03/10/1998 03:55 PM Senate L&C

                                                                               
                       SB 319 - ARBITRATION                                    
                                                                               
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 3:55 p.m. and announced SB 319 to be up for                
consideration.                                                                 
                                                                               
MR. JERRY BURNETT, Staff to Representative Randy Phillips,                     
explained that last year the legislature directed the Judicial                 
Council to propose a program for alternative dispute resolution for            
arbitration which is now being used as a standard procedure in                 
contracts.  One of the most common uses where it affects a number              
of people is in real estate contracts where people don't fully                 
realize the implications of arbitration.  There are no guidelines              
currently established anywhere governing many aspects of an                    
arbitration proceeding.  There are no provisions that arbitration              
be preceded by mediation.  The arbitrator doesn't have a state law             
or any other law in making a decision and there is no limit on the             
amount of money requested by a party to arbitration by another and             
no limit on the time in which an arbitration can be pursued after              
a contract is signed.                                                          
                                                                               
SB 319 requires language in a contract subject to arbitration                  
stating clearly that a party to arbitration may be limiting or                 
waiving rights to other remedies, including appeal of an                       
arbitrators decision to a court of law, and limits the amount that             
can be arbitrated to $5,000.                                                   
                                                                               
MR. BURNETT pointed out that Section 11 refers to Section Five and             
it should refer to Section Six and needs to be amended.                        
                                                                               
CHAIRMAN LEMAN said he didn't know why they chose $5,000 as the                
limit instead of the $7,500 limit for small claims court.  (This               
technical error was corrected in a later hearing - committee                   
staff.)                                                                        
                                                                               
Number 86                                                                      
                                                                               
MR. STEVE DEVRIES, Department of Law, said he had two minor                    
problems with the proposed bill in Section Three,(b))(4)                       
determination of whether a dispute under the contract is                       
arbitrable, seems to be at odds with existing Supreme Court                    
precedent, and (b)(9), waiving your right to recover punitive                  
damages, would only exist in law if there was an express                       
prohibition on recovery of punitive damages in the underlying                  
contract.  This was in a decision that came down from a U.S.                   
Supreme Court in 1995.                                                         
                                                                               
CHAIRMAN LEMAN asked him to provide suggested language that would              
correct the problems.                                                          
                                                                               
MR. BILL MCNALL, said he was representing no one in particular, but            
he has clients he represents in arbitration who are real estate                
agents as well as just plain folks.  It is obvious in the                      
arbitration process that the lack of guidelines was going to be a              
real hindrance and the lack of knowledge on behalf of both the real            
estate professional and the consuming public about what arbitration            
was vastly different than what they expected.  Everyone thought                
that it would be easier and less expensive than litigation.  The               
truth is that it can be more complex, expensive, and take longer               
than litigation, because of the lack of rules.                                 
                                                                               
He explained the reason for the $5,000 limit is because there is a             
trouble/damage section in the seller's disclosure law and if it                
turns out that someone intentionally  doesn't disclose something,              
they can be liable for up to $15,000.  As a result, it was felt if             
the treble damage amount was low enough, arbitration might still be            
an effective way to deal with it.                                              
                                                                               
He said this bill is trying to help the consuming public by giving             
them some advance notice of what it means to go to arbitration.                
                                                                               
SENATOR KELLY thought they should consider repealing what they did             
last year, rather than try to go forward and fix a broken system.              
                                                                               
MR. MCNALL said it seems to him that a lot of the small dollar                 
amounts could be handled in small claims court a whole lot more                
efficiently than in the arbitration process.  The only way to fix              
it is to make arbitration available only to matters that are above             
the small claims limit.                                                        
                                                                               
CHAIRMAN LEMAN said the Committee would hold the bill for further              
work.