12 Things We Learned From The New York Times’ Investigative Report On Arbitration

Consumerist’s first post on the subject of arbitration, back in 2007, described a dispute that was ultimately resolved in the consumer’s favor. Since then, we’ve been against the practice, pointing out when popular companies change their terms of service to add arbitration clauses. It doesn’t matter, though, because arbitration can save companies so much money that they don’t especially care what we think. Sometimes.

This weekend, the New York Times published a great two-part series based on analysis of tens of thousands of arbitration records and interviews with plaintiffs, defendants, arbitrators, and attorneys. You should go check it out: you most likely do business with a half-dozen entities that ban class actions and require arbitration, and the stories describe how that started and the possible consequences.

  1. Arbitration decisions can’t be appealed. That can simplify things, but becomes a serious issue when a case doesn’t go your way.
  2. The rules of evidence that exist in a court setting don’t apply, and pesky things like rules against conflicts of interest also don’t exist in arbitration.
  3. The Times notes that judges sometimes call arbitration clauses “get out of jail free” cards, since they prevent consumers from fighting companies over relatively small slights that aren’t worth going to arbitration over individually.”Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach,” said one federal judge.
  4. Arbitration clauses in contracts in cases grew after two Supreme Court cases, in 2011 and 2013.
  5. It happens that one of the lawyers working for the cause of banning class actions was John G. Roberts, Jr., who is now Chief Justice of the Supreme Court. At the time, he was a corporate lawyer working for Discover Bank.
  6. In theory, class action bans let consumers arbitrate their disputes without the lengthy class-action process that mostly benefits class-action attorneys. However, Times analysis of attempted class actions that stopped because of mandatory arbitration clauses show that most people drop their cases rather than go to arbitration.
  7. A wide variety of businesses now employ arbitration clauses, covering the whole lifespan, from obstetricians to funeral homes.
  8. Consumers suspected that banks were re-ordering debit card transations from the highest to the lowest amounts at the end of each day to rack up extra overdraft fees. Customers sued in class actions, and most of those banks now have arbitration clauses.
  9. Corporate lawyers and executives argue that arbitration and small claims court are both still open to consumers with small disputes, and we aren’t bothering to file complaints because we aren’t familiar with those venues or don’t know how.
  10. Oakland Raiders cheerleaders considered entering arbitration against the team. Then they learned that the abritrator in charge would be… the completely impartial commissioner of the NFL, Roger Goodell.
  11. A private justice system means that religion can also become part of the proceedings: some companies require their customers to go to prayer-filled Christian arbitration.
  12. Companies return to the same arbitrator over and over: how do you know that one won’t decide against you just to court future business?

Arbitration Everywhere, Stacking the Deck of Justice [The New York Times]

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