Many of CBL's clients favor binding arbitration of disputes, and since CBL's clients are very wise and always right, he tries to see to it that the clients who want and have a right to arbitration get it. But as he has expressed before, CBL is not without his doubts. Most civil cases involve two key elements: liability and damages. In a case where the trier of fact finds liability and has to decide damages, here are some choices: Federal Court, where the plaintiff has to convince a unanimous jury of six of the amount; State court, where nine out of twelve jurors have to be convinced; Bench trial, where one person decides, but at least there are rights to appeal; and binding arbitration, where one person decides, and when it's over, it's over. Runaway arbitrator? Too bad -- there's very little opportunity to appeal.
Let's consider, for example, the case of Shahinian v. Cedars-Sinai Medical Center (Second Dist., April 27, 2011) ___Cal.App.4th ___ (B223366). Dr. Shahinian was a big deal brain surgeon. He had a contract with the hospital requiring binding arbitration of disputes. He started griping that the hospital wasn't adequately cleaning or sterilizing his surgical instruments, so they had bioburden on them. (His definition of bioburden was quite a bit grosser than the medical dictionary's -- don't read Footnote 1 of the opinion unless you want to know.) The hospital took various actions limiting his ability to perform surgeries.
They went to arbitration. The arbitrator found the hospital guilty of all kinds of tortious misconduct and contractual breaches and awarded about $2.1 million in compensatory damages and a tad less than $2.6 million in punitive damages. And the hospital went back to the trial court and said -- "hey wait a minute, under State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408, 416-419, the ratio between punitives and compensatories shouldn't generally be more than 1 - 1. And we want our extra half a million bucks back.
To which the Court of Appeal said: Nope. State Farm doesn't apply to contractual arbitration. State Farm sets a Constitutional limitation on state action. But contractual arbitration isn't state action.
If this is true, an arbitrator could award a dollar in compensatories and $100 million in punitives, and the defendant couldn't do a thing about it. So I think I'm going to stand by my position: Binding arbitration? No thanks.