BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1090|
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THIRD READING
Bill No: AB 1090
Author: Monning (D)
Amended: 5/12/09 in Assembly
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-1, 6/9/09
AYES: Corbett, Harman, Florez, Leno
NOES: Walters
ASSEMBLY FLOOR : 71-0, 5/14/09 - See last page for vote
SUBJECT : Arbitration
SOURCE : Author
DIGEST : This bill provides that existing ethical
standards and requirements for neutral arbitrators are not
subject to negotiation and may not be waived.
ANALYSIS : Existing law provides that anyone may waive
the advantage of a law intended solely for his benefit, but
a law established for a public reason cannot be contravened
by a private agreement. (Civ. Code Section 3513.) Thus, a
waiver of statutory rights is unenforceable where the
"public benefit [of the statute] is one of its primary
purposes." ( DeBerard Properties, Ltd. v. Lim (1999) 20
Cal.4th 659, 668-669.)
Existing law requires a person serving as a neutral
arbitrator pursuant to an arbitration agreement to comply
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with the ethics standards for arbitrators adopted by the
Judicial Council. These provisions do not apply to an
arbitration conducted pursuant to the terms of a public or
private sector collective bargaining agreement. (Code Civ.
Proc. Sec. 1281.85.)
Existing law, under the Judicial Council's "Ethics
Standards for Neutral Arbitrators in Contractual
Arbitration," requires covered arbitrators to make basic
disclosures regarding potential conflicts of interest. The
standards also require compliance with certain standards of
conduct such as requirements that the arbitrator has a duty
to refuse to accept a gift from a party to the arbitration
and the arbitrator may not, during the arbitration,
entertain or accept any offers of employment from a party.
(Ethics Standards for Neutral Arbitrators in Contractual
Arbitration.)
Existing case law provides that the federal Securities
Exchange Act of 1934 preempts the foregoing obligations as
applied to arbitrations conducted by "self-regulatory
organizations" in the securities industry. ( Jevne v.
Superior Court (2005) 35 Cal.4th 935.)
Existing law, the California Arbitration Act, requires a
proposed neutral arbitrator to make specified disclosures
and allows a party to disqualify the arbitrator. (Code Civ.
Proc. 1281.9.)
Existing case law provides that a party may not waive its
statutory rights to disqualify an arbitrator under Code of
Civil Procedure Sections 1281.9 and 1281.91. ( Azteca
Construction, Inc. v. ADR Consulting, Inc. (2004) 121
Cal.App.4th 1156.)
This bill provides that existing ethical standards and
requirements for neutral arbitrators are nonnegotiable and
shall not be waived.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/10/09)
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California Dispute Resolution Council
Consumer Attorneys of California
Consumers Union
ARGUMENTS IN SUPPORT : According to the author's office,
this bill "protects consumers in the event of arbitration,
by ensuring California's ethics standards are nonnegotiable
and shall not be waived. This bill allows for proper
disclosure of any conflict of interest to be accessible and
transparent between the parties and the arbitration
provider." Furthermore, "[l]etting arbitration providers
or arbitrators waive their ethical duties undermines the
legislative intent in establishing these rules and puts the
arbitration consumer in the unintended position of either
postponing their arbitration indefinitely or waiving their
statutory rights under the ethical guidelines."
The California Dispute Resolution Council supports the
bill, arguing that it codifies the court's decision in
Azteca Construction v. ADR Consulting, Inc., supra, 121
Cal.App.4th 1156. Supporter Consumers Union writes that
"[b]y specifically making the adherence to high ethical
standards non-waivable, every individual who submits to the
arbitration process is guaranteed that all arbitrators are
required to conform to the highest standards of conduct
with respect to how arbitrations are handled."
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Beall, Bill Berryhill,
Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuller, Furutani, Galgiani, Gilmore, Hall, Harkey,
Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,
Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,
John A. Perez, V. Manuel Perez, Portantino, Price,
Ruskin, Salas, Silva, Skinner, Solorio, Audra Strickland,
Swanson, Torlakson, Torres, Torrico, Tran, Villines,
Yamada
NO VOTE RECORDED: Ammiano, Fuentes, Gaines, Garrick,
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Hagman, Nielsen, Saldana, Smyth, Bass
RJG:nl 6/10/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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