Bill Summary: S.B. 52 – Tortious Act Arbitration (Urquhart)

Final update: S.B. 52 was passed by the legislature.

S.B. 52 – Tortious Act Arbitration
Sponsor: Sen. Stephen H. Uruhart

While not the most exciting bill of the legislative session, S.B. 52 is nonetheless interesting and potentially important and is part of an ongoing effort being taken both within and without the judicial system in Utah to try and make justice more fair and less expensive.  As currently drafted, S.B. would provide a tort plaintiff a right to arbitration in certain cases, though election of that right would require that the plaintiff make certain concessions up front.

A System Designed to Dispense “Perfect Justice”?

Let me begin by providing some background, both about the nature of the justice system as well as arbitration.  Currently, civil (i.e. non-criminal) lawsuits brought in Utah are governed by a set of rules known as the Utah Rules of Civil Procedure.  Although the Utah Rules of Civil Procedure specifically provide that their purpose is to “be liberally construed to secure the just, speedy, and inexpensive determination of every action,” see Utah R. Civ. P. 1(b), anyone with even a rudimentary exposure to Utah’s legal system can tell you that, as a practical matter, the emphasis must be on just outcomes, because the current system is anything but “speedy” and “inexpensive.”

As it currently stands, people who bring a lawsuit to try and recover damages for an injury face years of expensive litigation to even get to the point where recover a judgment.  They are often forced into unsatisfying settlements because costs of going to trial are absolutely prohibitive in all but the largest cases.  Finally, to add insult to injury they often face uncertain prospects, at best, of collecting on the judgment they have spent some much time, effort, and money to obtain, since, at the very least, there’s a possibility that their opponent’s financial resources have also been bled dry by years of litigation.  That’s if you are a plaintiff.  If you are a defendant, you can be dragged through years of litigation at the plaintiff’s whim, forced to defend, at the plaintiff’s option, a case brought using the full panoply of tools available under the Utah Rules of Civil Procedure, whether it’s justified or not.  So, rather than be bankrupted in court, many defendants end up incurring thousands of dollars in legal fees and costs up front, only to suffer the further indignity of settling meritless cases for nuisance value (or more) simply to avoid the expense of a trial.

Much of that description is probably, and unfortunately, not news to many of my readers.  Most of us have had some experience with the justice system; likely an unpleasant one.

But the current system of expensive justice exists for a reason.  It’s designed to deliver what we in the legal community sometimes refer to as “perfect justice.”  By “perfect justice” we obviously can’t mean, of course, a just outcome in every case — though that is certainly a laudable goal.  Perfect justice, in the sense of perfectly fair outcomes is just not possible in an imperfect system run by imperfect men and women.  The perfect justice we can achieve, however, is a system that’s perfect in the sense that it provides both parties with all tools available to prove their case — one that errs on the side of expense in order to provide the best chances of getting it right.  In other words, a system designed to dispense perfect justice purposefully allows litigation to get very costly under the theory that, it’s better that we let things get expensive and get cases right rather than risking getting cases wrong in an effort to make things inexpensive and quick(er).

The starting point for S.B. 52, is that this system just doesn’t make sense in a whole class of cases — roughly defined as relatively small, uncomplicated personal injury cases where there is insurance that should cover the injury.  In these types of cases, the current system, rather than giving both parties a meaningful opportunity to prove their cases, can essentially be used, by either party, as a bludgeon to try and force settlement or to prevent the case from being brought at all.

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The Arbitration Alternative

What’s the solution, then?  Well, it could be a binding resolution procedure designed to be a little less perfect but much more efficient.  Enter arbitration.  In an arbitration proceeding, both parties agree to forgo some of the (costly) procedural niceties and protections afforded by some of the Utah Rules of Civil Procedure and, instead, in a somewhat less formal basis, submit their dispute to a mutually-selected third party for comparatively quick resolution.  Although often more expensive up front, arbitration is generally significantly less expensive than full-blown trial preparation and can, especially in less complicated cases where there is little need for expert testimony, reach a fair result much more quickly.  What’s the problem with arbitration, then?  Well, for one thing, it’s voluntary.  Currently, parties are not obligated to arbitrate a dispute unless they have contractually agreed to it up front (you’ve probably see these arbitration agreements in contracts you’ve signed for medical services).  Even then, one party can dispute the enforceability of an agreement to arbitrate, which then requires both sides to go to court and engage in an expensive mini-trial on the issue of whether they are required to arbitrate their case, or, depending on the agreement, they may be required to arbitrate the issue of arbitration!

Wouldn’t it be nice, you might think, if we just kicked some of these inexpensive, less controversial, likely recovery cases out of court altogether and forced them into arbitration?  While S.B. 52 doesn’t quite go that far, it does take a step in that direction.

What exactly would S.B. 52 do?

As currently drafted, S.B. 52 would allow tort plaintiffs to force certain types of cases into arbitration, regardless of whether the plaintiff and the defendant had a separate, enforceable agreement to arbitrate.  In particular S.B. 52 would provide a right of arbitration in tort cases not involving auto accidents or brought against entities with governmental immunity, where there is a liability policy that covers the injury suffered.  As a cost of doing this, the plaintiff would accept a couple of concessions: (1) he would agree to limit his recovery either to (1) insurance policy limits, or (2) $50,000, whichever is less.  He would also agree to forego any claim he might have for punitive damages.

If either side is unhappy with the arbitrator’s decision, they would be able to appeal the decision to the district court.  But taking this appeal is disincentivized.  If, as a plaintiff, you appeal to the district court and don’t improve your recovery by 30 percent (up to a maximum of $15,000 beyond the damages cap), you will be required to pay the costs of the opposing side.  Likewise, if you appeal an arbitrator’s decision as a defendant, and you don’t improve you recovery (i.e., decrease the plaintiff’s recovery) by 30 percent, then you pay the plaintiff’s costs.

This structure is not new in Utah.  It was enacted on a limited basis, to claims involving motor vehicle accidents.  This would be an extension of that rule to new ground.

Potential Constitutional Issues

Opponents of S.B. 52 have raised a few of different constitutional concerns.  The first is that it burdens a defendant’s right to trial by jury, which, applies in both civil and criminal cases.  The idea is that, although S.B. 52 does provide a defendant the opportunity to have a trial after an arbitrator decides his case, it requires him, if the plaintiff should so choose, to go through arbitration first, and then, threatens to punish him if he doesn’t win big on appeal.

The second issue is that S.B. 52 would violate the Open Courts Clause of the Utah Constitution, which requires that

All courts shall be open, and every person, for an injury done to him in his person, property or reputation, shall have remedy by due course of law, which shall be administered without denial or unnecessary delay; and no person shall be barred from prosecuting or defending before any tribunal in this State, by himself or counsel, any civil cause to which he is a party.

The Open Courts Clause is usually litigated in cases where the legislature has removed a cause of action for a particular injury for which there exists no reasonable alternative remedy.  For example, if the legislature were to pass a law that said people could no longer be sued for negligence in Utah, that would likely violate the Open Courts Clause, because it would close the courts to plaintiffs seeking for a recovery that has been broadly available in Utah for years.

S.B. 52 presents a different case.  Here, no cause of action has been abridged.  Instead, the argument would be that the defendant, by the plaintiff’s unilateral election of arbitration, would be denied the right to defend himself before the courts in an action to which he is a party.  It would require the courts to take a fresh look at the relationship between the Open Courts Clause and tort reform if the S.B. 52 were passed and challenged in court.

Finally, S.B. 52 raises equal protection concerns.  It clearly distinguishes between plaintiffs (who are allowed to elect arbitration) and defendants (who are not).  The question becomes, whether this distinction is justified in light of the benefits to society and the individual interests at stake.  Since S.B. 52 doesn’t define its operation with reference to any group the United States Supreme Court has deemed to be a suspect class, it can be upheld despite the distinctions if it has a rational basis–i.e. meaning that its distinction between plaintiffs and defendants must be based on a potentially legitimate ground and cannot simply be arbitrary.  This is generally a very easy requirement to satisfy, although S.B. 52 seems pretty close to the line.

It will be interesting to watch S.B. 52 progress, and, in particular, to see if it is amended to address some of the potential constitutional concerns.

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