Volume 1, Number 3
Possible inroads on mediation confidentiality
The traffic concerning attempts to require attorneys to report misconduct that they observe other attorneys commit is getting heavy and may affect mediation confidentiality. All this stems from the series of articles in the Los Angeles Times based on the Tom Girardi scandal that mistakenly characterized as ”mediation” the conduct of three retired judges who purportedly aided Girardi, perhaps because the three were also prominent ADR neutrals. In fact, their activities had nothing to do with mediation.
The first attempt to remedy the purported problem was SB 42, filed by Senator Tom Umberg. This bill requires an attorney who knows that another attorney “has engaged in professional misconduct that raises a substantial question as to that attorney’s honesty, trustworthiness, or fitness as an attorney in other respects” to inform the State Bar about said misconduct. The bill contains two exceptions to this requirement, neither of which pertain to mediation confidentiality. As a consequence, CDRC has asked Senator Umberg to amend the bill to insert an exception to mediation confidentiality.
This month, two more proposals surfaced concerning the purported problem. First, Assemblymember Jesse Gabriel introduced AB 924. The bill provides that “a dispute resolution neutral who, in the course of presiding over an alternate dispute resolution proceeding, receives a complaint against them [sic] alleging that they [sic] violated a provision of any applicable rule of conduct shall report the complaint to the State Bar” within thirty days of receipt of the complaint. The neutral must file a copy of the complaint, a summary of the complaint, and “the name and contact information of any attorney participating in the proceeding”. The bill contains no exceptions and so, presumably, the neutral must send the complaint to the State Bar, even if the complaint violates mediation confidentiality.
The bill is deeply flawed, aside from its failure to consider mediation confidentiality. For example, what is “any applicable rule of conduct”? Would not a summary of the complaint be the same as the complaint itself? If the neutral is required to send the complaint to the State Bar, can the neutral also send his or her response to the allegations? If it is important to provide the State Bar with contact information for other attorneys participating in the proceeding, should not contact information for other participants, such as parties, witnesses, or insurance representatives also be included?
Next, the State Bar weighed in with proposed Rule 8.3. That rule requires a lawyer to immediately “inform the State Bar when the lawyer knows of credible evidence that another lawyer has committed a criminal act, engaged in fraud, or misappropriated funds or property in violation of Rule 1.15 when that conduct raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects”. Unlike SB 42 and AB 924, the rule contains an exception for mediation confidentiality.
Although the California Lawyers Association (CLA) has sent a lengthy letter pointing out alleged flaws in the rule, CDRC believes that it is the best of the three proposals currently under consideration, primarily because it preserves mediation confidentiality. It is our hope that Senator Umberg and Assemblymember Gabriel would withdraw their bills and allow Rule 8.3 to wend its way through the State Bar rulemaking process. In that regard, CDRC is planning to meet with Assemblymember Gabriel and/or his staff to explain its position. This may be a difficult task. The two bills are in the “mom and apple pie” category designed to prevent the thievery engaged in by Girardi and his cohorts and there is little downside to casting a favorable vote for them. In addition, the legislators and the public consider the State Bar to be untrustworthy because it ignored complaints based on Girardi’s misconduct and some of its investigators may have accepted gifts from Girardi.
If any of you have comments on this legislation, please feel free to send them to Paul Dubow, CDRC’s legislative co-chair at email@example.com. You can also send comments to your own legislator and to Senator Umberg and/or Assemblymember Gabriel.
Amendment of the California International and Conciliation Act
In our last issue, we reported on the efforts of a CLA subcommittee to update the California International and Conciliation Act (CIAC) so that it conformed to the rules of the United Nations Commission on International Trade Law (UNCITRAL). At that time, a bill had been prepared and the subcommittee was looking for a sponsor. Since then, Assemblymember Brian Maienschein, who is the chair of the Assembly Judiciary Committee, agreed to sponsor the bill, which has been designated as AB 615. The bill was placed on the consent calendar, which meant that there was no need for a committee hearing. CDRC supports the bill and it expects that the bill will be passed by the Legislature.
The Ninth Circuit changes its position on AB 51
In 2019, the California Legislature passed and the Governor signed AB 51, which provided that an employer committed a misdemeanor by demanding that a proposed employee execute an arbitration agreement as a condition of employment. In an attempt to avoid preemption, the bill further provided that if the employee signed the agreement, the agreement would be enforceable. Plaintiffs filed suit seeking to enjoin enforcement of the statute, asserting that it was preempted. The District Court granted the injunction and defendants appealed, arguing that the statute was not preempted because it related only to formation of a contract.
Defendants appealed and in a 2-1 decision, the Ninth Circuit reversed, agreeing with defendants that that FAA preemption did not extend to contract formation. Subsequently, after plaintiffs filed a petition for an en banc hearing, the original panel withdrew its opinion.
The Ninth Circuit now has issued a new opinion in which it affirmed the District Court, holding that AB 51 was indeed preempted. See Chamber of Commerce v. Bonta, 62 F. 4th 473. CDRC expects that the proponents of AB 51 will now make another attempt to limit mandatory pre-dispute agreements. Given that the deadline for introducing new bills was February 17, the only way that the bill could be introduced is by amending an existing spot bill. Thus, it is quite possible that the attempt will not be made until next year, particularly since the defendants are appealing the Ninth Circuit ruling.
AB 365 has been introduced by Senator Scott Wiener. According to the fact sheet that accompanied the introduction, the bill was designed to eliminate the automatic stay of litigation that is in force when an employer appeals from a denial of a motion to compel arbitration. But the actual bill applies to all appeals from a denial of a motion to compel arbitration, including business to business disputes.
Although CDRC has no objection to the concept of the bill, it believes that it will not accomplish its purpose. This is so because if the trial proceeds while the appeal is pending, and the employee prevails, the employer can appeal from that decision and that will stay enforcement of the judgment. Even if the employer chooses not to appeal, it can be expected that it will move to stay enforcement of the judgment pending resolution of the appeal from the denial of the motion to compel arbitration.
The bill may also hurt employees if the denial of the motion to compel arbitration is reversed because the wasted trial will have given the employer a free peek at the employee’s case and thus a better chance to defend itself in the arbitration.
On March 30, CDRC met with a member of Senator Wiener’s staff and representatives of the California Employment Lawyers Association and the State Attorney General, who are the co-sponsors of the bill, and suggested that the problems described above could be cured if the bill were amended so that it would be similar to CCP Section 1294.4, which requires the Court of Appeal to issue its decision involving a claim under the Elder and Dependent Adult Civil Protection Act no later than 100 days after the notice of appeal is filed. However, the suggestions were rejected. CDRC expects that the bill will ultimately be passed by the Legislature.
CDRC’s Annual Meeting
This is a reminder that CDRC’s annual meeting is scheduled to be held by videoconference from 12 noon to 2 pm on April 25. The agenda includes a discussion of current legislation by Paul Dubow, who is co-chair of CDRC’s legislation committee; a review of CDRC history by Ron Kelly and Mickey Katz; a case update by Jim Madison; and a presentation of the Don Weckstein Award to Donne Brownsey, who was CDRC’s first lobbyist and who now is the chair of the California Coastal Commission. The event is free. You can register for the program by clicking here: CDRC Annual Meeting Event Registration
Please Renew Your Membership
We ask those of you who have not renewed your CDRC membership to do so as soon as possible. The cost is only $150 and is good for one year from the date of payment. Nearly all of CDRC’s income comes from membership dues and its major expense is the cost of its lobbyist in Sacramento.
There are many ADR neutrals who do not join CDRC because they recognize that non-members, in essence, gain the same benefits as members because all ADR neutrals are the beneficiaries of CDRC’s work representing the ADR industry in Sacramento. This thinking is short sighted. If ADR neutrals do not join or fail to renew their memberships, CDRC would not have the funds to pay its lobbyist and would be forced to disband. Right now, there is no other entity in Sacramento that is fully devoted to the interests of ADR neutrals. There are many legislators in Sacramento who either have no concept or a distorted concept of arbitration and mediation and they are prone to introduce bills that may severely affect the livelihoods of ADR neutrals. If CDRC were to cease to exist, many of these bills would be enacted to the severe detriment of the ADR community. And so please renew or rejoin now! You can do so by going to www.cdrc.net and striking the membership icon. Annual dues are $150, but higher contributions are always welcome.