Wednesday, June 24, 2009, 10:49 AM

Arbitration Can Be Troublesome

The conventional wisdom that arbitration is a way to avoid the expense, time and risk of litigation has been challenged repeatedly as plaintiffs, courts, and even legislators seek to impose new requirements which can make the arbitration process just as costly as litigation, with the added downside that there's no meaningful way to appeal an arbitration award. That lesson was brought home in the ongoing fight known as In re Cintas Corp. Overtime Pay Arbitration Litigation (N.D.Cal. No. 06-1781), involving the Cincinnati-based uniform and business services supplier. This long-running dispute started in 2003 with a collective action filed by Cintas sales representatives who claimed they should not have been classified as exempt.

(Round 1) The court allowed the sending of notices to the alleged class, and about 2400 opted into the case.
(Round 2) Cintas then argued that most of the claims had to be arbitrated, and the court agreed as to nearly 80 percent of the group, and Cintas asked 70 different courts to order the claimants to arbitrate.
(Round 3) The claimants asked the Judicial Panel for Multidistrict Litigation to consolidate all those cases back to San Francisco, aand the JPML agreed.
(Round 4) After the California court named an arbitrator, the court concluded that the claimants were refusing to arbitrate by angling for the class arbitration and threatened to send the cases back to the 70 district courts. That decision is on appeal.
(Round 5) The arbitrator disagreed with the district judge and allowed the claimants to proceed with their class arbitration.
(Round 6) Cintas asked the court to order the arbitration halted. The court refused to enter an injunction.

Where will this go? What will it cost? When will it end? One major difference between the Cintas case and a sporting event is the lack of a single referee with authority to dispose of disputes. Once the arbitration genie was loosed from its bottle, the law of unintended consequences took hold. So the next time you think, "Wouldn't it be nice if we could channel our wage-hour disputes into a simple procedure?," think again to see what could go wrong. Plaintiffs' counsel may be sufficiently motivated and financed to see the match through to the final bell.

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