Some thoughts on arbitration in the wake of AB 51

On Dec. 6, a coalition of business trade associations lead by the United States Chamber of Commerce and the California Chamber of Commerce filed a complaint for declaratory and injunctive relief in the U.S. District Court for the Eastern District of California alleging that California's recently enacted Assembly Bill 51, banning certain arbitration agreements, "conflicts with federal law and is, therefore preempted under the Supremacy Clause of the United States Constitution."

This lawsuit comes as no surprise. In fact, former Gov. Jerry Brown vetoed the same legislation in large part because he understood that it was likely preempted by the Federal Arbitration Act. Nevertheless, Gov. Gavin Newsom felt no similar compunction as he continues to sign statute after statute backed by unions and the plaintiff's bar. As usual, this column acknowledges my explicit (not implicit) and conscious (not unconscious), bias against AB 51 because I make my living as an arbitrator. Most of the other recently signed legislation, although abhorred by California employers, is actually quite beneficial to those of us who make our living dealing with labor and employment disputes.

I believe AB 51 will not survive the challenge. Nor do I think it should. In the wake of this challenge, I have reflected on the benefits of arbitration and how advocates can provide real benefit to clients by through effective arbitration advocacy. I hope practitioners find my suggestions useful.

The first thing to recognize about arbitration is that it is not civil litigation. Arbitration should be a faster, more efficient, and less costly way to resolve disputes. Unlike litigation, arbitration provides the parties with an opportunity to exercise significant control over the entire proceeding -- from the expedited exchange of information to the prompt resolution of discovery disputes, to the determination of customized procedures for the hearing on the merits. The parties can choose arbitrators who have specialized knowledge and expertise in the substantive area of the dispute. As a result, arbitrators can decide prehearing matters quickly. In addition, arbitrators have flexibility in working with the parties to determine the location of the arbitration hearing and the hours during which the hearing will be held. If it is more convenient for counsel and the witnesses, hearings can be conducted in the evening or during the weekend

Too often advocates for both employees and employers treat arbitration as just another civil matter but in a different forum. Why does this matter? Both California and Federal Civil Procedure rules are cumbersome, require too much useless paperwork, and take too long. Take discovery as an example. This year, I have resolved many discovery issues in employment cases through the use of email "joint position statements" which narrow the issues and permit resolution in a matter of a few hours or so. Most of the time, the parties stipulate to my tentative ruling on discovery issues agreeing to my proposed resolution without a hearing. This is in marked contrast to effort involved to get a discovery dispute resolved in court.

I actively discourage the parties from using interrogatories and requests for admissions in arbitration. Most of the time the information desired can be obtained by simply asking for it. Similarly, there is no need to prepare formal demands for the production of documents. The American Arbitration Association's Discovery Protocols for employment cases combined with a requirement that the parties exchange all relevant documents usually suffices. Again, any disputes in this regard can usually be resolved with a short telephone call. In civil employment litigation, written discovery has degenerated into a cudgel each party uses to bludgeon the other. Obtaining information necessary to try the case is, most of the time, not the primary objective of discovery requests. Arbitration markedly reduces discovery abuse and inefficiency.

Motions for summary judgment are the bane of existence for many plaintiff's lawyers and revenue generators for the defense bar. Given recent legislation, the chance of completely disposing of most employment cases on summary judgment keeps getting lower. Yet, defense lawyers, fearful of runaway juries, continue to file them. Arbitration should eliminate the knee-jerk reaction of defense lawyers to spend money on these motions which rarely dispose of an entire case. American Arbitration Association Employment Rule 27 affords the arbitrator discretion about whether to entertain a motion or not. The arbitration must find that the moving party has shown "substantial cause that the motion is likely to succeed and dispose of or narrow the issues in the case."

Before entertaining such a motion, I require the parties to meet and confer. If a party still wants to file a summary judgment motion, I require that party to file what one attorney called a "mini-motion" demonstrating the "substantial cause" required by the rule. Although I have, on rare occasions allowed and even granted dispositive motions, I believe it's generally a waste of time for employers to file them in arbitration. If there really is no dispute issue of fact, it takes far less time to present witness testimony at a hearing than it does to craft declarations, separate statements and memoranda of points and authorities.

That brings me to my next suggestion. Advocates should not prepare for an arbitration hearing as if the matter were being tried to a jury (or even a judge). Arbitration is far less formal. The rules of evidence do not strictly apply. Most labor and employment arbitrators are former practitioners in the field and know the law. Attorneys should refine their presentations according. For example, I just conducted a hearing where the parties gave me three huge binders full of exhibits about 100 of which the parties stipulated would be admitted. As the hearing was nearing conclusion, I mentioned to the attorneys that only about 15 exhibits had been mentioned during the testimony. At my insistence, the attorneys met and decided that only about 20 of the original exhibits would actually become part of the record. Think of the trees that could have been saved had the parties actually thought about what exhibits were necessary.

On a related note, I order the parties to an arbitration to meet and confer and stipulate to the admission of as many exhibits as possible. The amount of time saved at hearing if this is done is immeasurable. At the hearings over which I preside, hardly any time is spent laying foundation for the admission of documents that everyone knows are going to be admitted. And, we can dispense with the inevitable request to a witness to "please read paragraph 6 of Exhibit 135 into the record." As I told the lawyer at last week's hearing, the document is in evidence, what possible reason could you have for asking this witness to read the document out loud?

Arbitration lends itself to customization if counsel are willing to work together. In contrast, codified rules of civil procedure are generalized and rarely designed for efficiency. Counsel should be proactive during the initial pre-hearing conference, suggesting to the arbitrator specific procedures tailored to the parties and issues involved.

When all is said and done, it is easy to understand the opposition to compelled arbitration of employment disputes. Although the process should allow employees to have their cases heard more quickly, it is not necessarily to the employee's advantage to have the case heard by an expert in employment law as opposed to a jury. It is not necessarily an advantage to the employee to have an arbitrator instead of a jury awarding damages. It is not necessarily to the advantage of the employee to have her case decided by someone who may have decided other cases brought against the same employer.

Still, it seems pretty clear that banning compulsory, pre-dispute arbitration clauses conflicts with the Federal Arbitration Act. Given that virtually all employment cases contain some claim on which employees (but rarely employers) can recover attorneys' fees, arbitrating these cases still affords employees and their counsel a fair procedure through which they can be properly compensated for proven violations of California's myriad employee protection laws. 