Court Reform Will Push Some Businesses to Arbitration, Putting Pro Se Litigants at Risk.

Mason Walther

 

In the past decade, the rate of pro se litigation has increased dramatically.[1] In response, a network of activists, judges, and court employees are trying to create a judicial system more amenable to the plight of self-represented litigants.[2] This court reform movement advocates for a number of changes, ranging from increasing multi-lingual court resources[3] to assigning every impoverished civil litigant a court-appointed lawyer.[4] The intention behind many of these reforms is to level the playing field between well-resourced litigants and their under-resourced opponents. Some of these reforms have been implemented.[5]

One primary assumption underpinning this access to justice reform movement is that many pro se litigants with otherwise meritorious claims fail “procedural entrance exams,” and that remedying this failure will help pro se litigants to win cases they currently lose.[6] As more reforms are implemented and fewer pro se litigants lose cases on technicalities, the businesses who rely on winning those cases may rethink their contract enforcement strategy. If these businesses move from litigation to mandatory arbitration, they can avoid the reach of court reform. Policymakers and advocates for pro se litigants should consider ways to remove some types of disputes from arbitration or ways to apply access-to-justice safeguards to the arbitration context.

 

Which businesses will consider a switch to arbitration?

Mandatory arbitration is only a relevant conflict resolution option for would-be litigants that have contractually agreed to arbitrate before the dispute at issue.[7] A few characteristics further identify businesses for whom a pre-dispute agreement forcing arbitration may be especially beneficial.

Most of these business’ legal adversaries are self-represented. Holding all else equal, a business that faces pro se litigants in 80 percent of its cases is exposed to twice as much risk from access to justice reform as a business that faces pro se litigants in 40 percent of its cases. Landlords exemplify the at-risk group of businesses because in landlord-tenant cases “it is typical for ninety percent of tenants to appear pro se while ninety percent of landlords appear with counsel.”[8]

Businesses best positioned to benefit from a switch to arbitration will be those that are much more likely to win cases against pro se litigants than against represented litigants. The general existence of such a win-rate gap is well documented.[9] Businesses that benefit from a wider gap are more at risk from court reform than businesses benefitting from a small gap in win-rates. For instance, consumer debt plaintiffs in Utah win 47% of their cases against represented defendants and 81% of their cases against pro se defendants.[10] If court reforms were able to neutralize that justice gap completely, those Utah creditors would see a drop of 34 percentage points in their win-rate against pro se plaintiffs. In Utah, 98% of consumer debt defendants are pro se, so a business’ win-rate against pro se litigants in those cases dramatically affects its overall win-rate.[11] Equalizing the win-rate between pro se and represented defendants would drop the business’ win-rate from 80% to 47%.[12] This hypothetical indicates how great the potential incentives are for businesses in similar positions to flee courts as they reform.

In summary, the businesses that may benefit the most from a switch to arbitration are repeat players that try many cases against self-represented litigants, particularly if they win such cases at a higher rate than cases where they face represented parties. Only businesses in a few sectors may fit all of these descriptive categories,[13] but the applicability of arguments in favor of arbitration may remain relevant—though weaker—even for a business who does not fit every category.

 

Arbitration stabilizes win-rates

For businesses that mostly try cases against pro se litigants and win those cases more often than they win against represented litigants, arbitration provides a unique opportunity. It is widely known as a cheaper, faster, and less formal alternative to litigation,[14] and is widespread in the employment context.[15] Businesses for which an outsized win-rate in litigation against pro se parties counteracted the existing attractions of arbitration will want to reconsider their incentives as that particular comparative advantage of litigation shrinks in value as the court reform movement continues to gain ground. Faced with the prospect of its overall win-rate at trail dropping from 80% to 47%, a Utah debt collector may well decide to investigate arbitration as an alternative dispute resolution method.

Arbitration win-rates appear to closely imitate litigation win-rates in consumer debt collection cases.[16] If court reforms decrease the win-rates for the categories of businesses discussed above, then a switch to arbitration may allow them to return to the more favorable set of rules under which they operated pre-reform.

 

Implications for access to justice

If the businesses which stand the most to lose from court reform manage to compel arbitration, the benefits provided to pro se litigants in the courtroom will be nullified. To prevent this, lawmakers and court reformers should recognize the potential of this shift and plan for ways to prevent it. The Minnesota Attorney General’s settlement ending the National Arbitration Forum’s administration of debt collection arbitration provides one example of a path forward.[17] The American Arbitration Association’s voluntary decision to end its bulk debt collection arbitration program in response to public discourse shows another possible solution.[18] Public pressure and legal action are both achievable steps reformers and government actors can take to protect pro se litigants from being denied access to justice through arbitration.

In summary, court reforms which favor self-represented litigants by promoting their access to equal justice vis a vis represented litigants will push certain types of businesses to re-evaluate whether they pursue dispute resolution through arbitration or litigation. As such businesses seek a more favorable venue, their actions could deprive pro se litigants of the protections court reformers have fought to secure. In response, lawmakers and activists should seek to limit the extent to which pro se litigants are compelled to arbitrate cases and denied the benefits of court reform.

 

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[1] See Jessica K. Steinberg, Demand Side Reform in the Poor People’s Court, 47 Conn. L. Rev. 741, 749–52 (2015).

[2] Steinberg, supra note 1, at 743.

[3] Am. Bar Ass’n, Access to Justice Commissions: Increasing Effectiveness Through Adequate Staffing and Funding15-17 (2018).

[4] Steinberg, supra note 1, at 762.

[5] Am. Bar Ass’n, supra note 3, at 16-18.

[6]Steinberg, supra note 1, at 744.

[7] 9 U.S.C. §2.

[8] Steinberg, supra note 1, at 750.

[9] Id. at 744.

[10] Legal Services Corporation, Fiscal year 2019 Budget Request 10 (2019).

[11] Id.

[12] .98*.81+.02*.47=.8032. In contrast, .98*.47+.02*.47=.47.

[13] Rental housing is one such market. See Barbara Bezdek, Silence in the Court: Participation and Subordination of Poor Tenants’ Voices in Legal Process, 20 Hof. L. Rev. 533 (1992).  Consumer debt collection is another. See The PEW Charitable Trusts, How Debt Collectors Are Transforming the Business of State Courts (2020).

[14] Arbitration: Simpler, Cheaper, and Faster than Litigation, Harris Interactive 5 (2005).

[15] More than half of all nonunion private sector employees are subject to mandatory arbitration. Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration (2018).

[16] Christopher R. Drahozal & Samantha Zyontz, Creditor Claims in Arbitration and in Court, 7 Hastings Bus. L.J. 77, 78 (2011).

[17] Drahozal & Zyontz, supra note 16, at 1.

[18] American Arbitration Association, Notice on Consumer Debt Collection Arbitrations 1 (2010).