With an unfortunate name like “compulsory arbitration,” you might think one of our favorite judicial innovations has something to do with school detention, marriage counseling, or prison reform. Despite the name, it’s a major benefit to parties seeking the quick resolution of lawsuits. As a refresher, in a previous article, we talked about the two types of arbitration in Pennsylvania:
- Compulsory, or through the courts
- Contractual, or outside the courts
We covered contractual arbitration first because it’s an important component of drafting a contract for many entrepreneurs and small businesses. In the interest of completion, we wanted to talk about the other type of arbitration—that which is codified in law. Let’s say you file a lawsuit seeking an amount which falls within the “arbitration limits” of your particular jurisdiction. If the damages in your case don’t exceed the limit, the matter first goes to compulsory arbitration. For example, Philadelphia has an arbitration limit of $50,000.
Reason for Existence
How is this legal, you say? The Pennsylvania Code contains provisions authorizing each of the Judicial Districts in Pennsylvania to adopt rules calling for compulsory arbitration of civil cases at 42 Pa.C.S. § 7361, although the code is merely an enabling statute, meaning that the Supreme Court of Pennsylvania is tasked with adopting their own local rules.
The Sixth Amendment of the Constitution guarantees the right to trial by jury, but only in federal court. This gives the states some latitude in how they handle judicial proceedings. The Supreme Court of Pennsylvania has ruled that the compulsory arbitration process in Pennsylvania is constitutional. See Smith, 381 Pa. 223 (1955). Moreover, there is one key provision of compulsory arbitration to assuage critics that it does not violate the Sixth Amendment (remember, this isn’t a trial): it comes with an automatic right of any dissatisfied party to appeal the arbitration result, thus triggering a trial where it will be assigned to a judge (and if requested, a jury). Think of compulsory arbitration as “trial lite” where you are encouraged by the state to resolve your issue quickly and move on with your life. However, if you believe the arbitration award was unfair, or if you’re a sucker for punishment, you can still exercise your Constitutional rights in demanding a trial, because this is… America.
What are the Benefits?
Overall, compulsory arbitration is widely regarded as a beneficial innovation of the judicial branch because it improves speed, efficiency, and access to justice. The non-binding nature of it makes it an easy way to resolve relatively small disputes.
- Save Time. Procedures are streamlined in compulsory arbitration. The matter will be instantly assigned a trial date within four months after the filing of a complaint. Compare that to the timeline for cases on the court’s general docket, which can take a year or longer to reach trial.
- Convenience. Arbitration is a more relaxed setting than a trial. Although it takes place in the courthouse, the overall manner and nature of the experience is easier on participants, mentally.
- Relaxed Evidentiary Rules. One of the things that makes trials so expensive is that witnesses must be called (and paid) to present expert testimony, including the verification of documents. Failing to do so invokes an objection of hearsay by opposing counsel. Rule 1305 relaxes the evidentiary standard to allow parties to present hearsay evidence in documentary form which would ordinarily require witness testimony. For example, you can introduce invoices, business records, medical records, lost earnings documentation, damage estimates, and expert testimony in the form of written reports.
- You Get a Mulligan. Don’t like the result? Want to start over? Having a bad hair day? If you don’t agree with the result, you get a “do over” so long as you pay the minimal fee. Arbitration parties may appeal within thirty days, which triggers a trial de novo.
- Avoiding Small Claims. For cases involving claims of $12,000 or less, filing your case on the arbitration docket avoids the challenge of filing in small claims court from the outset. This is because in small claims, either party can appeal to the arbitration docket for any reason.