BILL NUMBER: S5425A
SPONSOR: HOYLMAN-SIGAL
 
TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to arbi-
tration agreements
 
PURPOSE:
This bill would clearly define the term "neutral third party' arbitrator
and void any agreement or contract that does not require any disputed be
submitted to a neutral third party arbitrator. The bill also would
require a series of disclosures by an arbitrator that may impact his or
her impartiality.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1. Amends the civil practice law and rules by adding a new
section 7500, providing definitions.
Section 2. Amends section 7501 of the civil practice law and rules to
ensure arbitrator neutrality and objectivity.
Section 3. Amends the civil practice law and rules by adding a new
section 7505-a, requiring potential arbitrators to make specific disclo-
sures to ensure their neutrality and objectivity.
Section 4. Amends section 7506 of the civil practice law and rules
outlining new provisions to ensure fairness and objectivity in arbi-
tration proceedings.
Section 5. Amends Section 7507 of the civil practice law and rules to
enact new provisions related to arbitration awards, requiring arbitra-
tors to state the issues in dispute and a basis for their findings.
Section 6. Amends Section 7511 of the civil practice law and rules to
allow awards to be vacated if a manifest disregard of the law is demon-
strated.
Section 7. Amends the civil practice law and rules by adding new
sections 7516 and 7517, together providing definitions, prohibitions,
and requirements for specific arbitration cases.
Section 8. Provides provisions for enforcement of the provisions of this
act.
Section 9. provides for severability of the provisions of this act.
Section 10. Provides the effective date.
 
JUSTIFICATION:
"Forced arbitration" or "mandatory arbitration" clauses are fine-print
terms included in contracts of adhesion - often contracts between an
employee and her employer or a consumer and a merchant - that, in the
case of consumer and employment contracts in non-unionized workplaces,
require the consumer or employee to give up her right to assert claims
against the merchant or employer in court as a condition of obtaining or
keeping her job or using the consumer goods or services. These clauses
are prevalent in a number of types of contracts including, among others,
cellphone contracts, and employment contracts in non- union workplaces.
Instead of providing employees and consumers with access to state or
federal court or administrative agencies, these clauses purport to
provide employees and consumers with a private forum to resolve their
claims against the company. But in actuality many consumers and employ-
ees are never actually able to access this alternative, private forum,
because forced arbitration clauses also often require the employee or
consumer to pursue her claims individually, without the benefit of class
or collective action procedures that many consumers and employees rely
on to assert their rights. Moreover, some clause s require the consumer
or employee to pay exorbitant arbitration fees or even to arbitrate in a
far-off forum. This bill builds upon the proscription against mandatory
arbitration clauses which is contained in General Business Law
Sec.399-c.
The presumption that an arbitration clause is enforceable has, however,
become a sword to wield against parties of lesser means rather than a
shield to protect against unnecessary litigation. Currently, a party
must prove, either during the course of misconduct by the arbitrator or
after an award by an arbitrator is perceived to be unfair, that the
arbitrator was biased even if the arbitrator clearly has an economic
stake in the outcome of the dispute. This outcome is in direct oppo-
sition to the reasons (efficiency and fairness) why arbitration is
favored. As arbitration is commonly thought to be a dispute resolution
procedure that occurs in front of a neutral third party, codifying it as
such will enforce the original intent of the law.
Even when the employee or consumer is able - or required - to pursue her
claims in arbitration, she often finds that the deck is stacked against
her. The arbitration process is secret, and arbitrators are often
subject to "repeat player" bias in favor of the business and against the
employee or consumer, because the business is the entity appearing in
front of the arbitrator most frequently and is the one paying the
arbitrator's salary. What is more, under both state and federal law, the
right to vacate an arbitrator's decision is extremely limited. A consum-
er or employee cannot obtain relief on a challenge to an arbitrator's
decision even when the arbitrator is clearly wrong on the facts or the
law. This bill requires that an arbitrator in such matters state the
basis for her decision, which is modeled after 11 NYCRR 65-4.5 (s),
which has been used in no-fault insurance arbitrations for many years.
The bill also allows an arbitration award to be vacated because of an
arbitrator's manifest disregard of the law. This latter standard is used
in arbitrations which are sought to be vacated pursuant to federal law.
See, Schwartz v. Merrill Lynch & Co., Inc. 665 F.3d 444 (2011).Likewise
for the provisions in the bill that call for arbit rators to provide
basic conflict disclosure. Given the high bar presently contained in
CPLR 7511 (b)(1)(ii), it is very difficult to establish arbitrator
partiality. This bill sets affirmative requirements for arbitrators
concerning disclosure of conflicts.
For the most part, business are allowed to write their contracts in a
way which is not consumer or employee-friendly, because of the Supreme
Court's recent interpretations of the Federal Arbitration Act (FAA), a
law that has been on the books for over 90 years. Although Congress's
purpose in enacting the FAA was to allow companies, bargaining at arm's-
length, to settle on an alternative dispute resolution forum, a series
of recent Supreme Court decisions have expanded the Act's reach to cover
almost all employment and consumer contracts, whether or not the parties
actually bargained over the term. As a result, given these judicial
interpretations, and given that mandatory arbitration may well be a more
common occurrence in New York State, it is felt that procedural modifi-
cations to the way arbitrations are conducted, such as set forth in this
bill and in away that they comport with the FAA, are warranted. In addi-
tion, the bill makes it clear that arbitration clauses in contracts
exempted under federal law, or not governed by federal law in the first
instance, are not preempted by federal law, and proscribed. Finally, the
bill specifically provides that it shall not apply to collectively
bargained agreements with unions, so as not to upset the delicate
balance that is had in agreements typically negotiated by lawyers for
both sides, as contrasted to the typically non-negotiated agreement
between businesses and employers and consumers.
 
LEGISLATIVE HISTORY:
S.3258 of 2023-2024 (Hoylman-Sigal): Died in Rules
A.856 of 2023-2024 (Dinowitz): Passed Assembly
S.0697 OF 2021-2022 (Hoylman): Died in Judiciary
A.1464-A of 2021-2022 (Dinowitz): Passed Assembly/ Died in Judiciary
S.3684 of 2019-2020 (Holyman): Died in Judiciary
A.3265 of 2019-2020 (Dinowitz): Died in Codes
 
FISCAL IMPLICATIONS:
None
 
EFFECTIVE DATE:
This act shall take effect on the first of January next succeeding the
date on which it shall have become a law.

Statutes affected:
S5425: 7501 civil practice law, 7506 civil practice law, 7507 civil practice law, 7511 civil practice law
S5425A: 7501 civil practice law, 7506 civil practice law, 7507 civil practice law, 7511 civil practice law