Texas 2009 - 81st Regular

Texas Senate Bill SB222 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	81R1307 AJA-F
2	2	By: West S.B. No. 222
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to arbitration and arbitration agreements.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. (a) The Texas Legislature, whose power is
10	10	defined broadly to include the power to set public policy, has
11	11	adhered to the Texas heritage of permissive arbitration and has not
12	12	declared a public policy favoring compulsory arbitration. The
13	13	Texas Arbitration Act, codified as Chapter 171, Civil Practice and
14	14	Remedies Code, was intended to reflect the Texas heritage of
15	15	permissive arbitration and was not intended to serve as an
16	16	expression of public policy compelling arbitration in the absence
17	17	of an agreement or as a consequence of agreements among parties of
18	18	disparate bargaining power, nor was it intended to derogate the
19	19	constitutionally protected right to trial by jury.
20	20	(b) A series of Texas Supreme Court decisions have changed
21	21	the intention and meaning of the Act so that it now extends to
22	22	nonsignatories and disputes among parties of disparate bargaining
23	23	power, such as consumer and employment disputes. As a result, Texas
24	24	consumers and employees may be compelled to submit their claims to
25	25	binding arbitration, even in the absence of agreement.
26	26	(c) Few people realize or understand the significance of
27	27	arbitration clauses set forth in fine print that strip them of
28	28	constitutionally protected rights. Because entire industries have
29	29	adopted the placement of arbitration clauses in documents of trade
30	30	or commerce, people increasingly have no choice but to accept them.
31	31	They must often give up their rights as a condition of having a job,
32	32	getting necessary medical care, buying a home, buying a car,
33	33	opening a bank account, getting a credit card, investing their
34	34	money, buying insurance, or buying an array of consumer goods and
35	35	services. Oftentimes, they are not even aware that they have given
36	36	up their rights.
37	37	(d) Mandatory or compulsory arbitration undermines the
38	38	development of public law for civil and consumer rights because
39	39	there is no meaningful judicial review of arbitrators' decisions.
40	40	Because they are working outside the civil justice system, and with
41	41	knowledge that their rulings will not be examined by a court
42	42	applying applicable law, arbitrators enjoy near-complete freedom
43	43	to ignore the law.
44	44	(e) Mandatory or compulsory arbitration is a poor system for
45	45	protecting civil and consumer rights because it is not transparent.
46	46	While the American civil justice system features publicly
47	47	accountable jurists who issue written decisions that are widely
48	48	available to the public and are subject to appellate scrutiny,
49	49	arbitration does not offer transparent or protective features.
50	50	(f) Many business entities add unfair provisions to their
51	51	arbitration clauses that deliberately tilt the systems against
52	52	individuals, including provisions that strip individuals of
53	53	substantive statutory rights, ban class actions, and force people
54	54	to arbitrate their claims hundreds or thousands of miles from their
55	55	homes. While some courts have been protective of individuals, too
56	56	many have upheld even egregiously unfair mandatory arbitration
57	57	clauses in deference to a supposed federal or state policy favoring
58	58	arbitration over the constitutional rights of individuals.
59	59	(g) Private arbitration companies, which have emerged to
60	60	handle the increase in arbitration business, are sometimes under
61	61	pressure to devise systems or engage in conduct that favors the
62	62	business entities that decide whether those companies will receive
63	63	their lucrative repeat arbitration business.
64	64	(h) For these reasons, Chapter 171, Civil Practice and
65	65	Remedies Code, should be amended to restore fairness to the system
66	66	of arbitration in Texas.
67	67	SECTION 2. Section 171.001, Civil Practice and Remedies
68	68	Code, is amended by amending Subsection (a) and adding Subsections
69	69	(c) and (d) to read as follows:
70	70	(a) Except as provided by this section, a [A] written
71	71	agreement to arbitrate is valid and enforceable if the agreement is
72	72	to arbitrate a controversy that:
73	73	(1) exists at the time of the agreement; or
74	74	(2) arises between the parties after the date of the
75	75	agreement.
76	76	(c) An agreement to arbitrate a controversy that arises
77	77	between the parties to the agreement after the date of the agreement
78	78	is void and unenforceable if the agreement requires arbitration of:
79	79	(1) a dispute between an employer and employee arising
80	80	out of the relationship of employer and employee, as defined by the
81	81	federal Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.);
82	82	(2) a dispute involving:
83	83	(A) a person who seeks or acquires goods, real or
84	84	personal property, services, money, or credit for personal, family,
85	85	or household purposes; and
86	86	(B) a seller or provider of goods, property,
87	87	services, money, or credit that is a business organization or
88	88	entity;
89	89	(3) a dispute between a franchisor and franchisee
90	90	arising out of or relating to a contract or agreement under which:
91	91	(A) a franchisee is granted the right to engage
92	92	in the business of offering, selling, or distributing goods or
93	93	services under a marketing plan or system prescribed in substantial
94	94	part by a franchisor;
95	95	(B) the operation of the franchisee's business
96	96	under the plan or system is substantially associated with the
97	97	franchisor's trademark, service mark, trade name, logotype,
98	98	advertising, or other commercial symbol designating the franchisor
99	99	or the franchisor's affiliate; and
100	100	(C) the franchisee is required to pay, directly
101	101	or indirectly, a franchise fee; or
102	102	(4) a dispute arising under any statute intended to
103	103	protect civil rights or regulate contracts or transactions between
104	104	parties of unequal bargaining power.
105	105	(d) Except as otherwise provided by this chapter, the
106	106	validity or enforceability of an arbitration agreement shall be
107	107	determined by a court, rather than the arbitrator, regardless of
108	108	whether the party resisting arbitration challenges the arbitration
109	109	agreement specifically or in conjunction with other terms of the
110	110	contract containing the agreement.
111	111	SECTION 3. Subchapter A, Chapter 171, Civil Practice and
112	112	Remedies Code, is amended by adding Section 171.0021:
113	113	Sec. 171.0021. APPLICABILITY OF CHAPTER. (a) This chapter
114	114	does not apply to an arbitration provision:
115	115	(1) in a collective bargaining agreement between an
116	116	employer and a labor union; or
117	117	(2) required by statute.
118	118	(b) An issue as to whether this chapter applies to an
119	119	arbitration agreement shall be determined under the law of this
120	120	state.
121	121	SECTION 4. Section 171.021, Civil Practice and Remedies
122	122	Code, is amended by adding Subsection (d) to read as follows:
123	123	(d) An order compelling arbitration may not violate a right
124	124	protected by the constitution of this state or the United States
125	125	unless the person holding the right knowingly waives the right.
126	126	SECTION 5. Section 171.041, Civil Practice and Remedies
127	127	Code, is amended by adding Subsection (d) to read as follows:
128	128	(d) An arbitrator appointed under Subsection (b) must
129	129	satisfy objective qualification standards that consider education,
130	130	training, and experience.
131	131	SECTION 6. Section 171.044, Civil Practice and Remedies
132	132	Code, is amended by adding Subsection (d) to read as follows:
133	133	(d) Notwithstanding Subsection (c), the hearing may not
134	134	proceed in the absence of notice or waiver of notice in accordance
135	135	with this section.
136	136	SECTION 7. Section 171.047, Civil Practice and Remedies
137	137	Code, is amended to read as follows:
138	138	Sec. 171.047. RIGHTS OF PARTY AT HEARING. (a) Unless
139	139	otherwise provided by the agreement to arbitrate, a party at the
140	140	hearing is entitled to:
141	141	(1) be heard;
142	142	(2) present evidence material to the controversy;
143	143	[and]
144	144	(3) cross-examine any witness; and
145	145	(4) obtain a stenographic recording of the hearing in
146	146	accordance with Subsection (b).
147	147	(b) A party must request a stenographic recording before the
148	148	commencement of the hearing or the party's right to obtain the
149	149	recording is waived. A stenographic recording under this section
150	150	may be made by any officer authorized by law to record testimony.
151	151	The cost of the stenographic recording shall be borne by all parties
152	152	requesting the recording or requesting a copy of the recording. The
153	153	cost of the stenographic recording may be considered by the
154	154	arbitrator to be an expense incurred in conducting the arbitration
155	155	under Section 171.055.
156	156	SECTION 8. Section 171.088(a), Civil Practice and Remedies
157	157	Code, is amended to read as follows:
158	158	(a) On application of a party, the court shall vacate an
159	159	award if:
160	160	(1) the award was obtained by corruption, fraud, or
161	161	other undue means;
162	162	(2) the rights of a party were prejudiced by:
163	163	(A) evident partiality by an arbitrator
164	164	appointed as a neutral arbitrator;
165	165	(B) corruption in an arbitrator; or
166	166	(C) misconduct or wilful misbehavior of an
167	167	arbitrator;
168	168	(3) the arbitrators:
169	169	(A) exceeded their powers;
170	170	(B) refused to postpone the hearing after a
171	171	showing of sufficient cause for the postponement;
172	172	(C) refused to hear evidence material to the
173	173	controversy; or
174	174	(D) conducted the hearing, contrary to Section
175	175	171.043, 171.044, 171.045, 171.046, or 171.047, in a manner that
176	176	substantially prejudiced the rights of a party; [or]
177	177	(4) there was no agreement to arbitrate, the issue was
178	178	not adversely determined in a proceeding under Subchapter B, and
179	179	the party did not participate in the arbitration hearing without
180	180	raising the objection; or
181	181	(5) the award clearly violates fundamental public
182	182	policy or is the result of manifest disregard of the law.
183	183	SECTION 9. Section 171.098(a), Civil Practice and Remedies
184	184	Code, is amended to read as follows:
185	185	(a) A party may appeal a judgment or decree entered under
186	186	this chapter or an order:
187	187	(1) granting or denying an application to compel
188	188	arbitration made under Section 171.021;
189	189	(2) granting an application to stay arbitration made
190	190	under Section 171.023;
191	191	(3) confirming or denying confirmation of an award;
192	192	(4) modifying or correcting an award; or
193	193	(5) vacating an award without directing a rehearing.
194	194	SECTION 10. Section 171.002, Civil Practice and Remedies
195	195	Code, is repealed.
196	196	SECTION 11. The change in law made by this Act applies only
197	197	to an arbitration agreement entered into on or after the effective
198	198	date of this Act. An arbitration agreement entered into before the
199	199	effective date of this Act is governed by the law in effect
200	200	immediately before that date, and that law is continued in effect
201	201	for that purpose.
202	202	SECTION 12. This Act takes effect immediately if it
203	203	receives a vote of two-thirds of all the members elected to each
204	204	house, as provided by Section 39, Article III, Texas Constitution.
205	205	If this Act does not receive the vote necessary for immediate
206	206	effect, this Act takes effect September 1, 2009.