Health Administration Responsibility Project
Some Arguments against Mandatory Arbitration
1. The higher costs of mandatory arbitration are not "neutral"
as applied to consumers.
- A. Plaintiffs are denied equal protection of the laws if they
are denied a hearing due to inability to pay the higher costs of
arbitration, as opposed to a jury or court trial.
- 1. To obtain an arbitration hearing plaintiffs must
advance the costs of arbitration administration and arbitrators'
- 2. The plaintiff's share of arbitration administration and
compensation of a 3-arbitrator panel may be in the
range of $10,000 to $20,000.
- 3. The comparable cost to file a complaint in the California
Superior Court is less than $200, plus jury fees and court
reporter fees if the case goes to trial.
- 4. Many if not most plaintiffs cannot afford to advance
$10,000-$20,000 in arbitration costs.
- 5. Presumably, the ability of attorneys to advance
arbitration costs is limited, thereby reducing plaintiff's
ability to obtain legal representation.
- 6. A forum that is economically inaccessible to many if
not most plaintiffs is de facto biased in favor of defendant
insurance companies that are not required to stand and defend
their actions against claims that cannot be brought against them.
- 7. Plaintiffs who cannot afford to pay are denied an alternative
forum, i.e., an affordable judge and jury.
- B. There is nothing in the statutory notices putting plaintiffs
on notice of the higher costs of arbitration as opposed to
jury or court trial.
- C. Alternative insurance products allowing plaintiffs to bring
suit in court are generally unavailable.
2. Arbitrators are more likely to be biased toward the defense.
- A. The requirement that both parties agree on a 'neutral'
arbitrator is equivalent to unlimited peremptory challenges
by each party.
- B. These peremptory challenges are more beneficial to the
defendant than to the plaintiff.
- C. Defendants arbitrate much more frequently than plaintiff
so can maintain a dossier on arbitrators.
- D. Use of unlimited peremptory challenges allows defendants
to blackball arbitrators who find for plaintiffs.
- E. Many arbitrators depend on repeat business for a significant
portion of their income.
- F. The threat of being blackballed by a frequent user of
arbitration represents a significant conflict of interest
for an arbitrator, and an incentive to benefit defendants.
- G. A judge's or jury member's income can not be affected
by his decision. An arbitrator's can. Thus arbitration,
as applied, is not as neutral as a trial.
- H. Plaintiffs are less able to benefit from challenges,
because of lack of past experience with arbitrators, and
lack of the promise of future business.
3. Procedurally, arbitration is not as "neutral" a forum as Trial,
as applied to managed health care disputes.
- A. Lack of Discovery disadvantages the patient disproportionately.
- 1. The managed care organization is much more likely to have
material information unknown to plaintiff than vice versa.
- B. Without judicial control, MCOs can drag out the proceedings
to patient's detriment, as in Engalla v. Permanente.
- C. A frequent arbitrator, inured to malpractice, is less likely to
reflect community sensibilities to the same degree as a jury of
- D. Arbitration actually results in lower awards than trials,
- E. It is precisely this non-neutrality which is the reason that
MCOs push so aggressively for arbitration and patients
4. Arbitration may not decrease conflict in the long run.
- A. Decisions are not reported and are not binding.
- 1. The same issues may be arbitrated again and again in the
absence of binding precedent.
- B. Injunctions, which might prevent repetitive malpractice, are
unavailable to arbitrators as remedies.
- C. The lower awards typically given by arbitrators are less
likely to discourage repetitive malpractice.
5. Self-serving "agents" should not waive constitutional rights
of their "principals" without explicit authorization.
- A. The employer as "agent" of the employee is a legal fiction.
- B. Employers consent to waive employee's right to trial in order
to lower their own insurance costs, a clear conflict of interest.
- C. This breaches the agent's fiduciary duty to act solely in the
best interest of the principal.
- D. Employees should not be bound by these unconsented-to actions of
- E. Waiver of constitutional guarantees is not a 'usual and proper'
function of an agent. If allowed at all it should require
explicit authorization by the principal.
6. Increased Due Process should be given, especially to tort
victims forced into mandatory arbitration by adhesionary contracts.
- A. The drafter of the adhesion contract must bear all costs beyond
those of a judicial trial.
- B. Random assignment of arbitrators without peremptory challenge
is necessary to offset possibility of reemployment bias.
- C. Plaintiffs must be allowed discovery against the MCO.
- D. Venue must be the same as it would be in a trial court.
- E. Breach of the arbitration rules or time limits by the MCO should be
grounds for setting aside the arbitration agreement and
proceeding to trial.
- F. Appeal should be allowed. Arbitrators are certainly not less
likely to commit error than judges.
- G. These rights should be waivable only in voluntary arbitration,
freely bargained for between parties of equal bargaining power.
7. A judicial bias toward arbitration may breed injustice.
- A. Judges gain personal advantage from arbitration.
- B. When salaried, their workload is eased by diverting cases
out of the judicial system.
- C. They may look forward to a comfortable retirement, funded by
acting as private arbitrators.
- D. It is therefore to their financial benefit to insure a steady
stream of cases to arbitration, in spite of the clearcut
detriments to plaintiffs outlined above.
- E. This is called a "strong public policy favoring arbitration".
Please send comments, suggestions and relevant citations to