Amd §7501, add §7515, CPLR; add §5-336, amd §5-702, Gen Ob L; amd §94-a, Exec L; add §2801-h, Pub Health L
Relates to contracts in small print, procedural reciprocity for arbitration agreements in consumer transactions and consumer arbitration; relates to the prohibition of certain and wrongful death claims; relates to powers and duties of the consumer protection division and contracts of adhesion; relates to protecting against certain contracts of adhesion in the provision of health care.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7445
SPONSOR: Titone TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to
contracts in small print, procedural reciprocity for arbitration agree-
ments in consumer transactions and consumer arbitration; to amend the
general obligations law, in relation to the prohibition of certain
contractual agreements to arbitrate personal injury and wrongful death
claims; to amend the executive law, in relation to powers and duties of
the consumer protection division and contracts of adhesion; and to amend
the public health law, in relation to protecting against certain
contracts of adhesion in the provision of health care
This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of his Advisory
Committee on Civil Practice.
This measure would remedy injustices arising out of contracts of adhe-
sion in the context of consumer contracts.
We support and encourage arbitration in the civil practice context.
Arbitration is a creature of contract law. Properly used, it can promote
fair, expeditious and economical resolution of disputes. The authority
to arbitrate rather than to proceed in court depends on the agreement of
the parties to arbitrate, however. In fact, arbitration has proven to be
most successful when agreed to between parties of equal bargaining power
as part of an arms' length agreement. Thus, we believe that vital, in
realizing the State's overarching objective of securing equal access to
justice for all New Yorkers, that each party to a contract freely be
able to choose either arbitration or litigation as the dispute resol-
ution mechanism should issues arise relating to that contract. Indeed,
such a decision must be voluntary. When an arbitration clause is foist-
ed upon a party to a contract, that choice is precluded; thus, access to
justice may be denied at the very commencement of the parties' relation-
ship.
We believe that the prevalence of arbitration agreements in contracts of
adhesion in transactions for personal, family or household services New
Yorkers cannot do without - e.g., telephone, internet, nursing home,
credit cards - and the proliferation of conflicting court decisions
interpreting these agreements in inconsistent ways, often producing
substantial inequity (in circumstances where the parties have not had
the opportunity genuinely to choose arbitration) requires prompt
redress. Another area of concern relates to the proliferation of arbi-
tration clauses in contracts affecting the rights, remedies or obli-
gations between health care providers and patients relative to personal
injuries to, or wrongful death of, patients.
This measure would amend the law to protect some of the most vulnerable
New Yorkers from predatory behavior and from being compelled to arbi-
trate against their wishes in a way we believe to be contrary to the
public policy of this State; to protect fairness in consumer and other
types of transactions that affect the health and well-being of New York-
ers; to create remedies targeting unconscionable contracts at the state
level; and to ensure access to justice for consumers as set forth here-
in.
This measure seeks to improve access to justice for New Yorkers by
amending current law in the following specific ways.
PROCEDURAL FAIRNESS, RECIPROCITY, MUTUALITY
This measure would amend CPLR 7501 to add language requiring a waiver of
the enforceability of an arbitration clause upon commencement of an
action to enforce a contract in a consumer transaction, other than an
action to enforce the arbitration clause, to stay arbitration or in aid
of arbitration. This amendment would provide reciprocity or mutuality
for the current effect of arbitration agreements that require that any
claim against a consumer arising out of or related to the contract must
be arbitrated. Current law is patently unfair: a consumer is denied all
rights to go to court if a dispute arises, but the contracting entity
may go to court and obtain a judgment.
CONSUMER ARBITRATION PROCEDURE UNDER CPLR ARTICLE 75
This measure would add a new CPLR 7515 to require that consumer arbi-
trations be conducted by a panel of arbitrators established and regu-
lated by the Superintendent of the Department of Financial Services. It
would require impartiality and competence standards. The arbitration
panel would be required to provide written findings of fact and conclu-
sions of law. New York law would control decisions, including New York
choice of law principles, where relevant. Any provision in a consumer
contract entered into in this State or by a resident of the State that
provides for arbitration by anyone other than a consumer arbitrator
appointed in accordance with these regulations would be void and unen-
forceable. Except where expressly agreed otherwise, either party could
seek relief by consumer class action arbitration pursuant to regulations
promulgated by the Superintendent, in accordance with article 9 of the
CPLR.
INSURED PERSONAL INJURY LIABILITY
A new General Obligations Law provision added by this measure would
generally invalidate arbitration provisions where (a) the agreement
requires arbitration of claims for personal injury or wrongful death,
and (b) the party seeking to enforce the arbitration provision has
applicable liability insurance coverage that applies to the claim in
issue. It would provide a prohibition against contractual provisions
requiring arbitration of claims for personal injuries or wrongful death
where no State statute provides otherwise.
CONSUMER NOTICE
This measure would amend the General Obligations Law requirements for
use of plain language in consumer transactions by adding requirements
regarding the size of type required for any clause relating to arbi-
tration in a consumer credit transaction and prohibiting any clause not
complying with that requirement from being received into evidence in any
trial, hearing or proceeding. The practical effect would be to prevent a
person seeking to enforce a noncomplying agreement from moving to compel
arbitration.
CONSUMER PROTECTION DIVISION POWERS AND OUI-TAM
This measure would amend section 94-a of the Executive Law and is
modeled both on section 349 of the General Business Law and on State
Finance Law article XIII. The amendments would be limited to consumer
contracts of adhesion. First, they would empower the Consumer Protection
Division of the Secretary of State, upon an application by a consumer,
to determine whether the contract or agreement in question violates
public policy under the laws of this State, including but not limited to
section 94-A of the Executive Law, article 22-A of the General Business
Law and section 2801-h of the Public Health Law, and refer the determi-
nation to an enforcement entity for appropriate action. Second, if no
action is brought to enforce the law by any Federal, State or local
agency, the statute would provide a new right of action for the consumer
to do so on behalf of the State. Remedies available would be an injunc-
tion or damages and attorney's fees for the prevailing plaintiff. Treble
damages are allowed, up to $1,000 in each instance, for willful or know-
ing conduct, and if awarded, such damages in excess of actual damages
shall be payable to the State.
CONTRACTS OF ADHESION IN THE HEALTH CARE SERVICES CONTEXT
This measure would add a new section 2801-h of the Public Health Law and
target provisions in health care provider contracts affecting the
rights, remedies or obligations between health care providers and
patients relative to personal injuries to, or wrongful death of,
patients. The new Public Health Law provision would invalidate limita-
tions of legal rights regarding personal injuries (not just arbitration
agreements) effected by health care services contracts that the patient
must sign in order to receive health care.
Not inclusive of definitions, this new section provides that any written
contract that a health care provider requires a person to sign as a
condition to providing health care services, which attempts to affect
any legal rights, remedies or obligations relative to personal injuries
to, or wrongful death of, patients which may be occasioned in connection
with the health care services rendered, shall be regarded as a contract
of adhesion, and shall be deemed unconscionable and entered into by the
person under duress, and, accordingly, prohibited as against the public
policy of the State.
SEVERABILITY
If any provision of this measure or its application to any person or
circumstance is held invalid, the invalidity would not affect any other
provisions of this measure or application of those provisions to any
other person or circumstance, and to this end the provisions of this
measure are severable.
This measure, which would have no meaningful fiscal impact on the State,
would take effect immediately.
LEGISLATIVE HISTORY:
None. New proposal.
STATE OF NEW YORK
________________________________________________________________________
7445
2017-2018 Regular Sessions
IN ASSEMBLY
April 25, 2017
___________
Introduced by M. of A. TITONE, WEINSTEIN, KAVANAGH, DINOWITZ -- (at
request of the Office of Court Administration) -- read once and
referred to the Committee on Judiciary
AN ACT to amend the civil practice law and rules, in relation to
contracts in small print, procedural reciprocity for arbitration
agreements in consumer transactions and consumer arbitration; to amend
the general obligations law, in relation to the prohibition of certain
contractual agreements to arbitrate personal injury and wrongful death
claims; to amend the executive law, in relation to powers and duties
of the consumer protection division and contracts of adhesion; and to
amend the public health law, in relation to protecting against certain
contracts of adhesion in the provision of health care
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known as the access to justice act of
2 2017: remedying injustices arising out of contracts of adhesion in the
3 context of consumer contracts.
4 § 2. Legislative intent. The legislature finds that it is the public
5 policy of this state to ensure access to justice for all New Yorkers.
6 The unified court system in this state supports and encourages arbi-
7 tration in the civil practice context and arbitration is one of a varie-
8 ty of alternative dispute resolution tools which help parties resolve
9 disputes without a trial. Arbitration has proven to be most successful
10 when agreed to between parties of equal bargaining power as part of an
11 arm's length agreement. A vital component of access to justice is to
12 preserve, when possible, the ability of New Yorkers to choose either
13 arbitration or litigation when seeking a remedy if an injury or dispute
14 has occurred. When an arbitration clause is foisted upon a party to a
15 contract, that choice is precluded; thus access to justice may be denied
16 at the very commencement of the parties' relationship. The legislature
17 further finds that the prevalence of arbitration agreements in contracts
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD09878-01-7
A. 7445 2
1 of adhesion in transactions for personal, family or household services
2 New Yorkers cannot do without - e.g., telephone, internet, nursing home,
3 credit cards - and the interpretation of such arbitration agreements by
4 the courts has resulted in conflicting decisions and substantial inequi-
5 ty between the parties. One area of concern is reflected in the effect
6 of recent arbitrations on contracts affecting the rights, remedies or
7 obligations between health care providers and patients relative to
8 personal injuries to, or wrongful death of, patients. This act amends
9 the law to preclude predatory behavior against some of the most vulner-
10 able New Yorkers against the public policy of this state, to protect
11 fairness in consumer transactions and other types of transactions that
12 affect the health and well-being of New Yorkers, to create remedies
13 targeting unconscionable contracts at the state level and to ensure
14 access to justice for consumers.
15 § 3. Section 7501 of the civil practice law and rules, as amended by
16 chapter 532 of the laws of 1963, is amended to read as follows:
17 § 7501. Effect of arbitration agreement. A written agreement to
18 submit any controversy thereafter arising or any existing controversy to
19 arbitration is enforceable without regard to the justiciable character
20 of the controversy and confers jurisdiction on the courts of the state
21 to enforce it and to enter judgment on an award. In determining any
22 matter arising under this article, the court shall not consider whether
23 the claim with respect to which arbitration is sought is tenable, or
24 otherwise pass upon the merits of the dispute. The commencement of an
25 action in a court of law by any person to enforce a contract entered
26 into by, or delivered to, a resident of this state that involves a
27 consumer transaction, as defined in section forty-five hundred forty-
28 four of this chapter, shall constitute a waiver of the enforceability of
29 the arbitration clause in that contract or agreement. Such waiver shall
30 not apply to any action brought to enforce the arbitration clause, to
31 stay arbitration or in aid of arbitration.
32 § 4. The civil practice law and rules is amended by adding a new
33 section 7515 to read as follows:
34 § 7515. Arbitration of disputes regarding contracts or agreements in a
35 consumer transaction. (a) 1. This section shall govern arbitrations of
36 disputes regarding contracts or agreements entered into by, or delivered
37 to, a resident of this state or entered into in this state that involves
38 a consumer transaction.
39 2. Proceedings pursuant to this section shall be commenced and
40 conducted in accordance with this article, except as otherwise provided
41 by this section and in accordance with rules promulgated and approved by
42 the superintendent of the department of financial services.
43 3. The term "consumer transaction" shall be defined as set forth in
44 section forty-five hundred forty-four of this chapter.
45 4. Except as provided by an express waiver contained in such contract
46 or agreement, either party to a consumer dispute may seek relief in
47 arbitration by way of class action in accordance with the regulations
48 promulgated by the superintendent of the department of financial
49 services pursuant to article nine of this chapter.
50 (b) 1. The rules promulgated by the superintendent of the department
51 of financial services shall set forth standards for panels of arbitra-
52 tors under this section and establish qualifications and compensation of
53 individuals seeking appointment to the arbitration panels. These stand-
54 ards shall require that an arbitrator be impartial and that the arbitra-
55 tor be competent to arbitrate the subject matter of each arbitration to
56 which he or she is appointed as a panel member.
A. 7445 3
1 2. All costs of arbitration shall be paid by the party providing the
2 money, property or service.
3 3. A consumer that prevails in whole or in part in arbitration under
4 this section shall be awarded reasonable attorney's fees by the arbitra-
5 tor.
6 4. A contract entered into, or delivered to, a resident of this state
7 that provides for arbitration of a dispute shall be void if it provides
8 for arbitration by any arbitrator contrary to the provisions of this
9 section.
10 (c) Decisions by members of the arbitration panel shall: 1. be
11 provided to all parties;
12 2. contain written findings of fact and conclusions of law and an
13 explanation of the calculation of any damages; and
14 3. be based on the applicable substantive law of this state or the law
15 of any other jurisdiction that the arbitrator determines, based upon the
16 choice of law principles of this state.
17 § 5. The general obligations law is amended by adding a new section
18 5-336 to read as follows:
19 § 5-336. Prohibition of contractual provisions requiring arbitration
20 of claims for personal injuries or wrongful death where the party
21 asserting the contractual right to arbitrate has liability insurance
22 applicable to the claim. Except where otherwise provided by state stat-
23 ute, any contractual provision requiring arbitration of claims for
24 personal injuries or wrongful death shall be deemed without effect where
25 the party asserting the contractual right to arbitrate has liability
26 insurance applicable to the claim.
27 § 6. Subdivision a of section 5-702 of the general obligations law is
28 amended by adding a new paragraph 3 to read as follows:
29 3. Written in clear and legible print no less than eight points in
30 depth or five and one-half points in depth for upper case type. The
31 portion of any printed contract or agreement involving a consumer trans-
32 action or a lease for space to be occupied for residential purposes
33 where the print does not comply with this paragraph may not be received
34 in evidence in any trial, hearing or proceeding on behalf of the party
35 who printed or prepared such contract or agreement, or who caused said
36 agreement or contract to be printed or prepared. No provision of any
37 contract or agreement waiving the provisions of this section shall be
38 effective. The provisions of this paragraph shall not apply to agree-
39 ments or contracts entered into or agreements effective prior to the
40 effective date of this paragraph.
41 § 7. Paragraphs 14 and 15 of subdivision 3 of section 94-a of the
42 executive law, as added by section 21 of part A of chapter 62 of the
43 laws of 2011, are amended to read as follows:
44 (14) cooperate with and assist consumers in class actions in proper
45 cases; [and]
46 (15) (i) determine, upon an application by a consumer, whether a
47 contract or agreement or any provision therein between the consumer and
48 any person, firm, corporation or association or agent or employee there-
49 of violates the public policy of the state of New York under the laws of
50 this state, including but not limited to the provisions of this section,
51 article twenty-two-A of the general business law or section twenty-eight
52 hundred one-h of the public health law, prohibiting unscrupulous or
53 questionable business practices or unconscionable contracts, or requir-
54 ing the consumer to enter into an unconscionable contract to obtain the
55 benefits of such contract or agreement, and (ii) refer such determi-
A. 7445 4
1 nation to the appropriate unit of the department, or federal, state or
2 local agency authorized by law for appropriate action; and
3 (16) create an internet website or webpage pursuant to section three
4 hundred ninety-c of the general business law.
5 § 8. Section 94-a of the executive law is amended by adding a new
6 subdivision 6 to read as follows:
7 6. Right of action. If within sixty days after an application is made
8 by a consumer under paragraph fifteen of subdivision three of this
9 section an action is not commenced by any federal, state or local agen-
10 cy, the consumer may bring an action in his or her own name on behalf of
11 the state to obtain such a determination and seek to enjoin enforcement
12 of the contract or agreement or any of its provisions determined to be
13 void under such subdivision, recover his or her actual damages or both.
14 In such action, preliminary relief may be granted under article sixty-
15 three of the civil practice law and rules. The court may, in its
16 discretion, increase the award of damages to an amount not to exceed
17 three times the actual damages up to one thousand dollars in each
18 instance, if the court finds the defendant willfully or knowingly
19 engaged in an unscrupulous or questionable business practice or required
20 the consumer to enter such contract or agreement to obtain its benefits.
21 Any amount of damages awarded to plaintiff in excess of actual damages
22 shall be payable to the state. The court may award reasonable attorney's
23 fees to a prevailing plaintiff.
24 § 9. The public health law is amended by adding a new section 2801-h
25 to read as follows:
26 § 2801-h. Prohibition of contractual provisions in health care provid-
27 er contracts affecting the rights, remedies or obligations between
28 health care providers and patients relative to personal injuries to, or
29 wrongful death of, patients. 1. Any written contract that a health care
30 provider requires a person to sign as a condition to providing health
31 care services which attempts to affect any legal rights, remedies or
32 obligations relative to personal injuries to, or wrongful death of,
33 patients which may be occasioned in connection with the health care
34 services rendered shall be deemed unconscionable and entered into by the
35 person under duress, and is prohibited as against the public policy of
36 the state.
37 2. For the purpose of this section, the term "health care provider"
38 shall include, but is not limited to: (a) hospitals, nursing homes, and
39 residential health care facilities as defined in section twenty-eight
40 hundred one of this article; (b) home care service agencies as defined
41 in section thirty-six hundred two of this chapter; and (c) physicians,
42 nurses, dentists, podiatrists, chiropractors, orthodontists, nurse
43 midwives, nurse practitioners, physician assistants, acupuncturists,
44 physical therapists, occupational therapists, speech therapists, home
45 health aides, nutritionists, medical technicians and dental hygienists,
46 as well as any groups, corporations, partnerships or joint ventures that
47 provides such services.
48 3. Nothing herein shall be deemed to prohibit or otherwise invalidate
49 an otherwise legally valid consent form being executed by or on behalf
50 of a person undergoing a medical, dental, podiatric or chiropractic
51 treatment or procedure where such consent is required, provided that the
52 document does not attempt to define any rights, remedies or obligations
53 relative to personal injuries to, or wrongful death of, patients arising
54 or resulting from, or contributed to by, the health care services
55 rendered.
A. 7445 5
1 § 10. If any provision of this chapter or its application to any
2 person or circumstance is held invalid, the invalidity does not affect
3 any other provisions or application of the provisions of the remainder
4 to any other person or circumstance, and to this end the provisions of
5 this chapter are severable.
6 § 11. This act shall take effect immediately and apply to contracts
7 entered into or agreements effective on or after the date on which it
8 shall have become a law; provided, however, that section four of this
9 act shall apply to all pending and future actions in which judgment has
10 not yet been entered.
