By Van de Putte                                       S.B. No. 1706
         77R7732 AJA-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to arbitration.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Section 171.001, Civil Practice and Remedies Code,
 1-5     is amended by amending Subsection (a)  and adding Subsection (c) to
 1-6     read as follows:
 1-7           (a)  Except as provided by Subsection (c), a [A] written
 1-8     agreement to arbitrate is valid and enforceable if the agreement is
 1-9     to arbitrate a controversy that:
1-10                 (1)  exists at the time of the agreement; or
1-11                 (2)  arises between the parties after the date of the
1-12     agreement.
1-13           (c)  A written agreement to arbitrate a controversy that
1-14     arises out of an agreement described by Section 171.002(a)(2) to
1-15     which this chapter applies is not valid and enforceable unless the
1-16     controversy exists at the time of the agreement to arbitrate.  This
1-17     subsection does not apply to a written agreement to arbitrate a
1-18     controversy that arises out of:
1-19                 (1)  a motor vehicle insurance contract;
1-20                 (2)  a contract for health benefit plan coverage; or
1-21                 (3)  a contract entered into with a health care
1-22     provider for the provision of health care services.
1-23           SECTION 2. Subchapter C, Chapter 171, Civil Practice and
1-24     Remedies Code, is amended by adding Section 171.0411 to read as
 2-1     follows:
 2-2           Sec. 171.0411.  APPEARANCE OF PARTIALITY. (a)  In this
 2-3     section:
 2-4                 (1)  "Arbitration services provider" means a person
 2-5     that initiates, sponsors, or administers arbitrations or is
 2-6     involved in the appointment of arbitrators.
 2-7                 (2)  "Nonparty arbitrator" means an arbitrator:
 2-8                       (A)  jointly selected by:
 2-9                             (i)  all the parties to an arbitration; or
2-10                             (ii)  all arbitrators selected by fewer
2-11     than all the parties; or
2-12                       (B)  appointed by:
2-13                             (i)  an arbitration services provider; or
2-14                             (ii)  a court.
2-15           (b)  For the purposes of this section, an arbitrator appears
2-16     partial if:
2-17                 (1)  based on the totality of the circumstances, a
2-18     reasonable person would conclude that the impartiality of the
2-19     arbitrator may be compromised or improperly or unduly influenced if
2-20     the arbitrator is asked to decide a significant matter that is the
2-21     subject of arbitration because of an actual or potential conflict
2-22     of interest; or
2-23                 (2)  the arbitrator is an attorney, and, in light of
2-24     the arbitrator's legal practice, a reasonable person would conclude
2-25     that the impartiality of the arbitrator may be compromised or
2-26     improperly or unduly influenced if the arbitrator is asked to
2-27     decide a significant legal matter at issue in the arbitration.
 3-1           (c)  Each party to an arbitration shall prepare a disclosure
 3-2     document that in good faith:
 3-3                 (1)  describes each material fact or legal issue that
 3-4     the party contends is included in the controversy to be arbitrated;
 3-5                 (2)  provides the name of each party to the
 3-6     arbitration; and
 3-7                 (3)  includes any other information the person has
 3-8     reason to believe a prospective nonparty arbitrator needs to know
 3-9     to determine whether the arbitrator appears partial.
3-10           (d)  The party that demands arbitration shall deliver a
3-11     disclosure document under Subsection (c) to each other party to the
3-12     arbitration, any arbitration services provider involved in the
3-13     arbitration, and any potential nonparty arbitrator not later than
3-14     the 10th day after:
3-15                 (1)  if the nonparty arbitrator is selected before the
3-16     controversy arises, the date the arbitration demand is filed; or
3-17                 (2)  the earliest date on which the identity of the
3-18     nonparty arbitrator is known.
3-19           (e)  Not later than the 10th day after the date a party to
3-20     arbitration receives a disclosure document delivered under
3-21     Subsection (d), the party shall submit that party's disclosure
3-22     document to each other party to the arbitration, any arbitration
3-23     services provider involved in the arbitration, and any potential
3-24     nonparty arbitrator.
3-25           (f)  A party to an arbitration may amend the party's
3-26     disclosure document at any time before all the nonparty arbitrators
3-27     have been selected and have agreed to serve.
 4-1           (g)  A party to an arbitration may not assert as a basis for
 4-2     disqualifying a nonparty arbitrator or vacating an arbitration
 4-3     award that the arbitrator appears partial if the cause of the
 4-4     appearance of partiality could not reasonably have been identified
 4-5     and disclosed by the arbitrator without information that the party
 4-6     failed to include in the party's disclosure document.
 4-7           (h)  Before an arbitrator is selected, an arbitration
 4-8     services provider shall provide to each party:
 4-9                 (1)  a complete copy of any agreement the arbitration
4-10     services provider has with a party or a party's counsel or insurer,
4-11     including any discount, compensation, or referral arrangement; and
4-12                 (2)  a complete copy of each agreement between the
4-13     arbitration services provider and any arbitrator designated as a
4-14     prospective arbitrator for the arbitration.
4-15           (i)  Before a nonparty arbitrator is selected and after all
4-16     disclosure documents required under this section have been
4-17     delivered, each prospective nonparty arbitrator shall disclose in
4-18     writing to each party any matter that might give rise to an
4-19     appearance of partiality.  After a disclosure by an arbitrator
4-20     under this subsection, at the request of a party, all of the
4-21     parties shall interview a prospective arbitrator on issues that
4-22     might give rise to an appearance of partiality.
4-23           (j)  A nonparty arbitrator shall promptly supplement a
4-24     disclosure required under Subsection (i) with any new information
4-25     affecting the potential for the arbitrator to appear partial that
4-26     occurs on or before the earlier of:
4-27                 (1)  the date the arbitrator renders the arbitrator's
 5-1     decision or award; or
 5-2                 (2)  the date the arbitration proceeding terminates.
 5-3           (k)  A nonparty arbitrator selected before the controversy
 5-4     being arbitrated arose is disqualified if a party establishes that
 5-5     the arbitrator appears partial based on information discovered by
 5-6     the party after the agreement to arbitrate was entered into.
 5-7           SECTION 3. Subchapter C, Chapter 171, Civil Practice and
 5-8     Remedies Code, is amended by adding Section 171.0431 to read as
 5-9     follows:
5-10           Sec. 171.0431.  CONSOLIDATION OF ARBITRATION PROCEEDINGS. (a)
5-11     Two or more arbitration proceedings may be consolidated if:
5-12                 (1)  two or more persons are subject to substantially
5-13     similar agreements to arbitrate a controversy with the same
5-14     opposing party;
5-15                 (2)  the method for appointment of arbitrators is
5-16     substantially the same in each agreement; and
5-17                 (3)  the subject matter of the arbitration proceedings
5-18     arises from the same or similar circumstances.
5-19           (b)  Arbitration proceedings must be consolidated into the
5-20     proceeding that commenced first if:
5-21                 (1)  all parties agree to the consolidation; or
5-22                 (2)  two or more persons subject to agreements to
5-23     arbitrate a controversy with the same opposing party move for a
5-24     consolidation and a majority of the arbitrators for the proceeding
5-25     that commenced first determine that the consolidation complies with
5-26     Subsection (a).
5-27           SECTION 4. Section 171.088(a), Civil Practice and Remedies
 6-1     Code, is amended to read as follows:
 6-2           (a)  On application of a party, the court shall vacate an
 6-3     award if:
 6-4                 (1)  the award was obtained by corruption, fraud, or
 6-5     other undue means;
 6-6                 (2)  the rights of a party were prejudiced by:
 6-7                       (A)  evident partiality by an arbitrator
 6-8     appointed as a neutral arbitrator;
 6-9                       (B)  corruption in an arbitrator; or
6-10                       (C)  misconduct or wilful misbehavior of an
6-11     arbitrator;
6-12                 (3)  the arbitrators:
6-13                       (A)  exceeded their powers;
6-14                       (B)  refused to postpone the hearing after a
6-15     showing of sufficient cause for the postponement;
6-16                       (C)  refused to hear evidence material to the
6-17     controversy; or
6-18                       (D)  conducted the hearing, contrary to Section
6-19     171.043, 171.044, 171.045, 171.046, or 171.047, in a manner that
6-20     substantially prejudiced the rights of a party;  [or]
6-21                 (4)  there was no agreement to arbitrate, the issue was
6-22     not adversely determined in a proceeding under Subchapter B, and
6-23     the party did not participate in the arbitration hearing without
6-24     raising the objection; or
6-25                 (5)  an arbitrator failed to make a material disclosure
6-26     required under Section 171.0411(i) or (j).
6-27           SECTION 5. (a)  Section 171.001(c), Civil Practice and
 7-1     Remedies Code, as added by this Act, applies only to an agreement
 7-2     to arbitrate a controversy that is entered into on or after the
 7-3     effective date of this Act.
 7-4           (b)  Sections 171.0411 and 171.0431, Civil Practice and
 7-5     Remedies Code, as added by this Act, and Section 171.088(a), Civil
 7-6     Practice and Remedies Code, as amended by this Act, apply only to
 7-7     an arbitration proceeding that begins on or after the effective
 7-8     date of this Act.  An arbitration proceeding that begins before the
 7-9     effective date of this Act is governed by the law in effect
7-10     immediately before that date, and that law is continued in effect
7-11     for that purpose.
7-12           SECTION 6. This Act takes effect September 1, 2001.