Court Opinion

ID: 5452219
Source: CourtListenerOpinion
Date Created: 2022-01-08 19:13:18.68303+00
Date Added: 2024-06-11T08:32:28.451404
License: Public Domain

KENNARD, J.
I concur in the majority opinion. I write separately to note that this case illustrates yet again the essential role of the courts in ensuring that the arbitration system delivers not only speed and economy but also fundamental fairness.
Unfairness in arbitration sufficiently extreme to justify court intervention can take many forms. As I have previously stated, in my view courts have the power to overturn an arbitrator’s decision if it contains manifest error that causes substantial injustice. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 36-40 [10 Cal.Rptr.2d 183, 832 P.2d 899] (dis. opn. of Kennard, J.).) It is also my view that arbitrators are limited to the same remedies that a court could award under the circumstances of the case, and that a court may overturn an arbitrator’s award of relief that exceeds that limit. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 394-395, 400-401 [36 Cal.Rptr.2d 581, 885 P.2d 994] (dis. opn. of Kennard, J.).)
*987This case illustrates the role that courts play in maintaining the procedural fairness, as well as the substantive fairness, of arbitration proceedings. Procedural manipulations can be used by a party not only to delay and obstruct the proceedings, thereby denying the other party the speed and efficiency that are the arbitration system’s primary justification, but also to affect the possible outcome of the arbitration. As to speed and efficiency, the Kaiser arbitration provision provides for appointment of a neutral arbitrator within a 60-day period. (See maj. opn„ ante, at p. 962, fh. 3.) In reality, a neutral arbitrator was appointed within 60 days in less than 1 percent of Kaiser’s arbitrations; the appointment occurred within 180 days (3 times the contractual time period) in less than 3 percent of Kaiser’s arbitrations. Indeed, the average time for appointment of a neutral arbitrator was 674 days, more than 11 times the contractual time period. The average time for a Kaiser-administered arbitration hearing to begin (not conclude) was 863 days or almost 30 months. (Id. at p. 967.) Although the comparison is not exact, it is instructive to compare the “speed” of Kaiser’s arbitration process to the speed of judicial proceedings in Alameda County Superior Court, where this action was filed. During the 1993-1994 fiscal year that court disposed of 96 percent of its civil cases in less than 24 months. (Judicial Council of Cal., Annual Data Reference, 1993-94 Caseload Data by Individual Courts, table No. 22, p. 52.)
By delaying arbitration in this case until after Wilfredo Engalla died, Kaiser also affected the potential outcome of his malpractice claims. Engalla’s death reduced Kaiser’s potential liability for noneconomic damages to $250,000 from the $500,000 potential liability it would have faced had the claims been arbitrated during Engalla’s life. (See maj. opn., ante, at p. 969.)
As the majority opinion makes clear, courts must be alert to procedural manipulations of arbitration proceedings and should grant appropriate relief when such manipulations occur. As here, such conduct may give rise to claims of fraud in the inducement of the arbitration agreement or claims that the manipulating party has waived its right to enforce the arbitration agreement. Moreover, if such conduct affects the arbitration award, it may form the basis for vacating the award as one “procured by corruption, fraud or other undue means.” (Code Civ. Proc., § 1286.2, subd. (a).)
Finally, it is worth noting that new possibilities for unfairness arise as arbitration ventures beyond the world of merchant-to-merchant disputes in which it was conceived into the world of consumer transactions (like the *988health care agreement in this case) and nonunion employment relationships.1 In such cases, the assumption that the parties have freely chosen arbitration as a dispute resolution mechanism in a process of arm’s-length negotiation may be little more than an illusion. Unlike the traditional model of arbitration agreements negotiated between large commercial firms with equal bargaining power, consumer and employment arbitration agreements are typically “take it or leave it” propositions, contracts of adhesion in which the only choice for the consumer or the employee is to accept arbitration or forego the transaction. And the fact that the business organization imposing the arbitration clause is a repeat player in the arbitration system, while the consumer or employee is not, raises the potential that arbitrators will consciously or unconsciously bias their decisions in favor of an organization or industry that hires them regularly as an arbitrator.
Here, neither plaintiffs’ decedent nor his employer was afforded an opportunity to accept or reject arbitration as the means of resolving disputes. Rather, Kaiser’s standard health care agreement, which included the arbitration requirement, was presented on a “take it or leave it” basis. (See maj. opn., ante, at p. 985.) There was no true bargaining involved here. Moreover, although Kaiser appears to have led its members to believe that Kaiser administered its arbitration system fairly and as a “fiduciary” (id. at p. 962), in reality the opposite may have been true. Kaiser “administered” its arbitration system through its defense attorneys, who appear to have manipulated the process to Kaiser’s advantage. (Id. at pp. 975-976.)
*989Private arbitration may resolve disputes faster and cheaper than judicial proceedings. Private arbitration, however, may also become an instrument of injustice imposed on a “take it or leave it” basis. The courts must distinguish the former from the latter, to ensure that private arbitration systems resolve disputes not only with speed and economy but also with fairness.

 Legislation is pending on both the state and federal levels to address some of the unique problems of arbitration agreements governing consumer and nonunion employment disputes. At the state level, legislation is currently pending that would make arbitrations conducted under standardized employment, health care, and consumer contracts reviewable for legal error that causes a miscarriage of justice; in addition, a party could require the arbitrator in such a case to give a written explanation of the basis for the award. (Sen. Bill No. 19 (1997-1998 Reg. Sess.), approved by Sen., May 8, 1997.)
Also at the state level, legislation has been introduced to prohibit enforcement of predispute arbitration agreements in the case of nonunion employment disputes. (Assem. Bill No. 574 (1997-1998 Reg. Sess.).) At the national level, legislation has been introduced to prohibit enforcement of predispute arbitration agreements in the case of employment discrimination claims arising under federal civil rights laws. (Sen. No. 63, H.R. No. 983, 105th Cong., 1st Sess. (1997).)
I also note that a major provider of arbitration services, the American Arbitration Association, has recently promulgated special rules governing the arbitration of employment disputes. (American Arbitration Association, National Rules for the Resolution of Employment Disputes (eff. June 1, 1996).) The stated purpose of these rules is to “meet. . . due process standards” and “administer cases in accordance with the law.” (Id. at p. 3.) Among other features, the rules provide that in employment disputes the award “shall provide the written reasons for the award unless the parties agree otherwise.” (Id., rule 32(b).) And the chairman of the National Labor Relations Board has recently called for reform of nonunion employment arbitration to ensure that it meets basic criteria of fairness. (Debare, NLRB Chief Gould Backs Rules for Arbitration, S. F. Chronicle (Apr. 10, 1997) p. Cl.)