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The New Jersey State Bar Association is pushing to eliminate mandatory arbitration, calling it a poor substitute for good lawyering and a “bureaucratic waste.” In a blistering report by its Ad Hoc Committee on Arbitration, the bar instead urged adoption of a multi-option, alternative dispute resolution program. The committee recommended mediation over arbitration and making arbitration just one of a variety of ADR options. The report, sent to chief justice Deborah Poritz in early November and made public in mid-December, said the system had too many inexperienced arbitrators as well as inherent problems, such as chumminess among lawyers, unavoidable biases among arbitrators, and conflicts arising from some lawyers’ relationships with insurance carriers. The perceived failure of arbitration has not led to more cases going to trial; only 6 percent of trial de novo requests go to a jury. But, the report said, more than 72 percent of arbitration awards are rejected. It also characterized the arbitration process as an often-abused settlement tool, and took a swipe at Allstate Insurance Company, in particular, for its policy of never accepting an arbitration award. “This evaluation of the current system offers an opportunity for New Jersey to embrace national trends toward mediation, and other innovative dispute resolution reforms,” state bar president Karol Corbin Walker said in a statement accompanying the report.”This multi-optional system, which has proven successful in federal courts, would substitute New Jersey’s one-size-fits-all approach with a new dynamic allowing parties to tailor the appropriate complimentary dispute resolution (CDR) device to their particular case,” she added. As the state bar sees it, the current system defeats the goals of ADR by increasing costs to parties, delaying adjudication, and adding to court congestion. The report deemed mandatory arbitration a failure, despite positive reports from the Administrative Office of the Courts. Most objectionable, said the report, is the high rate of rejection of arbitration awards. For the court year ending in August 2001, 19,774 of 27,285 arbitrated cases were rejected. The rejection rate was higher for auto cases, which account for two-thirds of those arbitrated. For the 2000-01 period, the latest figures available, 74 percent of arbitrations resulted in a trial request. That’s up from 49 percent in 1990. Personal injury cases, with an award-rejection rate of 72 percent, did not fare much better. Most rejections come from the defense, particularly in auto cases. And that rate continues to rise. Defense lawyers accounted for 82 percent of de novo requests in 2002, up from 55 percent in 1987. That increase “reflects either unremitting and increasing dissatisfaction with the system, or worse, a conscious abuse,” the bar report said. In a statement, Richard Williams, administrative director of the courts, registered the AOC’s disagreement with the report. Its “conclusions are at variance with our experience and the views of numerous attorneys and local bar associations,” he said. Lewis Stein, who chaired the committee, said, “At some point, we must separate the opinions of those with a vested interest in this system and realize that any system rejected 75 percent of the time is a failed system.” Mandatory arbitration came to New Jersey via legislation in 1983. Initially the program covered only auto negligence cases in which the noneconomic loss claim was under $15,000. In 1987 the legislature expanded the program to include personal injury cases and raised the ceiling to $20,000. In 2000 the supreme court added simple commercial cases. The report found fault with many aspects of the system, but the hearings themselves drew the bulk of the criticism. Scheduled at 30-minute intervals, they are too short, especially when some arbitrators lack the requisite seven years experience. Moreover, although attorneys are supposed to submit position statements ten days before the hearing, they often fail to do so. Instead, lawyers show up with statements, and the arbitrator reads them on the spot. The report also concluded that the system ends up costing more than it should because arbitration dates were, some time ago, pushed back to the end of discovery in the hope of reducing rejection rates. Defense lawyers who charge carriers by the hour spend roughly six hours on preparation and appearance, while plaintiffs’ attorneys spend the same time, but nonbillable. At $150 an hour, the state bar concluded that the cost to litigants was about $54 million for fiscal 2003. The report also argued that the program is losing money for the court system. Between 1998 and 2003, revenues from de novo fees were $3.5 million to $3.9 million. But expenditures exceeded those revenues by $555,220 in 2000, $210,505 in 2001, and $953,310 for the first nine months of 2002. The bar association chided the AOC for its annual reports, which have indicated that the program was self-supporting. A version of this story originally appeared in The New Jersey Law Journal, a sibling publication of Corporate Counsel and a part of American Lawyer Media.

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