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California lawmakers Monday turned up the heat on alternative dispute resolution providers, introducing a novel bipartisan package aimed at curbing perceived anti-consumer abuses in the industry. In all, a quintet of Assembly Judiciary Committee members — four Democrats and one Republican — introduced six bills intended to bolster confidence in ADR by ridding the industry of what they called unfair and one-sided practices. In doing so, the committee members made good on threats delivered to the industry last month during a special hearing that was called to look into the business of ADR. Monday’s announcement also coincided with news that the American Arbitration Association planned to tell those same lawmakers Tuesday that it will no longer handle cases between HMOs and patients unless both sides voluntarily agree to the process. If passed, the bills introduced Monday would preclude arbitration companies from engaging in repeat player activity — the process of having the same neutrals handle repeat cases for specific companies. Proposed legislation would also do away with immunity from malpractice suits for ADR providers, force the industry to reveal arbitration results, put an end to financial conflicts between ADR providers and the companies that use their services, and halt loser pay provisions that often leave consumers picking up the tab. Another bill by Assemblywoman Hannah-Beth Jackson, D-Santa Barbara, would implement a hiatus period for retired judges who wish to become arbitrators, although the length of time hasn’t been determined. Assemblyman Darrell Steinberg, D-Sacramento, said his goal is to put an end to cozy relationships that ADR firms may have with their clients. “If we’ve learned anything from Enron it’s the need to ensure independence and neutrality of private judging corporations,” said the outgoing committee chairman who’s spearheaded the effort to take on the ADR industry. The newly minted Judiciary chair — Ellen Corbett, D-San Leandro — said part of the problem stems from the secrecy in which the industry operates. “We simply don’t know what’s going on,” she said. Corbett added that no legislative body in the country has ever proposed such reforms. Assemblyman Thomas Harman, the lone Republican in the effort, said ADR needs to be regulated in the same way all other aspects of California’s legal system are controlled. Paraphrasing a recent speech by President George W. Bush, Harman said, “business people must answer to the demands of conscience.” The Huntington Beach assemblyman also predicted that the package would receive broad support from both sides of the aisle. Monday’s bills, which have not yet been given numbers, were the latest in what is shaping up to be an all-out legislative assault on what some describe as anti-consumer ADR practices. Still, at least one of the country’s biggest providers said the legislation shouldn’t have an adverse impact on its business. John “Jay” Welsh, vice president and general counsel of ADR provider JAMS, said he hasn’t seen the language in the legislation, but he said consumer arbitration makes up just a fraction of the work his company does. Welsh said JAMS doesn’t take a position on policy issues and will abide by any laws the Legislature puts forward. “We get our marching orders from legislatures around the country,” he said. He said it’s important for lawmakers to be aware that most of the consumer arbitration work is being done by individual neutrals and not big companies like AAA and JAMS. Welsh said his only concern was that the lawmakers restrict the bills to consumer arbitration and don’t tread on business-to-business cases. “I don’t think it’s appropriate to impact business arbitration,” he said. Two other bills already making their way through the Senate, though, have targeted the use of mandatory arbitration agreements in employment contracts. SB 410 by Senate President Pro Tem John Burton, D-San Francisco, would make it illegal for companies to force workers to arbitrate Fair Employment and Housing claims. And SB 458 by Sen. Martha Escutia, D-Montebello, would put an end to mandatory arbitration in the health care industry. Robert Meade, the senior vice president of AAA, was expected to go before Assembly Judiciary this week to voluntarily agree to an end to mandatory arbitration in health care disputes. Meade couldn’t be reached for comment Monday, but the move by AAA comes a month after the nation’s largest provider was heavily criticized for being a no-show at the committee’s last hearing on ADR. AAA has been playing with the idea of voluntary HMO arbitration since one of its committees recommended the action in 1998. Still, health care arbitration accounts for a tiny fraction of the cases AAA handles. When the idea was first proposed almost five years ago, HMO cases accounted for just 188 of the 78,000 cases AAA handled in 1997. Of the 200,000 cases it handled last year, just 16 involved health maintenance organizations.

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