BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1631 (Monning)
As Introduced
Hearing Date: June 12, 2012
Fiscal: No
Urgency: No
RD
SUBJECT
Arbitration: Legal Representation
DESCRIPTION
Existing law, until January 1, 2013, allows an out-of-state
attorney to represent a party in an arbitration proceeding in
this state or to render legal services in this state in
connection with an out-of-state arbitration proceeding (referred
to as the Out of State Attorney Arbitration Counsel Program
(OSAAC)), provided that the attorney, among other things:
serves a certificate, with specified information, upon the
arbitrator(s) or arbitral forum, the State Bar, and all other
parties and counsel in the arbitration;
obtains written approval on the certificate from the
arbitrator(s) or arbitral forum and files the certificate as
specified; and
submits to the disciplinary jurisdiction of the California
State Bar.
This bill would remove the sunset date, thereby extending this
program indefinitely.
BACKGROUND
California courts allow out-of-state attorneys to appear pro hac
vice upon submitting an application to the court and serving
notice of the hearing on the application with the State Bar.
(California Rules of Court, rule 9.40.) At the same time, many
companies use in-house counsel to handle many of their legal
needs, including representing the company during arbitration
proceedings.
(more)
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However, in Birbrower v. Superior Court (1998) 17 Cal.4th 119
(hereinafter "Birbrower"), the California Supreme Court ruled
that a New York law firm which was advising a California client
with respect to a pending arbitration in California, and which
had represented the client in pre-arbitration negotiations, was
engaging in the unlawful practice of law in the state in
violation of Business and Professions Code Section 6125. That
section prohibits the practice of law in California except by
attorneys licensed by the State Bar. Under Birbrower, the
practice of law includes representation of a client in an
arbitration proceeding and in proceedings leading to the
arbitration. In reaching its conclusion, the court declined to
adopt an arbitration exception to Section 6125, stating, "an
exception for arbitration is best left to the Legislature, which
has the authority to determine qualifications for admission to
the State Bar and to decide what constitutes the practice of
law." (Id., at 134.)
That same year, in direct response to Birbrower, AB 2086
(Keeley, Ch. 915, Stats. 1998) was enacted, amending Section
1282.4 of the Code of Civil Procedure to allow out-of-state
attorneys to represent parties in arbitration proceedings in
California, provided they followed the procedure specified under
that section. The California Supreme Court also adopted a rule
of court, currently Rule 9.43 (originally, Rule 983.4) effective
July 1, 1999, which required the State Bar establish and
administer a program to implement the process by which
out-of-state attorneys may comply with the statute (Out-of-State
Attorney Arbitration Counsel Program). (See California Rules of
Court, rule 9.43(b).) As such, out-of-state attorneys can
represent parties in California arbitrations once they have
satisfied, among other things, the following requirements: (1)
serve a certificate, with specified information, upon the
arbitrator(s) or arbitral forum, the State Bar, and all other
parties and counsel in the arbitration; (2) obtain written
approval on the certificate from the arbitrator(s) or arbitral
forum and file that certificate, as specified; and (3) submit to
the disciplinary jurisdiction of the California State Bar.
(Code Civ. Proc. Sec. 1282.4; California Rules of Court, rule
9.43.)
AB 2086 contained a two-year sunset provision stating the
authorization under Section 1282.4 would expire on January 1,
2001. In the years since, the sunset on that section has been
extended on numerous occasions, most recently through January 1,
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2013. Notably, in 2006, in addition to extending the sunset
until January 1, 2009, AB 2452 (Harman, Ch. 357, Stats. 2006)
established the current filing procedure of the arbitration
certificate and required the State Bar to issue a report and
recommendations, as specified, regarding the appearance of
out-of-state attorneys in arbitration hearings or proceedings in
this state to the Legislature by December 31, 2009.
This bill, co- sponsored by the California Dispute Resolution
Council and the Securities Industry and Financial Markets
Association, would repeal the sunset date and extend the section
indefinitely.
CHANGES TO EXISTING LAW
Existing law provides that no person shall practice law in
California unless an active member of the State Bar. (Bus. &
Prof. Code Sec. 6125.)
Existing law provides that a party to an arbitration has the
right to be represented by an attorney at any arbitration
proceeding or hearing. (Code Civ. Proc. 1282.4(a).)
Existing law authorizes an out-of-state attorney to appear on
behalf of a client in arbitration as long as the out-of-state
attorney files a certificate, as specified, and once the
certificate is approved by the arbitrator, the certificate must
be filed with the State Bar of California and served on all
parties to the arbitration. (Code Civ. Proc. Sec.
1282.4(b)-(e).)
Existing law provides that the out-of-state attorney
participating in an arbitration is subject to the disciplinary
jurisdiction of the State Bar of California. (Code Civ. Proc.
Sec. 1282.4(f).)
Existing law provides that the above-described provisions sunset
on January 1, 2013. (Code Civ. Proc. Sec. 1282.4(k).)
This bill would delete that sunset provision.
COMMENT
1. Stated need for the bill
According to the author, "�t]he out-of-state arbitration program
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is an effective, useful program that should be a permanent
fixture of California state law. Accordingly, this bill seeks
to implement the suggestion of the State Bar that 'consideration
should be given to whether the sunset provisions of CCP Sect.
1282.4 should be removed, which would make the requirements for
out-of-state attorneys to appear in California arbitration
proceedings permanent.'"
2. Purpose and operation of OSAAC program since 1998 and the
State Bar recommendation
This bill would remove the sunset on Section 1282.4 of the Code
of Civil Procedure, thereby extending that provision
indefinitely to allow out-of-state attorneys to represent their
clients in California arbitration proceedings upon following
specified procedures. (See also California Rules of Court, rule
9.43.)
As discussed in the Background and further explained by the
co-sponsor of this bill, the Securities Industry and Financial
Markets Association (SIFMA), the need for this provision dates
back the 1998 decision of Birbrower v. Superior Court. (17
Cal.4th 119.) SIFMA writes:
�That] decision effectively prevented many corporations
headquartered elsewhere from utilizing their in-house counsel
or their longstanding outside counsel when arbitration issues
arose. Instead, the companies had to incur substantial time
and expense to find, retain, and bring up to speed new and
often-times costly counsel in the state. In addition, there
was a very real fear that the decision would trigger
retaliatory action against California citizens and businesses
by other states. Finally, the court ruling seemed
particularly ironic given that these same out-of-state
attorneys were permitted to try their cases in the California
court system by merely filling out an application and asking
the judge to admit them pro hac vice. For these and other
reasons, the California Legislature quickly corrected the
Birbrower decision by enacting AB 2086 later that same year.
Similarly, according to the Senate Judiciary Committee Analysis
of AB 2086, the sponsor of AB 2086, the Security Industry
Association (SIA), argued that prior to Birbrower, "it was
common practice out-of-state corporate counsel to represent an
in-state affiliate or subsidiary in an arbitration in
California. This practice made sense, asserts the SIA, given
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the multi-state nature of corporate law practice. Corporate
counsel usually has the best expertise and most familiarity with
the corporation's business and the legal issues being litigated.
Thus, it makes legal as well as economic sense to use corporate
counsel in litigation and arbitration, as opposed to hiring
local counsel on an ad-hoc basis." (See Sen. Judiciary Com.,
analysis of AB 2086 (1997-1998 Reg. Session) Aug. 27, 1998, p.
4.)
Since the enactment of Section 1282.4 and the adoption of Rule
9.43 in 1999, out-of-state attorneys can also represent parties
in arbitrations in California, following specified procedure,
until January 1, 2013. The current procedures require the
attorney, among other things, to: (1) serve a certificate, with
specified information, upon the arbitrator(s) or arbitral forum,
the State Bar, and all other parties and counsel in the
arbitration; (2) obtain written approval on the certificate from
the arbitrator(s) or arbitral forum and file that certificate,
as specified; and (3) submit to the disciplinary jurisdiction of
the California State Bar. This bill would allow for the
indefinite continuation of those provisions.
3. 2009 State Bar Report supports removal
In 2006, while extending the then-sunset for the OSAAC statute
to January 1, 2009, the Legislature also required that the State
Bar collect, record the information reported to the State Bar on
certificates filed under the OSAAC program, including, among
other things, the volume, nature, and status of any complaints,
inquiries, or referrals made alleging a violation of that
section. (AB 2482 (Harman, Ch. 357, Stats. 2006).) The
findings of 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) demonstrated that the OSAAC program is sufficiently
protecting California litigants. During the two-year period
covered in the Report, only 1,192 out-of-state attorneys filed a
certificate of arbitration appearance (this total includes
multiple applications by the same applicants during that two
year period). The number of out-of-state attorneys requesting
to appear in arbitrations in 2007 and 2008 was lower than
out-of-state attorneys requesting to appear pro hac vice
(approximately 2,600 per year). The State Bar compiled a table
showing the number of out-of-state applicants and the
corresponding number of times they appeared in arbitrations
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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, though the vast majority of applicants appear to
make only a single appearance. The State Bar reported the
following special circumstances for which arbitrators accepted
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;
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 Report noted that the State Bar did not receive any written
complaints about the OSAAC program during the reporting period
and that it is not aware of any complaints or alleged violations
of Code of Civil Procedure Section 1282.4. While a report has
not been conducted since 2009 because it was a one-time
requirement under AB 2482 (Harman, Ch. 357, Stats. 2006), the
report is still arguably pertinent and the Committee has not
received information noting complaints about the program in the
time since. Additionally, the State Bar has confirmed with the
Committee that they do not have records of any complaints since
the 2009 report. As noted by co-sponsor California Dispute
Resolution Council (CDRC), "�t]he statute has been in effect for
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�thirteen] years and there is no evidence that there has been
any abuse of the procedures by out of state attorneys as
reported by the State Bar."
Support : None Known
Opposition : None Known
HISTORY
Source : California Dispute Resolution Council; Securities
Industry and Financial Markets Association
Related Pending Legislation : None Known
Prior Legislation :
SB 877 (Harman, Ch. 277, Stats. 2009) extended the sunset to
January 1, 2013.
AB 2482 (Harman, Ch. 357, Stats. 2006) See Background and
Comment 3.
AB 415 (Harman, Ch. 607, Stats. 2005) extended the sunset to
January 1, 2007.
SB 2153 (Schiff, Ch. 1011, Stats. 2000) extended the sunset to
December 31, 2005.
AB 2086 (Keeley, Ch. 915, Stats. 1998) See Background.
Prior Vote :
Assembly Floor (Ayes 77, Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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