Thursday, June 1, 2017

Justice Hart blasts use of arbitration to resolve disputes instead of courts

Posted By on Thu, Jun 1, 2017 at 10:08 AM

JUSTICE HART: No fan of dispute arbitration.
  • JUSTICE HART: No fan of dispute arbitration.
The Arkansas Supreme Court made no new law today in a decision over a dispute resolved by arbitration, but the case prompted a ringing dissent from Justice Josephine Linker Hart on the apparent preference in law for arbitration over judicial resolution.

Hart's solo dissent, though it had no impact in this or future cases as precedent, said arbitration is "eroding the cornerstone of our democracy — judicial process."

The case was brought by Joshua Kilgore, seeking to overturn an arbitration award and lower court rulings upholding it in a dispute with Robert Mullenax, his former partner in a dental care management company. Kilgore left the company after signing a non-compete and non-disparagement agreement that said any future disputes would go to arbitration. He soon entered a business in Tennessee that competed with Mullenax. Mullenax filed an arbitration claim to enforce the non-compete. Kilgore then complained to the state Insurance Department that Mullenax was engaged in a kickback scheme. The complaint was held to be unfounded. The arbitrator said that Kilgore made the claim to get an edge in defending against the non-compete claim. Mullenax was awarded $7,000 for his own defense expenses plus another $135,000 for attorney fees, expert witness fees and expenses.

Kilgore argued in court that the arbitrator lacked jurisdiction and that his statements to the Insurance Department were protected in the interest of public policy. Both Circuit Judge Chris Piazza and the Court of Appeals disagreed. Today, the Supreme Court upheld their rulings.  It said, in addition to agreeing the arbitrator had jurisdiction, courts "must" uphold an arbitrator unless one of four specific grounds to vacate an award are met, such as corruption or misconduct.  Kilgore did not provide such a justification. The court didn't directly rule on the question of whether Kilgore was due protection from the state whistleblower law, but said this would have been a "thin" argument because the arbitrator had found Kilgore was motivated by self-interest, not public protection.

Justice Hart wrote a separate opinion to criticize the "oppression" of alternative dispute resolution, or arbitration, "inexplicably a favorite of Congress and the U.S. Supreme Court."
She said the Arkansas Supreme Court had echoed that view in "finest ovine fashion."

Hart disputed the notion that arbitration is less expensive and more expedient. It should be viewed as "anathema" by every member of the judiciary, she wrote.

First, the case before us should forever dispel the notion that arbitration is "less expensive." ln this $7,000 case, the petitioner engendered $135,000 in legal fees, which were shifted to the respondent. Under Arkansas law, each side would bear its own fees in a tort case. It should also be noted that the arbitrator the petitioner selected billed at $350 per hour. In circuit court, an entire case would be heard for only the filing fee, currently just over $200.

Second, according to the majority, the arbitrator's decision ... is all but immune from judicial review. ...  While the grounds for overturning an arbitrator's decision are limited, they are present here. In this case, the arbitrator completely ignored the General Assembly's clearly stated public policy favoring whistleblowers. The majority has not justified why it has decided to immunize the arbitrator's decision to ignore Arkansas law; certainly a circuit court does not enjoy the same latitude.

Finally, the results achieved by alternative dispute resolution, whether inexpensive or not, speedy or not, or flexible or not, are not guided by the same ethos as our courts of law, which is the concept of justice. If alternative dispute resolution was not skewed in favor of the powerful, it would not be a fixture of the ubiquitous adhesion contracts that we are confronted with on a daily basis. We are losing one of the cornerstones of our democracy —courts of law. 

She then quoted from Harper Lee's "To Kill a Mockingbird," a passage about courts as the "great leveler" in society, a place where despite faults, all people are created equal.

Hart closed:

Forgoing justice in favor of expediency — for some — is too high a price to pay.
Hart's full dissent.

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