BILL ANALYSIS �
AB 1062
Page 1
Date of Hearing: April 12, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1062 (Dickinson) - As Introduced: February 18, 2011
As Proposed to be Amended
SUBJECT : COURT ORDERS REGARDING PRIVATE ARBITRATION: RIGHT TO
APPEAL
KEY ISSUE : SHOULD A COURT ORDER DENYING A PETITION TO COMPEL
ARBITRATION BE AUTOMATICALLY SUBJECT TO AN IMMEDIATE APPEAL WHEN
AN ORDER GRANTING A PETITION TO COMPEL ARBITRATION IS NOT
APPEALABLE?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
Contract clauses by which parties stipulate to resolve future
legal disputes by private arbitration are generally enforceable
under a body of case law that has largely developed over the
past 20 years. These contracts are not controversial when they
are made between parties of relatively equal bargaining power
and sophistication who are repeat users of arbitration, such as
in business-to-business disputes and cases arising under
labor-management collective bargaining agreements. However,
private arbitration clauses are highly controversial when they
are imposed as a mandatory condition in the fine print of a
"take-it or leave-it" contract between a "repeat-player"
business that drafted the clause and a consumer or employee who
is a "one-shot" user of arbitration. The debate is heated
because private arbitration is a substantially different process
than the civil justice system - arbitrators need not be lawyers,
the law and evidence need not be followed, there is no legal
right to obtain evidence, an arbitrator's award need not be
written or justified, and the entire process takes place in
secret, among other differences. This informality may have
corresponding benefits in speed and cost, although that point is
frequently disputed, as is the question of whether outcomes in
arbitration are as fair as those in court. One of the primary
differences between arbitration and litigation is that
arbitration provides no right to appeal. It might therefore
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seem paradoxical, that many of those who support arbitration
oppose this bill because it would limit their appeal rights in
court.
In the context of mandatory private arbitration clauses in
consumer and employment disputes, courts have recognized that
private arbitration clauses may be invalid under the contract
law principle of unconscionability if the contract is unfairly
imposed and too one-sided in favoring the business that imposed
it. Questions about the enforceability of mandatory private
arbitration clauses have generated many legal fights. Either
side of the dispute may file a petition in court to compel
arbitration pursuant to the arbitration clause. If the petition
is granted, and the court orders that the dispute go to private
arbitration, consumers and employees challenging the clause have
no right to appeal. Under current law, however, if a petition
to compel arbitration is denied, the defendant can immediately
appeal. This right to appeal is contrary to the general legal
rule prohibiting an appeal regarding procedural issues until the
underlying dispute is resolved. Critics contend that the
current imbalance in appeal rights regarding arbitration clauses
is unfair and results in frivolous appeals that delay resolution
of the dispute, harming consumers and employees. This bill
would do away with the right to an immediate appeal when a
petition to compel arbitration is denied, just as there is no
right to appeal when a petition to compel is granted. Either
side may nevertheless continue to seek appellate review by writ
of mandate for serious errors. The bill is supported by
consumer and employee advocates, and opposed by business
associations.
SUMMARY : Eliminates the current right to appeal from an order
denying a petition to compel. Specifically, this bill would put
a court order denying a petition to compel arbitration on the
same footing as an order granting a petition to compel - neither
would be immediately appealable, but both would be subject to
review by writ of mandate.
EXISTING LAW :
1)Provides that a party has an immediate right to appeal from an
order denying a petition to compel arbitration. (Code of
Civil Procedure Section 1294.)
2)Provides that a party has no immediate right to appeal from an
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order granting a petition to compel arbitration. (Code of
Civil Procedure Section 1294.)
3)Provides that a party seeking review of an order either
denying or granting a petition to compel arbitration may file
a writ of mandate with the court of appeal. (Code of Civil
Procedure Section 1085.)
4)Establishes the Federal Arbitration Act and the California
Arbitration Act, both of which provide that agreements to
arbitrate shall be valid, irrevocable, and enforceable, except
such grounds as exist at law or in equity for the revocation
of any contract. (9 USC section 1 et seq.; Code of Civil
Procedure Section 1281.)
5)Provides that trial by jury is an inviolate right and shall be
secured to all. (Cal. Const. Article 1, Section 16.)
6)Permits arbitrators to disregard the law and/or the evidence
in rendering their decisions. Awards may be enforced by the
court, even if they are legally and factually erroneous.
(Moncharsh v. Heily & Blase et al (1992) 3 Cal.4th 1.)
7)Allows private arbitrators to issue binding decisions that are
legally enforceable but essentially not reviewable by a court;
there is no appeal from an arbitrator's decision to a public
court, even if the arbitration agreement expressly provides
for judicial review. (Crowell v. Downey Community Hospital
Foundation (2002) 95 Cal. App. 4th 730.)
8)Allows arbitrators to conduct arbitrations without allowing
for discovery, complying with the rules of evidence, or
explaining their decisions in written opinions. (Code of
Civil Procedure Sections 1283.1, 1282.2, 1283.4.)
9)Permits arbitrations to be conducted in private with no public
scrutiny. (Ting v. AT&T (2002) 182 F.Supp. 2d 902 (N.D.
Cal.), affirmed, 319 F.3d 1126 (9th Cir 2003.)
10)Allows arbitrators substantial if not absolute immunity from
civil liability for acts relating to their decisions, even in
the case of bias, fraud, corruption or other violation of law.
(Baar v. Tigerman (1983) 140 Cal. App. 3d 979.)
11)Limits the relief that a court may grant to a party in
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arbitration, no matter what misconduct has taken place in the
arbitration, to potential vacatur of the award and returning
the parties to further arbitration, perhaps with the same
arbitrator or arbitration company. The grounds on which an
arbitrator's decision may be vacated are narrow and the
standards for vacatur are high. (Code of Civil Procedure
Section 1282.6.)
COMMENTS : The author explains the bill as follows:
AB 1062 is a procedural fix that would speed up the
judicial process when the court reviews a motion to compel
arbitration. AB 1062 will ensure that these motions are
speedy and efficient, thereby saving the court time and
money.
Every day consumers face situations where they have no
choice but to sign pre-dispute binding arbitration
agreements as a condition of employment or receipt of
service. Such "agreements" between parties of unequal
power have been looked at with growing skepticism by both
consumer advocates and the courts, especially when they are
made mandatory?.
Under current law, if a consumer files a lawsuit in court,
the defendant usually files a motion to compel arbitration.
If the defendant's motion is denied, the defendant has the
option of either filing a discretionary writ of mandate, or
filing an appeal which must be heard by the Court of Appeal
by a matter of right.
Defendants frequently file appeals, the results of which
are lengthy delays due to the additional work and lack of
court resources. Such delays are especially harmful in
employment cases where an employee's employment status may
be in question and in cases involving the elderly, wherein
during the delay the plaintiff dies. The delay of justice
is most damaging to the plaintiffs because of the potential
loss of evidence and witnesses during that extended period
of time. On the other hand, a discretionary writ of
mandate encourages judicial efficiency without the
potential loss of evidence, witnesses and legal standing.
AB 1062 simply leaves it within the court's discretion to
review the denial to compel arbitration instead of allowing
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time-consuming appeals by right. It would still allow a
party the opportunity to ask for review if a motion to
compel arbitration is denied, as well as the right to
appeal the final judgment at the end of trial.
Mandatory Private Arbitration Is Essentially Unregulated And
Highly Controversial. As set out below, much of the argument
for and against this bill centers on the claimed benefits and
harms of private arbitration. This may be confusing, because
the bill does not actually propose to change whether arbitration
is permissible, or the extent to which mandatory arbitration
clauses are enforceable. That so much of the debate on both
sides focuses on the claimed virtues or evils of arbitration
compared to litigation, however, illustrates what is at stake
regarding a petition to compel arbitration, and informs the
question whether it is critical that there be an immediate right
to appeal when a court finds an arbitration agreement
unenforceable but no right to appeal when a court orders a party
into arbitration.
As this Committee has frequently discussed over the past 15
years as mandatory arbitration has become increasingly
widespread, private arbitration is a mostly "anything goes"
private "court" system which, consumer and employment groups
contend, is often costly for consumers and where there is little
if any regulation, oversight or legal accountability to the
parties or the public. Arbitrators need not be trained in the
law, or even apply the law, or render a decision 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.
Indeed, unlike judges, arbitrators need not explain or defend
the rationale for their decisions. There is no need to justify
his or her decision because the law and the evidence need not be
followed and because - of particular relevance to the arguments
over this bill - there is no right for any party to appeal or
obtain an independent review of the arbitrator's ruling.
Regardless of the level or type of mistake, or even misconduct,
by the arbitrator, the most relief a court may grant to a party
in arbitration is to vacate the award and return the parties to
further arbitration, perhaps with the same arbitrator or
arbitration company. The grounds on which an arbitrator's
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decision may be vacated, however, are extremely narrow and the
standards for vacatur are stringent. Neither may the parties
generally obtain any remedy against the arbitrator for
misconduct because arbitrators are afforded substantial if not
absolute immunity from civil liability for acts relating to
their decisions, even in the case of bias, fraud, corruption or
other violation of law.
The Revenue Incentives Of Private Arbitration Have Caused
Concerns About The Advantages Enjoyed By "Repeat-Players" And
The Disadvantages For Consumers . As this Committee has also
frequently discussed, not only is private arbitration
effectively unregulated, it has caused concerns among workers'
rights and consumer advocates because it is a revenue-driven
system where, critics contend, "repeat players" have unfair
advantages when they are involved in mandatory arbitration
against "one-shot" users, such as individual consumers. This
may be particularly true where the dispute involves stigmatizing
allegations, such as race discrimination, sexual harassment, and
elder abuse.
As evidence of this contention, the California Employment
Lawyers Association points to a recent study, which it argues,
demonstrates why employers seek to force arbitration clauses on
workers: because arbitration favors employers in employment
disputes. According to CELA, a March 201 study reported in the
Journal of Empirical Legal Studies analyzed nearly 4,000
arbitration cases between 2003 and 2007 and found that: (1) the
employee win rate among the cases was 21.4 percent, which is far
lower than employee win rates reported in employment litigation
trials; (2) in cases won by employees, the median award was
$36,500 and the mean was $109,858, both of which are
substantially lower than amounts reported in employment
litigation; (3) in 82.4 percent of the cases, the employees
involved made less than $100,000 per year. The results of the
study also showed strong evidence of a "repeat player" effect in
which employee win rates and award amounts are significantly
lower where the employer is involved in multiple arbitration
cases.
Unconscionability Doctrine Places Some Limits On Enforcement of
Mandatory Arbitration Clauses, But Consumer And Employment
Rights Advocates Argue This Minimal Protection Is Defeated By
Delays Caused By Appeal. Whatever the benefits or disadvantages
of arbitration, it has generated the greatest controversy, and a
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modicum of judicial protection, when it is imposed as a
mandatory condition of pre-printed form contracts over which
consumers and employees have no opportunity to bargain. If the
contract is found to be both procedurally and substantively
unfair - that is, the weaker party to the contract was forced to
"take-it or leave- it," and the terms of the contract are highly
one-sided in favoring the party seeking arbitration - an
arbitration clause may be denied enforcement by the courts as an
unconscionable contract. (E.g., Gentry v. Superior Court (2007)
42 Cal.4th 443.)
Consumers and employee groups continue to challenge mandatory
arbitration clauses, and businesses continue to revise and
refine them in an ongoing tug-of-war to determine how extreme
the contract must be to draw a legal challenge and be denied
enforcement by the courts. It is against this background that
this bill proposes to limit this procedural squabbling by
consolidating all appeals on both sides to the end of the
dispute, whether the procedure followed is arbitration or
litigation.
The General Rule In All Litigation - Including Generally
Litigation Regarding Arbitrability- Prohibits An Appeal Unless A
Dispute Is Finally Resolved . The general rule is that there is
a right to appeal only from final judgments, not from
interlocutory orders. As one court noted,
There are sound reasons for the one final judgment rule.
These include the obvious fact that piecemeal disposition
and multiple appeals tend to be oppressive and costly.
Interlocutory appeals burden the courts and impede the
judicial process in a number of ways: (1) They tend to clog
the appellate courts with a multiplicity of appeals; (2)
Early resort to the appellate courts tends to produce
uncertainty and delay in the trial court; (3) Until a final
judgment is rendered the trial court may completely obviate
an appeal by altering the rulings from which an appeal
would otherwise have been taken; (4) Later actions by the
trial court may provide a more complete record which
dispels the appearance of error or establishes that it was
harmless; (5) Having the benefit of a complete adjudication
will assist the reviewing court to remedy error (if any) by
giving specific directions rather than remanding for
another round of open-ended proceedings." (Vivid Video,
Inc. v. Playboy Entertainment Group, Inc. (2007) 147 Cal.
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App. 4th 434, 442-444.)(citations omitted).)
The same "strong policy reasons" against multiple piecemeal
demands on the courts of appeal generally applies to arbitration
disputes as well. (Mid-Wilshire Associates v. O'Leary, 7 Cal.
App. 4th 1450, 1455 (Cal. App. 2d Dist. 1992). For example, a
party has no right to appeal from trial court's determination
regarding arbitrability of the dispute because such a ruling
contemplates further proceedings in the trial court and thus
does not finally determine all issues so as to provide
sufficient finality to give rise to a right to appeal. (Vivid
Video, Inc., at 443.)
It Is Not Clear What Rationale There Might Have Originally Been
For The Current Disparity In Appeal Rights, Which Appears To Be
Contrary To The General Rule Against Piecemeal Review Of Trial
Court Decisions. Despite the general rule requiring finality
prior to appeal, supporters and opponents of this bill agree
that the law currently allows defendants to appeal when a
petition to compel arbitration is denied, but does not allow
plaintiffs to appeal when a petition to compel is granted. The
justification for the rule is not clear, and neither supporters
nor opponents of this bill offer an explanation. Committee
research indicates that the California rule has changed over
time, as has the associated federal rule.
In a 1948 case, the Supreme Court noted that both federal and
"California cases hold that neither an order directing
arbitration nor an order refusing to stay trial pending
arbitration is appealable. The foregoing federal and California
cases are in accord with the general rules in this state
governing appeals from orders that do not finally determine all
the issues before the trial court. An appeal is allowed if the
order is a final judgment against a party in a collateral
proceeding growing out of the action. It is not sufficient that
the order determine finally for the purposes of further
proceedings in the trial court some distinct issue in the case;
it must direct the payment of money by appellant or the
performance of an act by or against him. ? If appellants have
a right to arbitration they may assert it on the appeal from the
final judgment in the contract action. Thus no greater hardship
will result than in any case where a party is forced to stand
trial because of an erroneous ruling of the trial court."
(Sjoberg v. Hastorf (1948) 33 Cal. 2d 116, 118-119 (citations
omitted).)
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The current rule dates to the 1961 revision of the arbitration
act at the suggestion of the California Law Revision Commission,
which the Legislature adopted. (All appellate jurisdiction is
solely within the province of the Legislature, since the right
to appeal is not conferred by our Constitution but by statute.
(Kinoshita v. Horio (1986) 186 Cal.App.3d 959, 962).) The
Commission's study and recommendation however does not explain
what if any policy rationale there might be for this policy,
which reflected a change in the law from the prevailing policy
that no appeal could be taken from an order granting or denying
a petition to compel arbitration.
The arbitration statute has no provisions relating to
appeals from orders made prior to the arbitration hearing.
Case law, however, has established that neither an order
compelling arbitration nor an order refusing to stay a
civil action pending arbitration is appealable. Thus, an
appeal must be on the order made after the award or on the
judgment entered thereon, or from the judgment resulting
from the pending suit.
Although a denial of a petition to compel arbitration and
to stay the pending action is not appealable, a denial of a
petition to compel arbitration is appealable if no action
is pending. ?.
It would seem advisable to make clear that an order denying
a motion to compel arbitration is appealable, and to
provide for such an appeal in the arbitration statute. This
would be in conformity with the present spirit of the
statute and with the similar provision in Section 19 of the
Uniform Arbitration Act.
(Cal. Law. Rev. Com. Recommendation and Study relating to
Arbitration (1960) p. G-60)(citations omitted).)
Shortly after adoption of the 1961 arbitration act revisions,
courts noted that the rule had changed with enactment of the new
legislation, but no explanation was given. One court observed,
"�T]he Sjoberg case was decided prior to the 1961 revision of
the Arbitration Act, and at a time when that act provided for
appeals only from "an order confirming, modifying, correcting or
vacating an award, or from a judgment entered upon an award."
In Smith v. Superior Court (1962) 202 Cal.App.2d 128, this court
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stated (although without discussion and without reference to the
Sjoberg case) that an order such as is herein involved was
appealable under the present statute. The order is as
interlocutory as it was before 1961; but the decision to make
interlocutory orders appealable or not is legislative and the
present language seems too clear for doubt. (Berman v. Renart
Sportswear Corp (1963) 222 Cal. App. 2d 385, 387-388.)(citations
omitted).)
One court posed the following rationale for the new disparity,
noting the apparent inequality: "The argument against allowing
appeals from orders to arbitrate seems as compelling as the
argument against allowing appeals from orders that arbitration
not take place. ? �T]he fact that the legislature saw fit to
specify in one code section the different orders and judgment
from which appeals may be taken clearly indicates, in our
opinion, an intention to restrict the appeals in such proceeding
to the orders and judgment therein specified; and the obvious
reason for not including among such appealable orders the one
which directs the parties to proceed with the arbitration was
that if at the very threshold of the proceeding the defaulting
party could appeal and thereby indefinitely delay the matter of
arbitration, the object of the law and the purpose of the
written agreement of the parties would be entirely defeated."
(Laufman v. Hall-Mack Co. (1963) 215 Cal. App. 2d 87, 88.)
While this statement may explain why there should be no right to
appeal from an order compelling arbitration, it does not account
for the one-sided nature of the current rule - that is, why
denial of a petition to compel arbitration is appealable. While
it is no doubt proper that parties to a fair and enforceable
arbitration agreement be held to the benefit of their bargain,
it seems no more unjust to allow a party to contest the
enforceability of an agreement than it does to hold a party to
the terms of a contract which is not lawfully enforceable. In
any event, the delay caused by an appeal is the same in either
instance.
More recently, another court explained the reason why an order
compelling parties to arbitrate is not appealable as follows:
"The rationale behind the rule making an order compelling
arbitration nonappealable is that inasmuch as the order does not
resolve all of the issues in controversy, to permit an appeal
would delay and defeat the purposes of the arbitration statute.
However, a party compelled to arbitrate is entitled to have the
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validity of the order reviewed on his appeal from a judgment
confirming an award. Another court has noted that the order
compelling arbitration is interlocutory in nature and works no
hardship on the litigant because the party who objects to
arbitration may win at the arbitration hearing, and if he does
not, the issue is reviewable on appeal from the judgment of
confirmation." (State Farm Fire & Casualty v. Hardin (1989) 211
Cal. App. 3d 501, 506.) These observations are certainly sound.
But the rationale against a right to appeal from an order
compelling arbitration would appear to apply with equal force to
appeal from denial of a petition to compel; the nature of the
order is interlocutory, the disappointed party may win in court,
and if he does not the issue is reviewable on appeal.
Whatever the rationale, the current rule dates from a time
before mandatory arbitration clauses in consumer adhesion
contracts were widespread.
What Are the Risks And Consequences If Defendants Cannot
Automatically File An Immediate Appeal From Denial Of A Petition
To Compel Arbitration? A right to appeal a procedural decision
such as a petition to compel arbitration is an opportunity to
root out potential error. Against this benefit there are costs,
both to the courts in time and workload, and to the parties in
delay and additional legal maneuvering.
If defendants no longer had a right to immediate appeal when a
petition to compel arbitration is denied, it seems probable that
some trial court errors would go uncorrected until later in the
proceeding. The rate of error is of course impossible to say,
but it seems likely that the risk of wrongly denying a petition
to compel is no greater than the risk of erroneously granting a
petition to compel. (The risk of error in denying arbitration
may be even less if critics are correct that trial courts have
incentives to order arbitration.)
If the trial court wrongly denies a petition to compel
arbitration, the consequence to the defendant is that the case
is litigated (or settled) contrary to the defendant's
contractual privilege to have the dispute decided in private
arbitration. This may be important if arbitration favors
defendants, or it may be trivial if, as supporters of
arbitration contend, arbitration is simply an alternative forum
where the parties have the same procedural protections and the
same fair outcomes as they do in litigation. Nevertheless, the
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loss or delay in the defendant's enjoyment of this contractual
right to arbitration may be compared to the arguably more
substantial loss of the plaintiff's constitutional right to a
trial by jury, as well as the legal right to have the dispute
decided according to the law and the evidence, which courts are
bound to apply but arbitrators are not. However, plaintiffs do
not have a right to appeal when a court grants a petition to
compel arbitration.
If the defendant wins, the trial court's error in retaining the
case would appear to be relatively inconsequential. On the
other hand, if the defendant loses there would be a right to
appeal in which the defendant can argue that the court was wrong
to deny arbitration, and the parties would then arbitrate the
dispute. This is the same procedure that obtains for plaintiffs
when a petition to compel is granted - the dispute proceeds in
the less desirable forum - and perhaps even a bit more
advantageous for defendants than it is for plaintiffs for the
following reason. If the petition to compel arbitration is
granted, the parties must arbitrate (or settle) because the
plaintiff cannot appeal. If the plaintiff wins, the court's
error is relatively inconsequential (unless arbitrator's awards
tend to be lower than juries, as plaintiffs' argue); if the
plaintiff loses in arbitration, she can theoretically return to
the trial court (not the court of appeal) to argue that the
arbitrator's award is invalid because the matter should not have
been arbitrated. Given the limited resources of most plaintiffs
in consumer and employment cases, however, it may be difficult
or impossible for the plaintiff to continue the contest in
court.
It may also be appropriate to evaluate the costs of the current
arrangement and which side of the dispute is best able to bear
those costs. One of the few areas on agreement between the
supporters and opponents of this bill is the amount of time
required for an appeal. Both sides agree it takes approximately
one year for an appeal to be heard, and up to two and one-half
years for an appeal to be decided. Defendants are not generally
harmed by delay because the happy result is that no judgment is
entered against them. On the other hand, plaintiffs contend
that the burden of appellate delay falls most heavily on them
because they are the injured party and because they have the
burden of proof. Thus, they must go without a remedy for their
wrongs, and may suffer the loss of evidence with the passage of
time. Supporters of this bill argue that this delay is
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particularly harmful in employment cases where an employee may
be out of work, and in cases involving the elderly, where the
plaintiff may die during the delay.
ARGUMENTS IN SUPPORT: The California Employment Lawyers
Association, co-sponsor of the bill argues:
By limiting the right of review to those matters
sufficiently compelling to persuade the Court of Appeal to
grant a discretionary writ of mandate, this bill would save
the Courts of Appeal time and money. Further, it would
prevent needless and oppressive stalling techniques
routinely employed by stronger parties seeking to impose
unfair arbitration provisions on working families and other
ordinary citizens.
Forced arbitration increasingly is being used by employers
to strip employees of important legal rights which would be
protected if their claims were heard in a court of law.
Arbitration usually is conducted in secret, without any
requirement to follow state or federal law, and provides
almost no opportunity for meaningful review. While
voluntary agreements to arbitrate an existing dispute may
be appropriate between parties on equal footing, provisions
in take-it-or-leave-it form agreements that force
arbitration on workers, consumers and other vulnerable
parties are not. Workers and others who sign agreements
containing forced arbitration provisions almost never
understand the true legal significance of the clauses. And
even if they did, they would have no choice but to sign.
Workers in a high-unemployment economy are in no position
to negotiate regarding unfair provisions in an employment
agreement. Further, increasing numbers of employers are
forcing arbitration clauses on workers, leaving fewer and
fewer opportunities to avoid forced arbitration in any
event.
The Consumer Attorneys of California, also co-sponsoring the
bill, states:
Pre-dispute binding arbitration provisions in consumer
contracts are spreading like wildfire. Lenders, HMOs, car
dealers, insurers, nursing homes, credit card, mortgage,
phone and computer companies and even employers are
requiring consumers to "agree" to such provisions as a
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condition of service or employment. These "agreements" are
drafted in a manner that is heavily weighted in the
companies' favor and are often buried deep within the fine
print of voluminous contracts.
Under current law, if a consumer files a lawsuit in court,
the defendant will typically file a motion to compel
arbitration. If the defendant's motion to compel
arbitration is denied, the defendant has the option of
either filing a discretionary writ of mandate, or filing an
appeal which must be heard by the Court of Appeal as a
matter of right. When a defendant files an appeal by right,
it must be heard as a matter or right by the Court of
Appeal, even if the appeal lacks merit and is maliciously
filed as a delay tactic. These appeals typically delay the
litigation process for up to two-and-a-half years! Yet, a
discretionary writ of mandate also accomplishes the same
procedural function and allows the court to review the
trial court's decision. However when filing a discretionary
writ of mandate, the court has the discretion to only
review those motions that have merit, and are resolved
within a matter of months.
AB 1062 simply leaves it within the court's discretion to
review the denial to compel arbitration. It would still
allow a party the opportunity to ask for review if denied a
motion to compel arbitration, and reserves the right to
appeal the final judgment at the end of appeal. By
preserving the discretionary writ of mandate to review a
denial to compel arbitration, consumers are less likely to
lose valuable evidence, witnesses and legal standing while
the motion is under review.
ARGUMENTS IN OPPOSITION: The California Chamber of Commerce
opposes the bill, stating:
AB 1062 will raise the cost of doing business in the state
by undermining enforcement of valid arbitration agreements,
and forcing cases into the courts that can be effectively
and efficiently handled through arbitration proceedings.
The background sheet for AB 1062 states that one of the
main goals of the bill are to save courts time and money
and insure speedy resolution of disputes, but in reality it
may do the opposite by forcing cases that can be
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effectively and efficiently handled through arbitration
into the courts. More often than not, arbitration can
deliver justice faster than litigation. ? Thus, while
appeals of right can extend the time necessary to resolve
disputes over the validity of an arbitration agreement, it
does not necessarily result in a faster resolution of the
primary dispute between the parties. As such, eliminating
access to this important procedural mechanism will merely
undermine protections for employers and the enforcement of
valid arbitration clauses, increasing the number of
non-meritorious claims that receive a full trial.
In addition, the Chamber of Commerce argues, "arbitration
proceedings are not merely preferred by employers," citing
surveys that reportedly show that parties in arbitration were
more satisfied than parties in litigation, apparently in part
because litigation is believed to be more expensive and takes
longer to reach a final outcome.
Similarly, the Association of California Insurance Companies
opposes the bill, arguing that arbitration has long been used as
a technique for the resolution of disputes outside the courts,
and that many different studies demonstrate the benefits of
arbitration over litigation, including improved satisfaction of
the parties, simplicity, reduced time in dispute, reduced costs,
and increased compliance. ACIC concludes, "AB 1062 would allow
parties who previously agreed to arbitration agreements to
change their mind and go to court. ? AB 1062 would prohibit
parties from being able to enforce the arbitration agreements
through an appeal."
Like other opponents, the Civil Justice Association of
California touts the values of arbitration over the civil
justice system, and interprets the bill as prohibiting all
appeals, asserting that the bill "would weaken the enforcement
of arbitration agreements by prohibiting an appeal when a lower
court refuses to enforce an arbitration agreement. This bill
would allow a person who voluntarily signed an agreement to
arbitrate any future dispute to sue anyway. And if they do sue
anyway, the other person would be prohibited from appealing a
court's decision to allow that suit to proceed." CJAC
concludes, "During a time when our court resources are
overburdened already, we should promote arbitration rather than
undermine it."
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Finally, the California Association of Health Facilities (CAHF)
likewise claims that the bill would weaken the enforcement of
arbitration agreements by prohibiting an appeal when a lower
court refuses to enforce the agreement. CAHF contends that
public policy favors arbitration because it is quicker and less
costly than litigation. CAHF argues that various statutes also
specifically recognize and validate the propriety and usefulness
of arbitration clauses in the context of health care. CAHF also
argues that the bill is unnecessary, because it contends that
certain procedural protections imposed by the courts regarding
employment discrimination cases also apply to legal claims
regarding nursing home care, although no citation to authority
is offered for this conclusion.
Much of CAHF's argument focuses on what it believes to be the
financial impact of the bill, on the understanding that
arbitration agreements will be less enforceable.
If a long-term care facility cannot offer to residents when
they enroll a voluntary agreement to arbitrate future
disputes that may arise between them, it cannot predict and
implement reduced health care costs. The result is higher
costs for delivery of long-term care services, higher costs
to the Medi-Cal program, and less access to needed
services.
AB 1062 promotes more costly litigation against LTC
facilities by allowing attorneys to use the threat of
astronomical attorney fee awards (which are allowed under
the Elder Abuse statute) if an action were to reach court.
With guaranteed fees (and the cash register running),
attorneys have no motivation to complete a case. AB 1062
will only lengthen the amount of time it takes to resolve
claims and compensate victims. Due to the prevalence of
litigation brought under the Elder Abuse Act, California
leads the nation in the number of claims brought against
nursing home operators at an annual rate of 11 claims per
1,000 beds per year, or roughly 1.1 claims per facility per
year. According to a June 2010 actuarial analysis of
nursing facility litigation costs by AON Corporation, the
cost per occupied bed in California is $2,150, compared to
the national average of $1,340. The size of the average
award has tripled from $65,000 in the early 1990's to
$195,000 in 2009, including indemnification paid to the
plaintiff and related attorney fees. California SNF
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providers are paying approximately $240 million per year in
litigation related expenses. On a cost of care basis, an
average of $5.89 per resident day already needs to be set
aside just to cover the cost of litigation targeting
long-term care facilities. This is equal to 3.63% of the
statewide average per diem reimbursement rate for Medi-Cal,
the source of funding for approximately two-thirds of all
nursing home residents.
Author's Narrowing Amendment. Because labor arbitrations are
customarily treated differently than others, in large part
because there is relatively equal bargaining power and an
established tradition of industrial justice, the author
appropriately proposes to narrow the bill by excluding labor
arbitrations, consistently with analogous provisions of existing
law, by restoring subdivision (a) with the following addition:
1294. An aggrieved party may appeal from:
(a) An order dismissing or denying a petition to compel
arbitration pursuant to the terms of a public or private sector
collective bargaining agreement.
REGISTERED SUPPORT / OPPOSITION :
Support
California Employment Lawyers Association (co-sponsor)
Consumer Attorneys of California (co-sponsor)
California Advocates for Nursing Home Reform
Employment Law Center - Legal Aid Society of San Francisco
Opposition
Association of California Insurance Companies
California Association of Health Facilities
California Chamber of Commerce
Civil Justice Association of California
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334