Civil Arbitration (MAR) Update

ICYMI, yesterday two EAGLE members of WSAJ, Celia Rivera of Olympia and Marshall Casey of Spokane, testified in the legislature in support of ESHB 1248, which would adjust the civil arbitration limits in Washington from $50,000 to $75,000, increasing the number of people and businesses who could seek justice without going to trial. This is an access to justice issue, making it possible for smaller cases to be heard without the expense of a full day in court.

Watch their testimony here:

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Thank you for the opportunity to be heard and to speak in favor of one of the most important court room efficiency and cost savings measures we believe you will see this year. The use of civil arbitration, known as the Mandatory Arbitration system, is along with the increased usage of District Courts, already saving the superior courts thousands and thousands of hours of court and judicial docket time, and saving litigants thousands of dollars in costs in every successful MAR case. Last year this committee expanded the District court usage across the state. This bill will dramatically expand the use of the arbitration system, with tremendous savings for the state, counties, citizen litigants and the small businesses that utilize this process. This is a true win-win.

Background:

Mandatory Arbitration (MAR) is used as a streamlined procedure for resolving disputes within our court  system when a claim is less than $50,000, exclusive of fees, interests or costs. An arbitrator reviews the case instead of a judge, and issues a decision. MAR is a simplified and economical tool for obtaining the resolution of disputes. It is also less formal than Superior Court with limited discovery, and allows for a much quicker resolution of disputes than going to trial. Arbitration can be completed in 2-3 months instead of the several years in can take to get a date due to an overburdened court system. Cases are arbitrated within 2-3 months and the vast majority are resolved in that time, many without arbitration.

The MAR system also works efficiently by incentivizing both sides to come to the table to reach a good faith agreement. This is because if an offer of compromise is rejected by one of the parties and a trial de novo is ordered, the requesting side must better its position in Court or beat a compromise offer, or risk paying cost and fees to the other party.

Forty-five percent of all filings in our state’s Superior Court are civil cases. The remaining cases include criminal (15%), domestic (14%) and other (26%). All criminal and domestic cases are heard ahead of any civil action, thus showing MAR as a useful tool in quickly resolving civil disputes.

The MAR system was first passed into law in 1979 and implemented in 1980. The program was originally made discretionary for counties to adopt, but the Legislature later mandated its use for all counties with a population of 150,000 or more. A filing fee of $220, paid by the plaintiff, covers the cost of the program. 

The program is so successful and cost-efficient, its jurisdictional limits, $10,000 originally, have been consistently raised to take on more cases and ease court congestion: $15,000 in 1982; $25,000 in 1985; $35,000 in 1988; and $50,000 in 2005 (population requirement reduced to 100,000).

Changes to the MAR system made by HB 1248
As a useful tool for lessening the burden on our already stretched courts, HB 1248 will improve and update the MAR system by:

  • Raising the limits to $75,000, a compromise from last year’s bill;
  • Raising the filing fee from $220 to $250 (paid by the plaintiff), providing much-needed income that goes directly to our budget-crunched counties, and increasing the filing fee for requesting a trial from $250 to $350, another boost for cash strapped local county systems;
  • Require that an aggrieved party who is filing the trial de novo must sign the declaration providing more flexibility in scheduling and discovery by requiring hearings to be held between 21 and 75 days after filing.

The value of this concept:

WSAJ has reviewed extensive research on the MAR program, especially in King County where the Judges conducted an extensive survey over the last three years. In addition, a member of ours hired some college researchers to also look at great depth in the system as it exists around the Puget Sound area counties.

First, some results from the judicial survey. While this is limited to King County for now, we are gathering information from other counties, too, and we have looked at this now on a county by county basis as well as state wide. But King County does account for over half the state wide total of MAR cases, so it is a significant sample.

Over the last seven years, in King County, an average of roughly 1400 cases per year are noted for arbitration. It is worth noting that 42% of these cases settle before the arbitration is even conducted. Of the other 58%, two-thirds of the arbitrations resolve the dispute once and for all. Only about 33% of those arbitration awards results in a trial de novo request, and of those requests, approximately 10% of them actually go to trial. That is fewer than 2% of the total number of cases noted for arbitration. Up until a request for de novo is made, these case never enter a judicial docket.

This means that over 80% of these 1400 cases never require a single moment of judicial docket time. They are handled and resolved completely separate and apart from the judicial docket and cost the court system nothing. Those litigants get to see their cases resolved in a fraction of the time and for a fraction of the cost that a trial for the same case would have required.

Without going into too much statistical detail, we believe that looking at our responses in our own survey about how this change would impact civil litigation that the number of cases noted for MAR would increase by as much as 20-25% the number of cases moving on to the MAR track.  

The benefits from this are many and help all parties. The increases could raise as much as an additional $250,000 for counties through the increased filings and increase in arbitration fees, and also increase monies raised through the de novo filings by another $150,000 or so. (Please note, these are very rough projections because it is impossible to know what the exact impact will be. But I am happy to share my methodology with you.) The counties will save thousands of hours of court time and judicial docket time. The pressure on court funding by the state will be slightly alleviated.

An additional major consideration in looking at this bill is the fact that citizen-litigants and the defendants in these cases that go to trial spend as much is 10 times as much in out-of-pocket cost in the same case if it is handled through MAR. Literally, as much as 10 times the out of pocket costs. Cases that might cost $2,000 out-of-pocket going through mandatory arbitration can cost as much as $20,000 or more out of pocket to go to trial.  That is largely a result of the cost of expert witness time and other additional costs that trial requires, and of course it costs counties thousands of dollar an hour to run a jury trial. All these costs are reduced dramatically under this proposal.

This bill is a true win-win for all parties. The demands and the pressure on the state for additional judicial slots will decrease. Counties are perhaps the biggest beneficiaries as they will also see a tremendous reduction in the judicial dockets and pressures and the time and money spent conducting jury trials. At the same time they will also benefit significantly from the increase in the filing fees. Citizen litigants will see their cases resolved in a fraction of the time and for a fraction of the cost that they would have to spend to go to trial. This will be a dramatic increase in access to justice for run of the mill cases that nonetheless jolt the citizen’s life. Small businesses, who file between 25 – 30% of these cases will also enjoy the same benefits, and finally defendants will also enjoy a swift and certain resolution for a fraction of the cost and can go on with their lives.

It is not often that we have an opportunity to make such a simple and yet dramatic change that provides so many benefits. The MAR program is a very successful one and national model, and this takes it to a new level. The pioneers of this program and the original legislature that adopted it deserve great credit, and the sponsor and great group of co-sponsors deserve credit for bringing this idea forward.

Let’s build on the history of success, and let’s work together to pass SHB 1248. We look forward to working with you as this moves forward. Thank you for considering our views.

 

 

 

 

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