Health Administration Responsibility Project

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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' compensation.
  • 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 representative citizens.
• D. Arbitration actually results in lower awards than trials, on average
• E. It is precisely this non-neutrality which is the reason that MCOs push so aggressively for arbitration and patients resist it.

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 their "agent".
• 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".