Amended in Assembly August 19, 2016

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 Bill No. 1078

Introduced by Senator Jackson

February 17, 2016

An act to amend begin delete Sections 1281.85 and end delete begin insert Section end insert 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 only require disclosure of solicitations made after January 1, 2017. begin insert The bill would specify what is, and what is not, a solicitation for purposes of this disclosure. 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 of employment or offers of new professional relationships, and, in a consumer arbitration case, would prohibit the arbitrator from entertaining or accepting any offers of employment as a dispute resolution neutral in another case from a party or lawyer for a party in the pending begin delete arbitration. end delete begin insert arbitration, except as provided. end insert

begin delete

Existing law requires a court to vacate an arbitration award if it determines that certain circumstances exist.

end delete begin delete

This bill, in a consumer arbitration case, 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 to 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 error.

end delete

This bill would exempt specified self-regulatory organizations from the application of the bill. begin insert The bill would provide that its provisions are severable. 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.  

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

(1) 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.

(2) In a consumer arbitration case, 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.

(b) This section does not apply to an arbitration conducted or
administered by a self-regulatory organization, as defined by the
federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a) or
regulations adopted under that act. begin insert This section also does not apply
to an arbitration conducted pursuant to the terms of a public or
private sector collective bargaining agreement. end insert

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

begin delete

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
ethics 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 ethics 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.

(d) (1) In a consumer arbitration case, 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 ethics 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. A recovery of costs from the private
arbitration company or from the arbitrator is only allowed after
the private arbitration company or the 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.
A recovery of costs under this paragraph is prohibited if the
arbitration award is vacated solely on the basis of a harmless error.
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.

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

end delete

begin delete SEC. 3. end delete

begin insert SEC. 2. end insert   

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 a 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 a 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 a 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 a party to the arbitration
proceeding or lawyer for a party.

(7) (A) 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 be made of a party to the arbitration or of a lawyer
for a party to the arbitration. Any solicitation made before January
1, 2017, is not required to be disclosed pursuant to this paragraph.

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

(C) (i) For purposes of this paragraph, “solicitation” includes
begin delete all end delete begin insert either end insert of the following:

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

begin delete

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

end delete begin delete

(III)

end delete

begin insert (II) end insert  Oral or written discussions, meetings, or negotiations to
designate the private arbitration company or the arbitrator as the
arbitration provider or arbitrator for a begin delete party. end delete begin insert party in specific
contracts. end insert

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

(I) Advertising directed to the general public.

(II) Communications indicating a general willingness to serve
as an arbitrator or private arbitration company. begin insert For purposes of
this subclause, “communications” include, but are not limited to,
standard educational materials about alternative dispute resolution
or the provider organization. end insert

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

begin insert

(IV) Responding to inquiries regarding the arbitration
provider’s costs, rules, procedures, or standards.

end insert

(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 before 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.

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

The provisions of this bill are severable. If any
provision of this bill or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.

end insert