Neutrals may have a chance to influence new certification program

Gov. Gavin Newsom recently signed a law that will make some of the most important changes to the alternative dispute resolution industry in California in years. Among many other changes, SB 940 will create a voluntary registration program within the California State Bar for arbitrators and mediators.

Neutrals themselves may now have a chance to influence what that program looks like.

"I've already reached out to quite a number of people around the state asking if they would like to become involved in issue spotting and/or helping the State Bar structure this certification program," said Berkeley based mediator Ron Kelly.

Kelly and other independent mediators have raised concerns that the law could speed up a trend of the industry consolidating around a few large providers.

"I'm not opposed to certification as long as the process and result does not advantage neutrals affiliated with providers over independent neutrals, whether procedurally or substantively," said David J. Sarnoff of Sarnoff Mediations in Burlingame.

Sarnoff said he is concerned about language in the law calling on the bar to create "different levels of tiers for certification." These may come with disclosures and other paperwork that large providers will have a far easier time providing, with their economies of scale and large support staff.

"My concern is that the new rules will force people's hand to have to join a provider or dedicate a significant percentage of their time to administrative tasks," Sarnoff said.

Kelly said he was worried about the technical details as the program rolls out. These include how due process and complaint procedures would work. The bar will need to step into a new area of oversight, just as it disciplines and sometimes disbars attorneys, he noted.

"How the State Bar is going to decide, 'No you're not following these well enough; we're going to decertify you,' I think that's a really big issue," Kelly said.

Kelly also echoed concerns that the law could harm small, independent neutrals. This spring, Kelly met privately with the bill's author, Senate Judiciary Committee Chair Tom Umberg, D-Santa Ana. In May, Umberg added changes to protect mediators from the need to turn over clients' confidential information regarding non-binding mediations.

But Kelly said he still had concerns about disclosure rules under the new system. For instance, he wonders if mediators will need to keep written evidence showing they complied with Rule 3.855 of the California Rules of Court regarding, "impartiality, conflicts of interest, disclosure and withdrawal."

SB 940 strengthens existing rules requiring providers to disclose previous work for the parties in a case. Smaller providers are less likely to have done prior work for one side or otherwise have a potential conflict. But Sarnoff pointed out that these rules only apply to arbitrations -- and most independent neutrals focus on mediation.

The law's other provisions include new protections for consumers, such as stating they cannot be required to adjudicate out of state or be deprived of "the substantive protection of California law."

The largest alternative dispute providers in the state appear to be confident they will be able to comply with the new rules.

"Not much will change for us at Judicate West," Rosemarie Chiusano Aubert, the company's executive vice president of business development, said in an email. "We generally don't enforce consumer arbitration clauses unless ordered by a court, which is quite rare."

She added, "As for the State Bar's ADR certificate program, it largely formalizes procedures we already follow, which I believe is true for most, if not all, California ADR providers."

"We are currently reviewing SB 940 and developing systems to address each provision of the new law," JAMS CEO and President Kimberly Taylor said in an email. "With over 45 years of experience in the ADR industry and our team of experienced legal professionals and associates across the country, JAMS is well positioned to comply with evolving state and federal law, including SB-940."

"We will comply with all of its requirements, which includes registering with the bar," Dario Higuchi, managing partner of Signature Resolution, said in an email. "We have a robust internal software that will be able to handle all new disclosure requirements seamlessly."

"ADR Services Inc. has been following Senate Bill 940 and its amendments since it was introduced in January 2024," CEO Lucie Barron said in an email. "Our office and panel of neutrals are looking forward to receiving the details of the Alternative Dispute Resolution Certification Program to be created by the State Bar. The full parameters and requirements of the Certification Program are not yet known."

The law could also signal increased legislative trust in the California State Bar -- or at least a willingness to work with an entity that has often been at odds with lawmakers in recent years. SB 940 places what could become a major new program under the bar's control -- particularly as the alternative dispute resolution industry continues to grow rapidly.

"In July, the State Bar Board voted to support SB 940, and we thank the governor and Legislature for their confidence in the State Bar to implement, for the first time, a volunteer certification program in California for alternative dispute resolution firms, providers and practitioners," said State Bar Board of Trustees Chair Brandon Stallings in an email. "Thank you to Senator Umberg for his leadership in this area and entrusting the State Bar with this new responsibility which will allow us to build on our efforts to protect the public."