Relates to arbitration organizations; requires private arbitration organizations involved in fifty or more consumer arbitrations per year to collect, publish at least quarterly, and make available to the public in a computer-searchable database certain information relating to such arbitrations; prohibits financial conflicts of interest.
TITLE OF BILL: An act to amend the general business law, in relation to arbitration organizations
PURPOSE OR GENERAL IDEA OF BILL: The purpose of this bill is to ensure fairness and accountability in arbitration proceedings conducted by private arbitration organizations and further protect consumers from unfair mandatory arbitration clauses.
SUMMARY OF SPECIFIC PROVISIONS: This bill would require private arbitration organizations involved in consumer arbitration cases to make certain information regarding those cases available to the public on its website and on paper upon request.
The information required to be disclosed for each consumer arbitration would include the name of the non-consumer party; the type of dispute involved; whether the consumer was the prevailing party; and on how many occasions, if any, the non-consumer party has previously been a party in an arbitration administered by the private arbitration organization, No Private arbitration organization would have any liability for collecting/publishing, or distributing such information.
The bill would provide for enforcement by the Attorney General of the arbitration information disclosure provisions, as well as the existing prohibition against the inclusion of mandatory arbitration clauses in certain consumer contracts. The Attorney General would be empowered to seek an injunction against violators and/or a civil penalty of up to $2/000 for each violation. Each contract offered and entered into in violation of the mandatory arbitration clause prohibition would constitute a separate violation.
JUSTIFICATION: The proliferation of binding mandatory arbitration clauses in consumer contracts, including contracts for credit cards/ telephone service, home loans, health care and consumer goods, over the past twenty years has led to a significant increase in the number of consumer disputes referred to arbitration. The vast majority of these proceedings are handled by arbitrators working for private organizations that administer arbitration programs for private businesses.
In recent years, consumer advocates have raised concerns regarding the fairness of private arbitration proceedings. Many advocates maintain that consumers may not be able to get a fair hearing since arbitrators have a financial incentive to rule in favor of the businesses paying for his or her services.
According to a 2007 report issued by Public Citizen, between January 1, 2003, and March 31, 2007, arbitrators working for one of the largest private arbitration organizations ruled in favor of
businesses in ninety-four percent of the cases involving California residents that it examined.
The report also found that:
* In one fiscal quarter, an arbitrator working for a large private arbitration organization handled eighty cases brought by banks against consumers, and ruled for the bank in all eighty cases. In all of the cases, except two, she gave the bank one hundred percent of the amount it claimed;
* Another arbitrator working for a large private arbitration organization handled sixty-eight cases in a single day - an average of one every seven minutes, assuming an eight-hour day - and ruled for the business in every case, awarding one hundred percent of the claim. According to Public citizen, the same arbitrator is an attorney with his own practice serving business and corporate clients;
* In several cases, arbitrators from a. large private arbitration organization entered awards in favor of a large national bank and other lenders against identity theft victims who did not, in fact,
owe any debts; and * Arbitrators who rule against businesses and in favor of consumers have been known to be blackballed from serving as arbitrators in future cases.
This bill would shed light on the private arbitration industry and provide for greater accountability for private arbitration organizations by requiring such organizations to collect and make available to the public basic data regarding the nature and outcome of consumer arbitrations. This would ensure that consumers who are given the choice of pursuing a claim in the courts or in arbitration are able to obtain access to relevant information, such as the number of cases a private arbitration organization has handled for a particular business and whether the business or the consumer won most of those cases. The bill would also help to improve fairness in arbitrations for consumer forced into arbitration pursuant to a contract containing a binding mandatory arbitration clause.
PRIOR LEGISLATIVE HISTORY: 2011-12: S.1471/A.8431 - Referred to Consumer Protection 2009-10: S.7270A/A.79433 - REFERRED TO RULES
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE: 180 days after enactment.
STATE OF NEW YORK ________________________________________________________________________ 1839 2013-2014 Regular Sessions IN SENATE (PREFILED) January 9, 2013 ___________Introduced by Sens. PARKER, PERALTA -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, in relation to arbitration organizations THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 1 of section 399-c of the general business law is amended by adding a new paragraph e to read as follows: E. THE TERM "ARBITRATION ORGANIZATION" SHALL MEAN AN ASSOCIATION, AGENCY, BOARD, COMMISSION, OR OTHER ENTITY THAT IS NEUTRAL AND INITI- ATES, SPONSORS, OR ADMINISTERS AN ARBITRATION PROCEEDING OR IS INVOLVED IN THE APPOINTMENT OF AN ARBITRATOR. S 2. Section 399-c of the general business law is amended by adding three new subdivisions 3, 4 and 5 to read as follows: 3. A. ANY PRIVATE ARBITRATION ORGANIZATION THAT ADMINISTERS OR IS OTHERWISE INVOLVED IN FIFTY OR MORE CONSUMER ARBITRATIONS A YEAR SHALL COLLECT, PUBLISH AT LEAST QUARTERLY, AND MAKE AVAILABLE TO THE PUBLIC IN A COMPUTER-SEARCHABLE DATABASE THAT PERMITS SEARCHING WITH MULTIPLE SEARCH TERMS IN THE SAME SEARCH, WHICH SHALL BE ACCESSIBLE AT THE INTER- NET WEBSITE OF THE PRIVATE ARBITRATION ORGANIZATION, IF ANY, AND ON PAPER UPON REQUEST, ALL OF THE FOLLOWING INFORMATION REGARDING EACH CONSUMER ARBITRATION IT HAS ADMINISTERED OR OTHERWISE BEEN INVOLVED IN WITHIN THE PRECEDING FIVE YEARS: (1) THE NAME OF THE NON-CONSUMER PARTY, IF THE NON-CONSUMER PARTY IS A CORPORATION OR OTHER BUSINESS ENTITY; (2) THE STATE AND ZIP CODE IN WHICH THE CONSUMER PARTY RESIDED AT THE TIME OF ARBITRATION; (3) THE TYPE OF DISPUTE INVOLVED, INCLUDING GOODS, BANKING, INSURANCE, HEALTH CARE, EMPLOYMENT, AND, IF IT INVOLVES EMPLOYMENT, THE AMOUNT OFEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD02935-01-3 S. 1839 2
THE EMPLOYEE'S ANNUAL WAGE DIVIDED INTO THE FOLLOWING RANGES: LESS THAN ONE HUNDRED THOUSAND DOLLARS, ONE HUNDRED THOUSAND DOLLARS TO TWO HUNDRED FIFTY THOUSAND DOLLARS, INCLUSIVE, AND OVER TWO HUNDRED FIFTY THOUSAND DOLLARS; (4) WHETHER THE CONSUMER WAS THE PREVAILING PARTY; (5) ON HOW MANY OCCASIONS, IF ANY, THE NON-CONSUMER PARTY HAS PREVI- OUSLY BEEN A PARTY IN AN ARBITRATION OR MEDIATION ADMINISTERED BY THE PRIVATE ARBITRATION ORGANIZATION; (6) WHETHER THE CONSUMER PARTY WAS REPRESENTED BY AN ATTORNEY AND, IF SO, THE IDENTIFYING INFORMATION FOR THAT ATTORNEY, INCLUDING THE ATTOR- NEY'S NAME, THE NAME OF THE ATTORNEY'S FIRM, AND THE CITY IN WHICH THE ATTORNEY'S OFFICE IS LOCATED; (7) THE DATE THE PRIVATE ARBITRATION ORGANIZATION RECEIVED THE DEMAND FOR ARBITRATION, THE DATE THE ARBITRATOR WAS APPOINTED, AND THE DATE OF DISPOSITION BY THE ARBITRATOR OR PRIVATE ARBITRATION ORGANIZATION; (8) THE TYPE OF DISPOSITION OF THE DISPUTE, IF KNOWN, INCLUDING WITH- DRAWAL, ABANDONMENT, SETTLEMENT, AWARD AFTER HEARING, AWARD WITHOUT HEARING, DEFAULT, OR DISMISSAL WITHOUT HEARING; (9) THE AMOUNT OF THE CLAIM, THE AMOUNT OF THE AWARD, AND ANY OTHER RELIEF GRANTED, IF ANY; AND (10) THE NAME OF THE ARBITRATOR, THE ARBITRATOR'S TOTAL FEE FOR THE CASE, AND THE PERCENTAGE OF THE ARBITRATOR'S FEE ALLOCATED TO EACH PARTY. B. IF THE INFORMATION REQUIRED BY PARAGRAPH A OF THIS SUBDIVISION IS PROVIDED BY THE PRIVATE ARBITRATION ORGANIZATION IN A COMPUTER-SEARCHA- BLE FORMAT AT THE ORGANIZATION'S INTERNET WEBSITE AND MAY BE DOWNLOADED WITHOUT ANY FEE, THE ORGANIZATION MAY CHARGE THE ACTUAL COST OF COPYING TO ANY PERSON WHO REQUESTS THE INFORMATION ON PAPER. IF THE INFORMATION REQUIRED BY PARAGRAPH A OF THIS SUBDIVISION IS NOT ACCESSIBLE THROUGH THE USE OF THE INTERNET, THE ORGANIZATION SHALL PROVIDE THAT INFORMATION WITHOUT CHARGE TO ANY PERSON WHO REQUESTS THE INFORMATION ON PAPER. C. THIS SUBDIVISION SHALL APPLY TO ANY CONSUMER ARBITRATION COMMENCED ON OR AFTER JANUARY FIRST, TWO THOUSAND FIFTEEN. D. THIS SUBDIVISION SHALL NOT APPLY TO ARBITRATIONS INVOLVING DISPUTES BETWEEN CONSUMERS. 4. A. NO PRIVATE ARBITRATION ORGANIZATION MAY ADMINISTER A CONSUMER ARBITRATION TO BE CONDUCTED IN THIS STATE, OR PROVIDE ANY OTHER SERVICES RELATED TO A CONSUMER ARBITRATION, IF: (1) THE ORGANIZATION HAS, OR WITHIN THE PRECEDING YEAR HAS HAD, A FINANCIAL INTEREST IN ANY PARTY OR ATTORNEY FOR A PARTY; OR (2) ANY PARTY OR ATTORNEY FOR A PARTY HAS, OR WITHIN THE PRECEDING YEAR HAS HAD, ANY TYPE OF FINANCIAL INTEREST IN THE PRIVATE ARBITRATION ORGANIZATION. B. THIS SUBDIVISION SHALL OPERATE ONLY PROSPECTIVELY SO AS NOT TO PROHIBIT THE ADMINISTRATION OF CONSUMER ARBITRATIONS ON THE BASIS OF FINANCIAL INTERESTS HELD PRIOR TO JANUARY FIRST, TWO THOUSAND FIFTEEN. C. FOR THE PURPOSES OF THIS SUBDIVISION, THE TERM "FINANCIAL INTEREST" MEANS OWNERSHIP OF MORE THAN A ONE PERCENT LEGAL OR EQUITABLE INTEREST IN A PARTY, OR A LEGAL OR EQUITABLE INTEREST IN A PARTY OF A FAIR MARKET VALUE IN EXCESS OF ONE THOUSAND FIVE HUNDRED DOLLARS, OR A RELATIONSHIP AS DIRECTOR, ADVISOR OR OTHER ACTIVE PARTICIPANT IN THE AFFAIRS OF A PARTY, EXCEPT AS FOLLOWS: (1) OWNERSHIP IN A MUTUAL OR COMMON INVESTMENT FUND THAT HOLDS SECURI- TIES IS NOT A "FINANCIAL INTEREST" IN THOSE SECURITIES UNLESS THE ARBI- TRATOR PARTICIPATES IN THE MANAGEMENT OF THE FUND.S. 1839 3
(2) AN OFFICE IN AN EDUCATIONAL, RELIGIOUS, CHARITABLE, FRATERNAL, OR CIVIC ORGANIZATION IS NOT A "FINANCIAL INTEREST" IN SECURITIES HELD BY THE ORGANIZATION. (3) THE PROPRIETARY INTEREST OF A POLICYHOLDER IN A MUTUAL INSURANCE ORGANIZATION, OR A DEPOSITOR IN A MUTUAL SAVINGS ASSOCIATION, OR A SIMI- LAR PROPRIETARY INTEREST, IS A "FINANCIAL INTEREST" IN THE ORGANIZATION ONLY IF THE OUTCOME OF THE PROCEEDING COULD SUBSTANTIALLY AFFECT THE VALUE OF THE INTEREST. 5. WHENEVER THERE SHALL BE A VIOLATION OF THIS SECTION, AN APPLICATION MAY BE MADE BY THE ATTORNEY GENERAL IN THE NAME OF THE PEOPLE OF THE STATE OF NEW YORK TO A COURT OR JUSTICE HAVING JURISDICTION BY A SPECIAL PROCEEDING TO ISSUE AN INJUNCTION, AND UPON NOTICE TO THE DEFENDANT OF NOT LESS THAN FIVE DAYS, TO ENJOIN AND RESTRAIN THE CONTINUANCE OF SUCH VIOLATION; AND IF IT SHALL APPEAR TO THE SATISFACTION OF THE COURT OR JUSTICE THAT THE DEFENDANT HAS, IN FACT, VIOLATED THIS SECTION, AN INJUNCTION MAY BE ISSUED BY SUCH COURT OR JUSTICE, ENJOINING AND RESTRAINING ANY FURTHER VIOLATION, WITHOUT REQUIRING PROOF THAT ANY PERSON HAS, IN FACT, BEEN INJURED OR DAMAGED THEREBY. IN ANY SUCH PROCEEDING, THE COURT MAY MAKE ALLOWANCES TO THE ATTORNEY GENERAL AS PROVIDED IN PARAGRAPH SIX OF SUBDIVISION (A) OF SECTION EIGHTY-THREE HUNDRED THREE OF THE CIVIL PRACTICE LAW AND RULES, AND DIRECT RESTITU- TION. WHENEVER THE COURT SHALL DETERMINE THAT A VIOLATION OF THIS SECTION HAS OCCURRED, THE COURT MAY IMPOSE A CIVIL PENALTY OF NOT MORE THAN TWO THOUSAND DOLLARS FOR SUCH VIOLATION. EACH WRITTEN CONTRACT OFFERED BY A NON-CONSUMER PARTY AND SUBSEQUENTLY ENTERED INTO IN VIOLATION OF SUBDIVISION TWO OF THIS SECTION SHALL CONSTITUTE A SEPARATE VIOLATION. IN CONNECTION WITH ANY SUCH PROPOSED APPLICATION, THE ATTOR- NEY GENERAL IS AUTHORIZED TO TAKE PROOF AND MAKE A DETERMINATION OF THE RELEVANT FACTS AND TO ISSUE SUBPOENAS IN ACCORDANCE WITH THE CIVIL PRAC- TICE LAW AND RULES. S 3. This act shall take effect on the one hundred eightieth day after it shall have become a law.