BILL ANALYSIS Ó
SB 1078
Page 1
SENATE THIRD READING
SB
1078 (Jackson)
As Amended August 19, 2016
Majority vote
SENATE VOTE: 24-12
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+-----------------------+---------------------|
|Judiciary |8-2 |Mark Stone, Wagner, |Gallagher, |
| | |Alejo, Chau, Chiu, |Maienschein |
| | |Cristina Garcia, | |
| | |Holden, Ting | |
| | | | |
| | | | |
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SUMMARY: Prohibits arbitrators in consumer arbitration cases
from accepting certain work assignments or offers of employment
during the course of an arbitration and requires them to make
additional disclosures about solicitations for work received
during the course of an ongoing arbitration. Specifically, this
bill:
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1)Prohibits, from the time of appointment until the conclusion
of the arbitration, an arbitrator - except when conducting an
arbitration regulated by the Securities and Exchange
Commission (SEC)-- from entertaining or accepting either of
the following:
a) Any offer of employment or new professional relationship
as a lawyer, expert witness, or consultant from a party or
lawyer for a party in the pending arbitration.
b) In a consumer arbitration case, any offer of employment
as a dispute resolution neutral (arbitrator) 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 to be made
to the arbitrator.
1)Defines, for purposes of 1) above, a "lawyer for a party" to
include any lawyer or law firm currently associated in the
practice of law with the lawyer hired to represent a party.
2)Provides that the provisions of 1) above, do not apply to an
arbitration conducted pursuant to the terms of a public or
private sector collective bargaining agreement.
3)Requires, in any arbitration pursuant to an arbitration
agreement, the proposed neutral arbitrator to disclose the
following, in addition to other disclosures required by
existing law, in a consumer arbitration case: any
"solicitation" made within the last two years by, or at the
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direction of, the private arbitration company to a party or
lawyer for a party to the consumer arbitration and provides
that any solicitation made before January 1, 2017, is not
required to be disclosed.
4) Prohibits, during the pendency of the consumer arbitration,
any "solicitation" to be made of a party to the arbitration or
of a lawyer for a party to the arbitration.
5)Defines "solicitation" to include private presentations and
oral and written discussions to designate the private
arbitration company or the arbitrator as the arbitration
provider for a party in specific contracts, but exclude
interactions such as advertising directed to the general
public, communicating standard educational material about
alternative dispute resolution, or responding to inquiries
regarding the arbitration provider's costs, rules, procedures,
or standards.
6)Provides that the provisions of the bill are severable if any
provision of the bill or its application is held to be
invalid.
FISCAL EFFECT: None.
COMMENTS: Arbitration is a sometimes controversial form of
alternative dispute resolution held outside of courts where a
third-party (rather than a judge) makes a binding (and rarely
appealable) award. In an effort to protect consumers and
workers, this Legislature has worked on legislation aimed at
leveling the playing field, a turf that has been used by
corporate interests to evade public scrutiny, and even, avoid
the law. This is because arbitrators do not need to be trained
in the law, or even apply the law, or render a decision
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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.
Restriction on solicitation of business during arbitration.
This bill would codify the ethical rule that, from the time of
appointment until the conclusion of the arbitration, an
arbitrator shall not entertain or accept 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. This bill would also prohibit an
arbitrator, in a consumer arbitration case, from entertaining or
accepting any offers of employment as a dispute resolution
neutral in another case involving a party or lawyer for a party
in the pending arbitration, something which is not prohibited by
existing Judicial Council regulations. Therefore, arbitrators
in consumer arbitration cases would be prohibited from
entertaining and accepting a wider range of employment for a
party involved in the pending arbitration. There is an
exception if all parties to the pending arbitration, including
the lawyers in the arbitration, confer and agree 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. These provisions that limit an arbitrator from
entertaining or accepting certain offers of employment do not
apply to an arbitration conducted pursuant to the terms of a
public or private sector collective bargaining agreement.
Disclosure rules under current law and as proposed to be
enhanced by this bill. In an effort to protect against
conflicts of interest in consumer arbitrations, this bill
requires arbitrators to disclose certain targeted solicitation
activities, beginning January 1, 2017, made by, or at the
direction of, the private arbitration company to a party or
lawyer for a party to a consumer arbitration, and prohibits
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arbitrators from undertaking such activities during the pendency
of an arbitration. Specifically, the bill requires the proposed
neutral arbitrator to disclose any solicitation made within the
last two years (but not including any such solicitation prior to
January 1, 2017) by, or at the direction of, the private
arbitration company to a party or lawyer for a party to the
consumer arbitration. The bill exempts from these requirements
"an arbitration conducted or administered by a self-regulatory
organization, as defined by the federal Securities Exchange Act
of 1934 (15 United States Code Section 78a) or regulations
adopted under that act"- or in other words, an arbitration
proceeding that is regulated by the SEC.
This bill also includes a severability clause.
Analysis Prepared by:
Eric Dang and Alison Merrilees / JUD. / (916)
319-2334 FN:
0004658