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The author of California’s landmark arbitration disclosure rules has sued one of the country’s largest consumer arbitration providers for thumbing its nose at the 18-month-old regulations. The suit, filed on behalf of Assemblywoman Ellen Corbett, D-San Leandro, in San Francisco Superior Court Monday, seeks to force the National Arbitration Forum to publish data about its repeat corporate customers and its track record of rulings. “It’s important when laws are passed in the state of California, especially laws that protect consumers and bring sunshine to a process, that they should be adhered to,” said Corbett, who chairs the Assembly Judiciary Committee. Under AB 2656, arbitration providers that do business in California must release quarterly public reports disclosing the names of the non-consumer parties, whether the consumer or non-consumer was the prevailing party, and the amount of the award, among other things. Since the law took effect at the beginning of 2003, two of the largest alternative dispute resolution providers — JAMS and the American Arbitration Association — have complied with the law, according to the suit. But Minneapolis-based NAF has insisted that it is not bound by the statute. According to the suit, the group lists zero California consumer arbitration cases between January and December 2003. “It is not that NAF has not handled and resolved any arbitrations in cases involving California consumers that were filed after Jan. 1, 2003,” reads the complaint. “Instead, the NAF claims to have no cases subject to [the law] because NAF has unilaterally decided that federal law excuses it from complying with the California Arbitration Act.” Edward Anderson, the managing director of NAF, said he wasn’t sure why the suit claims his company wasn’t complying with the law, pointing out that the company has voluntarily posted the handful of applicable arbitration cases on its Web site. “They’re all up there, all three of them,” said Anderson. The majority of the company’s arbitrations in California are not consumer cases, said Anderson, but business-to-business cases and Internet domain name disputes. The company also handles a number of arbitrations involving collection claims for credit card companies and other businesses. Some 1,200 independent neutrals throughout the country work with NAF on a non-exclusive basis, Anderson said, though he couldn’t say how many are located in California. “They correctly state our position on the law,” said Anderson, referring to the suit. “We think the law is pre-empted by the Federal Arbitration Act, and that’s what the courts have held.” Corbett and co-plaintiff Consumer Action are being represented by San Francisco attorney Cliff Palefsky, of McGuinn, Hillsman & Palefsky, and Washington, D.C.’s Trial Lawyers for Public Justice. The suit is being brought under � 17200 of the California Business Code and seeks injunctive and declaratory relief as well as attorneys fees. “This information is incredibly important for anybody who’s trying to make a decision,” said F. Paul Bland Jr., an attorney with the Trial Lawyers for Public Justice who heads up the organization’s mandatory arbitration abuse practice. The NAF “imagines that no consumer protection laws apply to them,” Bland said. According to the suit, California’s disclosure rules do not run afoul of federal law, as the NAF contends, since they don’t interfere with the enforcement of arbitration agreements or single out arbitration contracts for worse treatment than other types of contracts. The rules only come into effect after the completion of an arbitration proceeding, states the complaint. It’s not the first time that the intersection of local arbitration regulations and the FAA have caused sparks. Several stock brokerage organizations, including the National Association of Securities Dealers and the New York Stock Exchange, have mounted court battles in California over a previous set of arbitration ethics rules enacted by the Judicial Council. The groups, which resolve investor disputes through their own arbitration system, have argued that the council’s ethics rules conflict with the FAA. But Corbett’s suit appears to be the first fallout from a package of five arbitration reform bills that were signed by then-Gov. Gray Davis in 2002. The laws regulate the investment portfolios of arbitration providers, lower the cost of arbitration for consumers, and require arbitration providers to publish information about their caseloads. Tom Dresslar, a spokesman for Attorney General Bill Lockyer, said the office was very involved in cases relating to the Judicial Council rules, and did not rule out state involvement in cases where the disclosure statutes are violated. “The attorney general supports the enhanced disclosures provided under California law,” said Dresslar. “He believes it’s more than pro-consumer, it’s pro-arbitration.” Assemblywoman Corbett said her involvement in the suit was not personal. Rather, she said, she felt it was important to challenge the NAF when she found out it was flaunting legislation that was “duly passed by the state legislature and signed by the governor.” “When I pass legislation I do it for a purpose,” she said. “This is important consumer protection legislation, and they need to adhere to the law.”

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