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A09769 Summary:

Amd 399-c, Gen Bus L
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.
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A09769 Actions:

02/06/2018referred to consumer affairs and protection
03/06/2018reported referred to codes
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A09769 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
  TITLE OF BILL: An act to amend the general business law, in relation to arbitration organizations   PURPOSE: 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 PROVISIONS: This bill would require private arbitration organizations involved in consumer arbitration cases, excepting those businesses whose only relationship to arbitration is a contract clause authorizing arbi- tration, 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; wheth- er the consumer was the prevailing party; and on how many occasions, if any, the non-consumer party has previously been a party in arbitration administered by the private arbitration organization. No private arbi- tration organization would have any liability for collecting, publish- ing, 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 consti- tute a separate violation. This bill also provides for a right of action to any person who has been injured by reason of a violation of the section provided in the bill.   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 arbi- tration proceedings. Many advocates maintain that consumers may not be able to get a fair hearing since an arbitrator has 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 nine- ty-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 arbi- tration 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 for 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 organ- ization entered awards in favor of a large national bank and other lend- ers against identity theft victims who did not, in fact, owe any debts. -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 arbi- trations. 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 consumers forced into arbitration pursuant to a contract containing a mandatory arbi- tration clause.   FISCAL IMPACT ON THE STATE: None.   FISCAL IMPACT ON LOCALITIES: None.   IMPACT ON REGULATION OF BUSINESSES AND INDIVIDUALS: Would impose new requirements, described above, on arbitration organiza- tions.   IMPACT ON FINES, IMPRISONMENT, FORFEITURE OF RIGHTS, OR OTHER PENAL SANCTIONS: None.   PRIOR LEGISLATIVE HISTORY: 2017: A07175 (Kavanagh) - Third Reading 2016: A00108D (Dinowitz) - Third Reading 2015: A00108 (Dinowitz) - Third Reading 2014: A00604A (Dinowitz) - Passed Assembly 2013: A00604A (Dinowitz) - Passed Assembly 2012: A08431 (Dinowitz) - Passed Assembly 2011: A08431 (Dinowitz) - Consumer Affairs and Protection 2010: A7943B (Pheffer) - Passed Assembly 2009: A7943 (Pheffer) -Consumer Affairs and Protection   EFFECTIVE DATE: This act shall take effect on the one hundredth and eightieth day after it shall have become a law.
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A09769 Text:

                STATE OF NEW YORK
                   IN ASSEMBLY
                                    February 6, 2018
        Introduced by M. of A. TITONE -- read once and referred to the Committee
          on Consumer Affairs and Protection
        AN  ACT  to  amend  the general business law, in relation to arbitration
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
     1    Section  1. Subdivision 1 of section 399-c of the general business law
     2  is amended by adding a new paragraph e to read as follows:
     3    e. The term "arbitration  organization"  shall  mean  an  association,
     4  agency,  board,  commission,  or other entity that is neutral and initi-
     5  ates, sponsors, or administers an arbitration proceeding or is  involved
     6  in  the  appointment of an arbitrator unless such involvement is limited
     7  to a contractual relationship that authorizes the use of arbitration.
     8    § 2. Section 399-c of the general business law is  amended  by  adding
     9  three new subdivisions 3, 4 and 5 to read as follows:
    10    3.  a.  Any  private  arbitration  organization that administers or is
    11  otherwise involved in fifty or more consumer arbitrations a  year  shall
    12  collect, publish at least quarterly, and make available to the public in
    13  a  computer-searchable  database  that  permits  searching with multiple
    14  search terms in the same search, which shall be accessible at the inter-
    15  net website of the private arbitration  organization,  if  any,  and  on
    16  paper  upon  request,  all  of  the following information regarding each
    17  consumer arbitration it has administered or otherwise been  involved  in
    18  within the preceding five years:
    19    (1) The name of the non-consumer party, if the non-consumer party is a
    20  corporation or other business entity;
    21    (2)  The state and zip code in which the consumer party resided at the
    22  time of arbitration;
    23    (3) The type of dispute involved, including goods, banking, insurance,
    24  health care, employment, and, if it involves employment, the  amount  of
    25  the  employee's annual wage divided into the following ranges: less than
    26  one hundred thousand  dollars,  one  hundred  thousand  dollars  to  two
    27  hundred  fifty  thousand  dollars, inclusive, and over two hundred fifty
    28  thousand dollars;
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 9769                             2
     1    (4) Whether the consumer was the prevailing party;
     2    (5)  On  how many occasions, if any, the non-consumer party has previ-
     3  ously been a party in an arbitration or mediation  administered  by  the
     4  private arbitration organization;
     5    (6)  Whether the consumer party was represented by an attorney and, if
     6  so, the identifying information for that attorney, including the  attor-
     7  ney's  name,  the name of the attorney's firm, and the city in which the
     8  attorney's office is located;
     9    (7) The date the private arbitration organization received the  demand
    10  for  arbitration, the date the arbitrator was appointed, and the date of
    11  disposition by the arbitrator or private arbitration organization;
    12    (8) The type of disposition of the dispute, if known, including  with-
    13  drawal,  abandonment,  settlement,  award  after  hearing, award without
    14  hearing, default, or dismissal without hearing;
    15    (9) The amount of the claim, the amount of any  award  or  settlement,
    16  and any other relief granted; and
    17    (10)  The  name  of the arbitrator, the arbitrator's total fee for the
    18  case, and the percentage of  the  arbitrator's  fee  allocated  to  each
    19  party.
    20    b.  If  the information required by paragraph a of this subdivision is
    21  provided by the private arbitration organization in a  computer-searcha-
    22  ble  format at the organization's internet website and may be downloaded
    23  without any fee, the organization may charge the actual cost of  copying
    24  to  any person who requests the information on paper. If the information
    25  required by paragraph a of this subdivision is  not  accessible  through
    26  the use of the internet, the organization shall provide that information
    27  without charge to any person who requests the information on paper.
    28    c.  This subdivision shall apply to any consumer arbitration commenced
    29  on or after January first, two thousand nineteen.
    30    d. This subdivision shall not apply to arbitrations involving disputes
    31  between consumers.
    32    e. The provisions of this subdivision shall not  apply  to  agreements
    33  negotiated with any labor union through collective bargaining.
    34    4.  a.  No  private arbitration organization may administer a consumer
    35  arbitration to be conducted in this state, or provide any other services
    36  related to a consumer arbitration, if:
    37    (1) the organization has, or within the  preceding  year  has  had,  a
    38  financial interest in any party or attorney for a party; or
    39    (2)  any  party  or  attorney for a party has, or within the preceding
    40  year has had, any type of financial interest in the private  arbitration
    41  organization.
    42    b.  This  subdivision  shall  operate  only prospectively so as not to
    43  prohibit the administration of consumer arbitrations  on  the  basis  of
    44  financial interests held prior to January first, two thousand nineteen.
    45    c. For the purposes of this subdivision, the term "financial interest"
    46  means  ownership  of more than a one percent legal or equitable interest
    47  in a party, or a legal or equitable interest in a party of a fair market
    48  value in excess of one thousand five hundred dollars, or a  relationship
    49  as  director,  advisor  or  other active participant in the affairs of a
    50  party, except as follows:
    51    (1) Ownership in a mutual or common investment fund that holds securi-
    52  ties is not a "financial interest" in those securities unless the  arbi-
    53  trator participates in the management of the fund.
    54    (2)  An office in an educational, religious, charitable, fraternal, or
    55  civic organization is not a "financial interest" in securities  held  by
    56  the organization.

        A. 9769                             3

     1    (3)  The  proprietary interest of a policyholder in a mutual insurance
     2  organization, or a depositor in a mutual savings association, or a simi-
     3  lar proprietary interest, is a "financial interest" in the  organization
     4  only  if  the  outcome  of the proceeding could substantially affect the
     5  value of the interest.
     6    5.  a.  Whenever there shall be a violation of this section, an appli-
     7  cation may be made by the attorney general in the name of the people  of
     8  the  state  of  New  York to a court or justice having jurisdiction by a
     9  special proceeding to issue  an  injunction,  and  upon  notice  to  the
    10  defendant of not less than five days, to enjoin and restrain the contin-
    11  uance  of  such violation; and if it shall appear to the satisfaction of
    12  the court or justice that the defendant  has,  in  fact,  violated  this
    13  section, an injunction may be issued by such court or justice, enjoining
    14  and  restraining any further violation, without requiring proof that any
    15  person has, in fact, been  injured  or  damaged  thereby.  In  any  such
    16  proceeding,  the  court  may  make allowances to the attorney general as
    17  provided in paragraph six of subdivision  (a)  of  section  eighty-three
    18  hundred  three  of the civil practice law and rules, and direct restitu-
    19  tion.  In connection with any such proposed  application,  the  attorney
    20  general  is  authorized  to  take  proof and make a determination of the
    21  relevant facts and to issue subpoenas in accordance with the civil prac-
    22  tice law and rules.
    23    b. Notwithstanding any right of action granted to the attorney general
    24  pursuant to this section, any person who has been injured by reason of a
    25  violation of this section may bring an action in his or her own name  to
    26  enjoin such unlawful act, an action to recover his or her actual damages
    27  or  both such actions. The court may award reasonable attorney's fees to
    28  a prevailing plaintiff.
    29    c.   Whenever the court shall  determine  that  a  violation  of  this
    30  section  has  occurred, the court may impose a civil penalty of not more
    31  than two thousand dollars for such violation.
    32    d. Each written contract offered by a non-consumer  party  and  subse-
    33  quently  entered  into  in  violation of subdivision two of this section
    34  shall constitute a separate violation.
    35    § 3. This act shall take effect on the one hundred eightieth day after
    36  it shall have become a law.
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