BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1062 (Dickinson)
As Amended June 20, 2011
Hearing Date: June 28, 2011
Fiscal: No
Urgency: No
RD
SUBJECT
Arbitration: Appeals
DESCRIPTION
Existing law provides that an appeal may be taken from an order
dismissing or denying a petition to compel arbitration.
This bill would amend that provision to provide that an
immediate appeal may be taken from an order dismissing or
denying a petition to compel arbitration only if the arbitration
is for the adjudication of a dispute over the terms of a public
or private sector collective bargaining agreement or memorandum
of understanding (MOU).
BACKGROUND
As a general rule, California law provides that appeals may only
be taken from such judgments or orders as are made appealable by
statute. Conversely, the existence of an appealable judgment
operates as a court's jurisdictional prerequisite to hearing an
appeal. (Code Civ. Proc. Sec. 904.1; see also 4 Cal Jur
Appellate Review (3rd edition 2011) Appealability of Judgments
and Orders, Sec. 24.) A well-recognized reason for this rule is
the judiciary's interest in limiting the number of appeals
possible.
California Code of Civil Procedure Section 904.1 governs the
right to appeal in a civil action. Normally, this right to
appeal in civil cases exists only upon a judgment, except there
may be an appeal from an interlocutory judgment that is made
final and conclusive (See Code Civ. Proc. Sec. 904.1.) In turn,
(more)
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a judgment is the final determination of the rights of the
parties in an action or proceeding. (Code Civ. Proc. Sec. 577.)
This final judgment rule seeks to limit the number of appeals
possible in light of the court's interests in expediency,
efficiency, and economy.
Appeals in arbitration matters, however, are specifically
governed by Code of Civil Procedure Section 1294. As a general
matter, arbitration is accepted in California as a consensual
method of resolving disputes in which a neutral third party, the
arbitrator, renders a decision after a hearing to which both
parties have had an opportunity to be heard. (See 6 Cal Jur 3d,
Arbitration and Award, Sec. 1.) Where one party to an
arbitration agreement seeks instead to file suit in court or
refuses to submit the dispute to arbitration, disputing either
the validity or applicability of the arbitration agreement, the
other party to the arbitration agreement may seek to enforce the
arbitration by way of a motion to compel arbitration. (Code
Civ. Proc. Sec. 1281.2.) In addition, in enumerating the
appeals that a party may take with respect to arbitration
matters, Section 1294 creates a statutory right to appeal the
dismissal or denial of a petition to compel arbitration by the
party seeking to force arbitration of a dispute, before any
final judgment is rendered in the action. (Code of Civ. Proc.
Sec. 1294(a).)
Prior to 1961, however, California courts widely held that
neither an order compelling arbitration, nor an order denying a
petition to compel arbitration is an appealable order. These
cases relied on U.S. Supreme Court cases that held a ruling as
to the right to arbitration is interlocutory and not appealable
as a final judgment, and the fact that such orders were not
enumerated among those made appealable under then-Section 1293,
the precursor to today's Section 1294. (Sjoberg v. Hastrof
(1948) 33 Cal.2d 116, 118-119, citing Shanferoke Co. v.
Westchester Co. (1935) 239 U.S. 449 and Schoenamsgruber v.
Hamburg Line (1935) 294 U.S. 454; Jardine-Matheson Co., Ltd. v.
Pacific Orient Co. (1929) 100 Cal.App. 572; Fischer v. Superior
Court (1930) 105 Cal.App. 466.) As a result, whether or not the
court granted or denied a party's petition to compel
arbitration, parties on both sides of the issue were limited to
appealing the order after judgment -either from the award made
in arbitration, or from the judgment entered from the trial.
Then, in 1961, the California Law Revision Commission (CLRC)
released a report examining California laws on arbitration, in
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which it commented on those cases and recommended that Section
1293 of the Code of Civil Procedure be amended to provide for an
appeal of an order denying a motion to compel arbitration in
order to "be in conformity with the present spirit of the
statute and with the similar provision in Section 19 of the
Uniform Arbitration Act." The Legislature subsequently amended
Section 1293 of the Code of Civil Procedure accordingly.
The result of that amendment, now in Code of Civil Procedure
Section 1294, is a statutory right to appeal the dismissal or
denial of a petition to compel arbitration. (Code Civ. Proc.
Sec. 1294(a).) In other words, under existing law, when a
plaintiff files an action in court and the defendant's petition
to compel arbitration is denied or dismissed, the defendant has
the ability to immediately appeal the order as a matter of right
and does not have to await final judgment in the matter. In
contrast, the plaintiff who opposes the validity or the
applicability of the arbitration agreement in that dispute and
wishes to proceed to trial is not allowed to immediately appeal
an order compelling arbitration and must wait until after
arbitration is complete to appeal from the final judgment. At
best, the plaintiff, under extraordinary circumstances, may seek
a writ of mandate to obtain interlocutory appellate review of
the matter before proceeding to arbitration pursuant to the
court order. Moreover, a writ of mandate, unlike an appeal that
is a matter of right, is discretionary; a court has the
discretionary power to issue a writ only in those exceptional
circumstances that warrant such interlocutory review.
This bill would seek to address this uneven playing field
between defendants and plaintiffs and to bring existing law into
greater adherence with the final judgment principle by largely
reducing the ability to appeal a dismissal or denial of petition
to compel arbitration on an interlocutory basis. Because
collective bargaining agreements are comprehensively negotiated
agreements, this bill would provide for an immediate appeal from
an order dismissing or denying a petition to compel arbitration
only if the arbitration is for the adjudication of a dispute
over the terms of a public or private sector collective
bargaining agreement or MOU. In all other circumstances,
appellate review of any order regarding arbitrability of a
dispute would be restricted to an appeal after final judgment or
by way of a discretionary writ of mandate.
CHANGES TO EXISTING LAW
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Existing law governs arbitrations in California, including the
enforcement of arbitration agreements, rules for neutral
arbitrators, the conduct of arbitration proceedings, and the
enforcement of arbitration awards. (Code Civ. Proc. Sec. 1280
et. seq.)
Existing law provides that an "agreement," for the purposes of
arbitration, includes but is not limited to agreement providing
for valuations, appraisals, and similar proceedings and
agreements between employers and employees or between their
respective representatives. (Code Civ. Proc. Sec. 1280(a).)
Existing law provides that a written agreement to submit to
arbitration an existing controversy or a controversy thereafter
arising is valid, enforceable and irrevocable, save upon such
grounds as exist for the revocation of any contract. (Code Civ.
Proc. Sec. 1281; see also Federal Arbitration Act, 9 U.S.C. Sec.
2.)
Existing law provides that on a petition of a party to an
arbitration agreement alleging the existence of a written
agreement to arbitrate a controversy and that a party thereto
refuses to arbitrate such controversy, the court shall order
arbitration of the controversy if it determines that an
agreement to arbitrate the controversy exists, unless it
determines any of the following:
the right to compel arbitration has been waived by the
petitioner;
grounds exist for the revocation of the agreement; or
a party to the arbitration agreement is also a party to a
pending court action or special proceeding with a third party,
arising out of the same transaction or series of related
transactions and there is a possibility of conflicting rulings
on a common issue of law or fact. (Code Civ. Proc. Sec.
1281.2(a)-(c).)
Existing law provides that an aggrieved party may appeal from
the following:
an order dismissing or denying a petition to compel
arbitration;
an order dismissing a petition to conform, correct or vacate
an award;
an order vacating an award unless a rehearing in arbitration
is ordered;
a judgment entered pursuant to this title; or
a special order after final judgment. (Code Civ. Proc. Sec.
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1294(a)-(e).)
Existing law provides that a writ of mandate may be issued by
any court to any
inferior tribunal, corporation, board, or person, to compel the
performance of an act which the law specially enjoins, as a duty
resulting from an office, trust, or station, or to compel the
admission of a party to the use and enjoyment of a right or
office to which the party is entitled, and from which the party
is unlawfully precluded by that inferior tribunal, corporation,
board, or person. (Code Civ. Proc. Sec. 1085(a).)
Existing law provides that a party may not appeal an order
compelling arbitration until after final judgment, but may,
under extraordinary circumstances, seek a writ of mandate to
request review of the ruling by the court of appeal in advance
of the arbitration hearing. (Laufman v. Hall-Mack Co. (1963)
215 Cal.App.2d 87; United Firefighters of Los Angeles v. City of
Los Angeles (1991) 231 Cal.App.3d 1576; Mid-Wilshire Associates
v. O'Leary (1992) 7 Cal.App.4th 1450; Bertero v. Superior Court
(1963), 216 Cal.App.2d 213.)
This bill would provide that an aggrieved party may immediately
appeal from an order dismissing or denying a petition to compel
arbitration if the arbitration is for adjudication of a dispute
over the terms of a public or private sector collective
bargaining agreement or MOU.
This bill would make other technical, non-substantive changes.
COMMENT
1. Stated need for the bill
According to the author, "�t]his bill eliminates the current
right to appeal from an order denying a petition to compel
arbitration. Current law in this specific area is an anomaly in
that it violates the legal principle that appeals may only be
taken once a final judgment is rendered. The existence of this
anomaly has been exploited by parties to unnecessarily delay the
judicial process, causing great harm to aggrieved parties."
A co-sponsor of this bill, the California Employment Lawyers
Association writes:
Currently, a party whose motion to compel arbitration is
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denied by a trial court can file an immediate appeal as a
matter of right and use the processes of the Courts of Appeal
to stall the case for years. 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 ordinary
citizens.
Forced arbitration increasingly is being used by employers to
strip employees of important 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 agreement 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. . . .
�The existing] system clearly is unfair to the worker whose
case is being delayed, both because justice is delayed and
because witnesses and evidence may be lost through the passage
of time. It is also unfair to the defendant's law-abiding
competitors, whose employment practices do not engender
claims; and it is unfair to the voting public, which has a
right to see its substantive laws enforced rather than
stalled.
Also co-sponsor of this bill, the Consumer Attorneys of
California (CAOC) states that:
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 the defendant
files an appeal by right, it must be heard as a matter o�f]
right by the Court of Appeal, even if the appeal lacks merit
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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
discretion only to review those motions that have merit, and
are resolved in a matter of months. �Emphases in original.]
The delays caused by filing an appeal by right pose the
greatest threat to consumers because of the potential loss of
evidence, witnesses, and increased litigation expenses. Such
delays are especially harmful in employment cases where an
employee's status may be in limbo, and in cases involving the
elderly, wherein the delay often means the plaintiff dies,
causing changes in legal status that are favorable to the
defendant. The increased practice of filing appeals also bogs
down the Court of Appeal by creating more work and using
additional court resources, thus costing precious state
resources.
2. The requirement of finality of judgments does not support
allowing orders denying or dismissing petitions to compel to
be made immediately appealable
This bill would revise existing law permitting an aggrieved
party to appeal an order denying or dismissing a petition to
compel arbitration by providing that an appeal of an order
denying or dismissing a petition to compel arbitration may be
taken if the arbitration is for the adjudication of a dispute
over the terms of a public or private sector collective
bargaining agreement or MOU.
a. Appealability under current arbitration statutes creates
an unequal playing field for plaintiffs and defendants
This bill would limit the right to appeal from an order
dismissing or denying a petition to compel arbitration to
those arbitrations for the adjudication of a dispute over the
terms of a public or private sector collective bargaining
agreement or MOU. As a result, in all other circumstances,
the bill would arguably help level the playing field between
defendants and plaintiffs by limiting appeals to both parties
to appeals upon final judgment or discretionary writs of
mandate.
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As discussed in the Background, under California law, the
power to appeal is wholly statutory and is generally from
final judgment or order. While in civil actions those rights
are generally provided under Code of Civil Procedure Section
904.1, state law also specifically enumerates the orders from
which appeal may be taken in relation to arbitration. (See
Code Civ. Proc. Sec. 1294.)
Prior to 1961, the general rule among courts was that neither
the denial of a petition to compel arbitration, nor an order
compelling arbitration is immediately appealable until after
judgment had been entered. Now, after a 1961 revision of this
statute to provide that parties may appeal from a dismissal or
denial of a petition to compel arbitration, parties who have
lost their petition to compel arbitration may immediately halt
proceedings to appeal that issue to the court of appeal, while
a party who objects to a court order compelling arbitration
only has the right to appeal after arbitration is conducted
and judgment entered. The only other remedy available to that
latter party opposing arbitration is a discretionary writ of
mandate to request the court of appeal review the order prior
to the final judgment.
As described in the Background, while the 1961 revision to
this statute was made upon the CLRC recommendation to bring
the statute "in conformity with the present spirit of the
statute and with the similar provision in Section 19 of the
Uniform Arbitration Act," the UAA not only makes the denial of
an application to compel arbitration appealable, but it also
makes the order granting an application to compel arbitration
appealable-unlike California's Section 1294. (See Sec. 19
< http://www.adr.org/sp.asp?id=29567 > �as of June 19, 2011];
Sec. 28 in the 2000 UAA
< http://www.law.upenn.edu/bll/archives/ulc/uarba/arbitrat1213.h
tm > �as of June 19, 2011].)
As noted by its proponents, this bill would still allow a
party to appeal the order denying or dismissing the petition
to compel arbitration upon conclusion of the matter and it
would not preclude the party from seeking immediate review of
the order by way of discretionary writ of mandate. (See
Comment 3b, below on writs of mandate.) While opponents
argue that a writ of mandate is not sufficient because of its
discretionary nature and rare issuance, this does not detract
from the fact that the parties have this avenue of redress
where a court deems it to be appropriate. Moreover,
Committee staff notes that this is the same avenue that is
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afforded to their adversaries if the circumstances are
reversed and the plaintiff seeks appellate review to overturn
an order compelling arbitration. That the courts exercise
discretion in issuing these writs does not unduly prejudice
either the defendants or the plaintiffs with regard to their
ability to appeal orders regarding arbitrability, whereas the
existing law appears to greatly favor defendants.
Thus, the practical effect of this bill would arguably be to
bring the rules regarding appealability of an order denying or
dismissing a motion to compel by parties in favor of
compelling arbitration over a dispute, closer in line with
those rules prohibiting the appeal of orders compelling
arbitration by parties opposed to arbitration of a dispute.
In light of the fact that parties on both sides of the issue
are ultimately asking for a ruling on the arbitrability of
particular disputes, it appears equitable to treat the appeals
of orders denying or granting a petition to compel arbitration
similarly.
b. Appeals are generally limited by the finality of
judgments in the interests of judicial economy and
expediency
As noted by the author, appeals are ordinarily reserved until
after final judgment and that existing law allows for appeal
of an order denying or dismissing a petition to compel
arbitration is contrary to this final judgment principle.
Proponents of this bill also argue that the right of appeal
provided by existing law, Section 1294 of the Code of Civil
Procedure, creates a strain on limited judicial resources. To
remedy these issues, this bill looks to close the gap between
that principle and existing law in that it would allow a party
to make an appeal from an order denying or dismissing a
petition to compel arbitration only upon final judgment,
unless the order denied or dismissed a petition to compel
arbitration where the arbitration is for adjudication of a
dispute from the terms of a collective bargaining agreement or
MOU. Furthermore, as is ordinarily the case where appeal
cannot be made until after final judgment, a party can still
seek interlocutory appellate review of the order by way of
writ of mandate under this bill.
i. Final judgment principle
Rights of appeal in California, as generally governed by
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Section 904.1 of the Code of Civil Procedure, are
ordinarily only upon final judgment. In Vivid Video, Inc.
v. Playboy Entertainment Group, Inc. (2007), the Court of
Appeal discussed the history of the final judgment rule and
its characterization by the California Supreme Court. (147
Cal.App.4th 434, 441.) "The California Supreme Court has
noted: 'An appeal from a judgment that is not final
violates the one final judgment rule and must therefore be
dismissed �citations] . . . '" (Vivid Video, 147
Cal.App.4th at 441, quoting Sullivan v. Delta Air Lines,
Inc. (1997) 15 Cal.4th 288, 307.) A judgment is final
"'when it terminates the litigation between parties on the
merits of the case and leaves nothing to be done but to
enforce by execution what has been determined.'
�Citations.] Finality in this sense not only makes a
judicial determination a judgment, it also makes the
judgment appealable." (Vivid Video, 147 Cal.App.4th at 441
(citations omitted).)
The final judgment rule is justified in part by "the
obvious fact that piecemeal disposition and multiple
appeals tend to be oppressive and costly. �Citations
omitted.] 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." (Id. at 443, citing
Mid-Wilshire Associates v. O'Leary (1992) 7 Cal.App.4th
1450, 1455, which held that strong policy reasons support
the one final judgment rule in the arbitration appeal
context.)
In Vivid Video, the Court of Appeal commented that under
Section 1294, appealable arbitration orders require
finality. "'It is quite obvious that the Legislature's
philosophy and intent in drafting section 1294 was that
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there should be no appellate consideration of intermediate
rulings in arbitration disputes if the superior court was
of the view that there should be initial or further
proceedings in arbitration. Thus, most significantly, an
order compelling arbitration is not appealable.'" (Id. at
442 (citations omitted).)
Indeed, while California courts have consistently held that
an order compelling arbitration is not appealable because
Section 1294 of the Code of Civil Procedure does not list
it as one of the orders by which appeal may be made, prior
to that statute's 1961 revision, they were also held to not
be appealable under this one final judgment rule. Final
judgment, courts determined, would not be until arbitration
of the matter has concluded and an award has been made.
Committee staff notes, however, that the courts in those
pre-1691 cases would not allow a defendant to appeal an
order denying or dismissing a petition to compel
arbitration, also on the basis that the order was not a
final judgment. (See e.g. Sjoberg v. Hastorf (1948) 33
Cal.2d 116, holding under U.S. Supreme Court precedent that
orders refusing to stay trial or to direct arbitration and
orders granting stays and ordering arbitration are
interlocutory and not appealable as final judgment, and
also affirming California case law holding that neither an
order directing arbitration, nor an order refusing to stay
trial pending arbitration is appealable.)
In support of this pre-1961 rule, the Court of Appeal in
Fischer v. Superior Court (1930) commented that, "the trial
court has the right and power to decide this question �of
whether the pending suit is referable to arbitration], and
if it was not satisfied that the issue was referable to so
decide and to proceed thereupon to try the action. If the
trial court decided erroneously it was error committed in
the exercise of its jurisdiction, to be reviewed upon
appeal from the judgment." (105 Cal.App. 466, 470.) If
there can only be one final judgment in an action (Sjoberg,
33 Cal.2d at 118), there does not appear to be any obvious
reason why the courts prior to 1961 were wrong or an order
denying a motion to compel arbitration in the middle of an
action should have been deemed a final judgment and made
immediately appealable. In other words, absent this
specific statutory right created as a result of the 1961
CLRC recommendation, it does not appear that a defendant
would be permitted to appeal an order denying or dismissing
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a petition to compel arbitration.
ii. Applying this principle to existing law Section
1294(a)
While opponents argue that this bill would result in
additional costs to the courts and to defendant businesses
to litigate disputes by preventing appeal of order denying
arbitration until final judgment (see Comment 4), Committee
staff notes first, that this argument presumes courts are
erroneously denying motions to compel arbitration and their
decisions are consistently being overturned on appeal.
Second, that this bill requires an appeal on arbitrability
to be made upon final judgment, even assuming the order was
erroneous, is no different from the denial of any other
motion that would have resulted in a favorable outcome for
defendant. As stated above, California law ordinarily
requires appeals to be on final judgment. (See Code of
Civ. Proc. Sec. 904.1.) In fact, under the previous rule
that prevented appeal of all arbitrabilty orders until
after final judgment (i.e. including orders denying or
dismissing a petition to compel arbitration), the
California Supreme Court made clear that "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, 33 Cal.2d
116, 119.)
Further, Committee staff notes no compelling reason why the
plaintiffs ought to bear the costs of awaiting an appeal on
the issue of arbitrability that can take years, especially
where the initial review of the petition to compel under
Section 1281.2 is so favorable to finding in favor of
compelling arbitration. Nor does it find any compelling
reason why individuals should be forced to bear the costs
of an arbitration that was erroneously granted, while
defendants are spared the costs of a trial that was
erroneously granted. Moreover, according to the proponents
of this bill, plaintiffs often are left with no choice but
to settle their rights prematurely due to delay tactics of
some defendants who appeal these orders as a matter of
strategy, and without any real merits to their claim that
arbitration is warranted. (Because these statutory appeals
are a matter of right, it does not matter for purposes of
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reviewability that an appeal has no merit.)
Co-sponsor CAOC notes the case of Dorthea, a 92-year old
widow who had put all of her savings in to a deferred
annuity and thereby locked up her money for seven years at
the encouragement of her bank, against industry standards
which expressly recognize the unsuitability of such
investments for persons of 65 years or over. According to
the CAOC, "�w]hen a complaint was filed against Washington
Mutual, the defendants not only attempted to compel
arbitration but also filed every motion under the sun to
delay the litigation process. Dorthea was finally forced
to settle the case because her bills were piling up and her
health was quickly diminishing. . . . Such unscrupulous
delay tactics can be stopped, while still granting
�defendants] the ability to make meritorious pleas for
review. 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 the
appeal."
c. Writ of mandate remains available for interlocutory
review on a discretionary basis
Nothing in this bill would impact the current availability of
a writ of mandamus for appellate review of a denial or
dismissal of an order to compel arbitration if the court found
it necessary to correct an abuse of discretion by the court.
This writ is already available to both parties and is, in
fact, the only option prior to appeal on judgment for parties
who seek review of orders compelling arbitration in
extraordinary circumstances prior to proceeding to
arbitration.
For years, courts have held that an order to compel
arbitration is an interlocutory order that is appealable only
from the judgment confirming the arbitration award, or in
extraordinary situations, is reviewable by writ of mandate.
(See e.g. United Firefighters of Los Angeles v. City of Los
Angeles (1991) 231 Cal.App.3d 1576, 1581-158 and Mid-Wilshire
Associates v. O'Leary (1992) 7 Cal.App.4th 1450, 1454.)
For example, in Bertero v. Superior Court (1963), the Court of
Appeal held that if the parties were to proceed to
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arbitration, an appeal from the order or judgment made
vacating or confirming the award would not be an adequate
remedy given that the parties would be put to the unnecessary
delay and expense of an arbitration, further court
proceedings, and an appeal-after which they would be required
to start over. As such, it issued a preemptory writ of
mandamus to require the superior court to set aside its
earlier orders compelling arbitration. (216 Cal.App.2d 213,
222.)
Under this bill, a party would not be able to appeal an order
denying or dismissing a petition to compel arbitration until
after judgment is rendered, unless the arbitration is to
adjudicate a dispute over the terms of a collective bargaining
agreement or MOU, but could still seek a writ of mandamus such
as that ordered in Bertero.
Committee staff notes a concern by opponents that a writ of
mandamus is not a sufficient alternative to the existing law
right of appeal. (See Comment 2a; see also Comment 4 below.)
As discussed in Comment 2a, and in light of the author's
efforts to reduce the burden on the judiciary placed by these
appeals and to remedy the anomaly created by these non-final
judgment type appeals, Committee staff notes that to amend
existing law to allow for both parties to appeal arbitrability
orders by the court in middle of an action would arguably only
further exacerbate strained judicial resources and would move
the law further away from the final judgment rule that
ordinarily limits appeals.
3. Public policy considerations and this bill's narrowed right
to appeal
This bill narrows the immediate right to appeal an order denying
or dismissing a petition to compel arbitration to those
situations where the arbitration is for the adjudication of a
dispute over the terms of a public or private sector collective
bargaining agreement or MOU.
While there is a general public policy in California favoring
arbitration, that policy is neither dispositive of the issue
here, nor does it innately trump competing public policy
interests in favor of limited appeals upon final judgments or
public policy interests in protecting the right to trial by
jury. First, public policy favoring arbitration of disputes
cannot be used to compel arbitration of disputes outside the
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scope of the agreement. Second, where an agreement is not
enforceable, arbitration cannot be compelled by way of this
public policy. Third, notwithstanding this public policy
favoring arbitration, "courts also recognize that the right to
pursue claims in a judicial forum is a substantial right and not
one lightly to be deemed waived." (6 Cal Jur 3d Arbitration and
Awards, Sec. 3.) Finally, the public policy in favor of
arbitration, however strong, may not be used to permit a party
to enforce provisions of an arbitration agreement that were so
poorly drafted that the party cannot be presumed to have agreed
to them. (Thompson v. Toll Dublin (2008) 165 Cal.App.4th 1360,
1370.)
In addition to these public policy considerations, is the
consideration of fairness in requiring a party subject to an
"agreement" providing for arbitration of any disputes in a
take-it-or-leave-it contract of adhesion to arbitrate disputes
arising out of that contract. Unlike a collective bargaining
agreement, where both parties are negotiating provisions of the
contract and agree to bring disputes against one another in
arbitration in that bargained for contract, the likelihood is
that many, if not most, disputes brought to court arising out of
a contract of adhesion will be against the corporation who
provided the take-it-or-leave-it terms of the contract, by the
individual who had no say in the provisions of the contract.
Noting the oppositions' arguments that it is illogical to
provide for this distinction in law (see Comment 4 below), the
author argues that "�t]he reason why it's appropriate to allow
for appeal of an order denying/dismissing a petition to compel
arbitration in cases involving �collective bargaining agreements
(CBAs)] or MOUs is that they are fundamentally different from
other disputes. When the dispute involves a CBA or MOU, both
parties are essentially professional negotiators who freely and
fairly choose to use arbitration to resolve their dispute. In
the case of an average consumer, elder, or employee the contract
is not the result of professional negotiation over terms,
including a mandatory arbitration clause, but rather the only
choice is to sign the whole contract as written, or not."
This bill would address the unfairness of forcing an individual
to endure long appeals on orders denying the motion to compel
arbitration where he or she did not even have any part in
drafting the agreement to arbitrate, as described by the author
above. In limiting the scope of the existing right of appeal,
this bill addresses such abusive delay tactics by defendants
AB 1062 (Dickinson)
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who seek to force arbitration of actions brought against them
based on language included in an adhesive contract. At the same
time, by not eliminating the right altogether, it recognizes the
fairness of allowing for immediate appeals in fully negotiated
arbitrations as found in public or private collective bargaining
agreements or MOUs, where either party could realistically find
itself in the position of seeking to compel arbitration against
the party who later attempts to proceed to trial against their
negotiated agreement to arbitrate.
4. Expedited appeals
California Association of Health Facilities (CAHF) also argues
that there can be expedited hearings of appeals. Specifically,
it argues that courts may grant calendar preference on two
grounds.
First, Code of Civil Procedure Section 1291.2 requires all
courts to give preference to proceedings relating to
enforcement of arbitration agreements. Second, under Warren
v. Schester (1997) 57 Cal.App.4th 1189, 1199, this Court has
discretion to grant calendar preference to litigants who, due
to age and infirmity, qualify for a trial preference (under
Code of Civil Procedure Section 36(a).) in the court.
In Hedges v. Carrigan (2004) 117 Cal.App.4th 578, 582, the
Court held that Code of Civil Procedure Section 1291.2
requires that the appeal of a denial of a petition to compel
arbitration be granted preference. See also Woolls v.
Superior Court (2005) 127 Cal.App.4th 197, 204 n.4
("Arbitration proceedings are entitled to preference in all
courts.")
Committee staff notes that even with calendar preference, with
the overwhelming caseload of courts and the frequency with which
arbitration provisions are included in contracts of adhesion,
calendar preference likely does not alone resolve the issue of
delays. In Hedges v. Carrigan, the appeal followed a March 10,
2003 denial of a petition to compel arbitration, and the court's
decision in that appeal, even after granting the case preference
as required under Section 1291.2, took until April 6, 2004.
Co-sponsor CAOC rebuts any presumption that expedited appeals
are a sufficient mechanism to resolve the issue of delay
tactics. First, they state that Section 36 "only allows courts
to grant calendar preference to litigations�;] it is not
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guaranteed. . . . Even if a judge determines that the plaintiff
has met the high standard of proof required under Code of Civ.
Proc. � 36 �requiring "clear and convincing evidence"],
defendants often use the opportunity to repudiate that the
plaintiff has satisfied this requirement. This leads to further
litigation in even achieving calendar preference, prolongs the
appeals process, and completely conflicts with the goals �of] AB
1062." Moreover, with respect to Section 1291.2, CAOC states
"this statute is arbitrary and provides no relief to the
litigant because �the] statute provides no guidance on how
quickly these matters will be heard and handled."
The author argues "�i]t is true that the �Code of Civil
Procedure] gives preference to proceedings related to
arbitration, but in a system as backlogged as the Court of
Appeals, preference is a relative term. And this issue is really
ancillary to the purpose of the bill, which is to conform this
section of the law to the principle that appeals may only be
taken from a final judgment . . . . Additionally, while elderly
litigants and others are granted preference . . . , employees
with similar claims are not granted preference. The author
believes that employees have an equally urgent need to resolve
claims related to their livelihood without undue delay."
5. Opposition's arguments against the bill
In opposition to the bill, the Civil Justice Association of
California writes:
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 by
AB 1062 from appealing a court's decision to allow that
decision to proceed.
�AB] 1062 was recently amended and now only ensures the right
of appeal for unions with arbitration agreements. Creating
different enforcement mechanisms for unions and not for others
is an illogical distinction. Like any other contract,
parties' should be encouraged to adhere to contractual
obligations freely entered into.
Arbitration and mediation provisions work well in many areas
of law. The cost and time savings of arbitration offer
considerable benefits to both parties. In lieu of going to
trial, using arbitration to settle a dispute is a widely
AB 1062 (Dickinson)
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accepted, faster, and less-costly alternative to the court
system.
Also in opposition, the California Assisted Living Association
(CALA) states, that "�w]ithout a right to appeal the denial or
dismissal of a petition to compel arbitration, an aggrieved
party must either go through the entire trial and then appeal
after final judgment - a scenario that completely deprives him
of the benefits of the arbitration agreement - or petition for a
writ - a discretionary review that is commonly denied. In
essence, without the right of direct appellate review, an
aggrieved party has no viable means to enforce the arbitration
agreement. By the time final judgment is entered, the party
will have already fully litigated the case in court, the very
thing parties agreed not to do." CALA argues that the bill
"would adversely impact Assisted Living communities because many
such communities are parties to arbitration agreements."
The California Chamber of Commerce, states:
?while appeals by right can extend the time necessary to
resolve disputes over the validity of the 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-meritorus claims that can receive a full trial.
In addition, arbitration proceedings are not merely preferred
by employers. A study conducted by the American Bar
Association found arbitration litigants were more satisfied
than those involved in lawsuits. . . .
Finally, despite assertions by the author, a discretionary
writ of mandate is an inadequate procedural protection for
employers. Unlike an appeal, a writ of mandate is an
extraordinary remedy requiring an appellate court to compel a
lower court to take a specified action. Appellate courts are
under no obligation to review the trial court decision, and if
they do so, the lower court's ruling will only be reversed
through a writ if the trial court has abused its discretion,
regardless of the merits of the claim.
CAHF makes the argument that "AB 1062 promotes more costly
AB 1062 (Dickinson)
Page 19 of ?
litigation against �long term facilities] by allowing attorneys
to use the threat of astronomical attorney fee awards (which are
allowed in 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." CAHF also argues that this bill would
adversely impact long term facilities through higher costs for
delivery of long-term care services, higher costs to the
Medi-Cal program, and less access to needed services.
Support : California Advocates for Nursing Home Reform (CANHR);
Congress of California Seniors; Consumer Federation of
California; The Legal Aid Society-Employment Law Center
Opposition : Association of California Healthcare Districts
(ACHD); Association of California Insurance Companies (ACIC);
Californians Allied for Patient Protection (CAPP); California
Assisted Living Association (CALA); California Association of
Health Facilities (CAHF); California Association of Professional
Liability Insurers; California Automotive Business Coalition;
California Building Industry Association; California Business
Properties Association; California Chamber of Commerce;
California Chapter of the American Fence Association; California
Farm Bureau Federation; California Fence Contractors
Association; California Grocers Association; California League
of Food Processors; California Manufacturers and Technology
Association; California Retailers Association; Chambers of
Commerce Alliance of Ventura & Santa Barbara Counties; Civil
Justice Association of California (CJAC); Engineering
Contractors Association; Flasher Barricade Association; Marin
Builders Association; Personal Insurance Federation of
California; Simi Valley Chamber of Commerce; TechAmerica;
TechNet
HISTORY
Source : California Employment Lawyers Association (CELA);
Consumer Attorneys of California (CAOC)
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
AB 1062 (Dickinson)
Page 20 of ?
Assembly Floor (Ayes 42, Noes 29)
Assembly Judiciary Committee (Ayes 6, Noes 3)
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