicial arbitration program and
28maybegin delete expandend deletebegin insert expand,end insert but shall notbegin delete limitend deletebegin insert limit,end insert the disclosure and
29disqualification requirements established by this chapter. Thebegin insert ethicsend insert
30 standards shall address the disclosure of interests, relationships,
31or affiliations that may constitute conflicts of interest, including
32prior service as an arbitrator or other dispute resolution neutral
33entity, disqualifications, acceptance of gifts, and establishment of
34future professional relationships.

35(b) Subdivision (a) does not apply to an arbitration conducted
36pursuant to the terms of a public or private sector collective
37bargaining agreement.

38(c) The ethics requirements and standards of this chapter are
39nonnegotiable and shall not be waived.

P4    1(d) begin deleteIf end deletebegin insert(1)end insertbegin insertend insertbegin insertIn a consumer arbitration case, if end insertan arbitration award
2is vacated pursuant to paragraph (2), (3), or (6) of subdivision (a)
3of Section 1286.2 because of a violation of thebegin delete ethicalend deletebegin insert ethicsend insert
4 standards adopted by the Judicial Council pursuant to this section
5or a violation of the disclosure requirements established by this
6chapter, a party may recover any costs incurred in the arbitration
7proceeding from the private arbitration company or from the
8arbitrator to whom the costs were paid.begin insert A recovery of costs from
9the private arbitration company or from the arbitrator is only
10allowed after the private arbitration company or the arbitrator is
11provided notice and an opportunity to be heard only on the issue
12of whether there was a violation of the ethics standards or
13disclosure requirements. A recovery of costs under this paragraph
14is prohibited if the arbitration award is vacated solely on the basis
15of a harmless error.end insert
For purposes of this paragraph, “costs” include
16filing fees, administrative costs, arbitrator fees, or any other fees
17paid to the private arbitration company or arbitrator.

begin insert

18
(2) This subdivision does not apply to an arbitration conducted
19or administered by a self-regulatory organization, as defined by
20the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a)
21or regulations adopted under that act.

end insert
22

SEC. 3.  

Section 1281.9 of the Code of Civil Procedure is
23amended to read:

24

1281.9.  

(a) In any arbitration pursuant to an arbitration
25agreement, when a person is to serve as a neutral arbitrator, the
26proposed neutral arbitrator shall disclose all matters that could
27cause a person aware of the facts to reasonably entertain a doubt
28that the proposed neutral arbitrator would be able to be impartial,
29including all of the following:

30(1) The existence of any ground specified in Section 170.1 for
31disqualification of a judge. For purposes of paragraph (8) of
32subdivision (a) of Section 170.1, the proposed neutral arbitrator
33shall disclose whether or not he or she has a current arrangement
34concerning prospective employment or other compensated service
35as a dispute resolution neutral or is participating in, or, within the
36last two years, has participated in, discussions regarding such
37prospective employment or service with a party to the proceeding.

38(2) Any matters required to be disclosed by the ethics standards
39for neutral arbitrators adopted by the Judicial Council pursuant to
40this chapter.

P5    1(3) The names of the parties to all prior or pending noncollective
2bargaining cases in which the proposed neutral arbitrator served
3or is serving as a party arbitrator for a party to the arbitration
4proceeding or for a lawyer for a party and the results of each case
5arbitrated to conclusion, including the date of the arbitration award,
6identification of the prevailing party, the names of the parties’
7attorneys, and the amount of monetary damages awarded, if any.
8In order to preserve confidentiality, it shall be sufficient to give
9the name of any party who is not a party to the pending arbitration
10as “claimant” or “respondent” if the party is an individual and not
11a business or corporate entity.

12(4) The names of the parties to all prior or pending noncollective
13bargaining cases involving a party to the arbitration or lawyer for
14a party for which the proposed neutral arbitrator served or is serving
15as neutral arbitrator, and the results of each case arbitrated to
16conclusion, including the date of the arbitration award,
17identification of the prevailing party, the names of the parties’
18attorneys and the amount of monetary damages awarded, if any.
19In order to preserve confidentiality, it shall be sufficient to give
20the name of any party not a party to the pending arbitration as
21“claimant” or “respondent” if the party is an individual and not a
22business or corporate entity.

23(5) Any attorney-client relationship the proposed neutral
24arbitrator has or had with a party or lawyer for a party to the
25arbitration proceeding.

26(6) Any professional or significant personal relationship the
27proposed neutral arbitrator or his or her spouse or minor child
28living in the household has or has had with a party to the arbitration
29proceeding or lawyer for a party.

30(7) begin insert(A)end insertbegin insertend insert For a consumer arbitration case, any solicitation made
31within the last two years by, or at the direction of, the private
32arbitration company to a party or lawyer for a party to the consumer
33arbitration. During the pendency of the consumer arbitration, no
34solicitation shallbegin insert beend insert made of a party to the arbitration or of a lawyer
35for a party to the arbitration.begin delete Forend deletebegin insert Any solicitation made before
36January 1, 2017, is not required to be disclosed pursuant to this
37paragraph.end insert

begin insert

38
(B) This paragraph does not apply to an arbitration conducted
39or administered by a self-regulatory organization, as defined by
P6    1the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a)
2or regulations adopted under that act.

end insert

3begin insert(C)end insertbegin insertend insertbegin insert(i)end insertbegin insertend insertbegin insertForend insert purposes of this paragraph, “solicitation” includes begin delete4 an oral or written request for arbitration business, but does not
5include advertising directed to the general public or
6communications indicating a general willingness to serve as an
7arbitrator or private arbitration company.end delete
begin insert all of the following:end insert

begin insert

8
(I) Private presentations made to a party or lawyer for a party
9by the private arbitration company or the arbitrator.

end insert
begin insert

10
(II) An oral or written request for arbitration business.

end insert
begin insert

11
(III) Oral or written discussions, meetings, or negotiations to
12designate the private arbitration company or the arbitrator as the
13arbitration provider or arbitrator for a party.

end insert
begin insert

14
(ii) For purposes of this paragraph, “solicitation” does not
15include any of the following:

end insert
begin insert

16
(I) Advertising directed to the general public.

end insert
begin insert

17
(II) Communications indicating a general willingness to serve
18as an arbitrator or private arbitration company.

end insert
begin insert

19
(III) Presentations made by the private arbitration company or
20the arbitrator at a program or seminar held open to the public.

end insert

21(b) Subject only to the disclosure requirements of law, the
22proposed neutral arbitrator shall disclose all matters required to
23be disclosed pursuant to this section to all parties in writing within
2410 calendar days of service of notice of the proposed nomination
25or appointment.

26(c) For purposes of this section, “lawyer for a party” includes
27any lawyer or law firm currently associated in the practice of law
28with the lawyer hired to represent a party.

29(d) For purposes of this section, “prior cases” means
30noncollective bargaining cases in which an arbitration award was
31rendered within five years before the date of the proposed
32nomination or appointment.

33(e) For purposes of this section, “any arbitration” does not
34include an arbitration conducted pursuant to the terms of a public
35or private sector collective bargaining agreement.



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