Remarkably, state appellate courts confirmed only 56.4% of employee wins in arbitration. But when the same courts ruled on employer victories, they confirmed 86.7% of awards. The difference in rates was statistically significant. Similarly, federal appeals courts upheld 85.7% of employer wins. Lower courts behaved like appellate courts. These state courts confirmed only 77.6% of employee wins, while federal district judges enforced 92.7% of these awards.

The author, Prof. Michael LeRoy of the University of Illinois, suggests these two items as a solution: “Judicial review of awards in all courts should be limited to the four explicit FAA standards” and “arbitration losers who incur liability should be required to post judgment bonds if they challenge an award.”

That sure goes against what I’ve perceived to be the CW (specifically, that employees are doing everything they can to get out of arbitration and into the courts, probably so they can get a jury).  Arguably, this article is addressing a problem that arises after that determination has been made.  But, if the courts deem the process or arbitration to be fair and equitable enough not to disturb its awards, except in extremely narrow cases, why would they feel compelled to boot borderline cases out of arbitration in the first place?

The recent line of cases, at least in California, suggests that appellate courts here have lost almost all faith in consumer and employment arbitrations and seem only to suffer them because of the federal enabling legislation.  The flip side of that is a willingness to engage in more searching judicial review of a process which they do not think is fair.

This also forces me to rethink, at least a little of my employer-side arbitroskepticism®.  So, if you can compel the arbitration, and if you prevail, you probably will get your win confirmed (which is something like avoiding an appeal).

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• Last week, we took a look at the Metters case: another arbitration agreement is thrown out by the courts.  A number of BigLaw summaries of this case advised clients to review their arbitration agreements and the procedures related to getting them agreed to.  I disagree.  Even before these recent cases, it was apparent that arbitration agreements were getting rocked by the courts.  What it’s time for is an in depth study of the actual cost savings, forum by forum, versus the risks and the opposing costs (including recurrent legal fees keeping the agreements and procedures up to date).  If someone would publish that, I wouldn’t be surprised to see that, as often as not, it’s of little or no benefit to the employer.

• The Legislature has introduced bills to overturn a couple of last session’s big cases.  AB 2279 would overturn Ragingwire (FEHA does not protect medical marijuana usage).  SB 1192 would reverse Murphy (missed meal and rest period payments are not penalties).  You all are aware of my mixed prognostication record, but I would predict SB 1992 dies in commitee and AB 2279 dies on the Governor’s desk.  I wouldn’t be surprised if the latter ended up as a ballot initiative.

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The Wall Street Journal‘s law blog asks “Is Arbitration The New Litigation?” itself citing to a Financial Times article which highly touts arbitration.  The key quote, to me, is this:

As the incidence of court trial has decreased, some trial lawyers have moved into arbitration,” he says, adding that they have “brought more and more of the tools they used in court into the arbitration process”. That has helped make arbitrations longer, more complex and more costly, leading to a situation where “arbitration is the new litigation”, he says.

First, yes, arbitration can be in fact just as costly, and in some cases may take longer.  You have to compare it to the forum you’re in.  Where I practice, the courts are busy, of course, but you can get a trial in a year.  That is not the case in many, many other forums.  Second, in California, at least, arbitration only really gets you the benefit of no jury, which employers often feel are intrinsically biased against them.  Again, in my opinion, the benefit of that varies by forum and issue.  I do not give a blanket pro-arbitration recommendation, as the FT appears to.

The question I can never seem to find the answer to is simply this: given established law, is it worth it for companies to go to the Supreme Court(s) to defend their arbitration clauses (at least in California)?  I could have told Circuit City they had a snowball’s chance in Gentry.  Clearly, that’s–as they say in the service–above my pay grade–they may have some non-checkers chess strategy I’m not privy to or incapable of understanding, but just in dollars, I don’t see it.

As expanded as the FAA has become over the years, and leaving aside questions about arbitration firms allegedly being afraid to piss off big corporate clients, the fact is that in our Constitutional system, there are limits on what these arbitrations will ever be able to achieve.  That goes double in California.

The English legal system, for example, has been able to adapt to these inefficiencies because the Supremacy of Parliament allows their Constitution to be modified with the times more easily.  I’m not saying we should abandon our Constitution, by any means–but I am saying that if that’s our playing field, there are limits.

Within the scope of employment law, we do have some models.  We have the WCAB, which is probably as universally loathed as the DLSE, but that’s probably because employers have no memory of being sued in civil court for worker injuries.  And, then there is the DLSE.

I would contend that all of these problems–delays in the courts, problems with the administrative agencies–are because of understaffing and underfunding, and neglect by the Legislature.  Employees need their wages; employers don’t want to be targeted by class actions for good faith mistakes–everyone seems to have an interest in efficiency, and arbitration is no longer a panacea for that problem.

With the snow-balling arbitration blow back in full effect, and with no signs of not turning into an avalanche, people should start at least thinking about alternatives.

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