Forced arbitration, the scourge of fair and open adjudication, is greatly favored by the corporate defendants sued for fraud and misconduct by consumers, corporate defendants who fund and almost always win arbitration’s closed proceedings that occur without a judge, jury, or public scrutiny

Earlier this week, the California Senate Judiciary Committee passed SB 365, closing a procedural loophole that allows corporations to delay justice by abusing the judicial appellate process to halt all case proceedings when a judge denies a defendant’s motion to compel arbitration instead of having the case proceed in public in open court.

SB 365, aimed at “reigning in corporate abuse of legal processes around forced arbitration”, allows a worker’s, consumer’s, or government’s lawsuit to move forward even if a corporate defendant files an appeal to a trial court’s ruling that a forced arbitration clause is invalid or non-existent. Corporations frequently delay proceedings for months or years in consumer and workers rights cases by filing appeals when a forced arbitration clause is ruled invalid or inapplicable. SB 365 will level the playing field for workers and consumers by allowing cases to proceed.

Forced arbitration clauses have become a common feature of consumer transactions and employment relationships. More than half of America’s workforce has been bound by forced arbitration clauses as a condition of employment, and they are a common feature of consumer agreements as well. Under these clauses, consumers and workers whose rights have been violated cannot pursue their claims in court or with a state agency.  Instead, they must submit their claims in a private arbitration proceeding that overwhelmingly favors businesses and employers

Sarah LondonLieff Cabraser partner Sarah R. London testified before the Committee in support of the bill, sharing the testimony of Mayah Curtis. Ms. Curtis, who underwent intrusive, painful, and expensive fertility procedures to assure the storage of her eggs and then lost those eggs when a cryogenic containment vessel at the fertility clinic failed, found her case forced into limbo when the defendants in an ensuing lawsuit derailed the proceedings over questions relating to the transferrability of an underlying arbitration clause in the clinic’s agreements. Though the court denied the tank manufacturer’s motion to compel arbitration, the manufacturer’s subsequent appeal of the decision stopped the case entirely for over three years. Ultimately, the appellate court upheld the denial, meaning Ms. Curtis’ case was delayed for no reason at all.

As Ms. Curtis’ explained in her testimony,

“This court delay has had profound impacts that go beyond frustration with the justice system. In the context of fertility treatments, time is of the essence, and justice delayed can really amount to justice denied.  The defendant’s appeal of the order denying arbitration paused all proceedings. But I could not pause my biological clock. I had to take swift action to attempt to mitigate the damage caused by defendants, undergoing additional rounds of IVF treatments. If I waited the more than three years it took for the appeal to conclude, I could have lost my chance at ever having children.”

“While my case and others were stayed, some victims were able to proceed to trial in federal court. The federal judge used her discretion to allow the proceedings to continue during the arbitration order appeal. But California law does not allow judges to have discretion over the proceedings, regardless of what the case is about, or the harm that could come from a long delay. It makes no sense that cases arising from the same disaster could proceed in Federal court, against the very same defendant, while the California actions had to come to a screeching halt.”

Ms. Curtis concluded: “While I cannot fix the tank failure that damaged and destroyed so many families, I can speak in support of SB 365 to urge you to ensure that California citizens have the same access to justice in their own courts as residents from other states have in our federal courts.”

SB 365 is sponsored by the California Employment Lawyers Association (CELA) and Consumer Attorneys of California (CAOC).

Due to the one-sided provision in the Code of Civil Procedure that places the court case on pause if an appeal is filed – even though no arbitration clause even existed to bind the State or Labor Commissioner to arbitration – defendants have been able to file appeals to delay the valid cases prevent them from proceeding until the appeals are resolved.

SB 365 would prevent injustices like this one by ensuring that cases can proceed while an appeal is heard. The bill establishes that an appeal of a court’s decision denying a corporation’s motion to compel arbitration will not stay the consumer or worker’s court proceedings in the trial court while the appeal is pending.

Ms. London noted, “This is a great day for consumers in California, and we look forward with great hope to the full Senate upholding the ideals of swift justice in fully approving and implementing the bill.”

Lieff Cabraser’s Consumer Protection Practice Group – Stopping fraud via civil litigation since 1972

Lieff Cabraser advises consumers as well as businesses whether and how to pursue legal action to halt and obtain compensation for the deceptive practices of large corporations. With a blend of courage, superior legal skills, and high principles, we protect our clients’ interests and help them achieve their goals by winning highly-complex consumer protection lawsuits against those that have defrauded consumers. We have successfully prosecuted scores of consumer class action lawsuits against many of the largest U.S. banks, financial service companies, and corporations. Working with co-counsel, we have achieved judgments and settlements in excess of $20 billion for consumers in these cases.

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