San Francisco Courts Says No to Lawsuit Against the National Arbitration Forum

April 25, 2005

A California Superior Court in San Francisco has dismissed a lawsuit that alleged the National Arbitration Forum had not disclosed results of consumer and employment arbitration cases subject to the California Arbitration Act.

The National Arbitration Forum said the law did not define the cases that were subject to disclosure and, additionally, that the law was pre-empted by the Federal Arbitration Act. The National Arbitration Forum also said that the plaintiffs did not have standing to bring their Section 17200 claim for “unfair competition,” following the adoption of Proposition 64 by the California electorate.

Although the 9th Circuit Court of Appeals and other federal and state courts had previously ruled that the plaintiffs’ legal theories were pre-empted by federal law, the San Francisco Superior Court dismissed the plaintiffs’ case at the very outset because they had not suffered injury and were without standing to bring the claim.

A recent nationwide study by Ernst & Young of consumer arbitration and a recent Harris poll of consumers who had used arbitration reportedly show widespread benefits to consumers.

Results from both independent initiatives reportedly demonstrate that consumers do as well in arbitration as they do in court, but in much less time and at a much lower cost, and that their satisfaction with arbitration is very high.

Despite the court victory, the National Arbitration Forum and its
arbitrators, many of whom are retired judges, were reportedly dissatisfied.

According to Ed Anderson, managing director of the National Arbitration Forum, “A patchwork of individual arbitration regulations drive up the cost of arbitration to the parties, which in turn decreases access to justice for Americans with legal disputes. Frivolous legal claims have the same impact. The lawyers get paid and arbitration parties pay the bill.”

The National Arbitration Forum had been posting the results of California arbitrations brought by consumers, but to avoid the possibility of future frivolous litigation, Anderson said that it would post additional arbitration results pursuant to the definition outlined in the Judicial Council’s arbitrator ethics standards, which, because the definitions in the Arbitration Act were vetoed by the governor, offers the only guide for disclosure under the law.

The National Arbitration Forum is compiling the results of consumer
arbitrations that meet the definitions in the ethics standards and predicts that the results will be posted by month end. Anderson calculated, “This way we can keep the costs of arbitration as low as possible for all parties.”

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