Mandatory Binding Arbitration: The Worst Choose Your Own Adventure Ever
Mandatory binding arbitration agreements are bad for consumers for so many reasons that, unless you're the victim of one, it's hard to keep track of the various ways you can be screwed. So we've come up with this helpful illustration: a choose-your-own-adventure-styled trip through the arbitration process.
Your credit card/insurance/utility/cellphone company just screwed you, the new home you just bought is falling apart, a nursing home let your relative wander outside and freeze to death. You've suffered an injury, and you demand justice. You get out the contract you signed and look over it, noticing the clause that says
YOU AGREE THAT ANY DISPUTE ARISING BETWEEN THE PARTIES SHALL BE SUBMITTED TO CONFIDENTIAL ARBITRATION IN A LOCATION CHOSEN BY THE COMPANY. ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED UNDER THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR'S AWARD SHALL BE BINDING AND MAY BE ENTERED AS A JUDGMENT IN ANY COURT OF COMPETENT JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, NO ARBITRATION UNDER THIS AGREEMENT SHALL BE JOINED TO AN ARBITRATION INVOLVING ANY OTHER PARTY SUBJECT TO THIS AGREEMENT, WHETHER THROUGH CLASS ACTION PROCEEDINGS OR OTHERWISE.
You...
File a lawsuit anyway.
Sorry. You're subject to an arbitration agreement, and the court will require that you submit to arbitration.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
Right.
Nope. This is going to be depressing.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
(a)New Jersey.
(b)Connecticut.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
New Jersey.
Actually, the arbitration clause requires that any disputes be arbitrated in Connecticut. Sorry about that.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
(a)Discovery is an important part of dispute resolution and the right to get documents from my adversary is a hallmark of the legal system.
(b)I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
Discovery is an important part of dispute resolution and the right to get documents from my adversary is a hallmark of the legal system.
LOL.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In my favor!
Liar. Recent studies have found that arbitrators rule against consumers between 94-96% of the time. Even if an arbitrator rules in your favor, there's no guarantee that the damages will even cover the cost of arbitration, much less the injury itself. In one case, a consumer sued her brokerage firm after it lost over $280,000 of her money. The arbitration panel ruled in the consumer's favor, awarded her $5,000, and charged her $10,000 in fees.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In the company's favor.
Wa waaa. This is probably not surprising. Unlike judges or juries, arbitrators' services are paid for by the parties. Companies are repeat players in the arbitration game, and they get to decide which arbitrator to use. A company is going to go with the arbitrator that rules in its favor the most. One study found that the ten most frequently used arbitrators decided in favor of consumers 1.6% of the time, while the least used arbitrators decided in favor of consumers 38% of the time.
This is crap, I'm going to appeal the decision to a real court.
No you're not, because:
(a)In all states but California, there are no records kept of the arbitration, so it's impossible to appeal.
(b)The deference that the Supreme Court has extended to arbitration has meant judges usually won't even overrule unethical or blatantly wrong judgments.
(c)A study of fifty-two arbitration clauses found in typical consumer contracts found that forty of them describe the arbitrator's decision as final or non-appealable, and the five agreements that allowed appeal simply provided for a new arbitration.
(d)All of the above.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In the company's favor.
Wa waaa. This is probably not surprising. Unlike judges or juries, arbitrators' services are paid for by the parties. Companies are repeat players in the arbitration game, and they get to decide which arbitrator to use. A company is going to go with the arbitrator that rules in its favor the most. One study found that the ten most frequently used arbitrators decided in favor of consumers 1.6% of the time, while the least used arbitrators decided in favor of consumers 38% of the time.
This is crap, I'm going to appeal the decision to a real court.
No you're not, because:
In all states but California, there are no records kept of the arbitration, so it's impossible to appeal.
Yes, but there's more.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In the company's favor.
Wa waaa. This is probably not surprising. Unlike judges or juries, arbitrators' services are paid for by the parties. Companies are repeat players in the arbitration game, and they get to decide which arbitrator to use. A company is going to go with the arbitrator that rules in its favor the most. One study found that the ten most frequently used arbitrators decided in favor of consumers 1.6% of the time, while the least used arbitrators decided in favor of consumers 38% of the time.
This is crap, I'm going to appeal the decision to a real court.
No you're not, because:
The deference that the Supreme Court has extended to arbitration has meant judges usually won't even overrule unethical or blatantly wrong judgments.
Yes, but there's more.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In the company's favor.
Wa waaa. This is probably not surprising. Unlike judges or juries, arbitrators' services are paid for by the parties. Companies are repeat players in the arbitration game, and they get to decide which arbitrator to use. A company is going to go with the arbitrator that rules in its favor the most. One study found that the ten most frequently used arbitrators decided in favor of consumers 1.6% of the time, while the least used arbitrators decided in favor of consumers 38% of the time.
This is crap, I'm going to appeal the decision to a real court.
No you're not, because:
A study of fifty-two arbitration clauses that are in typical consumer contracts found that forty of them describe the arbitrator's decision as final or non-appealable, and the only five agreements that allowed appeal simply provided for a new arbitration.
Yes, but there's more.
Submit to arbitration.
Fine you'll use arbitration, it's probably just like going to court, except cheaper, faster, and easier, right?
No, but I have no choice.
Exactly. First, you need to pick a venue. Let's say you live in New Jersey, and the injury occurred in New Jersey. Where would you like this arbitration to take place?
Connecticut.
Even though one of arbitration's supposed advantages is convenience, and even though arbitrations typically occur in a generic conference room, many arbitration clauses require that the dispute be arbitrated in a place that's convenient to the company.
Okay, well whatever. You have to head up to their office anyway, because you need to get copies of some contracts and documents, right?
I totally expected this company to screw me, so I've kept copies of everything and recorded every phone call with them; or I'm just going to make an impassioned plea directly to the arbitrator.
Yeah. Convenience means no subpoenas, no interrogatories, no discovery. One of the reasons companies use arbitration is because it prevents their dirty laundry from being aired (there's also no record kept of the arbitration).
Alright, you're at arbitration. Since you weren't able to get any evidence from the company, your entire case is based on allegations and some pictures you made on MSPaint, except you saved them as bitmaps so they're taking forever to load. The arbitrator is getting impatient and cuts you off. He thinks about it for a couple minutes, and now the arbitrator decides...
In the company's favor.
Wa waaa. This is probably not surprising. Unlike judges or juries, arbitrators' services are paid for by the parties. Companies are repeat players in the arbitration game, and they get to decide which arbitrator to use. A company is going to go with the arbitrator that rules in its favor the most. One study found that the ten most frequently used arbitrators decided in favor of consumers 1.6% of the time, while the least used arbitrators decided in favor of consumers 38% of the time.
This is crap, I'm going to appeal the decision to a real court.
No you're not, because:
All of the above.
Exactly. The problem with mandatory binding arbitration agreements, as you've probably noticed from this terrible choose your own adventure, is that there's no choice. You're forced to use a sham proceeding that has no real procedural or judicial protections.
The point that we're making isn't that lawsuits solve everything, or even that all arbitration is bad. What we're attacking are contracts that require you upfront to agree to binding arbitration. If a problem arises and both parties want to arbitrate, that's fine. Even a contract that requires arbitration, but allows litigation if the result is unsatisfactory, is acceptable. The essential component is the choice to arbitrate, or not arbitrate.
(Photos: spi516, navets, and superbomba)
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