SB 707: California Continues to Attack Arbitration Agreements

Ervin Cohen & Jessup LLP

Ervin Cohen & Jessup LLP

Although popular with employers as a method to expedite the resolution of disputes and reduce costs, arbitration is unpopular with plaintiff’s lawyers and, apparently, the California Legislature. As we wrote about previously, Assembly Bill 51 prohibits employers from requiring that employees submit disputes to binding arbitration as a condition of employment. The attack on arbitration agreements continues with Senate Bill 707, set to become law on January 1, 2020. 

SB 707 applies to employment or consumer arbitration agreements and requires that the drafting party pay any fees and costs that might be due before the arbitration can proceed within 30 days after the due date. The failure by the drafting party to pay will mean that the drafting party is in material breach of the arbitration agreement, is in default of the arbitration and will waive its right to compel arbitration.  More importantly, this failure will give the employee or consumer the right to proceed in a court of appropriate jurisdiction or to compel arbitration. If the employee or consumer decides to proceed with arbitration, the drafting party will be required to pay the reasonable attorney’s fees and costs related to the arbitration. If the employee or consumer proceeds with an action in a court, the court must impose sanctions on the drafting party, including prohibiting the drafting party from conducting discovery, or issuing a terminating sanction through an order striking out the pleadings or parts of the pleadings of the drafting party, rendering a judgment by default against the drafting party or treating the drafting party as in contempt of court. 

Further, if the drafting party is required to pay fees or costs during the pendency of the arbitration and if these are not paid within 30 days after the due date, the consumer or employee can elect to do any of the following: withdraw from arbitration and proceed in a court of appropriate jurisdiction, in which case the employee or consumer can bring a motion to recover all attorney’s fees and costs associated with abandoning the arbitration; continue the arbitration if the arbitration company agrees, and the arbitrator or company can institute a collection action against the drafting party for all fees and costs; petition the court to compel the drafting party to pay all arbitration fees; and pay the drafting party’s fees and proceed, in which case the arbitration award must provide for the recovery of all arbitration fees paid by the employee or consumer without regard to any findings on the merits of the underlying claims. 

Interestingly, SB 707 also requires that the arbitration company publish a report on its website containing information collected from the previous five years, which might have otherwise been private. Specifically, the report must include:

  1. 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.
  2. The name of the nonconsumer party, if the nonconsumer party is a corporation or other business entity, and whether the nonconsumer party was the initiating party or the responding party, if known.
  3. The nature of the 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.
  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 any monetary award, the amount of any attorney’s fees awarded and any other relief granted, if any.
  11. The name of the arbitrator, the arbitrator’s total fee for the case, the percentage of the arbitrator’s fee allocated to each party, whether a waiver of any fees was granted and, if so, the amount of the waiver.
  12. Demographic data, reported in the aggregate, relative to ethnicity, race, disability, veteran status, gender, gender identity and sexual orientation of all arbitrators as self-reported by the arbitrators. Demographic data disclosed or released pursuant to this paragraph shall also indicate the percentage of respondents who declined to respond.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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