Opinion ID: 1297060
Heading Depth: 3
Heading Rank: 2

Heading: Voluntary vs. Compulsory Arbitration

Text: Normally, arbitration is a process in which parties voluntarily contract to select an impartial third personan arbitratorto whom they refer their dispute for a decision based on evidence and arguments before the arbitration tribunal, in order to obtain a speedy and inexpensive final resolution of the dispute. 1 Martin Domke & Gabriel M. Wilner, Domke on Commercial Arbitration § 1:01 (rev. ed. 1993); see also Fernandez v. Farmers Ins. Co., 115 N.M. 622, 625, 857 P.2d 22, 25 (1993). Judicial review of voluntary, consensual arbitration is generally limited to allegations of fraud, partiality, misconduct, excess of powers, or technical problems in making the award, see NMSA 1978, §§ 44-7-12 and -13 (provisions governing review under Uniform Arbitration Act); the district court does not have the authority to review arbitration awards for errors as to the law or the facts, Fernandez, 115 N.M. at 625-26, 857 P.2d at 25-26. The limited scope of judicial review of arbitration awards is appropriate when the parties have voluntarily bargained for the decision of an arbitrator and, presumably, have assumed the risks of and waived objections to that decision. American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 530 A.2d 171, 176 (1987). Arguably, Harrell voluntarily consented to submit his employment discharge grievance to binding arbitration. His contract of employment with the Carlsbad Board of Education contained a clause stating: This contract may be canceled by the Board for cause, including unsatisfactory work performance, incompetency, insubordination, physical or mental inability to perform the required duties or for any other good and just cause, provided, that any such cancellation may be effected only in accordance with the New Mexico Statutes and any applicable rules and regulations of the State and Local Boards of Education. The terms of Harrell's contract thus implicitly provided that it could be canceled in accordance with the applicable New Mexico statute, Section 22-10-17.1, which requires that any appeal from the local board's decision be submitted to final and binding arbitration. When Harrell agreed to the terms of the contract, he arguably agreed to the arbitration procedure contained in the statute. See, e.g., Paine, Webber, Jackson & Curtis, Inc. v. Chase Manhattan Bank, N.A., 728 F.2d 577, 580 (2d Cir.1984) (holding membership in New York Stock Exchange, with concomitant obligation to be bound by arbitration provisions of its constitution and rules, sufficient to constitute consent to arbitration of covered disputes, whether or not arbitration provisions are specifically incorporated in contract). We hold, however, that Harrell's putative agreement to arbitrate was in reality a nonconsensual submission to a statutorily imposed requirement of mandatory arbitration. The term of his employment agreement subjecting him to arbitration was not negotiable, see Wilson v. Security Ins. Group, 199 Conn. 618, 509 A.2d 467, 471 (1986) (legislative interference with contractual freedom, restricting party's choice of judicial forum, renders arbitration compulsory rather than voluntary); and Harrell, as the weaker party in the transaction, had no power to alter the employment relationship, see Moore v. Fragatos, 116 Mich.App. 179, 321 N.W.2d 781, 785 (Ct.1982) (party in civil proceeding seeking to assert waiver of constitutional right of access to courts must establish that waiver was made knowingly, voluntarily, and intelligently). When arbitration is statutorily mandated as the sole method for resolution of a particular dispute, the arbitration is not consensual even if a provision for such arbitration is incorporated into a contract. Arbitration required by statute is compulsory; arbitration freely entered into by contract is voluntary. Bodner v. United Servs. Auto. Ass'n, 222 Conn. 480, 610 A.2d 1212, 1216-17 (1992); Nelsen v. Colleary, 152 Misc.2d 81, 574 N.Y.S.2d 912, 914 (App.Div. 1991). Because of the compulsory aspect of the procedure, the person whom the statute calls an independent arbitrator is more like an independent hearing officer resolving disputes within an administrative agency than a true arbitrator consensually chosen by the parties to an agreement. The commentary to the Restatement of Judgments notes this distinction: Arbitration is a method of determining legal disputes that is authorized by contract between the parties to the dispute. There are forms of dispute-resolution procedure that are called arbitration but which are made obligatory by law instead of being prescribed by contract, for example, some proceedings in no fault insurance schemes. These procedures might perhaps better be regarded as adjudication before specialized tribunals. See § 83 [(discussing preclusive effect of adjudicative determination by administrative tribunal)]. Restatement (Second) of Judgments § 84 cmt. a (1982) (discussing preclusive effect of arbitration award). The similarity between compulsory arbitration and an administrative adjudication thus makes caselaw on the constitutional validity of administrative adjudications instructive in assessing the validity of Section 22-10-17.1. As noted by the New York Court of Appeals, [T]he device of arbitration is a substitute for a determination of the dispute by an administrative or regulatory agency. As a substitute device, however, its objective may not be accomplished under lower constitutional standards than would be required of an administrative or regulatory agency. Mount St. Mary's Hosp. v. Catherwood, 26 N.Y.2d 493, 311 N.Y.S.2d 863, 260 N.E.2d 508, 516 (1970).