Mandatory arbitration

Mandatory arbitration

Arbitration has long been a feature of certain types of litigation.  I’ve seen mandatory arbitration clauses most extensively utilized in securities (client/broker), construction, employment, and general commercial disputes.  In my personal experience – which is shared by many attorneys on both sides of the bar – the oft-touted cost and time saving advantages of arbitration are highly overrated.  Filing and arbitrator fees can run into six figures in some cases, especially when a panel consists of three arbitrators. And that is apart from the attorney fees and expenses. In some cases, the expenses of arbitration prevent a plaintiff from pursuing even a meritorious case.

Apart from the cost issue, Defendants often prefer mandatory arbitration because the arbitrators are drawn from the industry and perceived to be more conservative than a jury in awarding damages.  For that reason, mandatory arbitration clauses are often attacked as unfair, particularly when the parties are in positions of unequal bargaining.

These clauses are becoming increasingly favored by nursing homes trying to limit liability for substandard care. However,nothing would seem more unequal than an elderly patient “negotiating” with  the management of a nursing home. The reason people are admitted to nursing homes is because of failing physical and/or mental health.  Not an ideal circumstance for well informed, arms-length negotiating.

As this article details, Congress has become concerned and a bipartisan bill in the US Senate would curtail the use of such clauses, particularly as a pre-requisite for care.  I imagine this bill has a decent chance of passage, but would likely face a veto from President Bush.

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