Let's Face It: Mandatory Binding Arbitration Sucks

A few days ago a “big business” lawyer wrote an opinion piece in the Wall Street Journal suggesting that those mean old people in the government were trying to take away your right to arbitration. How dare they!

For example (emphasis ours):

Congress is taking up legislation this week that will wipe out arbitration provisions in hundreds of millions of consumer contracts — for everything from credit-card agreements to cell phones to health-insurance policies, even a contract for the purchase of a kitchen sink.

Holy sh*t! Not the f*cking kitchen sink! I’m moving to Canada this time, I swear to God!

Anyway, in our august and respected opinion (ha ha ha ha) this WSJ piece was misrepresenting the real issue at hand — whether or not arbitration should be mandatory. The piece of legislation she refers to does not remove your ability to enter into arbitration, a fact that she manages to ignore. She also refutes generalized “anti-arbitration” arguments with studies paid for by the American Arbitration Association — the people who most directly benefit from forcing consumers to use their services.

We could have written a response to the piece, but some kind consumer lawyers sent us one that had been written already and we like it. So, we’re just going to link to that and save ourselves some time. In short, however, our point is this: We think the market should be able to decide whether or not arbitration is a better deal for consumers, and in order for it to decide it has to be able to choose.

There’s nothing wrong with arbitration, if that’s what you want to do, but you should not be forced into it by your employer, your nursing home, or in order to purchase something. Especially a kitchen sink.

Big Business Wants You Out Of The Courtroom [Cranky Greg]
Arbitration Works Better Than Lawsuits [WSJ]

Comments

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  1. John says:

    We just bought an RV and I rejected the binding arbitration agreement they wanted me to sign. And they let me. Dunno if that was a mistake on the part of the credit manager, never having had anyone reject it, but we did it and I’m happier for it.

    A lawyer I knew would go through contracts or releases he had to sign, for say the hospital and would line out clauses he didn’t like. I suggest anyone try the same with arbitration clauses where possible.

  2. chiieddy says:

    I bought an Alitalia vacation via travelzoo.com recently and just didn’t check the box for binding arbitration agreement. The sale went through just fine. Only 8 months and 4 days until Italy. :)

  3. Roycester says:

    Join the blog at the nation’s premiere site for exposing the evils of BMA
    http://www.arbitrationjustice.com

    Together we can bring this monster to its knees.

  4. Beerad says:

    Not to be contrarian or anything, but you do realize that if “the market should be able to decide whether arbitration is a better deal for consumers” is exactly what happened, right? Consumers turned out to be perfectly content to agree to whatever fine print necessary to sign up for cell phones, credit cards, and whatever else. They DID choose. Maybe a poor decision in hindsight, but there it is.

    If you really wanted to the market to work that way, you should just be advocating that people stop supporting companies that insist on it, not that legislation should make that choice by fiat. I’m just sayin’.

  5. vladthepaler says:

    It’s unfortunate that the rebuttal to The Wall Street Journal, a well-known, respected, and venerable newspaper, comes from an an article on an unknown website signed by “Cranky Greg”. Pretend for a moment that you haven’t already made up your mind about this issue. Who are you going to believe?

  6. cotr says:

    @John: when we bought a Nissan, i told them i didnt agree to the arbitration agreement. they said we will take back the keys.

    needless to say, i despise the car parked outside.

  7. cotr says:

    @Beerad: imaging if you didnt agree to them. no cellphone, no credit card, no car, no lease.

    you have your anti arbitration principle intact, but nothing else.

    its not that the market won, it was just pushed on everyone.

  8. Bladefist says:

    I’m against Mandatory binding arbitration. Mandatory being the keyword. I know this is a political issue, any fellow republicans out there care to explain why we are for this?

  9. jtheletter says:

    @Beerad: You assume that (a) people found the binding arbitration clause (b) knew what it meant – as in 90+% of cases are found in favor of the company against the customer, and (c) that there is an alternative choice for that product/service to allow one to vote with their wallet.

    Saying that people shouldn’t support businesses that have these clauses is like saying you should only get a cell phone plan that doesn’t have an ETF or minimum contract term – they almost don’t exist in the US. Especially if you need anything other than standard phone service, which some of us do.

    Going without is not always an option either. The problem with voting with your wallet is there has to be something to vote FOR. If no alternatives exists then what can someone do besides hope for one?

    Remind me again how legislation that says ‘let people choose’ is somehow MORE restrictive than just allowing companies to FORCE arbitration on people?

  10. junkmail says:

    @camelontherun: So where’s the problem? Give ‘me the keys and take a walk. The End.

  11. junkmail says:

    @junkmail: Dammit. That’s give ‘EM the keys… stupid keyboard.

  12. cotr says:

    @junkmail: the deal was too good. i mean insanely good.

  13. humphrmi says:

    @Beerad: Today more people have heard about mandatory arbitration, but only fairly recently. Most did not know that these provisions were present, or what they meant. Free market advocates all agree that letting the market decide is predicated on full knowlege of the terms. I doubt that was happening when people signed these forms. Granted, people should read their contracts and ask questions. But I also bet car dealer credit managers wouldn’t answer questions about mandatory arbitration very completely.

  14. chrisjames says:

    @Beerad: Wasn’t mandatory binding arbitration one of the things the credit card companies supposedly colluded on? Maybe it wasn’t the credit card companies, but it was some oligopolistic cadre. Maybe I’m just wrong.

    You may be right, though. A little bad press could open up companies to provide alternatives to customers, and legislation is not necessary. But, how I see it, mandatory binding arbitrary is like the company itself tinkering with your rights. Nothing should stand in the way of an individual’s right to seek fair judgement, even if they have previously waived the right. Consider it upholding the rights of all individuals, big business included, and not blind regulation.

  15. Wormfather is Wormfather says:

    @Bladefist: Becuase elections cost money blade, sorry to say it.

  16. Wormfather is Wormfather says:

    @Bladefist: And because we’re anti-litigation, anti-large punitive damages and belive that unfettered capitalism without intervention from overreaching courts is in America’s best interest.

    I have to disagree only because the ends (binding arbitration) makes the the means look bad.

  17. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    @camelontherun: Well, I mean, there you go. The deal was great… but what if something came up where now you needed to take legal action but, whoops, Arbitration Kangaroo Courts for you! When you wave your rights for justice things might just wind up more expensive than they ordinarily will be.

    Obviously you weighed the odds of something happening and needing legal remediation versus how much of a deal you’d get. But, a lot of times you gotta vote with your wallet and your vote is that arbitration is a-ok.

  18. mythago says:

    an opinion piece in the Wall Street Journal

    You can pretty much stop reading anything fitting this description.

    Varney, according to her bio, is a partner at a large law firm representing the interests of huge corporations. The best interests of consumers are hardly near and dear to her heart. Saving her clients money is – that’s what mandatory binding arbitration is all about.

  19. stinerman says:

    @Bladefist:
    IANAR, but I’d bet those who are for this are for this for several reasons:

    1) Mandatory binding arbitration is probably better for their stock portfolio.
    2) This is government meddling in the “free market”. I use quotes because the entire idea of unconscionable clauses is that if there actually was a free market in that area, no one would sign a contract with those clauses in it.
    2a) Many Republicans would simply assert that there is a free market at work in this particular area and if you didn’t want binding arbitration, you shouldn’t have signed the contract. Again, if all market players require mandatory binding arbitration it reasons that there is not a free market, not that consumers don’t mind the arbitration clause.

  20. dweebster says:

    @Beerad: Yeah, citizens (consumers) have “chosen” to accept these clauses in the same way that people “choose” to allow gangs and drug lords to operate in their neighborhood.

    This clause is like waking up with your horse’s head beside you in the morning. The monopoly/oligopoly controlling the crucial product or service dictates the terms of what it wants, and if you refuse to accept all of their ridiculous terms they withhold service.

  21. dweebster says:

    @mythago: …and the WSJ is now owned by that evil genius idiot Rupert Murdock’s group – the same one that brings Faux “News” and their ridiculously inaccurate and looney-biased “reporting.” Right now, WSJ is probably neck-and-neck with the Weekly World News for journalistic accuracy.

    It totally makes sense that the WSJ is just operating as an open conduit for Big Business spin doctors now – I would expect no less from News Corporation.

  22. Tmoney02 says:

    @John: A lawyer I knew would go through contracts or releases he had to sign, for say the hospital and would line out clauses he didn’t like. I suggest anyone try the same with arbitration clauses where possible.

    The line out doesn’t change anything unless both parties also initial next to the strike.

  23. cotr says:

    @Applekid: i could always just crash it?

  24. JustThatGuy3 says:

    I agree we should get rid of BMA, but only once we also add loser pays to our legal system. If you want to sue someone, go right ahead, but, if your suit doesn’t have merit, you should be willing to shoulder the costs they incurred to defend against your lawsuit. Also, your legal counsel should be jointly and severally liable.

    @dweebster: Your rant against the owner of the WSJ would be a smidge more credible if you knew how to spell his name.

  25. yourbffjill says:

    I have yet to find a doctor that does not force me to sign an arbitration agreement. I asked if I could refuse to sign it and they told me they wouldn’t see me.

  26. ShanghaiLil says:

    @vladthepaler: It’s unfortunate that the rebuttal to The Wall Street Journal, a well-known, respected, and venerable newspaper, comes from an an article on an unknown website signed by “Cranky Greg”. Pretend for a moment that you haven’t already made up your mind about this issue. Who are you going to believe?

    If it contradicted a corporate lawyer opining in the pages of the WSJ, I would I would have to reluctantly believe that Katherine Zeta-Jones actually IS 35. I would approach the autobiographical writings of Lillian Hellman with the zeal usually reserved for fundamentalists calculating the length of the First Day, pending the creation of the sun two days later. If there were only the two options, I would believe the crazy guy in Times Square ranting about how everyone in the bible was black rather than accept the word of a corporate lawyer in the WSJ. Since you asked…

  27. mythago says:

    “Loser pays” is a gift to whoever has the bigger walled. No matter how good your lawsuit is, do you want to gamble that you might get an unfair judge and have to pay the cost of BigCorp’s very expensive legal team? On the other side, would you want to try to fight a frivolous lawsuit, risking paying for both sides’ lawyers, instead of settling fast and cheap?

    Costs are often recoverable by the winner in a lawsuit – it’s a little more complicated than “loser pays”, though.

  28. mythago says:

    *walled = wallet

  29. Norcross says:

    @Beerad: not always. my wife’s OB/GYN has begun to require a mandatory binding arbitration agreement to keep seeing her. She called to all the other OB/GYNs within 3 counties. They all either had them, or were going to within the next 6 months.

    Consumer choice my ass.

  30. Cattivella says:

    We have a client who uses binding arbitration language in their contracts and we just recently wrapped up our last arbitration. It’s true that the arbitration system is currently biased towards the company because, honestly, who do you think is going to be the arbitration company and the arbitrator’s repeat business? Not the consumer, that’s for sure. They want to make the person who is most likely to repeat business happy.

    BUT I’ve also seen numerous consumers not take arbitration seriously. They show up without lawyers, without preparation. They think it’s an informal setting, but just because it doesn’t take place in a court room doesn’t mean you can be ill-prepared to argue your case and expect to win.

    We prepare for arbitration just like any other litigation – meaning a lot of time and money. The consumer typically doesn’t.

    These two factors, both out of and within the consumers control, are major contributors to the high arbitration win rate for businesses.

  31. LuciusAntimachus says:
  32. Shark1998 says:

    @Beerad: Really? It’s kind of hard to go to another company if, say for example, Comcast was the only cable provider in your area and Satellite was not an option…..

  33. Shark1998 says:

    @stinerman: Do not tag Republicans with being for Arbitration. You are way off base with that crap…

    It’s like me saying that all Democrats are for legalizing drugs because of the added tax benefit.

  34. Shark1998 says:

    Let me play the devils advocate here for a second. Could it be that Binding Arbitration, though not fair to the average consumer, does protect the company from frivolous lawsuits and the associated costs dealing with them?

    Not a statement, just a question.

  35. JustThatGuy3 says:

    @Norcross:

    And if you were facing their malpractice insurance rates, you’d put mandatory binding arbitration into place too.

  36. JustThatGuy3 says:

    @mythago:

    Easily handled, just put a cap on your liability at what you spent (or would have spent, if the lawyer did it on contingency).

  37. doctor_cos wants you to remain calm says:

    @Beerad: The proposed legislation does NOT remove arbitration as an OPTION, so where’s the “fiat”?
    @dweebster: Exactly.
    @Bladefist: Holy cow, we agree on something (other than each other being, well, silly). :)

  38. shelleyp says:

    @chrisjames: The case you’re referring to is Ross v. Bank of America.

  39. snoop-blog says:

    The first clue that is sucks the fact that it is MANDATORY! Otherwise no one would opt-in.

  40. Amy Alkon says:

    I went to get an MRI and there was a mandatory arbitration thing to sign — so I did sign it — with something like: “Don’t accept this.” Most administrative people aren’t going to look too closely as long as it’s signed.

  41. bbb111 says:

    A while ago a read an article about an arbitration company that was the required arbiter for many big companies. The reporter managed to review two weeks worth of judgments and found that every one was for the big company. Even more interesting was that the arbiter did about a hundred cases a day. [this was one arbiter's results, not the whole practice.] I can’t find the original article right now – if I do, I’ll post the reference.

  42. P_Smith says:

    Settling things in court is akin to the police negotiating with a hostage taker, using SWAT as a last resort.

    Mandatory arbitration is akin to the police telling the hostage taker they’re sending in SWAT and then doing it, all without attempting to negotiate.

    Which would you prefer if you were being held hostage by a corporation?

  43. varro says:

    Oregon has mandatory arbitration for all civil cases under $50K. See ORS 36.400.

    Of course, this is real arbitration, where the arbitrator is either agreed on by the attorneys/parties or picked randomly from attorneys who apply to the court to hear the case, not part of an arbitration organization the creditor likely has repeat business with.

    The arbitration award can also be appealed to the Circuit Court.

  44. @dweebster: That is not really fair. After all, their editorial page was off in fantasyland for as long as I can remember.

  45. Bladefist says:

    @doctor_cos: You’ll find that I’m extremely objectionable and have no problem questioning the policies of my own parties.

  46. cf27 says:

    @John: Crossing out parts you don’t like is only half the answer. The problem is that when the company tries to enforce the original, they can say “He crossed those parts out and we didn’t know — he tried to trick and should be bound to the original agreement.”

    If you cross stuff out or add text, make sure that the changes are initialed by both you and the person who’s signing for the other side. Doing so won’t completely guarantee that your changes will be enforced, but it will certainly help.

  47. Norcross says:

    @JustThatGuy3: understandable, but this is a doctor who delivers babies. to ‘shield’ them from malpractice isn’t right