By Cliff Palefsky

Make no mistake about it, the fight against mandatory arbitration is the civil rights issue of our time. That is why the practice has been opposed by virtually every civil rights and consumer organization in the country. Every federal agency charged with enforcing the nation's labor and civil rights laws opposes it. The Republican and Democrat Commissioners of the EEOC unanimously issued a policy statement declaring that mandatory arbitration agreements required as a condition of employment not only violate the civil rights laws but make it more difficult for them to fight discrimination in the workplace. Every government commission to consider mandatory arbitration advocates its abolition. And most importantly, the nation's leading professional organizations of arbitrators, the National Academy of Arbitrators and the Society of Professionals in Dispute Resolution (SPIDR), have taken the extraordinary and courageous step of condemning the mandatory arbitration of statutory discrimination claims. The significance of these pronouncements cannot be overstated. The most respected arbitrators in the country, who stand to economically benefit from the practice, have instead chosen to follow their consciences and acknowledge publicly that mandatory arbitration is an inappropriate forum for statutory cases. What is there left to say once the arbitrators themselves issue public resolutions opposing the practice?

The very purpose of the federal civil rights laws was to create rights that could be enforced in federal court because of Congress' concern about the states' unwillingness to protect those rights. The passage of the Civil Rights Act of 1964 was a turning point in our nation's history. Virtually every significant positive change we have achieved in the fight for civil rights since 1964 has come about because of a federal judicial decision enforcing the law. The simple truth is that the civil rights laws have no meaning if you cannot go to court to enforce them but instead are relegated to a private forum where the sometimes untrained decision maker is not even required to know or follow the law.

In 1991 Congress determined that there was a need to strengthen the enforcement provisions of Title VII of the civil rights laws and specifically add the guarantee of a jury trial in federal court to the law enforcement mechanisms. But judges hostile to civil rights claims, in Orwellian fashion, pronounced that the public policy behind the 1991 amendments creating a jury trial right was actually the exact opposite. The policy was, they said, to encourage employers to not only unilaterally deny the new jury trial right to their employees but also to deny them access to court entirely. The public policy in favor of clearing their court dockets, they declared, was more important than the public policy expressed in the civil rights laws and the guarantees expressly set forth in our constitution. And with that legal door jimmied opened, employers seized on their perceived opportunity to repeal the application of the nation's civil rights laws to them---not because it was right or fair--but simply because they could. With the perceived encouragement of courts, intoxicated by the possibility of docket clearing, "do it yourself tort reform" became the rage. As a natural and predictable result of turning an adversarial system over to the stronger party, gross overreaching occurred. Management lawyers publicly urged their clients to mandate arbitration because they would win more often, pay less when they lose, and arbitrators were reluctant to award punitive damages. Management went further. Their mandatory arbitration provisions often limit damages, shorten statutes of limitations, eliminate discovery and permit management to pick the arbitrators themselves and place exorbitant costs on the process to deter claims.

As a result, a fierce struggle for the very integrity of the civil rights laws, involving every segment of the civil rights community, rages on. Fortunately, in recent years, an intellectual and academic consensus has developed condemning mandatory arbitration. It is quite interesting, however, to examine how much this current struggle resembles the old.

The dominant image of the 60's civil rights movement is that of state officials blocking the school house doors, openly contemptuous of federal officials trying to enforce the federal civil rights laws. In the 90's, the barricades were moved to the courthouse doors. The negative attitude that many courts have shown towards EEOC policy and the purposes of the Civil Rights Act was an extremely disheartening flashback to those difficult days for the 60's.

In earlier civil rights struggles, courts employed the legal chimera of "separate but equal" to justify their approval of segregated schools. In the 90's, the courts employed an eerily similar and equally false rationalization--that mandatory arbitration, designed and imposed unilaterally by the employer was "just another forum" and didn't affect substantive rights.

What makes this modern day version of "separate but equal" so troubling is that everyone knows it is completely untrue and that mandatory arbitration is "not just another forum."

It would be malpractice for any attorney not to understand the profound differences between litigation and arbitration and how those differences may affect a particular case. Every method of dispute resolution has strengths and limitations that determine its appropriateness for different kinds of cases. Pretending that meaningful differences do not exist is intellectually dishonest and does a disservice to both arbitration and the judicial system. The truth is that in almost every single material respect, the constitutionally defined features of our civil justice system are the exact opposite of those that define arbitration.

Consider these incontrovertible facts. Our justice system attempts to ensure fairness by making the proceedings open to the public and media. (Remember how we mocked the Soviet Union for its secret judicial proceedings?) Arbitration on the other hand is conducted in private.

Our public judges are carefully selected and must swear an oath to uphold and enforce the law. Arbitrators need not have any legal training or minimum qualifications and are not required to know or follow the law.

Our civil justice system recognizes that full discovery, and especially depositions, is essential to leveling the playing field when there is an imbalance in access to evidence and witnesses. In arbitration, depositions are severely limited in number and scope and are often not permitted for discovery but are permitted only to preserve the testimony of unavailable witnesses. Without depositions, a party who has the burden of proving the other's "state of mind", as in a discrimination case, is at a dramatic disadvantage. It is very difficult to prove "pretext" when you hear the stated reasons for discharge for the first time at the hearing. In addition it is more difficult to force the employer to produce incriminating and important documents.

American citizens pay for a public court system with their tax dollars. Access to a state or federal court involves only a nominal filing fee, while in mandatory arbitration victims are often forced to pay exorbitant amounts of money as a condition of having their rights enforced. The costs for employment arbitration's are sometimes in excess of $20,000. Even at the theoretically not-for-profit American Arbitration Association, the filing fee alone for a discrimination case can be as high as $7000! And that's before the arbitrators charge up to $400 per hour, per arbitrator, in addition to other administrative charges. In the arbitration of the well publicized sex harassment case of Michelle Peacock v. Great Western, the parties were sent an interim bill for $94,000, when they were only three days into the liability phase of the arbitration. Several federal circuits have now held that there is no precedent in American jurisprudence for forcing an American citizen to pay for the cost of a judge to vindicate statutory rights and that the costs of arbitration present an impermissible obstacle to access to justice. Nevertheless, many other courts refuse to even cite these precedents and instead continue to base their decisions on the false assertion that arbitration is a less expensive option than a public court-- even though the only costs savings they can actually identify come from depriving victims of discrimination the right to take the depositions they need to prove their case.

In our public justice system, judges must follow precedent and make all legal rulings on the record. In contrast, while arbitrators need not ever read a published decision nor offer any explanation of their legal rulings or awards. In fact, in the securities industry the arbitrators are specifically told that "they are not strictly bound by case precedent or statutory law" and were trained to not provide any explanations of their awards specifically to frustrate any possibility of judicial review.

After a court proceeding, an incorrect legal interpretation of a statute can be appealed to ensure that the law is properly enforced. In contrast, legal error is no ground for appeal of an arbitration award. Thus an arbitration award that "contains an error of law or fact on the face of the award that results in a substantial injustice" must be confirmed. Yet, many courts still proclaim that you don't lose substantive rights in arbitration when in fact you lose the "ultimate substantive right"--the right to have the law enforced correctly.

Judicial proceedings use well established rules of evidence that require the opportunity to cross examine and prohibit hearsay to ensure the reliability of testimony. In arbitration those rules do not apply. Statutory privacy protections and limitations on the use of improper testimony to intimidate victims of harassment and sex crimes also are not followed in arbitration.

There are other critical differences. We appoint judges for life or a fixed term to make them less subject to political pressures and improper economic incentives while arbitrators are entirely dependent on the satisfaction of the parties for their livelihood. It is no secret in the real world that repeat users of the same arbitrator exploit this advantage. The "repeat user" advantage has been statistically demonstrated in several academic surveys.

And while public judges must adhere to strict ethical standards and avoid even the appearance of a conflict of interest, major arbitration providers now refer to large corporations as "clients" and routinely seek to develop paid consulting relationships with these same companies in order to get all of their arbitration business, forsaking their solemn obligation of neutrality and violating their own unenforced ethical rules against soliciting cases.

But the most fundamental distinction lies in the very different goals of the two systems. The ultimate goal of our public civil justice system is quite simply "justice"--to reach the legally correct result. On the other hand, the ultimate goal of arbitration is "finality", regardless of whether the decision is correct or not.

In truth, our constitutionally defined civil justice system and arbitration couldn't be more different. Our constitutional system, although imperfect, is a true "justice system" with checks and balances and review procedures to ensure that laws are properly enforced, mistakes are corrected and justice is ultimately done. On the other hand, arbitration is merely a "dispute resolution system"--which can in the wrong hands be sometimes only slightly less arbitrary than throwing darts or flipping a coin. That comparison may be unfair to the many intelligent and studious professional arbitrators. But the truth remains, if a less conscientious arbitrator secretly flips a coin to decide a case, that outcome will be confirmed if the award is issued without an explanation, as is frequently the case.

Fortunately, many of the nation's courts, led by the Court of Appeals for the Ninth Circuit, have begun to finally view arbitration as it exists in the real world. They have dispensed with the myth that it is "just another forum" as well as the equally insupportable pronouncement that public policy favors mandatory arbitration. Even the United States Supreme Court, in its unanimous opinion in Wright v. Universal Maritime Services, acknowledged that its Gilmer decision does not resolve the question of whether an agreement to arbitrate civil rights claims must now be voluntary in light of the subsequent passage of the 1991 Amendments.

The extraordinary volume of law review articles criticizing mandatory arbitration, the numerous public pronouncements by the nation' most respected neutrals and exposes by every segment of the American media confirm that the intellectual and academic debate is over. It is clear now that mandatory arbitration of civil rights claims will end. It just isn't clear yet whether the end will come by way of legislation or courts rediscovering the constitution, the civil rights laws and their very reason for being. But ultimately, mandatory arbitration will end because the arbitrators themselves, regarding it as inappropriate, have felt compelled to advocate its abolition. It will end because access to court cannot be coercively denied in a constitutional democracy. It will end because there are simply too many people and too many judges who won't stand by and let the civil rights laws be repealed by the part the laws are intended to regulate.

In the meantime, the civil rights struggle continues. And as in the past, every judge, arbitrator and employer has to search their conscience and make a decision as to which side of history they want to say they were on when their children ask them whether they stood for civil rights or in front of the court house doors.