BILL ANALYSIS
```SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 1680 (Saldana)
As Amended April 22, 2010
Hearing Date: June 29, 2010
Fiscal: No
Urgency: No
KB:jd
SUBJECT
Civil Rights: Waiver of Rights
DESCRIPTION
This bill, sponsored by Asian Americans for Civil Rights and
Equality California, would impose specified restrictions on the
future contractual waivers of rights under the Ralph Civil
Rights Act and the Bane Civil Rights Act.
BACKGROUND
California has led the nation in enacting a statutory scheme
which provides for civil, criminal, and administrative penalties
for violations of civil rights laws. In particular, the Ralph
Civil Rights Act and Bane Civil Rights Act were designed to
protect individuals from hate-based crimes of violence. Despite
these statutory protections, hate crimes are still a common
occurrence in some areas of California.
This bill seeks to implement specified restrictions on future
contractual waivers of rights under these civil rights statutes
so as to ensure that the private and public enforcement of these
rights are not undermined.
CHANGES TO EXISTING LAW
Existing law , the Ralph Civil Rights Act, provides that all
persons within the jurisdiction of this state have the right to
be free from any violence, or intimidation by threat of
violence, committed against their persons or property because of
personal or other characteristics or statuses, such as political
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affiliation, sex, race, color, religion, marital status, sexual
orientation, or position in a labor dispute. (Civ. Code Sec.
51.7.)
Existing law , the Bane Civil Rights Act, prohibits violence or
the threat of violence based on grounds such as race, color,
religion, ancestry, national origin, political affiliation, sex,
sexual orientation, age, disability, or position in a labor
dispute. (Civ. Code Sec. 52.1.)
Existing law provides that a person who violates the Ralph Civil
Rights Act or aids, incites, or conspires in that act, is liable
for actual damages suffered by any person denied that right, as
well as a civil penalty and attorney's fees. (Civ. Code Sec.
52(b).)
Existing law provides that whenever there is reasonable cause to
believe that any person or group of persons is engaged in
conduct of resistance to the full enjoyment of any of the
foregoing rights the Attorney General, any district attorney or
city attorney, or any person aggrieved by the conduct may bring
a civil action. (Civ. Code Sec. 52(c).)
Existing law provides that a person whose enjoyment of legal
rights has been interfered with, or attempted to be interfered
with, may bring a civil action for damages, including injunctive
relief, and other appropriate equitable relief. (Civ. Code Sec.
52.1.)
This bill would provide that no person shall require another
person to waive any legal right, penalty, remedy, forum, or
procedure for violation of the Ralph Civil Rights Act or the
Bane Civil Rights Act as a condition of entering into a contract
for the provision of goods and services, including the right to
file and pursue a civil action or complaint with or otherwise
notify the Attorney General or any other public prosecutor or
any law enforcement agency, the Department of Fair Employment
and Housing, or any court or other governmental entity.
This bill would provide that no person shall refuse to enter
into a contract with, or refuse to provide goods or services to,
another person on the basis that the other person refuses to
waive any legal right, penalty, remedy, forum, or procedure for
violation of these civil rights acts.
This bill would provide that the exercise of a person's right to
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refuse to waive any legal right, penalty, remedy, forum, or
procedure for a violation of these civil rights laws shall not
affect any otherwise legal terms of a contract or an agreement.
This bill would require that any waiver of any legal right,
penalty, remedy, forum, or procedure for violation of these
civil rights acts shall be knowing and voluntary, and in
writing, and expressly not made as a condition of entering into
the contract or as a condition of providing or receiving goods
and services, and that any person who seeks to enforce such a
waiver shall have the burden of proving that it was knowing and
voluntary and not made as a condition of the contract or of
providing or receiving the goods or services.
This bill would provide that the foregoing protections apply to
any agreement to waive any legal right, penalty, remedy, forum,
or procedure for a violation of these civil rights laws entered
into, altered, modified, renewed, or extended on or after
January 1, 2011.
COMMENT
1. Stated need for the bill
The author states:
The purpose of AB 1680, the Hate Crimes Protection Act, is to
ensure that a contract requiring the waiver of rights or
procedures under the hate crimes statute is a matter of
voluntary consent and not coercion.
The Ralph Civil Rights Act provides civil penalties and
remedies to victims of hate-based violence and threats of
violence. A central feature of the Ralph Act affords an
individual the opportunity to file a private civil action, as
well as a complaint with the Department of Fair Employment and
Housing (DFEH).
However, it is becoming common for contracts to mandate wavier
of these rights, including clauses that mandate private
arbitration of any legal controversy or claim. A person who
signs such a contract but later becomes the victim of a hate
crime is forced to privately arbitrate the hate crime
violation, rather than bring the civil action to court.
While voluntary agreements for arbitration are appropriate,
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many contracts make accepting a mandatory arbitration
provision a condition of entering into a contract which cannot
be refused without invalidating the entire agreement. When
waiving the right to go to court for redress under the law is
made a condition of entering into a contract, rather than as a
term that can be knowingly and freely accepted or rejected,
statutory enforcement of the rights of Californians to be free
from hate-based violence is undermined.
AB 1680 is narrow in its scope to address only hate crimes,
not other types of employment or consumer disputes, and to
ensure that the waiver of any legal rights under the hate
crimes laws is knowing and voluntary, not imposed as a
condition of entering into the contract. It also prohibits
refusing to enter into a contract on the basis that the other
person declines to waive his/her rights under the hate
statutes. However, the bill does not prohibit all waivers, or
even all pre-dispute waivers, when the parties voluntarily
believe it is in their interest to do so.
2.Bill seeks to respond to recent controversial appellate court
decision regarding hate crimes
D.C. et al. v. Harvard-Westlake School et al., (2009) 176
Cal.App.4th 836, involved alleged threats of violence against a
student, D.C., at Harvard-Westlake school, a private educational
institution in Los Angeles. According to the facts of the case,
several students at Harvard-Westlake used the school's
computers, went to D.C.'s Web site and posted death threats
against D.C., along with derogatory comments about him. Several
other posts contained threats with references to D.C.'s
misperceived sexual orientation as a homosexual. When D.C.'s
father read the threats on the Web site, he immediately informed
Harvard-Westlake of the problem, believing that some of its
students were responsible. The father also contacted the Los
Angeles Police Department, which, in turn, notified the Federal
Bureau of Investigation. On the advice of the police, D.C.
withdrew from Harvard-Westlake. He and his family moved to
another part of California, where he enrolled at a different
educational institution. The Chronicle, Harvard-Westlake's
student newspaper, ran an article disclosing D.C.'s new
residential location and the name of the school he was
attending. The article also disclosed that postings at the Web
site had referred to D.C. as a "faggot." The faculty advisor to
the staff of The Chronicle approved the article before
publication. Harvard-Westlake did not suspend or expel any of
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the students who admitted posting the threats.
D.C. and his parents attempted to sue Harvard-Westlake under the
hate crimes law. (Civ. Code Secs. 51.7, 52.1.) In response,
the school filed a petition to compel arbitration of all claims.
The petition was based on the contents of Harvard-Westlake's
"Enrollment Contract," signed by D.C.'s father, which consisted
of five pages. The contract contained an arbitration provision,
stating: "I understand that any legal and actionable controversy
or claim arising out of or relating to this Agreement (including
but not limited to the determination of the scope and
applicability of this Agreement to arbitrate), the student's
enrollment in/departure from Harvard-Westlake or the student's
educational experience at Harvard-Westlake (including, but not
limited to academic matters and extracurricular activities and
community service) shall be submitted to final and binding
arbitration to be held in Los Angeles County, California, before
a single, neutral arbitrator in accordance with JAMS'
Comprehensive Arbitration Rules and Procedures. This
arbitration agreement applies during the term of this enrollment
agreement and survives after the termination of the enrollment
agreement." The contract further contained an attorney's fees
provision, stating that in the event of any arbitration or
litigation between the parties, the prevailing parties would be
entitled to recover all reasonable attorney's fees.
The trial court granted the petition to compel arbitration and
the case went to a private arbitrator retained by JAMS (Judicial
Arbitration and Mediation Services) as specified in the
enrollment contract. The arbitrator found for the school on all
counts, and ordered the parents to pay the school over half a
million dollars in attorney's fees and arbitration costs. The
school then filed a petition to confirm the arbitrator's award.
The appellate court concluded that because hate crimes laws
constitute unwaivable statutory rights comparable to
antidiscrimination laws, arbitral expenses and attorney's fees
may not be imposed on plaintiffs. The court noted that the
plaintiffs would not have been required to pay these expenses
had the dispute been heard in court and allowing them to be
imposed in arbitration would deter the filing of hate crimes
claims. Thus, the court, although recognizing that the rights
provided for hate crimes statutes are unwaivable, upheld the
order to arbitrate, but reversed the order for the plaintiff to
pay the school's arbitral expenses and costs.
3. Controversy surrounding mandatory arbitration
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In recent years, there have been frequent discussions as to the
merits and benefits of mandatory private arbitration as an
alternative forum to the civil justice system. Supporters of
mandatory arbitration generally assert that it is a more
efficient and less costly manner of resolving legal disputes
because they are able to limit discovery, set their own rules
for presenting evidence, schedule proceedings at their own
convenience, and select the third party who will decide their
cases. However, critics of private arbitration contend that it
is an unregulated industry, which is often costly and
unreceptive to consumers. Consumer advocates view mandatory
arbitration as putting consumers and businesses employees on an
uneven playing field that creates an inclination by arbitrators
to decide cases in favor of businesses. They further view
arbitration as an expensive process which also puts consumers at
a disadvantage by imposing procedural limitations on their
ability to pursue their legal claims. This is especially true
in cases where the business has pre-selected the company in the
contract who will arbitrate the claim. Critics contend that
arbitrators have far less incentive to be fair to both sides
when they owe their engagement to the business that will
repeatedly appear before them, unlike the consumer party who did
not choose the arbitration company and is not likely to be the
source of future work for the arbitrator.
These concerns are compounded by the fact that there are little,
if any, regulations or legal standards imposed on arbitrators or
their decisions. Regardless of the level or type of mistake, or
even misconduct, by the arbitrator, the grounds on which a court
will allow judicial review of an arbitration are extremely
narrow. (See Moncharsh v. Heiley & Blase (1992) 3 Cal.4th 1
(holding that a court is not permitted to vacate an arbitration
award based on errors of law by the arbitrator, except for
certain narrow exceptions).) Courts have recently begun to make
some exceptions to Moncharsh, and allowed for more expanded
judicial review of arbitral awards in certain circumstances.
(See Cable Connection, Inc. v. DIRECTV Inc., (2008) 44 Cal.4th
1334 (finding an exception to Moncharsh and held that judicial
review of arbitration awards based on legal error is permissible
where the arbitration agreement itself provides for such
review); see also Pearson Dental Supplies Inc. v. Superior Court
(2010) 48 Cal.4th 1334 (holding that error of law was sufficient
grounds to vacate the arbitral award because an arbitrator whose
legal error barred an employee subject to a mandatory
arbitration agreement from obtaining a hearing on the merits of
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a discrimination claim under the Fair Employment and Housing Act
(or other claims based on unwaivable statutory rights) exceeded
his or her legal powers).) Although the Pearson decision does
provide some recourse for individuals who were compelled to
arbitrate claims of unwaivable statutory rights, and effectively
denied a hearing on the merits for their claim, the general rule
providing for limited judicial review of arbitral awards is
still controlling.
4.Mandatory arbitration may infringe upon meaningful enforcement
of unwaivable civil rights laws
While arbitration may be appropriate where parties have
relatively equal bargaining power and have mutually agreed upon
the forum, it arguably is not appropriate when the contract is
one of adhesion that a person has been forced to sign without
the right to negotiation. This is particularly true in
instances where an individual signs arbitration agreements that
encompass unwaivable statutory rights.
While a party is free to waive the advantage of a law intended
solely for his or her benefit, a law established for a public
reason cannot be waived by private agreement. (Civ. Code Sec.
3513.) Both the Ralph and Bane Civil Rights Acts provide for
enforcement by the Attorney General and other public
prosecutors, as well as the Department of Fair Employment and
Housing (DFEH), in addition to private rights of action for both
equitable relief, civil penalties, and damages. The rights and
remedies afforded under these Acts reflect their purpose in not
only vindicating individual rights, but also to provide a
mechanism to redress the harms hate-based violence causes to the
larger community.
Indeed, the court in D.C. v Harvard-Westlake recognized the
fundamental public nature of the hate crimes statutes in holding
that the rights they establish should not be subject to waiver
by private contracts. However, the court disregarded the
implications of upholding the mandatory arbitration of a
violation of the hate crimes laws. The court instead
distinguished the required waiver of the right to have claims
resolved by the court from a complete waiver of statutory
rights. ("While we recognize that a party compelled to
arbitrate such rights does not waive them, but merely 'submits
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to their resolution in an arbitral, rather than judicial, forum'
? arbitration cannot be misused to accomplish a de facto waiver
of these rights." (citing Little v. Auto Stiegler, Inc. (2003)
29 Cal.4th 1064).) In other words, according to the D.C. Court,
requiring a party to allow a private arbitrator to decide hate
crimes violations is not, inherently, a waiver of rights and
procedures provided by the statutes. However, as discussed in
the previous comment, there are many problematic aspects of
private arbitration which arguably indicates that a waiver of
the right to have the claims resolved by the court does
essentially equate with a complete waiver of rights.
This is especially true with arbitration of civil rights cases,
where private arbitration may block not only an individual's
access to the civil justice system, but also public prosecution
by the Attorney General or other prosecutors or a complaint to
the DFEH. (See Sonic-Calabasas A, Inc. v. Moreno (2009) 174
Cal. App. 4th 546, rev. granted, 99 Cal. Rptr. 3d 866
(2009)(private arbitration clause precluded employee from making
use of the enforcement mechanism of the state Labor Commissioner
for redress of alleged labor law violation).) Moreover, a
fundamental feature of the hate crimes enforcement scheme is
that immediate protective and/or restraining orders may often be
needed to prevent further abuse. Even if an arbitrator were to
believe that immediate intervention was necessary, private
arbitration does not provide for orders necessary for immediate
injunctive relief. Thus, there are ample policy reasons for
which to conclude that claims rooted in unwaivable civil rights
are not appropriate for private arbitration, particularly
mandatory private arbitration.
5. Bill would prohibit waiver of rights under hate crimes
laws except as specified
This bill would provide that no person shall require another
person to waive any legal rights, penalty, remedy, forum, or
procedure for a violation of the Ralph Civil Rights Act or Bane
Civil Rights Act as a condition of entering into a contract for
goods or services. This bill would further provide that no
person shall refuse to enter into a contract with, or refuse to
provide goods and services to another person on the basis that
the person refuses to waive his or her rights. Thus, for
example, a private school could not require, as in the D.C.
case, a student's parents to sign a mandatory arbitration
agreement as a condition of enrolling the student at the school.
Nor could the private school refuse to enroll the student
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because his or her parents refused to waive their rights. Any
waiver of legal rights, penalty, remedy, forum, or procedure for
a violation of the Ralph Civil Rights Act or Bane Civil Rights
Act that is required as a condition of entering into a contract
for goods and services would be deemed to be involuntary,
unconscionable, against public policy, and unenforceable.
In addition, this bill would prohibit waivers of any legal
right, penalty, remedy, forum, or procedure for violations of
the Ralph and Bane Civil Rights Act, unless they are knowing and
voluntary, in writing, and expressly not made as a condition of
entering into a contract for, or receiving, goods and services.
Any person seeking to enforce a waiver of rights under this bill
would have the burden of proving that the waiver was made
knowingly and voluntarily, and not made as a condition of
receiving good or services.
This bill would apply to any agreement, including an agreement
to accept private arbitration, entered into, altered, modified,
renewed, or extended on or after January 1, 2011.
As articulated by the D.C. court, the legal rights to be free
from unlawful violence afforded under the Ralph and Bane Civil
Rights Act, are unwaivable statutory rights. However, this bill
would provide that an individual may knowingly and voluntarily
waive a legal right, remedy, forum, or procedure for violations
of the Acts, which could arguably be interpreted as authorizing
a complete waiver of all rights. This would be contrary to the
longstanding public policy that civil rights established by the
state for a public reason cannot be contravened by a private
agreement. (Civ. Code Sec. 3513; see also Civ. Code Sec. 1663
(stating that all contracts which have for their object,
directly or indirectly, to exempt anyone from responsibility for
his own fraud, or willful injury to the person or property of
another, or violation of law, whether willful or negligent, are
against the policy of the law).) It does not appear to be the
author's intent to allow individuals to completely waive
otherwise unwaivable rights by contract. Accordingly, this
Committee may wish to consider whether this bill should be
clarified to provide that its provisions shall not be construed
to authorize the complete knowing and voluntarily waiver of
rights that currently are unwaivable.
Suggested amendment
On page 4, after line 20 insert: "d) Nothing in this section
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shall be construed to negate or otherwise abrogate the
provisions of Civil Code Sections 1668 and 3513."
6. Federal Arbitration Act
The Federal Arbitration Act (FAA) (9 U.S.C. Sec. 2) provides
that an arbitration agreement shall be valid, irrevocable, and
enforceable, except on such grounds as exist at law or in equity
for the revocation of any contract. Opponents have raised
concerns that the restrictions on waivers in this bill may be
preempted by federal law. In Allied-Bruce Terminix Companies,
Inc., et al. v. Dobson (1995) 513 U.S. 265, the United States
Supreme Court discussed the issue of federal preemption over
state regulation of arbitration contracts. The Court stated
that Section 2 of the FAA "gives States a method for protecting
consumers against unfair pressure to agree to a contract with an
unwanted arbitration provision. States may regulate contracts,
including arbitration clauses, under general contract law
principles and they may invalidate an arbitration clause 'upon
such grounds as exist at law or in equity for the revocation of
any contract.' 9 U.S.C. [Sec.] 2 ? . What States may not do is
decide that a contract is fair enough to enforce all its basic
terms (price, service, credit), but not fair enough to enforce
its arbitration clause. The Act makes any such state policy
unlawful, for that kind of policy would place arbitration
clauses on an unequal 'footing,' directly contrary to the Act's
language and Congress' intent." (Id. at pg. 281.)
This bill generally applies to all waivers of legal rights,
penalties, remedies, forums or procedures under the hate crimes
statutes, not just specifically to arbitration agreements. This
bill also relies on the general contract law principle of
unconscionability to invalidate waivers that are required as a
condition of entering into a contract for goods or services.
Unconscionability is routinely applied by the courts to
invalidate contracts, including arbitration agreements. It
would be difficult to imagine a scenario where a required waiver
of civil rights is not unconscionable. Finally, this bill does
not completely bar waivers of legal rights under the hate crimes
statutes, or agreements to arbitrate such claims. Instead, this
bill requires that all waivers be knowing and voluntary. Thus,
it does not appear that this bill conflicts with the Federal
Arbitration Act.
7. Opposition
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A coalition of business interests argues against the bill,
contending as follows:
This bill would affect a situation where an individual had
voluntarily engaged in a contract with another party that
includes an agreement to resolve future disputes through
arbitration. This bill does not affect stranger-on-stranger
hate crimes, which can (and should) be prosecuted criminally
and civilly. There is no reason that a voluntary, pre-dispute
agreement to resolve a future dispute through arbitration is
unfair.
Arbitration has evolved into a productive and useful method of
resolving disputes. In the modern economy, organizations
continue to look at more efficient ways of conducting
business. Arbitration is an alternative method of resolving
disputes derived from the need to more efficiently handle
conflicts.
The U.S. Supreme Court and California courts support
arbitration agreements in contracts. Businesses use
arbitration to save resources and reinvest back into the
economy. The use of pre-dispute arbitration benefits
California and is good public policy.
Arbitration is Quicker than Litigation. Arbitration brings
cases to resolution faster and at less expense to both parties
than traditional litigation.
Arbitration is Less Expensive than Litigation. A consumer or
employee who participates in arbitration can save money due to
the greater expenses of a lawsuit. The benefits also apply to
employers and merchants. Furthermore, the state benefits by
shifting the caseload to arbiters and saving taxpayers money.
Arbitration Is More Satisfactory than Litigation. A study
conducted by the American Bar Association found arbitration
litigants were more satisfied than those involved in lawsuits.
Likewise, a survey conducted by Dispute Resolution Times
found that 83% of employees favored using arbitration.
Prohibiting Arbitration Agreements Puts California Out of
Step. Prohibiting these agreements would put California out
of the mainstream and place California at an economic
disadvantage.
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Arbitration is a fair, useful, cost-efficient way to resolve
disputes.
The Civil Justice Association of California likewise argues:
While CJAC agrees that the Ralph Civil Rights Act is as
deserving of vigorous enforcement as any other area of law in
California, we disagree that a consensual, voluntary,
pre-dispute agreement to resolve a future dispute through
arbitration is somehow unfair.
This prohibition on arbitration is not only contrary to the
provisions of the Federal Arbitration Act (FAA), but is also
contrary to well-established public policy encouraging
arbitration. Arbitration agreements are becoming increasingly
favored and have worked well in many areas. The cost and time
savings of arbitration offer considerable benefits to both
parties.
Support : American Civil Liberties Union; American Federation of
State, County and Municipal Employees; Anti-Defamation League;
The Arc of California; California Alliance for Retired
Americans; California Church IMPACT; California Commission on
the Status of Women; California Communities United Institute; CA
Conference Board of Amalgamated Transit Union; California
Conference of Machinists; California Dispute Resolution Council;
California Employment Lawyers Association; California Teachers
Association; California Teamsters Public Affairs Council; City
of West Hollywood; Consumer Attorneys of California; Disability
Rights California; Engineers and Scientists of CA, IFPTE Local
20; Inland Counties Stonewall Democrats; International Longshore
and Warehouse Union; Mexican American Legal Defense and
Educational Fund; National Lawyers Guild Labor & Employment
Committee; Professional and Technical Engineers, IFPTE Local 21;
Public Advocates; UNITE-HERE; United Food & Commercial Workers
Western States Council; one individual
Opposition : Association of California Insurance Companies;
California Assisted Living Association; California Association
of Joint Powers Authorities; California Business Properties
Association; California Chamber of Commerce; California Farm
Bureau; California Hospital Association; California
Manufacturers & Technology Association; California Retailers
Association; Civil Justice Association; Cooperative of American
Physicians, Inc.; Medical Insurance Exchange of California
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HISTORY
Source : Asian Americans for Civil Rights & Equality; Equality
California
Related Pending Legislation : AB 2706 (Lowenthal) would
specifically add homeless persons, as defined, to the list of
individuals protected from violence and intimidation under the
Ralph Civil Rights Act, thereby providing civil remedies to
homeless person who are injured as a result of such violence.
This bill is currently in the Senate Appropriations Committee.
Prior Legislation :
AB 1715 (Committee on Judiciary, 2003) would have, among other
things, made it an unlawful employment practice for a covered
employer to require an employee to waive any rights or
procedures under the Fair Employment and Housing Act as a
condition of employment. This bill was vetoed by Governor Gray
Davis.
SB 1538 (Burton, 2002) would have, among other things, made it
an unlawful employment practice to require an employee to waive
any rights or procedures under the Fair Employment and Housing
Act, and would have made unenforceable any predispute
arbitration agreement between an employer and employee that
violated this prohibition. This bill was vetoed by Governor
Gray Davis.
Prior Vote :
Assembly Judiciary Committee (Ayes 6, Noes 3)
Assembly Floor (Ayes 44, Noes 27)
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