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California Arbitration Companies Fail to Comply with Transparency Law

As San Diego personal injury lawyers, we often rely on arbitration to resolve injury cases. Arbitration is often an attractive alternative to trial because it is faster and less expensive. For corporations, hospitals, and other entities accused of negligence, arbitration is preferable because proceedings are largely confidential. As a result, the public is often unaware of their misdeeds, such as elder abuse, medical malpractice or product safety violations, and how often they may occur.

California Code of Civil Procedure Section 1281.96

To improve arbitration transparency, California enacted a law in 2003 that requires "any private arbitration company that administers or is otherwise involved in consumer arbitration" to collect and publish certain data. Pursuant to California Code of Civil Procedure Section 1281.96, the report must contain the following information regarding each consumer arbitration within the preceding five years (among other data):

  • 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.
  • The name of the non-consumer party, if the non-consumer party is a corporation or other business entity, and whether the non-consumer party was the initiating party or the responding party, if known.
  • The nature of the dispute involved, i.e. goods; credit; other banking or finance; insurance; healthcare; construction; real estate; telecommunications; debt collection; personal injury; employment; or other.
  • Whether the consumer or non-consumer party was the prevailing party.
  • The total number of occasions, if any, the non-consumer party has previously been a party in an arbitration or mediation administered by the private arbitration company.
  • The type of disposition of the dispute, including: withdrawal, abandonment, settlement, award after hearing, award without hearing, default, or dismissal without hearing.
  • The amount of the claim, whether equitable relief was requested or awarded, the amount of any monetary award, the amount of any attorney fees awarded, and any other relief granted.
  • The name of the arbitrator, his or her 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.

The law requires California arbitration companies to publish the data at least quarterly. They must also make the information available to the public via their websites. Section 1281.96 further stipulates that the data must be published in a format that allows the public to search and sort the information using readily available software.

Arbitration Firms Fail to Comply with Disclosure Requirements

The Public Law Institute of the UC Hastings College of the Law recently analyzed compliance with Section 1281.96. It revealed that many California arbitration companies are not fulfilling their obligations. Several of the arbitration companies we work with are on the list, including OIA, JAMS, AAA, and Judicate West.

The Public Law Institute identified 32 private companies that appear to be involved in consumer arbitrations in California. Of those, only 11 complied with the substantive requirements of §1281.96(a). The report further concluded that only three firms "can be said to evidence robust and full compliance with the statutory regime, including §1281.96(b)'s formal requirements as to format, timing and depth of reporting."

Below are several other key findings:

  • No firm made all the required disclosures for all its cases.
  • Nine arbitration firms do not provide any data at all, claiming they are not subject to the law. However, at least one of those companies promotes its arbitration services on its website.
  • The American Arbitration Association failed to provide required information about the prevailing party in most cases where there was a hearing and an award, reporting the prevailing party in only 46% of such cases.
  • ARC Services had a 0% compliance rate as to reporting repeat arbitration customers, even when its disclosures show identical named parties.
  • Kaiser's Office of the Independent Administrator (OIA) reported 98 cases with a prevailing party; 92 of those cases were resolved in favor of the non-consumer party (94%).
  • The time between filing and final disposition varied widely, from 150 days to more than 350 days.

California Code of Civil Procedure Section 1281.96 has the potential to provide valuable information to California consumers, including victims of medical malpractice. Unfortunately, the disclosure law is only useful if arbitration firms provide reliable and comprehensive data.