Arbitration & Mediation

National Law Journal Article Oversells Gloom and Legislation on Arbitration

By Christopher B. Hopkins, Esq.

Is it just us or are we sensing a tide of legal-journalism pieces prophecizing the end to arbitration? Scroll down on this page and you will see our Wall Street Journal article which, by its front page stature, suggests that arbitration-concerns are either (1) something readers are interested in or (2) something the WSJ wants readers to be interested in.

An article then appeared in the National Law Journal (which can be found here on Law.com) which begins with a discussion of an academic study and then turns to pending anti-arbitration federal legislation. Stated more clearly, the second half of the article is essentially a sequel to the WSJ article.

THE STUDY

A law professor at the University of Illinois, Michael LeRoy, began a review of arbitration cases from 1975 - 2007. These cases involve court review of arbitration awards in the employment context. Sounds impressive (over 30 years of cases) but that database has a meager 443 cases. Hmmm, not impressive. Or at least not a stunningly broad sample -- a fact the article completely overlooks. He found that, during this three decade span, the outcome in federal courts is nearly equal: sometimes employers win, sometimes employees win. In the state courts, however, he claims that employers win more often.

The article quotes the professor as laying this in the lap of the FAA -- namely, the federal courts follow the limited review steps while the state courts may have broader state arbitration laws to follow. Then, presumably, a state-court bias towards employers kicks in (we added that last part, which was floated yet unsaid in the article). That is NOT our experience in Florida.

Moreover, without undertaking our own detailed analysis, we think professor LeRoy's premise is correct. There is limited review of arbitration awards under the FAA and a long history of precedent interpreting those rules. State courts, on the other hand, may have more recent arbitration laws and lack a full precedent. Indeed, some state laws may be more liberal (we saw no examples in the article and aren't moved by the argument as it applies here in Florida).

Finally, the true importance of the data is WHY the awards were upheld. Not just where the percentages fall. It may have NOTHING to do with the fact that one party is an employee. Consider that, in nearly all employment cases, the employee is the plaintiff with the burden of proof. One could predict that a victory for the person with the burden could conceiveably be more at risk for reversal. Lacking is the evidence indicating that state courts are ruling for employers simply because they are businesses. At least by the article, that's sheer conjecture.

Bottom line, when you have a database of 400 cases over thirty years, it is hard to pin down a trend, much less a projectable study result. Also, when the study says that employers-win-most-of-the-time-in-state-courts, remember we're talking about 45 cases for the employer vs. 39 cases for employee. For a 30-year nationwide study, is that statistically reliable?

LEGISLATION

The article does bring up the mounting grassroot and trial lawyer revolution against arbitration clauses. And it is worth following since there are two federal bills pending to end "front end" pre-dispute arbitration and jury waivers. We'll continue to track HR 3010 and S. 1782.

Interestingly, the article reports that the pundits do not believe these bills will pass and/or will be vetoed. That said, the same insiders felt that restrictions for nursing homes' use of arbitration clauses may have the oompf to get through. Should that be the case, we believe even the battle over nursing home arbitration clauses is going to be another public flaying of that industry.

Full post as published by Florida Arbitration Law on April 22, 2008 (boomark / email).