Arbitration
| Author | Jeffrey Wilson |
| Pages | 533-540 |
Page 533
Arbitration refers to one of several methods, collectively referred to as "alternative dispute resolution" (ADR), for resolving legal disputes other than through a formal court system. Arbitration is very similar to a trial in court, except that the claims and defenses are presented to a privately-retained neutral party ("arbitrator" or "arbiter") rather than a judge or jury. After listening to summary arguments and considering all the evidence presented in a dispute, an arbitrator renders a decision tantamount to a court decision or judgment.
Since it is intended to substitute for a trial, formal arbitration is generally as binding as a court adjudication. Therefore, like it or not, a decision of an arbitrator may be appealed only under very narrow circumstances and criteria. (In fact, the arbitration agreement may designate that the decision is final and binding and cannot be appealed.) However, some forms of arbitration may be expressly designated as "non-binding." In those circumstances, one may accept or reject the arbitration decision and continue with litigation in the courts.
Arbitration has become a preferred alternative favored by both courts and parties for resolving disputes. All 50 states acknowledge some form of arbitration for the resolution of certain disputes. A majority of states (48 as of 2002, excepting Georgia and Mississippi) have adopted the Uniform Arbitration Act (UAA) and/or its revised version, published in 2000, or substantially similar legislation. Washington, D. C. and Puerto Rico also have adopted versions of the Act.
The use of arbitration has greatly expanded in recent years, because of the fast resolution of disputes, and the relative consistency and near-uniformity in procedural requirements (thanks to the UAA). The arbitration process also affords the parties a degree of privacy for sensitive or personal matters. Health care providers and insurance companies almost universally favor arbitrations because of the opportunity to avoid the publicity of court trials and jury verdicts.
Voluntary arbitration refers to an agreement entered into by two or more parties who choose to arbitrate a matter rather than litigate the matter in court. The agreement is a binding contract, and if a dispute later develops, one cannot choose to ignore the arbitration agreement and file suit instead.
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But arbitration is not "compulsory." It simply means that persons have voluntarily agreed in advance to arbitrate any future disputes and cannot back out of that agreement once a dispute arises. Failure to abide with "contractual arbitration" as agreed constitutes a breach of the agreement. If an individual has entered into such an agreement and later decides to file suit instead of arbitrating the dispute, the other person or party may take that individual to court to compel arbitration.
One of the most common circumstances where this situation arises is in the health care and insurance industries. When individuals enter a hospital for treatment or care, or fill out "new patient" forms for a physician, they may be asked to sign a document in which they agree to arbitrate any dispute which may arise. If they later attempt to sue the doctor or hospital for malpractice or a billing dispute, the agreement they signed will be presented to the court and their lawsuit will be dismissed and/or the court will order them to arbitrate the matter. The real danger in having their case dismissed is that the time limit for filing a dispute in arbitration may have expired while they were attempting to file a lawsuit in court (in some jurisdictions, a court may "stop the clock" to provide them with enough time to dismiss their court case and file it in arbitration). The lesson to learn is that they should carefully read all documents their health care provider may present to them prior to treatment or care, and they need to be always be certain to retain a copy for their records.
In many states, laws prohibit health care providers from refusing to treat individuals if they will not sign a voluntary arbitration agreement. On the other hand, only in rare circumstances will a court permit them to "set aside" a signed agreement to arbitrate and allow them to file suit instead. Usually, they will have to prove to the court that they did not sign the arbitration agreement "voluntarily." For example, there is some legal precedent for allowing agreements with health care providers to be set aside (making them "voidable") when evidence shows that they were signed while under extreme duress or in pain, semi-conscious, etc. In even more rare circumstances, a court may find an agreement to arbitrate "unconscionable" as against public policy and determine it to be null and void.
It is common practice for insurance policies (e.g., automobile, home, health, etc.) to contain language that commits an insured to the use of arbitration in the event of a dispute with the insurer. Many insureds do not realize that such language is contained in the lengthy policy language at the time they apply for insurance coverage. It often remains unknown and unrealized until a dispute arises and the insured attempts to sue his or her insurance provider. In most insurance policies, the agreement to arbitrate is not a separate document, but rather a statement contained in the policy, such as, "You agree to arbitrate any dispute relating to …" Individuals who sign the application for insurance coverage and have a policy issued to them have agreed to those terms.
On the other hand, "compulsory arbitration" is generally the result of express statute or regulation that mandates the arbitration of certain matters. The most common of these is the mandatory arbitration of labor disputes. If individuals are members of a union, the bargaining agreement for their bargaining unit will most likely contain provisions for the arbitration of all disputes.
One of the most compelling reasons for mandating the arbitration of certain matters is that such matters tend to be very complex, specialized, or too time-consuming for a general jury trial. For example, a dispute over a provision in the Internal Revenue Code may be technically complicated. Instead of a jury trial, arbitration will provide the opportunity for appointment of a neutral arbitrator or panel of arbiters who may be knowledgeable and experienced in tax matters and can more readily understand the arguments presented. The "State Provisions" Section below summarizes key areas where states have mandated compulsory arbitration of certain matters.
If the subject matter of a particular dispute falls within the scope of subjects that the parties agreed in advance to arbitrate, then the particular dispute is "arbitrable." However, many disputes involve multiple issues, not all of which were contemplated when the arbitration agreement was executed. For example, a claim may state an arbitrable issue of wrongful discharge from employment. But the defense may raise an issue of untimely filing of the claim or some other procedural error or fatal flaw on the part of the complainant. Who decides that?
Most federal and state appellate court decisions have concluded that the only proper inquiry that a court should make, on a motion to compel arbitration, is (1) whether there exists a valid agreement to arbitrate between the parties, and (2) whether the
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agreement covers the dispute at hand. All other issues, particularly defenses such as untimeliness, collateral estoppel, res judicata, etc., should properly be decided by the arbitrator.
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