Originally from Dispute Resolution Journal

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In recent years, there has been a dramatic increase in the inclusion
by businesses of mandatory arbitration clauses in contracts with
consumers. Rarely are such clauses the subject of bargaining between
the parties, mainly because the business simply inserts the provision
in a take-it-or-leave-it form contract. Indeed, many consumers don’t
even know that the clause is there when they make their purchase, in
some cases because the contract arrives in the mail with the product
being acquired.

Many consumers, their lawyers, and consumer advocacy
organizations oppose mandatory arbitrations because they deny
consumers their right to go to court. There are many reasons for that
opposition, including limitations on tools that are available in court,
such as discovery, and additional costs that are not incurred in court--
mainly fees for the arbitrators. Many arbitrations do not require a
statement of reasons for the decision, and there are limited rights to
appeal an unfavorable arbitration ruling. Finally, many people oppose
giving up their right to a trial by jury, at which a state official serves
as the judge, and the public can watch the proceedings.

The question that this paper seeks to answer is whether, leaving
aside the absence of a public trial before a jury, can one category of
mandatory arbitrations--claims of medical malpractice--be operated
in a manner in which those who must use it to resolve their claims
receive a fair hearing and a reasonable opportunity to recover their
damages? To seek to answer that question, this paper examines the
mandatory arbitration system used by the Kaiser Foundation Health
Plan, Inc., which operates the Kaiser Permanente medical delivery
system for its approximately 7.4 million members that it had in
California as of December 31, 2014.2 The current arbitration program,
which has been in operation since 1999, received 657 demands for
arbitration in 2013.3 It follows one that was heavily criticized by the
California Supreme Court in Engalla v. Permanente Medical Group,
64 Cal. Rpt 843, 938 P.2d 903, 15 Cal 4th 951 (1997), for the lack of
an independent manager outside of Kaiser and for excessive delays in
the appointment of neutral arbitrators and the holding of arbitration
hearings.

After Engalla was decided, Kaiser could have litigated it further or
attempted to make only the changes identified by the Court in its
arbitration system. Instead, Kaiser chose to appoint a Blue Ribbon
Panel that recommended sweeping changes in the system, which
Kaiser accepted. The most significant change was to shift
responsibility for managing the arbitration system from Kaiser to the
Office of Independent Administrator (OIA), and the creation of an
Arbitration Advisory Council, which later became the Arbitration
Oversight Board (the Board). Working with Kaiser Permanente, the
Administrator and the Council prepared and then approved the Rules
that are now the basis of the current arbitration system.