BILL ANALYSIS
SENATE COMMITTEE ON ELECTIONS AND REAPPORTIONMENT
Senator Don Perata, Chair
BILL NO: SB 157 HEARING DATE: 4/18/01
AUTHOR: HAYNES ANALYSIS BY: Rachel
Harris
AMENDED: 4/16/01
FISCAL: YES
SUBJECT : Campaign contributions: arbitration.
BACKGROUND :
Current law prohibits any public official from
participating in making or in any way using his/her
official position to influence a governmental decision in
which he/she knows or has reason to know he/she has a
financial interest. The definition of a financial interest
does not include campaign contributions.
Current law prohibits an officer of an agency from
accepting, soliciting or directing a contribution of $250
or more from any participant while a proceeding involving a
license, permit or other entitlement for use is pending
before the agency. However, the definition of agency does
not include the courts or any agency in the judicial
branch, local governmental agencies whose members are
directly elected by the voters, the Legislature, the Board
of Equalization or constitutional officers.
Arbitration proceedings are used often in state business,
mostly in state contract disagreements. Generally, the
decision to submit the matter to binding arbitration and
who shall determine the panel of judges is predetermined in
the contract in question. Most often the panel of judges
is agreed upon by the parties in the case.
PROPOSED LAW :
This bill would create a new conflict of interest within
the Political Reform Act. It would treat a campaign
contribution like a financial interest in the case of a
governmental decision regarding lawsuits that may be
referred to binding arbitration.
Specifically, this bill would prohibit an elected state
officer from doing any of the following if that official
has received a contribution of $250 or more within the
preceding 12 months from a party to the pending lawsuit,
the party's attorney or any person acting on behalf of the
party:
1. Submitting a lawsuit or any part of a lawsuit to
binding arbitration.
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2. If that lawsuit is submitted to binding
arbitration select or designate an
arbitrator for the proceeding.
3. Designate someone else to do one of the above
activities.
This bill would also prohibit an elected state officer from
receiving a contribution of $250 or within 12 months from
acting if he/she has performed one of the above activities.
COMMENTS :
1.According to the author, this bill was introduced in
reaction to the recent arbitration agreement on the smog
impact fee attorney's fees settlement which awarded the
attorneys in that case $88.5 million.
2.Last year Governor Davis signed SB 215 (Karnette) and AB
809 (Lowenthal), which worked in conjunction to repeal
the original legislation that created the smog impact fee
and refund the fee with interest to the motorists from
whom it was collected. Included in SB 215 was a
provision to have the legal fees associated with the
lawsuit dealt with through a binding arbitration
proceeding. In that proceeding, Governor Davis chose one
of the judges on the arbitration panel, the plaintiffs
chose a second member and together those two judges
picked the third.
Governor Davis had received campaign contributions from
one of the plaintiffs and his law firm, Milberg, Weiss,
Bershad, Hynes & Lerach, who were involved in the suit.
The author asserts that there is the appearance of
impropriety and a conflict of interest on the part of the
Governor who had direct input into the selection of the
judges who awarded the $88.5 million settlement.
3.In December, after the arbitration panel had decided on
the settlement, Governor Davis requested that they
reconsider their decision. The panel declined. In
January, Attorney General Lockyer, at the request of the
Governor, on behalf of the state, filed a motion to
vacate the award. Soon thereafter, the Lerach legal team
filed a petition to confirm the award. Motions will be
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heard in superior court on April 18th.
4.In most cases of binding arbitration between two parties
each party has input into the designation of the judges.
If this bill were to become law, it is possible that no
elected official that would generally have input on
behalf of the state would be able to do so. In the
lawsuit referenced above, it was the Governor's
responsibility to represent the state's interests as a
party to the lawsuit. This bill does not make provisions
for who would take part in the designation process on
behalf of the state if the governor were prohibited from
participating.
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Additionally, any of the legislators that had received
contributions of $250 or more from any these attorneys
would have been prohibited from participating in the
drafting of or voting on SB 215, which made the
determination to send the matter to binding arbitration.
5.Because current law already prohibits a public officer
from participating in decisions where they may have a
financial interest, if Governor Davis had received
personal income from these lawyers he would have been
prohibited from taking part in these decisions.
6.Current conflict of interest laws prohibit elected
officials from participating in decisions concerning
direct benefits. In this instance, we would be
prohibiting officials from participating in decisions
concerning what kind of proceeding would be utilized or
who should preside.
7.It may be that the financial relationship between the two
parties in the lawsuit is not as much of a possible
conflict of interest as the possible financial
relationship between the judges and the individual
parties, if the judges are somehow beholden to either of
the parties. If the judges act impartially the
contributions between the parties are irrelevant.
POSITIONS :
Sponsor: Author
Support: Dean Andal, Member, State Board of Equalization
Oppose: None Received
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