GSB Vol. 11, No. 1 - #1. A Re-Evaluation of Arbitration In Light of Class Actions and Appeal Rights - Is It Still Worth It?.

• Author: By Christopher P. Galanek and Jennifer B. Dempsey

Georgia Bar Journal

Volume 11.

GSB Vol. 11, No. 1 - #1.

A Re-Evaluation of Arbitration In Light of Class Actions and Appeal Rights - Is It Still Worth It?

Georgia State Bar JournalVol. 11, No. 1, August 2005"A Re-Evaluation of Arbitration In Light of Class Actions and Appeal Rights - Is It Still Worth It?"By Christopher P. Galanek and Jennifer B. DempseyOver the last 20 years, the use of arbitration has increasingly gained in popularity as a means to resolve disputes among parties to commercial transactions. Proponents urge that the advantages of arbitration over traditional litigation in a court are many. The advantages they tout include that arbitrators have more particularized experience to address the parties' needs in a complex dispute than a judge, that the arbitration forum is private and confidential, that the risk of "home-cooking" is reduced, and that the parties have more control over possible remedies than if a judge or jury is making the remedy determination. Most importantly, proponents of arbitration have insisted that arbitration costs less than going to court and leads to a quicker resolution of disputes. Of course, as arbitration has evolved, and as attorneys increasingly use arbitration as a method to resolve disputes, disadvantages have arisen that undermine the conclusion that arbitration costs less and takes less time. Attorneys comfortable with solving disputes in the courtroom often find it difficult to modify their approach to dispute resolution to take full advantage of the cost and time-saving potential of the arbitration forum. Attorneys often find it difficult to restrict the scope of the traditional discovery process, or to forego the discovery process altogether, to minimize time and expense. The natural inclination of many attorneys is to utilize traditional discovery methods to learn whatever they can about their opponent's case before the ultimate adjudication of the matter. Other disadvantages, separate and apart from how attorneys use the arbitration process, have also come to light. Disappointment in the perceived tendency that arbitrators too often "split the baby" when deciding a dispute has led to an increasing dissatisfaction with arbitration by some members of the bar. Other perceived disadvantages include the fact that summary judgment is often not allowed and the limited right of appeal of an arbitrator's award. As attorneys increasingly approach arbitration as merely another forum in which to conduct full-blown litigation, the question of whether arbitration is really less costly and takes less time needs to be evaluated. Increasingly, attorneys are advising their clients simply to avoid using arbitration clauses in contracts because the advantages of arbitration are simply not being realized. In the past few years, several developments have occurred that again call into question the utilization of arbitration as a means of dispute resolution. One development that will make businesses less likely to subject themselves to the uncertainties of arbitration is the recent rise of class-action arbitrations. This development could significantly impact the manner in which Georgia attorneys have approached class actions since the General Assembly first passed the class action statute in 1966. A second development - the Georgia General Assembly's amendment to Georgia's statute regarding appealing an arbitrator's award - may, however, actually make critics of the process more comfortable with arbitration in Georgia. These two developments are discussed further below.

Recent Development - The Threat and Uncertainty of Class- Wide Arbitration

For years, the possibility that a party would be required to defend a class action in an arbitration forum was not a real threat to businesses that used arbitration clauses in their contracts. That has now changed. With a 2003 decision by the United States Supreme Court and the adoption of the American Arbitration Association's (AAA) Supplementary Rules for Class Arbitration, as well as the policies on class action arbitration issued by commercial arbitration companies like JAMS, the possibility of a class action arbitration is real and palpable. Now businesses are faced with arbitrating class-wide disputes that they never contemplated would be addressed in arbitration, by arbitrators wholly unfamiliar with the procedure for adjudicating issues related to class actions. The United States Supreme Court changed the landscape of class-wide arbitration with its decision in Green Tree Financial Corp. v. Bazzle.1 Before the decision in Bazzle, whether a class-wide arbitration could proceed pursuant to an arbitration agreement was a decision for the court. The vast majority of federal courts had determined that where an arbitration agreement did not specifically provide for class-wide arbitration, the parties must not have intended class-wide arbitration to occur, and thus, a class-wide arbitration could not occur. In Bazzle, however, the Supreme Court sharply changed directions and held that where an arbitration agreement is silent on the issue of class-wide arbitration, the question of whether a class arbitration can proceed pursuant to an arbitration agreement is a decision for an arbitrator rather than a court.2 The Bazzle...