Arbitration is a means of alternative dispute resolution, whereby parties agree to resolve their differences in front of an arbiter (often called a neutral) rather than by going through a lawsuit.
Arbitration is fair and just, and cases that go to arbitration often resolve much quicker than a lawsuit would.
Nevertheless, the organized trial bar has been mounting a serious attack on arbitration. That’s because lawyers earn much less representing a client in arbitration than they do when they sue. There is also a belief that in arbitration there is less settlement leverage – meaning the defendant won’t pay the plaintiff simply to go away.
There are a number of legislative attacks on arbitration in the California Legislature this session. The biggest is Assembly Bill 2667, which prohibits the use of arbitration agreements for discrimination claims. Many businesses use arbitration agreements with employees or customers as a way of managing risk – customers or employees can still file grievances, but the risk of a runaway jury award is less with arbitration than with a lawsuit. Companies in California have a justifiable fear of jackpot justice – we are, after all, considered the nation’s number one judicial hellhole.
The attack on arbitration comes primarily from lawyers – who make more money when there is a lawsuit. For employees and customers, if they feel wronged, they don’t necessarily want to sue – they want instead to be made whole, to be treated fairly. The idea that arbitration is somehow second class justice is false. The trial lawyers want people to think that arbitration is lesser justice so that the plaintiff’s lawyers will have more cases with higher fees.
A lawsuit takes a lot longer to resolve than does an arbitration. Civil cases in California can drag on for three years or more. Our courts are already clogged and underfunded; it does not make sense to cut off one of the primary relief valves.
Interestingly, there is one way that arbitration is more pro-worker than is a lawsuit. Lower wage workers are unlikely to have high enough damages to make their case attractive to a contingency-fee plaintiff’s lawyer. These workers, however, if they are wronged, may get the justice they deserve through arbitration. Researcher Lewis Maltby found that more than twice as many employees can afford to take their case to arbitration as can afford to litigate those same cases. He also found that, employees who arbitrate their claims are more likely to win than those who go to court.
Researchers Theodore Eisenberg and Elisabeth Hill also found that employees fare better in arbitration than they do in court. There are studies claiming the opposite, but those studies tend to omit summary judgment motions from their tallies, thereby skewing results. If a study only looked at cases that went to trial then there is a necessarily skewed sample because cases where the defendant company won on summary judgment would weed out a large number of cases where the plaintiff lost. If you include cases where the defendant won on summary judgment, the comparison between lawsuit and arbitration is more accurate – and arbitration comes out ahead.
Another attack on arbitration this legislative session is Assembly Bill 2879 (Stone). This bill bans employment arbitration agreements when the employee is a military member. Not surprisingly, the veterans groups oppose the bill. Turns out, military folks would rather have jobs – and have employers want to hire veterans – than have veteran employees treated differently from non-veteran employees.
The trial lawyers keep attacking arbitration in an effort to scare us – that we’re “giving up our rights” somehow by arbitrating rather than by suing. But most of us, if we have a problem with our employer or with a company, don’t want to file a lawsuit. We want our problem resolved. We want to be treated justly. Arbitration allows that, in many cases better than filing a lawsuit would.
The Civil Justice Association of California is a non-profit, membership supported coalition of citizens, taxpayers, businesses, local governments, professionals, manufacturers, financial institutions, insurers, and medical organizations. Founded in 1979, CJAC is the only statewide association dedicated solely to improving California’s civil liability system. It is active in both the Legislature and the courts, working to reduce the excessive and unwarranted litigation that increases business and government expenses, discourages innovation, and drives up the costs of goods and services for all consumers. For more information, visit www.cjac.org.