2024 -- S 2671

========

LC004989

========

     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2024

____________

A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE IN PARTICULAR

ACTIONS -- ARBITRATION

     Introduced By: Senators Gallo, Cano, Lawson, and LaMountain

     Date Introduced: March 01, 2024

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 10-3-2 and 10-3-4 of the General Laws in Chapter 10-3 entitled

"Arbitration" are hereby amended to read as follows:

     10-3-2. Agreements to arbitrate subject to chapter. Agreements to arbitrate subject

to chapter - Notice.

     (a) When clearly written and expressed, a provision in a written contract to settle by

arbitration a controversy thereafter arising out of such contract, or out of the refusal to perform the

whole or any part thereof, or an agreement in writing between two (2) or more persons to submit

to arbitration any controversy existing between them at the time of the agreement to submit shall

be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract; provided, however, that the provisions of this chapter shall not apply to

collective contracts between employers and employees, or between employers and associations of

employees, in respect to terms or conditions of employment; and provided further, that in all

contracts of primary insurance, wherein the provision for arbitration is not placed immediately

before the testimonium clause or the signature of the parties, the arbitration procedure may be

enforced at the option of the insured, and in the event the insured exercises the option to arbitrate,

then the provisions of this chapter shall apply and be the exclusive remedy available to the insured.

     (b) Notice of intention to arbitrate. A party may serve upon another party a demand for

arbitration or a notice of intention to arbitrate, specifying the agreement pursuant to which

arbitration is sought and the name and address of the party serving the notice, or of an officer or

agent thereof if such party is an association or corporation, and stating that unless the party served

applies to stay the arbitration within twenty (20) days after such service they shall thereafter be

precluded from objecting that a valid agreement was not made or has not been complied with and

from asserting in court the bar of a limitation of time. Such notice or demand shall be served in the

same manner as a summons or by registered or certified mail, return receipt requested. An

application to stay arbitration shall be made by the party served within twenty (20) days after

service upon the party of the notice or demand, or they shall be so precluded. Notice of such

application shall be served in the same manner as a summons or by registered or certified mail,

return receipt requested. Service of the application may be made upon the adverse party, or upon

their attorney if the attorneys' name appears on the demand for arbitration or the notice of intention

to arbitrate. Service of the application by mail shall be timely if such application is posted within

the prescribed period. Any provision in an arbitration agreement or arbitration rules which waives

the right to apply for a stay of arbitration or prescribes a manner of notifying a party of an intention

to commence arbitration that is more burdensome than that described in this section is hereby

declared null and void.

     (c) The party required to send notice pursuant to subsection (b) of this section shall

affirmatively include in the notice the rights being waived by failure to apply for the stay of

arbitration. Said notice shall be done in bold print and highlighted.

     10-3-4. Petition for arbitration — Service, hearing, and reference.

     The party aggrieved by the alleged failure, neglect, or refusal of another to perform under

a written agreement for arbitration may petition the superior court for the county in which any of

the parties reside or has his or her place of business for an order directing that the arbitration proceed

in the manner provided for in the agreement. If there are multiple parties seeking arbitration against

the same party or parties, the proceeding may be brought in any court and county where any of the

parties seeking arbitration resides or is doing business or where the arbitration was held or is

pending. Five (5) days’ notice in writing of the application shall be served upon the party in default.

Service thereof shall be made in the manner provided by law for the service of a writ of summons.

The court shall hear the parties, and upon being satisfied that the making of the agreement for

arbitration or the failure to comply therewith is not in issue, the court shall make an order directing

the parties to proceed to arbitration in accordance with the terms of the agreement.

     SECTION 2. Chapter 10-3 of the General Laws entitled "Arbitration" is hereby amended

by adding thereto the following sections:

     10-3-22. Right to representation.

LC004989 - Page 2 of 6

     A party has the right to be represented by an attorney and may claim such right at any time

as to any part of the arbitration or hearings which have not taken place. This right may not be

waived. If a party is represented by an attorney, papers to be served on the party shall be served

upon his attorney. Any agreement which discriminates against or penalizes a party for retaining the

services of counsel in an arbitration is null and void.

     10-3-23. Fees and costs of arbitration initiation; invoice; breach of agreement;

sanctions.

     (a)(1) In an employment or consumer arbitration that requires, either expressly or through

application of state or federal law or the rules of the arbitration provider, unless there is a mutually

agreed upon provision to split costs equally, the drafting party, unless otherwise specified, is to pay

certain fees and costs before the arbitration can proceed. If the fees or costs to initiate an arbitration

proceeding are not paid within thirty (30) days after the due date the drafting party is in material

breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel

arbitration under § 10-3-4.

     (2) After an employee or consumer meets the filing requirements necessary to initiate an

arbitration, the arbitration provider shall immediately provide an invoice for any fees and costs

required before the arbitration can proceed to all of the parties to the arbitration. The invoice shall

be provided in its entirety, shall state the full amount owed and the date that payment is due, and

shall be sent to all parties by the same means on the same day. To avoid delay, absent an express

provision in the arbitration agreement stating the number of days in which the parties to the

arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to

the parties as due upon receipt.

     (b) If the drafting party materially breaches the arbitration agreement and is in default under

subsection (a) of this section, the employee or consumer may do either of the following:

     (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction;

or

     (2) Compel arbitration in which the drafting party shall pay reasonable attorneys' fees and

costs related to the arbitration.

     (c) If the employee, consumer, or other involved party withdraws the claim from arbitration

and proceeds with an action in a court of appropriate jurisdiction under subsection (b)(1) of this

section, the statute of limitations with regard to all claims brought or that relate back to any claim

brought in arbitration shall be tolled as of the date of the first filing of a claim in a court, arbitration

forum, or other dispute resolution forum.

     (d) If the employee or consumer proceeds with an action in a court of appropriate

LC004989 - Page 3 of 6

jurisdiction, the court shall impose sanctions on the drafting party in accordance with § 10-3-25.

     10-3-24. Material breach of agreement - Remedies.

     (a)(1) In an employment or consumer arbitration that requires, either expressly or through

application of state or federal law or the rules of the arbitration provider, that the drafting party pay

certain fees and costs during the pendency of an arbitration proceeding, if the fees or costs required

to continue the arbitration proceeding are not paid within thirty (30) days after the due date, the

drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and

waives its right to compel the employee or consumer to proceed with that arbitration as a result of

the material breach.

     (2) The arbitration provider shall provide an invoice for any fees and costs required for the

arbitration proceeding to continue to all of the parties to the arbitration. The invoice shall be

provided in its entirety, shall state the full amount owed and the date that payment is due, and shall

be sent to all parties by the same means on the same day. To avoid delay, absent an express

provision in the arbitration agreement stating the number of days in which the parties to the

arbitration must pay any required fees or costs, the arbitration provider shall issue all invoices to

the parties as due upon receipt. Any extension of time for the due date shall be agreed upon by all

parties.

     (b) If the drafting party materially breaches the arbitration agreement and is in default under

subsection (a) of this section, the employee or consumer may unilaterally elect to do any of the

following:

     (1) Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction.

If the employee or consumer withdraws the claim from arbitration and proceeds with an action in

a court of appropriate jurisdiction, the statute of limitations, with regard to all claims brought or

that relate back to any claim brought in arbitration, shall be tolled as of the date of the first filing

of a claim in any court, arbitration forum, or other dispute resolution forum;

     (2) Continue the arbitration proceeding, if the arbitration provider agrees to continue

administering the proceeding, notwithstanding the drafting party's failure to pay fees or costs. The

neutral arbitrator or arbitration provider may institute a collection action at the conclusion of the

arbitration proceeding against the drafting party that is in default of the arbitration for payment of

all fees associated with the employment or consumer arbitration proceeding, including the cost of

administering any proceedings after the default;

     (3) Petition the court for an order compelling the drafting party to pay all arbitration fees

that the drafting party is obligated to pay under the arbitration agreement or the rules of the

arbitration provider; or

LC004989 - Page 4 of 6

     (4) Pay the drafting party's fees and proceed with the arbitration proceeding. As part of the

award, the employee or consumer shall recover all arbitration fees paid on behalf of the drafting

party without regard to any findings on the merits in the underlying arbitration.

     (c) If the employee or consumer withdraws the claim from arbitration and proceeds in a

court of appropriate jurisdiction pursuant to subsection (b)(1) of this section, both of the following

apply:

     (1) The employee or consumer may bring a motion, or a separate action, to recover all

attorneys' fees and all costs associated with the abandoned arbitration proceeding. The recovery of

arbitration fees, interest, and related attorneys' fees shall be without regard to any findings on the

merits in the underlying action or arbitration; and

     (2) The court shall impose sanctions on the drafting party in accordance with § 10-3-25.

     (d) If the employee or consumer continues in arbitration pursuant to subsection (b)(2)

through (4) of this section, inclusive, the arbitrator shall impose appropriate sanctions on the

drafting party, including monetary sanctions, issue sanctions, evidence sanctions, or terminating

sanctions.

     10-3-25. Breach of arbitration agreement; court sanctions; additional sanctions.

(a) The court shall impose a monetary sanction against a drafting party that materially

breaches an arbitration agreement pursuant to § 10-3-23(a) or § 10-3-24(a), by ordering the drafting

party to pay the reasonable expenses, including attorneys' fees and costs, incurred by the employee

or consumer as a result of the material breach.

     (b) In addition to the monetary sanction described in subsection (a) of this section, the court

may order any of the following sanctions against a drafting party that materially breaches an

arbitration agreement pursuant to § 10-3-23(a) or § 10-3-24(a), unless the court finds that the one

subject to the sanction acted with substantial justification or that other circumstances make the

imposition of the sanction unjust:

     (1) An evidence sanction by an order prohibiting the drafting party from conducting

discovery in the civil action;

     (2) A terminating sanction by one of the following orders:

     (i) An order striking out the pleadings or parts of the pleadings of the drafting party;

     (ii) An order rendering a judgment by default against the drafting party; and

     (3) A contempt sanction by an order finding the drafting party in contempt of court.

     SECTION 3. This act shall take effect upon passage.

========

LC004989

========

LC004989 - Page 5 of 6

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE IN PARTICULAR

ACTIONS -- ARBITRATION

***

     This act would spell out additional notice provisions, fees and costs of the arbitration

process, from initiation to default provisions and potential court sanctions for breach of the

arbitration agreement.

     This act would take effect upon passage.

========

LC004989

========

LC004989 - Page 6 of 6