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San Francisco-The National Arbitration Forum, which has twice butted heads over its compliance with a California law requiring it to publish details about consumer cases, is now launching an attack on the law itself. Earlier this year, NAF, a Minnesota-based arbitration provider, prevailed in a challenge to its compliance when the suit was dismissed on procedural grounds. But that victory proved to be short-lived. San Francisco lawyer Cliff Palefsky, one of the plaintiffs’ lawyers in the suit, has since put a bug in the ear of the San Francisco district attorney’s office, which recently subpoenaed the NAF as part of an investigation into its compliance. The NAF recently countered with its own complaint. The NAF recently filed suit against the San Francisco DA in the U.S. District Court for the Central District of California, arguing that Section 1281.96 of the state Code of Civil Procedure is pre-empted by the Federal Arbitration Act. Supporters of the law have argued that large companies that use arbitrators repeatedly have a handle on their track records-a help when entering into a contract or choosing a neutral-while consumers who rarely encounter the process are operating in a vacuum. “The idea is to at least level the information playing ground,” said Assistant DA Maxwell Peltz. But the NAF’s lawyers, from Kirkpatrick & Lockhart Nicholson Graham, argue in the federal suit that the statute “is hostile towards” the use of arbitrations in consumer agreements, and treats them differently than other contracts. Plus, the law’s disclosure requirements add “costs and burdens” to arbitrations in California. Facing a patchwork? Edward Anderson, the NAF’s managing director, said that if California’s law is upheld, arbitration providers across the country could find themselves having to comply with a patchwork of such rules nationwide. “I really do believe it’s a national issue-that if California can do it, it means that Toledo, Ohio, could do it,” Anderson said. “So the implications for arbitration and mediation are enormous.” New York-based provider American Arbitration Association (AAA), which has offices in 19 states, is already keeping tabs on the case, though it isn’t staking out a position yet. “As of the moment, we do not have any definite plans to be an intervenor,” said Larry Parker, director of corporate communications for AAA. “But we are literally monitoring it day by day.” AAA hasn’t come to any conclusions about whether the statute is undercutting its business, or whether it conflicts with federal law, Parker added. Compared to the NAF, he said, “Our position would definitely be more wait-and-see.” JAMS, the arbitration service based in Irvine, Calif., isn’t even considering getting involved, said General Counsel Jay Welsh. “We have no intention of intervening in this lawsuit,” Welsh said, stressing that his company is complying with the disclosure law. Before the district attorney got involved, San Francisco’s McGuinn, Hillsman & Palefsky, and Trial Lawyers for Public Justice, went after the NAF in a civil lawsuit, representing Ellen Corbett, the assemblywoman who sponsored the 2002 legislation, as well as Consumer Action, a San Francisco-based advocacy group. The NAF would have defended itself with the Federal Arbitration Act’s pre-emption argument in that case, Anderson said. But voters derailed that plan by passing Proposition 64 in late 2004. With that new law, private enforcement of unfair business competition laws was no longer allowed unless the plaintiff had suffered an economic loss. As far as San Francisco County Superior Court Judge Ronald Quidachay was concerned, that change in the law was enough to snuff Corbett’s case. “The plaintiffs, who were very appropriate plaintiffs before Prop 64, could not allege an economic injury,” Palefsky said. He and his co-counsel have appealed that ruling, but Palefsky didn’t stop there. He contacted the city attorney and district attorney’s offices, which wouldn’t need to show economic damages to pursue a case, and the district attorney took up the case last spring. (The plaintiffs’ lawyers are not working with prosecutors on their investigation, according to June Cravett, head of the DA’s consumer protection unit.)

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