BILL ANALYSIS
SB 877
Page 1
Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 877 (Harman) - As Amended: March 8, 2010
PROPOSED CONSENT (As Proposed To Be Amended)
SENATE VOTE : 31-0
SUBJECT : ARBITRATION: LEGAL REPRESENTATION
KEY ISSUE : SHOULD THE SUNSET BE ELIMINATED ON THE AUTHORITY OF
NON-CALIFORNIA LAWYERS TO APPEAR AND REPRESENT CLIENTS IN
ARBITRATION PROCEEDINGS?
FISCAL EFFECT : As currently in print this bill is currently
keyed non-fiscal.
SYNOPSIS
This non-controversial bill would remove the sunset provision
from the out-of-state attorney arbitration counsel program,
making the program permanent. Under this authority, attorneys
admitted to practice in other states are permitted to practice
law in California for the purpose of arbitration proceedings,
despite lacking a license to practice in California, similarly
to lawyers appearing in court proceedings. It would also
provide parity between non-admitted attorneys appearing in
arbitration proceedings and those appearing in court proceedings
with respect to the fee charged for this valuable privilege.
SUMMARY : Permits out-of-state lawyers to practice in California
arbitration proceedings. Specifically, this bill would remove
the current sunset provision and make permanent the
authorization for out-of-state lawyers to practice law in
arbitration proceedings despite lacking a license to practice
law in California.
EXISTING LAW provides that a party to an arbitration agreement
has the right to be represented by an attorney at any
arbitration proceeding or hearing and authorizes an out-of-state
attorney until January 1, 2011 to appear on behalf of a client
in arbitration as long as the out-of-state attorney files and
serves a certificate, as specified, and is subject to the
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disciplinary jurisdiction of the State Bar of California. (Code
Civ. Proc. Sec. 1282.4.)
COMMENTS : In support of the bill the author states that the
out-of-state arbitration program is an effective and useful
program that should be a permanent fixture of California state
law.
Further, the California Dispute Resolution Council (CDRC), a
supporter of the bill, notes that "[t]his statute has worked to
ensure that arbitrations can proceed smoothly in our state,
especially in those cases where out of state counsel are the
lawyers for the parties involved in the arbitration. This is
not an attempt by these lawyers to avoid becoming members of the
state bar but merely to perform their duties for their clients
when the arbitration occurs in the State of California."
Creation and Operation of the Current Program For Out-of State
Arbitration Counsel. This bill is sponsored by the Securities
Industry and Financial Markets Association. In Birbrower v.
Superior Court (1998) 17 Cal.4th 117, the court ruled that
out-of-state attorneys were precluded from representing their
clients in California arbitrations because it constituted the
unauthorized practice of law. In response, the Legislature
enacted a statute creating the Out of State Attorney Arbitration
Counsel Program (OSAAC) under Code of Civil Procedure Section
1282.4 and Rule of Court 9.43.
California courts allow out-of-state attorneys to appear pro hac
vice upon submitting an application and fee to the court and
serving notice of the hearing and the application with the State
Bar of California. (Rules of Court Rule 9.40.) Similarly,
under OSAAC, out-of-state attorneys can represent parties in
California arbitrations once they have satisfied, among other
things, the following requirements: (1) obtaining the approval
of the arbitrator; (2) serving notice and a certificate on the
arbitrator and State Bar of California; and (3) submitting to
the disciplinary jurisdiction of the California State Bar.
(Code Civ. Proc. Sec. 12824; Rule of Court 9.43.)
When it was enacted in 1999, the bill contained a sunset date of
two years. A subsequent report prepared in 2000 by the State
Bar noted that some certificates contained no attorney of record
on file, and many were never filed. Accordingly, there was
little record of adequate compliance by both attorneys in filing
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the certificates and by arbitrators in ensuring that the rules
adopted by the Supreme Court for the out-of-state attorney in
arbitration appearances were followed. Various measures
extended the sunset temporarily. Most recently AB 2482 (Harman,
Chapter 357, Statutes of 2006) required the out-of-state
attorney to get the arbitrator's approval of certificate of
intent to appear in arbitration before the out-of-state attorney
filed it with the State Bar. AB 2482 also contained a reporting
requirement by the State Bar.
The "2009 Report of the State Bar of California to the
California Legislature in Accordance with AB 2482 (Harman)
(2006, Ch. 357) Relating to Arbitration Proceedings Conducted
Under California Code of Civil Procedure Section 1282.4" (the
Report) shows that during the two-year period covered in the
Report, 1,192 out-of-state attorneys filed a certificate of
arbitration appearance. The State Bar compiled a table showing
the number of out-of-state applicants and the corresponding
number of times they appeared in arbitrations during the two
years covered by the report as follows:
-------------------------------------------------------------------------------------------------------------
|# of | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|Appearanc| | | | | | | | | | |
|es | | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|# of | 676 | 104 | 33 | 10 | 10 | 2 | 2 | 2 | 6 |2 |
|Applicant| | | | | | | | | | |
|s | | | | | | | | | | |
-------------------------------------------------------------------------------------------------------------
As the table demonstrates, there are a number of out-of-state
attorneys making multiple appearances in California
arbitrations. While most applicants have only one or two
appearances, a few are engaging in a relatively high number of
matters. By most accounts, a lawyer appearing in 10 trials in a
two-year period would be considered a busy lawyer, and certainly
one doing substantial professional work in the state. The State
Bar reports the following special circumstances given by
arbitrators for allowing repeated appearances by these
out-of-state attorneys:
1. the arbitration is a collection case on behalf of a
major brokerage firm against registered representative
employees;
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2. the out-of-state attorney represented the brokerage firm
nationwide;
3. the proceeding is in California because the claimant
resides in California and prefers to use an out-of-state
attorney because of his or her familiarity with the
subject; or
4. the applicant is in-house counsel or associated with
outside law firms who handle similar matters nationwide.
The State Bar reports that it did not receive any written
complaints about the OSAAC program during the reporting period
and it is not aware of any complaints or alleged violations of
Code of Civil Procedure Section 1282.4. At this time it appears
that the dual step requirement of arbitrator's approval and
subsequent filing with the State Bar is helping to provide
greater compliance among out-of-state attorneys. Although the
study period has been relatively brief in the life of the
statute, it reflects some improvement on prior experience such
that elimination of the sunset may be appropriate in light of
the proposed amendments which, it is hoped, offer arbitrators
some added incentive to overcome their apparent prior resistance
and embrace their obligation to assure the voluntary compliance
upon which the program depends, particularly given that there
will be no further reports to the Legislature if this bill is
enacted.
Author's Amendment. In order to ensure equality between out of
state attorneys appearing in arbitration and those appearing in
litigation, the author and sponsor agree that out of state
attorneys appearing in arbitration shall pay the same fee for
that valuable privilege as those who appear in court.
Consistently with the nature of arbitration, these funds are to
be designated for support of ADR programs under the Dispute
Resolution Programs Act. Procedurally, this bill will be
amended to make it contingent upon passage of another bill that
will so provide.
REGISTERED SUPPORT / OPPOSITION :
Support
Securities Industry and Financial Markets Association (sponsor)
SB 877
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California Dispute Resolution Council
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334