SB 42 and AB 924

 

We have good news to report with respect to the status of these two bills. Both bills were introduced in reaction to articles in the Los Angeles Times which were critical of three retired judges who purportedly allowed disgraced attorney Tom Girardi to make unauthorized withdrawals from settlement funds that the judges were administering. Notwithstanding the allegations in the articles, there was a question whether the judges were acting improperly. All three judges happened to be mediators and the article erroneously asserted that the judges were acting as mediators when they administered the funds and it called for regulation of mediators.

 

SB 42 was introduced by Senator Tom Umberg and required an attorney who knew that another attorney “has engaged in professional misconduct that raises a substantial question as to the attorney’s honesty, trustworthiness, or fitness as an attorney in other respects” to inform the State Bar about said misconduct. The bill contained two exceptions, neither of which pertained to mediation confidentiality.  That meant that if an attorney’s misconduct occurred during a mediation, other attorneys participating in the mediation were at risk of breaching mediation confidentiality when filing a report to the State Bar. Consequently, CDRC asked Senator Umberg to amend the bill to insert an exception for mediation confidentiality.  Senator Umberg declined to do so because he believed that an exception for mediation confidentiality would enable attorneys and mediators to escape the consequences of any criminal conduct admitted or committed during the mediation.

 

Senator Umberg’s concern was not necessary because it is generally understood that mediation confidentiality only applies to noncriminal conduct. However, to assuage this concern, CDRC proposed adding subsection (d) to Evidence Code 1119 which would specifically provide that mediation confidentiality does not apply to evidence of criminal conduct. Before anything substantive could occur, Senator Umberg withdrew the bill after the Supreme Court approved Rule 8.3 of the Rules of Professional Conduct. Rule 8.3 is similar to SB 42 but includes an exception for mediation confidentiality.

 

Assemblymember Jesse Gabriel introduced AB 924, also in reaction to the Girardi scandal. That bill, unlike Senator Umberg’s bill, was specifically targeted at mediators. It provided that a licensed California attorney acting as a dispute resolution neutral who received, in the course of presiding over an alternate dispute resolution proceeding, a complaint against him or her alleging that the attorney violated a provision of the State Bar Act and the California Rules of Professional Conduct was required to report the complaint to the State Bar within thirty days of receipt of the complaint. The bill contained no exceptions and so, presumably, the neutral had to send the complaint to the State Bar even if the complaint violated mediation confidentiality. Ironically,  the bill was designed to curtail the  purported conduct described in the newspaper articles, but it had no effect on  such conduct because the conduct did not involve actions by mediators.

 

CDRC brought the bill’s flaws to the attention of Assemblymember Gabriel’s staff, but the staff declined to make any amendments at that time. The bill subsequently passed the Assembly unanimously. CDRC consequently formed a coalition with the Consumer Attorneys of California, the California Employment Lawyers Association, the California Judges Association, and the California Defense Counsel to amend the bill. The amendment specifically provided that the proposed bill did not contradict Evidence Code 1115 et. seq. in any manner. At a meeting with the assemblymember, he indicated that he was about to amend the bill in a manner that he felt would be satisfactory to the coalition. He then converted the bill to a two-year bill and so any amendments will not be introduced until 2024.

 

AB 615

 

In 1988, the Legislature enacted the California International Arbitration and Conciliation Act (CIACA). It was based on the model law proposed by the United Nations Commission on International Trade Law (UNCITRAL). This model law was amended in 2006, but no action was taken in California to similarly amend CIACA and thus California law was no longer in tune with the UNCITRAL Model Law.

 

AB 615, introduced by Assemblymember Brian Maienschein, corrected this anomaly. The bill was supported by CDRC, and the Assembly passed the bill without opposition. However, the Senate Appropriations Committee placed it in the suspense file because of a belief that the bill would impose additional costs on the California courts. A larger number of bills than usual have been placed in the suspense file this year because of the State’s $31.5 billion deficit. AB 615 is now a two-year bill and CDRC expects that the author will reintroduce it in 2024.

 

AB 886

 

This bill, introduced by Assemblymember Buffy Wicks, created the California Journalism Competition and Preservation Act. It directed digital advertising companies to pay news outlets a “journalism usage fee” when they sold advertising alongside news content. The bill required publishers to invest 70% of those funds in preserving journalism jobs in California. It also contained an arbitration provision which permitted journalism providers to initiate a final offer arbitration before a three member American Arbitration Association panel to determine the percentage of the covered platform’s advertising revenue that was to be remitted to the journalism provider. CDRC did not take a position on the bill.

 

The bill passed in the Assembly with bipartisan support on June 1 and moved on to the Senate. A hearing was initially scheduled for July 11, but before it could be held, the author converted it to a two-year bill and announced that she would reintroduce it in 2024. In the interim, the Senate will hold an informational hearing this fall to further explore issues the bill attempts to address and look at examples of successful legislation in other jurisdictions to inform the California bill.

 

SB 365

 

This bill, introduced by Senator Scott Wiener, amended Code of Civil Procedure Section 1294 by providing that trial proceedings would not be automatically stayed pending an appeal from the denial of a motion to compel arbitration.  The bill passed both houses of the Legislature and was signed by Governor Newsom.   Because the bill had no effect on the ability of arbitrators to practice their profession, CDRC did not take a position.

 

Probate Court mediations

 

The Trusts and Estates Section of the California Lawyers Association is considering introducing legislation in 2024 that will amend the decision in Breslin v. Breslin, 62 Cal. App. 5th 801 (2021).

 

In Breslin,  a testator left a restated living trust in which he made four specific bequests and divided the balance among 24 charities without stating the percentage of each charity’s share. The trustee filed a petition in probate court to determine how to divide the estate. The court ordered that the percentage of each bequest be resolved in a mediation in a proceeding where the parties would presumably pay the mediator for his or her services.

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Accordingly, one of the charities, TMLC, sent a notice to the others advising them of the mediation and warning that if they did not participate in the mediation, they might forfeit their right to a bequest. Only five of the charities attended the mediation. The mediation resulted in a settlement that divided the estate among TMLC and the four other charities that attended the mediation plus relatives of the testator.

 

The trustee petitioned to confirm.  Pacific Legal Foundation, a charity that did not attend the mediation, objected. The probate court granted the petition and overruled Pacific’s objections. Pacific appealed. The Court of Appeal affirmed in a 2-1 decision.  It held that the probate court had the power to order the parties into mediation, citing Probate Code Section 17206, which states that “the court in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by [a] petition”.

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The dissent argued that a trust must be administered according to the testator's intent. That meant honoring the testator's final wishes above all else. Here, the probate court exalted principles of forfeiture over the testator’s express wishes, concluding that the Pacific parties forfeited their rights to the gifts the testator wanted them to have because they did not satisfy a requirement the testator did not impose: participation in mediation at their expense.

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Neither the majority opinion nor the dissent mentioned Jeld-Wen, Inc. v. Superior Court. 146 Cal App 4th 536 (2007). In that decision, the court stated that the essence of mediation is its voluntary nature. Thus, a case management conference order requiring the parties in complex cases to attend and pay for mediation over the party’s express objection was contrary to this principle and conflicted with the statutory scheme pertaining to mediation.

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The Trust and Estates Section proposal recognizes the Jeld-Wen decision by adding Probate Code Section 17212(a), which would read as follows: “The court in any action under this Chapter may not order parties or interested persons to attend and pay for private mediation”. Note that the proposed statute, like Jeld-Wen. does not apply to court connected mediations where the mediator agrees to act pro bono for a specified number of hours and the parties can walk away once the pro bono period expires. If any reader wishes to comment on the proposal, please contact CDRC legislative co-chairs Paul Dubow at pdubow2398@aol.com or John Warnlof at jwarnlof@aol.com.

 

Please renew your membership

 

We are anticipating substantial legislative activity in 2024, even without considering the 2023 bills that were converted into two-year bills. This means we need a strong membership group to cover our lobbying expenses. If you haven’t done so yet please renew as soon as you can. You may do so by going to the CDRC website at www.cdrc.net and hit the membership icon. Dues are $150 and are good for one year from the date you sign up. You are of course free to pay any sum above $150 if you care to do so.