BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 802 (Wieckowski)
As Amended June 16, 2014
Hearing Date: June 24, 2014
Fiscal: No
Urgency: No
RD:rm
SUBJECT
Private arbitration companies: disclosures
DESCRIPTION
Existing law generally requires private arbitration companies to
collect and publicly disclose specific information regarding the
type, quantity, and certain particulars of consumer arbitrations
they administer or are involved in. Existing law requires that
this information be made available in a computer-searchable
format on the company's Internet Web site.
This bill would clarify the information that is to be disclosed
with respect to consumer arbitrations administered by a private
arbitration company, and require that this information be made
available in a format that allows the public to search the
information and be directly accessible from a conspicuously
displayed link on the Internet Web site of the private
arbitration company. This bill would also codify the
legislative intent that private arbitration companies comply
with all legal obligations of this law.
BACKGROUND
Arbitration is a method of alternative dispute resolution where
the disputing parties present their disagreement(s) to one or
more "neutral" third-party arbitrators whose decisions are
generally final and binding, in place of litigating the issues
in courts. The use of mandatory arbitration clauses in consumer
contracts has increased immeasurably in recent years and has
been highly controversial for a variety of reasons, including
issues surrounding concerns of "repeat players" whereby an
(more)
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arbitrator is inclined to rule in favor of corporations that
return to them to arbitrate future matters. Concerns are
particularly heightened as arbitrators do not have to follow the
law, decisions cannot be appealed, and proceedings are often
conducted without any opportunity for public scrutiny. Many of
these clauses are contained in adhesion contracts used by a wide
range of companies, including telecommunications providers,
banks, doctors, insurance providers, hospitals, and nursing
homes.
In 2002, AB 2656 (Corbett, Ch. 1158, Stats. 2002) was enacted as
part of a series of bills that sought to address concerns about
the private arbitration industry, to generally require private
arbitration companies to collect and provide certain data
regarding consumer arbitrations they administer, and to make
that information available in a computer-searchable format on
the company's Web site.
This bill seeks to both clarify and expand upon the existing
reporting requirements to address gaps in information. The bill
would also require that the information be made available in a
format that allows the public to search the information, and
that the information be directly accessible from a conspicuously
displayed link on the private company's Internet Web site.
CHANGES TO EXISTING LAW
Existing law , with respect to any consumer arbitration commenced
on or after January 1, 2003, requires a private arbitration
company that administers or is otherwise involved in a consumer
arbitration, to collect, publish at least quarterly, and make
available to the public in a computer-searchable format
accessible on the company's Internet Web site, if any, and on
paper upon request, all of the following information regarding
each consumer arbitration within the preceding five years,
except as otherwise specified:
1)The name of the nonconsumer party, if the nonconsumer party is
a business entity.
2)The type of dispute involved, including goods, banking,
insurance, health care, employment, and, if it involves
employment, the amount of the employee's annual wage divided
into the following ranges: less than $100,000, $100,000 to
$250,000, inclusive, and over $250,000.
3)Whether the consumer or nonconsumer party was the prevailing
party.
4)On how many occasions, if any, the nonconsumer party has
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previously been a party in an arbitration or mediation
administered by the private arbitration company.
5)Whether the consumer party was represented by an attorney.
6)The date the private arbitration company received the demand
for arbitration, the date the arbitrator was appointed, and
the date of disposition by the arbitrator or private
arbitration company.
7)The type of disposition of the dispute, if known, including
withdrawal, abandonment, settlement, award after hearing,
award without hearing, default, or dismissal without hearing.
8)The amount of the claim, the amount of the award, and any
other relief granted, if any.
9)The name of the arbitrator, his or her total fee for the case,
and the percentage of the arbitrator's fee allocated to each
party. (Code Civ. Proc. Sec. 1281.96(a), (c).)
This bill would, instead, require a private arbitration company
that administers or is otherwise involved in, a consumer
arbitration, to collect, publish at least quarterly, and make
available to the public on the company's Internet Web site, if
any, and on paper upon request, in a single cumulative report
that contains all of the following information regarding each
consumer arbitration within the preceding five years:
1)Whether the arbitration was demanded pursuant to a pre-dispute
arbitration clause and, if so, whether the pre-dispute
arbitration clause designated the administering private
arbitration company.
2)The name of the nonconsumer party, if the nonconsumer party is
a corporation or other business entity, and whether the
consumer party was the initiating party or the responding
party, if known.
3)The nature of dispute involved as one of the following: goods;
credit; other banking or finance; insurance; health care;
construction; real estate; telecommunications, including
software and Internet usage; debt collection; personal injury;
employment; or other. If the dispute involved employment, the
amount of the employee's annual wage divided into the
following ranges: less than one hundred thousand dollars
($100,000); one hundred thousand dollars ($100,000) to two
hundred fifty thousand dollars ($250,000); inclusive, and over
two hundred fifty thousand dollars ($250,000). If the
employee chooses not to provide wage information, it may be
noted.
4)Whether the consumer or nonconsumer party was the prevailing
party. "Prevailing party" would include the party with a net
monetary recovery or an award of injunctive relief.
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5)The total number of occasions, if any, the nonconsumer party
has previously been a party in an arbitration administered by
the private arbitration company.
6)The total number of occasions, if any, the nonconsumer party
has previously been a party in a mediation administered by the
private arbitration company.
7)Whether the consumer party was represented by an attorney and,
if so, the name of the attorney and the full name of the law
firm that employs the attorney, if any.
8)The date the private arbitration company received the demand
for arbitration, the date the arbitrator was appointed, and
the date of disposition by the arbitrator or private
arbitration company.
9)The type of disposition of the dispute, if known, identified
as one of the following: withdrawal, abandonment, settlement,
award after hearing, award without hearing, default, or
dismissal without hearing. If a case was administered in a
hearing, indicate whether the hearing was conducted in person,
by telephone or video conference, or by documents only.
10)The amount of the claim, whether equitable relief was
requested or awarded, the amount of the monetary award, the
amount of any attorney's fees awarded, and any other relief
granted, if any.
11)The name of the arbitrator, his or her total fee for the
case, the percentage of the arbitrator's fee allocated to each
party, whether the waiver of any fees was granted, and, if so,
the amount of the waiver.
This bill would provide that the changes made by this bill shall
not apply to any consumer arbitration administered before
January 1, 2015.
This bill would require the mandated information to be made
available in a format that allows the public to search and sort
the information using readily available software, and would
require that the information be directly accessible from a
conspicuously displayed link on the Internet Web site of the
private company with the identifying description: "consumer case
information." This bill would make other conforming changes and
would codify the intent of the Legislature that private
arbitration companies comply with all legal obligations of this
bill.
COMMENT
1. Stated need for the bill
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According to the author:
Existing law requires a private arbitration company involved
in consumer arbitration cases to collect and make certain
information regarding those cases available to the public in a
computer-searchable format, accessible at the Internet Web
site of the private arbitration company, if it has an Internet
Web site. ([Code Civ. Proc. Sec.] 1281.96.)
AB 802 modifies existing disclosure requirements and adds two
new required disclosures of arbitration companies. The two
new requirements are:
a. To disclose whether arbitration was demanded pursuant to a
pre-dispute arbitration clause and, if so, whether the
pre-dispute arbitration clause designated the administering
private arbitration company, and;
b. To require that the information disclosed be made available
in a format that allows the public to search the information,
and shall be directly accessible from a conspicuously
displayed link on the Internet Web site of the private
arbitration company with the identifying description:
"consumer case information." This requires that private
arbitration companies provide the currently-required
disclosures in a sortable database format, rather than simply
a "searchable" format.
2. This bill seeks to address issues of inadequate reporting
and non-compliance
This bill seeks to modify existing data reporting requirements
for private arbitration companies. As noted in the Background,
for the last decade, private arbitration companies have been
subject to statutory requirements to collect and publicly
disclose, on a quarterly basis, in a computer-searchable format
on the company's Web site (if any), certain information
regarding the type, quantity, and particulars of consumer
arbitrations they administer or are involved in, as specified.
(See Code Civ. Proc. Sec. 1281.96.)
In 2002, AB 2656 (Corbett, Ch. 1158, Stats. 2002) was introduced
in response to skepticism about the fairness of such
arbitrations and concerns with the "repeat player" problem in
arbitrations, whereby a repeat defendant such as a corporate
defendant may, conspicuously or not, receive preferential
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treatment or rulings from arbitrators who rely on being selected
by the corporate defendant to earn a living as an arbitrator.
The proponents of AB 2656 argued that, in contrast to public
court proceedings, consumer arbitrations are conducted in secret
because of arbitration clauses or rules of the designated
provider that were designed to impose secrecy-not because there
was something inherent in the nature of arbitration or the
function of the arbitrator that requires such secrecy.
Accordingly, AB 2656 sought to "address these concerns and
reduce any bias that may exist in favor of corporate
repeat-players in consumer arbitration" by mandating public
reporting of certain information by private arbitration
companies conducting consumer arbitrations.
Despite those provisions, the author writes that:
A new study by the Public Law Research Institute at UC
Hastings College of Law shows that the longstanding and
pervasive issues of arbitration company compliance with the
consumer data law appear to persist. (Jung, et al, Reporting
Consumer Arbitration Data in California (March 15, 2013)
(available at http://gov.uchastings.edu/public-law/index.php.)
In addition - apart from the problem of tolerating violations
of a legal obligation - the failure of arbitration companies
to provide the legally required data may also have the effect
of skewing the conduct of consumer arbitrations by permitting
unscrupulous arbitration companies to gain an unfair
competitive advantage over their law-abiding competitors.
Like other providers of services, arbitration companies
compete with each other to attract business. This competition
can take a variety of forms, giving rise to the criticism that
it gives arbitration companies an incentive to structure the
arbitration process to favor businesses, which are more likely
than consumers and employees to be repeat players in
arbitration. Some observers contend that self-regulation may
be a valuable constraint against the perceived incentive for
arbitration companies to favor business parties who offer the
promise of repeat business. However, the value of
self-regulation would appear to be largely lost, or at least
unascertainable, without transparency. [ . . . ]
The above-referenced 2013 UC Hastings Public Law Research
Institute (PLRI) study reported that of the 26 private
arbitration companies involved in consumer arbitrations in
California, 15 do not publish any of the information the statute
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requires, while 11 companies publish at least some of the
required information. (Note, however, that this latter figure
dropped to eight companies by the PLRI's December 2013 update as
two companies had removed their previous disclosures from their
Web sites and one was no longer involved in consumer
arbitrations.) The PLRI reviewed a sample of each company's
reports and made the following findings:
many published reports are incomplete, either omitting
categories of information entirely or reporting information
inconsistently or ambiguously;
although the statute requires companies to report the amount
of the consumer's claim, many companies do not comply;
very few companies report the employee's salary range in
employment arbitrations as the statute requires;
information about the number of times the non-consumer party
previously arbitrated with the company is often reported
inconsistently or ambiguously;
companies use idiosyncratic labels and categories to present
the information, rather than using the categories the statute
requires; and
while the statute requires companies to publish information in
a "computer-searchable format," only one company posts the
data in a format that allows users to manipulate or sort the
published information. (See UC Hastings Public Law Research
Institute's Executive Summary, Reporting Consumer Arbitration
Data in California (Mar. 18, 2013), available at
[as of May 12, 2014] at pp. 1-2.)
To address issues relating to inadequate reporting, this bill
seeks to clarify the current information that is to be reported
and expand the reporting requirements moving forward, so that
the private arbitration companies disclose all of the following:
whether the arbitration was demanded pursuant to a pre-dispute
arbitration clause and, if so, whether the pre-dispute
arbitration clause designated the administering private
arbitration company;
whether the consumer party was the initiating party or the
responding party, if known;
the nature of dispute involved, with greater precision than
under existing law (in terms of whether it involved goods;
credit; other banking or finance; insurance; health care;
construction; real estate; telecommunications, including
software and Internet usage; debt collection; personal injury;
employment; or other). If the employee chooses not to provide
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wage information, it may be noted;
the name of the attorney and the full name of the law firm
that employs the attorney, if any, if the consumer party was
represented by an attorney;
if a case was administered in a hearing, indicate whether the
hearing was conducted in person, by telephone or video
conference, or by documents only;
whether equitable relief was requested or awarded, as well as
the amount of any attorney's fees awarded; and
whether the waiver of any arbitrator fees was granted, and, if
so, the amount of the waiver.
Furthermore, this bill seeks to address the issue of
underreporting by codifying the intent of the Legislature that
private arbitration companies comply with all legal obligations
of this statute.
Notably, under the terms of this bill, the new reporting
requirements would be prospective only as they would apply to
consumer arbitrations administered by a private arbitration
company on or after January 1, 2015.
3. Format required for the mandated disclosures
Under existing law, certain information regarding each consumer
arbitration administered by or in which a private arbitration
company is involved within the proceeding five years must be
published at least quarterly, and made available to the public
in a "computer-searchable format," which shall be accessible at
the Internet Web site of the private arbitration company, if
any, and on paper upon request.
Recognizing that "[a] consumer's ability to access the
arbitration reports is fundamental to ensuring transparency,"
the Public Law Research Institute (PLRI) at the UC Hastings
School of Law investigated private arbitration companies'
compliance with AB 2656 (Corbett, Ch. 1158, Stats. 2002) and
reported that such access varied among the companies. "While
some company websites make the [Section] 1281.96 data easily
available, other websites make it difficult to locate and view
the data." (UC Hastings Public Law Research Institute, Reporting
Consumer Arbitration Data in California (Mar. 18, 2013) at p.
34.) Moreover, the PLRI study reports that "[c]ompanies
approached the quarterly reporting requirement in two ways. Some
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companies publish a report each quarter containing the data for
the cases processed during that quarter. Other companies publish
a cumulative report, republishing it with additional cases
periodically. In some of the cumulative reports, the cases are
not reported in chronological order, making it difficult to tell
where one quarter begins and another ends. As the California
Dispute Resolution Institute noted in its 2004 study of
[Section] 1281.96, different posting practices complicate the
analysis of the data and limit its value to policy makers."
(Id. at 13-14.)
To this end, this bill would strike reference to the reporting
of the collected information in a "computer-searchable format"
and instead require that all of the mandated information
regarding each consumer arbitration over the preceding five
years be made available to the public in a single cumulative
report. Furthermore, the bill requires that the required
information be made available in a format that allows the public
to search and sort the information using readily available
software, and further requires that the information be directly
accessible from a conspicuously displayed link on the Internet
Web site of the private arbitration company with the identifying
description: "consumer case information."
4. Enforcement mechanism
As currently drafted, this bill would codify the Legislature's
intent that private arbitration companies comply with all legal
obligations of the resulting statute. Even absent that
language, all statutes have the force and effect of law and
persons subject to statutes must comply with the obligations
imposed. This language is intended to operate as a placeholder
for an enforcement mechanism which has yet to be agreed upon by
the author and stakeholders. Accordingly, the author should
continue to work with this Committee during the process of
developing an appropriate enforcement mechanism.
Support : None Known
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
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Prior Legislation : AB 2656 (Corbett, Ch. 1158, Stats. 2002) See
Background and Comment 2.
Prior Vote :
Assembly Floor (Ayes 54, Noes 23)
Assembly Judiciary Committee (Ayes 7, Noes 2)
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