What chaos will ensue if legislation to reject arbitration passes?

When the business community urged New York state lawmakers to resolve cases other than in the courts incurring cost, delay and inconvenience to witnesses, the legislature introduced the role of arbitration. Several years later Congress concurred in enacting the Federal Arbitration Act.

Although Congress has done nothing significant to amend the statute, the U.S. Supreme Court has judicially expanded the interpretation of the FAA and increased the scope of its coverage -- the latest instance being on Monday, when the court handed down its decision in Epic Systems Corp. v. Lewis, 2018 DJDAR 4705, finding that neither the savings clause of the FAA nor the National Labor Relations Act prevent the enforcement of agreements to arbitrate claims individually. Over time, the justices have not only resolved arbitration issues but preempted all state courts and legislatures from enacting changes or ignoring the FAA.

The California Legislature enacted arbitration statutes in1960 and continues to endorse arbitration, but now some members of the Legislature are drafting legislation to reject arbitration.

Arbitration critics are cognizant that amending, diluting or ending arbitration in California may suffer reversal under U.S. Supreme Court preemption doctrine. To avoid imparting the language of arbitration in a contract, the proposed legislation will probably amend the Private Attorneys General Act or compose an identical procedural process to allow employees and consumers to bring class actions.

The amended PAGA, or its linguistic equivalent, would also permit plaintiffs to file a complaint alleging claims to include the state of California as a plaintiff with deputized state employees currently permitted under Iskanian v. CLS Transportation, 59 Cal. 4th 348 (2014). Counsel in California courts who prevail in trial under a PAGA complaint must now share a minority percentage of the award with the state.

Iskanian approved PAGA as an implementation of public policy, a factor permitting possible alternatives to arbitration. But avoiding the specific language of arbitration does not preclude the U.S. Supreme Court, based on its prior repeated judicial support of the FAA, from ignoring a rhetorical facade.

A Kentucky Supreme Court had lauded constitutional rights, particularly jury trials, which it said must be respected over arbitration. A Kentucky law approved the agent of a decedent's estate requesting a jury trial despite a will that mandated arbitration for beneficiaries. Kindred Nursing Centers Ltd v. Clark, 137 S. Ct. 1421 (2017). The U.S. Supreme Court reversed the state court, holding constitutional rights cannot overrule selection of arbitration. Other states have attempted to avoid arbitration by characterizing the state statute as a procedural, not substantive, doctrine. One state framed arbitration as not a subject of "public policy."

The state legislation is understood locally as an alternative to avoid arbitration, but in each case the U.S. Supreme Court has reversed.

Arbitration opponents in California enacting collateral legislation, or possibly amending Iskanian, confront another state judicial facade in their decision to avoid arbitration. The California Supreme Court has felt rejection of its arbitration opinions by the U.S. Supreme Court. California employees could not participate in class action arbitration clauses included in their contracts. The state Supreme Court disallowed the rule but the U.S. Supreme Court reversed and specifically identified the California case (Discover Bank). The California Supreme Court in Iskanian subsequently invented application of PAGA, in effect to approve a class action filed by the plaintiff employee. The court also considered the case as a dispute between the state labor board -- not solely the plaintiff -- and the employer.

Arbitration is a forum to resolve disputes but invokes the procedural and substantive law of contracts enforced in civil cases. Confronting another judicially legislated system will unearth novel additional problems emerging with whatever amendments or inventions the legislators provide. For example, the plaintiff coupled with a government staff member as a party and co-counsel disagree on strategy between them; issues of discovery, limited in arbitration length or comparable to civil discovery; use of civil procedure; consequences of multiple opposition parties with and without arbitration clauses; enforcement of venue and choice of law; severance; injunctions; class actions (disliked by the U.S. Supreme Court); plaintiff loses part of the award (if the prevailing party). Who pays attorney fees if plaintiff loses the case?

Ever since the Iskanian decision, the Courts of Appeal, trying to understand a novel judicial theory, have attempted to apply civil law and procedure to an unknown system. What chaos will ensue with another illusory system, which, unlike the arbitration system, is already built on an existing civil law base?