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Should You Be Forced Into Arbitration?

In some states, you may be forced into an arbitration agreement without ever knowing.

Arbitration Cartoon

In Madden v. Kaiser Foundation[1], the California Supreme Court held that by definition of implied authority and an agent’s authority to do what is necessary to perform the agreement that “…arbitration is a “proper and usual” means of resolving malpractice disputes, and thus that an agent empowered to negotiate a group medical contract has the implied authority to agree to the inclusion of an arbitration provision.” (at 706). 

I PERSONALLY DISAGREE! The dissenting judge in this case crafted a solid dissent for which I will summarize and add laymen’s insight to it.

First, arbitration is to be held at the same level of a contract which must meet the general elements of contract law including a “meeting of the minds”. Where there is clear evidence that a party (especially a non-signatory) never intended to sign an arbitration agreement, then a judge can rule in favor of that party and not force arbitration (Harvey v. Joyce, 199 F.3d 790 (5th Cir. 2000)). Even though the Madden case was ultimately decided in 1976, two years after the California legislature strengthened the arbitration laws of the state to avoid another case like this, the California Supreme Court chose to ignore the legislation as the case began prior to the legislative fix[2].

As noted by arbitrator Bruce Meyerson, former chair of the American Bar Association’s Section of Dispute Resolution writing in a self published paper found here, more and more courts are giving greater leeway towards compelling arbitration, even to non-direct-signatories. This is a dangerous trend.

The dissenting judge noted that the trial judge did in fact find that there was no notice given to the participants of the health plan concerning arbitration and the waiver of a jury trial if needed. This is important as it is the norm for appellate courts to not discerning facts and to believe the facts of the case are worked out at trial level with the trial judge as the final authority. Appellate courts are to decide how those facts mesh with the law (dissent par. 6 – not numbered).

When the plaintiff enrolled in the plan in 1965, there was no arbitration agreement. It was not placed into the agreement until six years later. Either the plaintiff should have been “grandfathered” or should have had to sign a new agreement as the original agreement was materially affected by placing an arbitration clause unilaterally after the fact (if one does not believe agency indeed took effect.)

Finally, notwithstanding any contradiction to the Federal Arbitration Act, the dissenting judge noted that a right to a trial by jury is guaranteed in the California State Constitution and cannot be waived except by specific authority in which an apparent agent would not have[3].

Although a non-issue in California today due to the 1977 over-riding legislation, this is a case where judicial restraint was not shown.

 

Nathan J. Kerr, MS, PMP is the co-owner and founder of PMCertDC – Washington D.C.’s metro area premier project management boot camp provider. With our primary location in Tysons, Virginia, we hold classes throughout the Washington D.C. metro area and anywhere online.

We are a proud Service-Disabled Veteran-Owned Small Business with a huge impact on the project management world. Visit us at https://pmcertdc.com

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Nathan J. Kerr, MS, PMP teaching PMP to students.

 

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