Navigating the complexities of SB 940: The debate over voluntary certification and its challenges

When the California Legislature enacted Senate Bill 940 last year, it delivered a "concept" of a plan for regulating the ADR industry through a system of voluntary certification. It delegated to the State Bar the task of working out the tricky details.

The process

That the statute lacks clarity is not up for debate. How to clarify and implement it is. So the State Bar has set up a 21-member working group to come up with a plan to submit to the Board of Trustees.

The working group is drawn from California's broad ADR community. Its processes are quite transparent, with plenary sessions available for online viewing and opportunities for public comment. Subgroups, whose work calls for more granularity, operate behind closed doors.

The philosophical divide

Early indications suggest a philosophical split among members. Those favoring a "baseline" approach want to keep to the letter of the statute. Those with an "expansionist" approach view the statute as a starting point for a system that builds on - but is not limited to - what is expressly mandated.

Some indications suggest most members lean toward the baseline. But debate is ongoing.

This divide is reflected in views about the basic criteria for certification. The baseline view is that certification should require little more than a promise by a neutral to commit to prescribed ethical standards and a representation that a complaints procedure is in place. Prior complaints that were upheld would, presumably, also be a factor.

The expansionist view is that there should be some showing that a neutral is qualified to be certified. That could require experience or training.

The problem is that if certification will require "qualifications," it will likely end up making a representation about "quality." And the new law, which provides for tiers of certification, requires that these "do not reflect an assessment of the quality of a firm, provider, or practitioner."

Baseliners argue this bars certification from relying on quality-related factors such as training or experience. However, expansionists interpret this language as meaning only that certification can't reflect a quality assessment of one tier versus another. They say it doesn't prevent "quality" being a factor in whether someone is certified at all.

The flaw in the expansionist interpretation is that this isn't what the statute says. The statute refers to "tiers" not reflecting quality, which surely includes any tier standing alone, not just two stacked up for comparison.

Furthermore, there's a risk that an expansionist system will confuse the very consumers it is meant to protect. Try explaining why certification reflects quality, but higher levels have nothing to do with quality. To paraphrase the British writer George Orwell, "All neutrals are equal, but some neutrals are more equal than others."

So what should higher tiers reflect in order to check the statutory boxes? Maybe the best solution would be a more robust and transparent complaints system.

Complaint procedures

The requirement for a complaints procedure is itself problem-ridden, however. Neutrals who belong to private-sector ADR panels will likely qualify via those providers' internal procedures. But what if a neutral sometimes operates under the umbrella of a provider, but at other times on his or her own? Would certification be conditioned on the neutral refraining from practicing without a complaints procedure for some of the time? Such a restriction could encourage some to skip the whole process (which, as a reminder, is entirely voluntary).

Or would the certified neutral be required to disclose to consumers when a complaints procedure isn't available so that certification isn't in effect? That would be confusing.

And what about solos who don't operate under a panel for any of their work? One idea being floated involves complaints procedures modeled on the volunteer-driven mandatory fee arbitrations run by local bar associations.

But would local bar associations step up? Or could the State Bar, by virtue of being the ultimate giver and taker of certification, itself be construed as providing a qualifying complaints procedure - even if it is one of last resort?

The State Bar, apparently, isn't eager to set up its own full-blown ADR complaints system, including for those neutrals who aren't even lawyers. But there must be a limit to how uninvolved it can be. The Legislature did not ask the State Bar to be a rubber stamp. Thus, if the criteria for certification - or decertification - should include the outcome of a complaint, the State Bar will surely have to take a view as to whether that outcome was fair (either in the neutral's or consumer's favor).

If the State Bar is required to assess complaints, someone will need to report the details of those complaints that are upheld. But how would such a reporting system account for complaints whose nature - even if legitimate - is beyond the scope of certification?

Not all complaints are of equal import. When a consumer has a legitimate complaint about a neutral - e.g., "the mediator seemed more interested in lunch than in listening" - that grievance may not necessarily rise to a level that should be reported as an ethics violation. Given that there will often be fine lines involved in deciding if a certain neutral's shortcomings cross an ethical norm, what criteria should be used to determine what complaints get reported? And who should have the last word in deciding what to report, and with what due process?

Timing

The working group was meant to have its recommendations ready by mid-2025. Given the number of unresolved questions, this seems unrealistic. Some think the whole messy thing should go back to the Legislature for clarification, but that's unlikely to happen before anything takes effect.

Conclusion

The problems with implementing SB 940 are more obvious than the solutions. This would seem to favor a more baseline approach. Ultimately, the less ambitious the certification system, the less scope there will be for getting it wrong.

John Derrick is a neutral with Alternative Resolution Centers and the American Arbitration Association.