A side note is that my day job as an engineering consultant for arbitration/litigation disputes puts my legal risk tolerance higher than most, but I'm trying to avoid litigation unless it makes sense.

Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner and/or spouse live in CA, you probably want to arbitrate in CA if the two of you had a disagreement.

Read it only and give an opinion, which for the most part is going to be either "you have nothing here" or "There might be this hole here, but it is going to cost twice as much or more to put into action and take it to arbitration or court.  

Specifically the S-Corp has to keep annual meeting minutes and the IRS tax deadline is March 15 vs April 15th...which is a pain because all my taxes have to be done then in order to finish off the silly S-corp.There are a bunch of articles out there, but take a look at the LLC, it's going to be your best option in my opinion.Also draft an operating agreement...every time I form a partnership we identify 1) how to arbitrate a dispute (We have a trusted family member and a real estate mentor, both are named as potential arbitors in our agreement). 2) Dissolution...how the partnership gets split if it doesn't work out.I heard a joke one time...the only ship that doesn't float is the Partner-Ship...I avoid forming them and have ended up buying out 2 of the three I've formed in the real estate world.

I wanted to continue with arbitration, like our contract says but even the arbitration company telling me I have very low chance of getting him from out of state to show up.After talking to an attorney, he wanted $15K - $25K to help.

If the remedy calls for arbitration, financial penalty, right to sue, or whatever, you should pursue those remedies.

Long story short the tenant lost after arbitration and HUD involvement. 

Also if you purchased the home on the California Residential Purchase Agreement then most likely you signed Pg8 Section 22 Item B which is the Arbitration clause which means you will need a neutral party to mediate the issue.However I agree with @Scott Carder if the repair is not very expensive 1k to 2k it might be easier and less stressful to just fix it and let it go.

And my point is 1% would ever see the interior or a courtroom in a full blown trial.these things all get settled in mediation or arbitration that's my personal experience. and you can have all the asset protection you want but if someone sues you   you still have to pay to defend.. they may not collect the judgement but your still out the defense dollars right ? 

If not mediation/arbitration then in court i should prevail.