Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A week after the government passed sweeping new regulations for California’s arbitration industry, at least two providers are already indicating that they might stop handling consumer arbitrations in the state. While the most controversial bill in a six-pronged arbitration package was vetoed by Gov. Gray Davis a week ago, the five bills that passed point to substantial changes in the way dispute resolution services run their operations. The most noticeable effect so far seems to be confusion. Arbitration providers say they’re still trying to determine to whom exactly the new laws apply and how the laws relate to earlier ethics rules enacted by the Judicial Council. “It’s a train wreck,” said American Arbitration Association Vice President India Johnson. “It’s like walking up to a train wreck and figuring out who to help first.” According to Johnson, the organization is evaluating whether to continue offering consumer arbitration services in California. The cost and trouble of complying with the new rules may prove untenable for a company of AAA’s size and nature, she said. Most onerous of the new laws, say arbitration providers, is AB 2656, which requires them to compile and electronically publish information on their caseload. Among the data that must be disclosed beginning next year: the name of the nonconsumer party in the arbitration, the type of dispute involved, the amount of the claim, the party that prevailed and the number of times the nonconsumer party has been involved in an arbitration with the provider. “We don’t have an onsite webmaster,” said Bridget Lambert, the vice president of operations for the San Diego Mediation Center. “We’re not sure that we’ll be able to afford the labor to keep those types of information disclosed.” The nonprofit organization, which runs a community mediation program and a court-mandated mediation program, has maintained a consumer arbitration program for the past few years. Lambert said the center is analyzing the costs of complying with the new rules and is “apprehensive about whether or not we’ll be able to continue the program.” The specter of arbitration providers pulling the plug on certain services comes a few months after the National Association of Securities Dealers and the New York Stock Exchange stopped hearing arbitration cases in California as a result of the Judicial Council’s arbitrator ethics rules. The standstill left more than 500 investors without a forum to resolve disputes with their stockbrokers. “If the AAA is named in a pre-dispute arbitration clause for a consumer case and refuses to take it, I’m assuming that the consumer would then have a choice of other arbitrators,” said Jay Folberg, a University of San Francisco School of Law professor. “But the mechanics of that are unclear, and it may initially require going to court.” JAMS, one of the biggest dispute resolution providers in the state, said it will comply with the new disclosure rules. While the company said only a small percentage of its arbitration cases are consumer and employment, it doesn’t intend to leave that market. Sharon Lybeck Hartmann, who is the independent administrator of the Kaiser Permanente Healthcare mandatory arbitration system, said the new regulations won’t affect the Kaiser system much, but could have an overall impact. “My belief is that these changes will make arbitration slower, and they will make it more expensive,” said Hartmann. “But the bodies that are deciding this have to look at what they believe the abuses to be,” and whether the delay and expense are a worthy trade-off. While Kaiser already compiles and publishes its case data, Lambert said it’s not clear how the new laws will mesh with the Judicial Council’s earlier rules on information disclosure for providers. The Judicial Council’s ethic rules for individual arbitrators took effect July 1, but its guidelines for the arbitration provider organizations don’t take effect until next year. If the two sets of guidelines don’t match, things could get confusing. Meanwhile, AB 3030, which laid out the penalties for providers that don’t comply with the new rules, remains a question mark. Although Gov. Davis signed it, the bill’s language holds that its passage is contingent on the passage of AB 3029, which was vetoed. Similarly, the only definition of “consumer arbitration” in the new legislation was contained in the vetoed AB 3029. Thus, providers who handle employment arbitration cases and healthcare cases may or may not be affected by the new regulations. The coming months will determine the way the issues are resolved, as well as the future role of consumer arbitration. “This is the first state to have these types of tough data collection and disclosure laws,” said USF’s Folberg, “so I think the rest of the country will be looking to see how well this disclosure works, as well as whether it discourages the use of consumer arbitration clauses.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.