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SB-33 Arbitration agreements.(2017-2018)

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Date Published: 04/24/2017 09:00 PM
SB33:v97#DOCUMENT

Amended  IN  Senate  April 24, 2017
Amended  IN  Senate  March 23, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 33


Introduced by Senator Dodd
(Principal coauthor: Senator Wieckowski)
(Principal coauthor: Assembly Member Dababneh)
(Coauthors: Senators Hertzberg and Galgiani)
(Coauthor: Assembly Member Chiu)

December 05, 2016


An act to add Section 1624.7 to the Civil Code, relating to contracts. An act to amend Section 1281.2 of the Code of Civil Procedure, relating to arbitration.


LEGISLATIVE COUNSEL'S DIGEST


SB 33, as amended, Dodd. Contracts for goods or services: waiver: fraud, identity theft, and wrongful use of personal identifying information. Arbitration agreements.
Existing law requires a court, on petition of a party to an arbitration agreement alleging (1) the existence of a written agreement to arbitrate a controversy and (2) that a party to the agreement refuses to arbitrate the controversy, to order the petitioner and the respondent to arbitrate the controversy if the court determines that an agreement to arbitrate exists, unless the court makes other determinations.
This bill would add to these determinations instances in which a financial institution, as defined, seeks to apply a written agreement to arbitrate, contained in a contract consented to by a consumer, to a relationship with that consumer created fraudulently by the petitioner without the consumer’s consent or by unlawfully using the consumer’s personal identifying information, as defined.

Existing law generally regulates the formation, terms, conditions, and enforcement of contracts, including what constitutes an unlawful contract. Existing law declares all persons capable of contracting, except minors, persons of unsound mind, and persons deprived of civil rights. Existing law restricts the use and enforcement of waivers of certain rights for specified contracts. Existing law makes it a crime for a person to willfully obtain personal identifying information, as defined, of another person, and use that information for any unlawful purpose, as specified.

This bill would require that, in any contract between a person and a financial institution, a waiver of a legal right related to a claim of fraud arising out of the wrongful use of personal identifying information or identity theft committed by a party to a contract or its agents or employees be knowing and voluntary, express and in writing, and not a condition of entering into the contract or a condition of providing or receiving goods or services. The bill would assign any person seeking the enforcement of a waiver of these protections the burden of proving that the waiver was knowing and voluntary and not made as a condition of the contract or of providing or receiving goods or services. The bill’s provisions would apply to consumer contracts between a person and a financial institution entered into, altered, modified, renewed, or extended on and after January 1, 2018. The bill would authorize a court to award a plaintiff enforcing her or his rights under these provisions reasonable attorney’s fees.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1281.2 of the Code of Civil Procedure is amended to read:

1281.2.
 On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:
(a) The right to compel arbitration has been waived by the petitioner; or
(b) Grounds exist for the revocation of the agreement.
(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.
(d) The petitioner is a financial institution, as defined in Section 4052 of the Financial Code, that seeks to apply a written agreement to arbitrate, contained in a contract consented to by a consumer, to a relationship with that consumer created fraudulently by the petitioner without the consumer’s consent or by unlawfully using the consumer’s personal identifying information, as defined in Section 1798.92 of the Civil Code.
If the court determines that a written agreement to arbitrate a controversy exists, an order to arbitrate such controversy may not be refused on the ground that the petitioner’s contentions lack substantive merit.
If the court determines that there are other issues between the petitioner and the respondent which are not subject to arbitration and which are the subject of a pending action or special proceeding between the petitioner and the respondent and that a determination of such issues may make the arbitration unnecessary, the court may delay its order to arbitrate until the determination of such other issues or until such earlier time as the court specifies.
If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c) herein, the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.

SECTION 1.Section 1624.7 is added to the Civil Code, to read:
1624.7.

(a)In any consumer contract between a person and a financial institution, a waiver of a legal right related to a claim of fraud arising out of the wrongful use of personal identifying information or identity theft committed by a party to a contract or its agents or employees, including, but not limited to, the waiver of a right to a penalty, remedy, forum, or procedure, and the right to file and pursue a civil action or complaint with, or otherwise notify, a state agency, public prosecutor, law enforcement agency, or any court or other governmental entity, shall be all of the following:

(1)Knowing and voluntary.

(2)Express and in writing.

(3)Not a condition of entering into the contract for goods or services or of providing or receiving goods or services.

(b)A person seeking to enforce a waiver of a right described in subdivision (a) shall have the burden of proving that the waiver is enforceable.

(c)This section shall apply to any waiver in a consumer contract entered into, altered, modified, renewed, or extended on or after January 1, 2018, between any person and a financial institution.

(d)This section shall not affect a legal right, penalty, forum, or procedure for which a waiver is prohibited by law.

(e)For the purposes of this section:

(1)“Identity theft” has the same definition as in Section 1798.92.

(2)“Personal identifying information” has the same definition as in Section 1798.92.

(3)“Financial institution” has the same definition as in Section 4052 of the Financial Code.

(f)In addition to injunctive relief and any other remedies available, a court may award a plaintiff enforcing her or his rights under this section reasonable attorney’s fees.