California has had a long, successful tradition of allowing parties to enter into contracts specifying that should any future dispute arise between them, the disagreement will be resolved through private, binding arbitration.
Californians use arbitration agreements in a variety of settings, including real estate transactions, automobile repairs, even fee disputes between lawyers and their clients. A provision approving such agreements between physicians and their patients is part of the landmark Medical Injury Compensation Reform Act of 1975 (MICRA).
In Washington, however, there's a movement to amend the Federal Arbitration Act to preclude parties from contracting for arbitration before a dispute arises. One bill heard in the last Congress, S. 1782 sponsored by Sen. Feingold (D-Wisconsin) would have prevented such clauses in employment, franchise, and "consumer" disputes. It is certainly likely that the issue will be approached again with the new Congress sworn in this month.
But what such attempts fail to appreciate is the benefit that all parties receive when arbitration has been agreed upon before a dispute has even taken place.
For example, when arbitration -- which allows parties to resolve disputes at significantly lower transaction costs than through court -- is factored into a business transaction, the cost of the goods or services can be reduced at the outset. Another benefit to pre-dispute arbitration agreements is that they promote a smooth, less emotional environment for a continued relationship. This is especially true in health-care relationships such as assisted living and health maintenance organizations.
Finally -- and Congress should pay attention to this -- it is no coincidence that the use of arbitration in California coincides with our judges' ability to control their civil trial calendars. Without the availability of this beginning-to-end alternative resolution system, overcrowding would again handicap the country's civil justice system -- with serious consequences to our national economy.
Preserving pre-dispute arbitration -- whether in California or nationwide -- promotes the public policy of giving citizens freedom of choice when dealing with others. Take away that choice, and we'll have nothing but uncertainty in return.
Gordon Ownby is general counsel of the Cooperative of American Physicians, Inc., www.cap-mpt.com, and can be contacted at gownby@cap-mpt.com.