Mandatory Binding Arbitration Isn't Just Bad For Consumers, It's Bad For Small Businesses
Mother Jones has an excellent writeup of Deborah Williams and Richard Welshans, the Maryland couple whose horrific experience with franchising a Coffee Beanery we've covered before. Inside, MoJo breaks down the arbitration award to show just how much more expensive arbitration is than litigation.
Since arbitration is a private system of justice, all the trappings of litigation, like court reporters and judges, are paid by the parties. In the Coffee Beanery case, that came to $35,000 for the reporter, $25,000 for the arbitrator and arbitration association, and several thousand for the opposing lawyers' and witnesses' lunches, commutes, and hotels.
Although the Sixth Circuit Court of Appeals eventually overturned the arbitration award, this is an unlikely outcome, and Coffee Beanery is planning to appeal. In the meantime, we can hope that Congress passes the Arbitration Fairness Act, which bans mandatory binding arbitration in consumer, employment, and franchise contracts.
Franchise Fraud: Wake Up and Smell the Fine Print [Mother Jones]
(Photo: Lisa Brewster)
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What a racket. I guess if everyone requires arbitration people have know choice but to give up there legal rights to corporations. I wonder if I printed something on the back of a check like : cashing this check releases the payee of all future arbitration obligations on any existing contracts : if it woul work.
@Wombatish: That's already the case. When a company tells you that you're subject to binding arbitration, they're effectively stating in advance that they *do* plan to rob you.
Well, you know, if you happen to be feeling all paranoid or something. ;-)
@Wombatish: At least when that happens, you can take your AK-47 to his house and reciam your posessions - because then you'd be able to choose the arbitrator for that case ;)
MBA is so patently inequitable that it is only a question of time before it's abuses are addressed and redressed either in the political arena or in some landmark ruling by the Supreme Court that eviscerates it once and for all.
The curent system (where one side picks the arbitrator every time) cannot survive a determined attack by common people that want an unbiased forum for airing disputes.
Segregation was wrong. Sexual discrimination was wrong.Religious discrimination was wrong. At one time,all were enshrined and protected by the law. When our society reached a consensus that all deserved equal protection,those wrongs were righted. It will be thus with MBA.
We don't need any new laws to secure this. The right already exists in the constitution.We as a people need to demand enforcement of that right.
This is nothing more than a smear piece from Mother Jones. Basic line: State = good, private solutions = bad, because, you know, there's never, ever, every any miscarriages of justice in the legal system. Why, I don't even know how "miscarriage of justice" even became a phrase...
Also, how about reading your contract, and striking out the mandatory arbitration clause? There are ways to get out of it once you've signed the thing, possibly maybe, but that's too expensive and uncertain to bet on.
@Ezra Ekman: You might want to start looking at the contracts that come with your car, PC, TV, things like that. You might then ask yourself if pretty much everyone you're buying anything but food from is robbing you.
My wife once went to a DOCTOR that made her sign into Mandatory Binding Arbitration, and I was like um... let's go, and we never went back. The next one we tried had no such agreement. Yeay choice!
This is why unions are able to wield so much power. When ONE person gets to decide things, it's ripe for major abuse.
@RogueWarrior: lol Ya because unions are so powerful right now.
Keep it to the topic on hand instead of trying to threadjack this into another GOP/Dem fight.
@Wombatish: I know. The bad part about humor is that it's based on tragedy. Might as well enjoy it while we can. Well, until we end up in arbitration, anyway. ;-)
@Mad Dog McCree: Did you tell the previous doctor that the MBA was why you left? Let them know that it's costing them business.
@Snarkysnake: oooooh but businesses whine that mandatory arbitration saves taxpayer money by keeping cases out of the courts. Yeah right saves the business's taxpayer money...
@AirliaClytius: Hm. Reading comprehension fail.
A "smear piece" would be mostly BS and little to no fact. Not the case here. And there's no implication that the legal system is always perfect - rather, the idea is that these binding arbitration clauses are never perfect and rarely even anywhere close to good for the individuals, but are generally super for the company. The clauses are in the contracts so that the company can get away with shit easily with as minimal detriment to itself as possible. And it's getting nigh impossible to sign a contract for anything that doesn't include a mandatory binding arbitration clause.
Do people sometimes sign contracts without reading them carefully or without investigating what the end result of the clauses might be? Sure, and that's not good. But I doubt anyone assumes that things will end up as they did for Williams and Welshans - and if the Coffee Beanery had been honest and above-board with them from the start, they might have avoided this situation altogether.
@frodolives35: you'd be better off amending the contracts before they go through...There have been posts on this in the past about the process and legality of it.
@Snarkysnake: Disregarding the Mandatory part of it, Arbitration has benefits in the right contexts. If both sides are equal Arbitration as the benefit of being much quicker than taking it to trial.
Of course with MBA, rarely is it that both sides are equal, so the little guy always gets screwed.
You always have the choice not to sign a contract that requires arbitration. People just don't like having the responsibility of reading what they sign, so they sign away their rights.@frodolives35:
Precisely. If you don't like mandatory binding arbitration, don't agree to mandatory binding arbitration.
This new Bill that would outlaw mandated arbitration that would bring some justice to American consumers is still in Committee -----Why??? Mandated arbitration defeats due process of law guarantees and is unconstitutional.
If mandated arbitration is outlawed in franchise contracts, the courts will have to look at the rampant fraud in the sale of franchises to the unsuspecting public, and "maybe" do something about enabled fraud. (as demonstrated by the Coffee Beanery injustice written about on Mother Jones)
The ineffective Franchise Rule of the Federal Trade Commission enables franchisors to sell franchises without disclosing material risk factors, known to the franchisors, to the new buyers. Apparently, this subsidy of the franchisors is protected by the status quo of rule and regulation and arbitration ---that hides the fraud from the view of the public, as demonstrated in the CB Case, above.
The Rule of Law can be manipulated by the special interests who influence the committees in the Congress with their money and their view of what constitutes the "greatest good" for the public.
It is time for CHANGE as President Obama promised and the Rule of Law must not be used to enable fraud.
Carol
Ugh... more and more stories about how terrible Mandatory Binding Arbitration is.
Just wait until they start expanding the scope.... pretty soon, if you get robbed, you'll be in arbitration. And the robber will get to pick the arbitrator.