Mandatory Arbitration: The Good, The Bad, and The Ugly

January 31st, 2014 - Bryan L. Page

It is no surprise that the cost of legal services has increased over the years. In particular, it is increasingly expensive to resolve legal disputes through lawsuits in a court of law. One common negative effect of this is people of low and moderate means are unable to afford legal services to help resolve disputes. Another effect, applicable to everyone, is that it can be cost-prohibitive to resolve legal disputes in court when there are relatively small dollar amounts at stake.

To combat this problem, the legal profession and courts are increasingly looking to alternative methods of dispute resolution. One method is arbitration. Arbitration involves the submission of a legal dispute to a neutral third party, the arbitrator, who makes a decision after a hearing at which both parties have an opportunity to present their case, usually in a more informal setting than a full-blown trial in court with a judge. Pursuant to state law, many counties in Washington, including Whatcom County, have adopted a program of mandatory arbitration in cases filed in superior court where the amount in controversy is less than $50,000.

Mandatory arbitration is supposed to serve several purposes. First, arbitration can reduce court congestion in an age where courts are becoming increasingly backlogged. Second, arbitration can expedite the litigation process and help the parties resolve their dispute faster. Third, arbitration can help keep legal costs down by making the dispute resolution process less formal than an expensive trial in court. The rules of evidence are generally more relaxed in an arbitration hearing. Also, discovery is generally limited, such that parties cannot engage in endless and costly interrogatories, requests for documents, and depositions of witnesses.

However, there are also drawbacks to mandatory arbitration. The biggest drawback is that either party can appeal the arbitrator’s decision to the superior court and have the case decided through a full trial in court. If the party requesting the appeal does not improve its position at trial over what it received from the arbitrator’s decision, that party will be required to pay the other side’s attorney fees and costs, which could be quite large. Another drawback is that defendants can find ways to drag out mandatory arbitration cases and make them expensive to prosecute in order to wear down plaintiffs, which is a common litigation strategy in cases litigated in courts. This can subvert the goal of arbitration to keep litigation costs down for both parties.

Fortunately, there is another option to try to avoid these downsides of mandatory arbitration. Cases involving less than $75,000 can be filed in district court, rather than superior court. Resolving legal disputes in district court can provide many of the same benefits as mandatory arbitration. It can often be quicker to get a trial date and resolve the case in district court because these courts generally have smaller case loads than superior courts. Also, the amount of discovery each side can engage in, including interrogatories and depositions, is limited. However, unlike with mandatory arbitration, there is usually no right to appeal to have the case reheard in another full trial. Instead, the case is often subject to more limited appellate review by the appellate court.

Therefore, there can be both pros and cons to resolving a dispute through mandatory arbitration. If the downsides outweigh the benefits, a plaintiff should consider filing the case in district court. Plaintiffs with cases involving relatively small dollar amounts should think carefully about which forum would be best.

Disclaimer: This article and blog are intended to inform the reader of general legal principles applicable to the subject area. They are not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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