Legislators Should Support Arbitration, Not Cripple It

By: Andy Kotner

Some people just refuse to accept reality. They’re easy to spot, they’re using a member of the legislature who continues to introduce dangerous and self-serving legislation year after year even though it has no hope of passing, or withstanding a constitutional challenge. A case in point is Sen. John Burton’s SB 1538, which is a thinly veiled attempt to abolish arbitration agreements in employment contracts.

Even though Governor Davis, the U.S. Supreme Court, and even a lawyer for the ACLU have upheld arbitration as a faster and less expensive alternative to litigation, Senator Burton (D – San Francisco) and his friends in the personal injury bar are frivolously wasting the Legislature’s time and the taxpayer’s money pushing this frivolous legislation.

For several reasons, this "fool’s errand" should be dropped immediately:

First, under the Federal Arbitration Act, SB 1538 is dead on arrival. This Act preempts state statutes that discriminate against arbitration agreements. The U.S. Supreme Court has interpreted the Federal Arbitration Act to favor arbitration on numerous occasions. Most recently, in March 2001, the court in Circuit City Stores, Inc. v Adams specifically held that arbitration clauses in employment contracts are enforceable.

Writing for the majority, Justice Anthony Kennedy said, "Arbitration Agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation, which often involves smaller sums of money than disputes concerning commercial contracts."

Next, according to a lawyer with the American Civil Liberties Union (ACLU), arbitration is both faster and less costly than litigation. ACLU lawyer Lewis L. Maltby, in his article "Private Justice: Employment Arbitration and Civil Rights" (published in Arbitration Now, a publication of the American Bar Association) states: "Litigation is estimated as taking 2 1/2 years on average to resolve while the average arbitration case is resolved in 8.6 months."

Maltby adds that fees for employment arbitration can be as low as $3,000 while fees to litigate a title VII discrimination case will be at least $10,000 if the case is resolved without a trial. If a trial is involved, Maltby says the cost increases to at least $50,000.

Little wonder the personal injury lawyers are so opposed to arbitration. It puts more money in the client’s pockets instead of their own.

Third, Governor Davis is unlikely to sign a bill that eliminates arbitration as an option for resolving disputes. Not just because of the federal law preemption, but because his own views on arbitration are well documented.

In vetoing legislation that would have banned arbitration agreements in tenant contracts, Governor Davis wrote, "I believe that mediation and arbitration clauses serve a vital purpose in that alternative dispute resolution is an efficient and effective forum for resolving disputes…"

In authoring this legislation, Mr. Burton is clearly putting the special interests of personal injury above the greater public interest, and he’s at odds with common sense. Does anyone believe that eliminating arbitration and triggering more employment lawsuits will actually create more jobs in California? Has anyone, other than personal injury lawyers and the candidates they fund, ever benefited from legislation that only makes the lawyers wealthier?

As Mark Twain said, "I was only poor twice, once when I lost a lawsuit, and once when I won one." While conflicts are inevitable in our society, litigation should be a measure of last resort, as it does little to compensate legitimate victims. Research has shown that less than 25 percent of every litigation dollar ever goes to compensate victims, the rest goes to lawyers’ fees and court costs.

Add to this the fact that our courts are tremendously overburdened, to the detriment of those who need swift justice, and it’s clear our state government should be working to encourage arbitration instead of prohibiting it.

There are 33 million Californians looking to their elected leaders for good public policy to help the state emerge from its financial and energy morass. Yet Mr. Burton has opted to cater to a special interest lobby of 5,000 personal injury lawyers and one more example in their litany of self-serving, anti-consumer pet projects.

Senator Burton should scrape SB 1538 off the bottom of his shoe and tell the personal injury lawyers he’s going to focus his efforts on resolving the real problems facing California.