To Arbitrate or Litigate Tort Claims? That is the Question

Chances are if you were recently hired as an employee or visited a doctor’s office that you were asked to a sign a document (that you may not have read) in which you consented to submit to arbitration rather than go to court if you had any grievances with the employer or the doctor. Such a choice necessarily begs the question whether that was a good idea for either the potential plaintiff, or defendant, both or neither.

Before answering that question, it might help to understand the lay of the arbitration/judicial landscape in California (and generally). Because of a steady diet of television legal dramas, most people are at least vaguely familiar with traditional court. In civil proceedings, juries or appointed or elected judges render verdicts that determine the outcome of cases. They are tried in courtrooms of many different shapes and sizes, and particularly since the pandemic, may also be conducted remotely by virtual interface. Courts are primarily funded by taxpayer dollars, with the collection of fees assessed to those who are litigating as partial defraying of the costs. Judges likewise are paid from public funds. The applied rules are either passed by the legislature, the court system (as rules of court) with some additional local rules that may be applied by a particular court or a judge. However, for the most part, the rules are fairly uniform because they are based on applicable law.

Traditionally, arbitration is privately funded with private judges, paid for with some exceptions by the parties themselves. The cost of an arbitrator varies widely depending on the arbitrator’s experience, organization with whom he is affiliated and other factors.

Most formal arbitration agreements require arbitrators to have at least 5 years of experience in dealing with matters in the particular practice areas in which they serve as arbitrators. This means that unlike civil judges who could be hearing a matter in which they had no prior practice, an arbitrator will have related experience in the type of matter the arbitrator is to hear. Retired judges frequently become arbitrators.

Arbitration offers parties a greater flexibility in the rules applied to the arbitration and often offers a quicker timeline for a particular matter to be arbitrated than a court can provide for a jury or a judge (AKA bench) trial. Because of this, many people who do both arbitrations and civil trials find arbitration to feel (and often be) less formal than civil court. Unlike a jury or judge verdict, some arbitrations are nonbinding, which means that the parties can choose to accept the arbitrator’s decision or not. But for arbitrations involving formal agreements, they almost always require binding arbitration in lieu of litigating the merits of the case in court.

Unlike courts, which have inherent power to enforce their own decisions, arbitrators have no such power. Someone trying to enforce an arbitration decision must still go to court to enforce any arbitration award. Courts, by law, must accept the arbitrator’s decision, unless the court finds that there was an error so egregious as to constitute misconduct or so profound as to render the process unfair. This is a high bar to hurdle.

In the 2019 case Heimlich v. Shivji, the California Supreme Court determined that an arbitrator had gotten the law wrong in his belief on his jurisdictional limitations rendering a final arbitration decision but still refused to overturn the arbitrator’s decision. The Court explained, “When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators, like judges, are fallible.”

So are mandatory arbitrations better or worse in tort cases? The answer, like almost everything, is it depends. The common thinking for the usual tort defendants is that arbitration is better because businesses, which are often defendants, like the greater predictability of an arbitration over a civil jury trial, where a jury could give what the defendant considers to be an unjustly large result. Unlike a jury, arbitrators are less likely to be overly persuaded by emotional or passionate arguments that nevertheless lack legal substance and arbitrators generally have a reputation that they are more like Solomon (split the baby) than the Queen of Hearts (“Off with their heads!”). These tort defendants prefer eliminating the risk of a disproportionate loss to the possibility of getting a disproportionate win.

However, Plaintiffs who prefer civil court over arbitrations often get stuck in slow moving courtrooms where their claims may not be tried for years, causing tort plaintiffs to ultimately settle their claims with defendants for far less than they may have gotten from an arbitrator just to be done with it all. Employers that require their employees to enter into arbitration agreements are also required by law to pay the employee’s share of the arbitration fees. In the 2022 case of Espinoza v. Superior Court, the Court of Appeal held unequivocally thatCode of Civil Procedure section 1281.97 mandates that if an employer fails to pay the required arbitration fees within 30 days after the due date, the employer waives its right to compel arbitration in California and can be sued by the employee in court anyway.

The takeaway is that for tort defendants and tort plaintiffs alike, there is no sure thing, but you can still make a choice to enter those mandatory arbitration agreements (or not) with your eyes wide open.