Arbitration and You

ARBITRATION AND YOU….Over at Mother Jones, Stephanie Mencimer writes about the increasing number of businesses that won’t do business with you unless you sign away your right to a trial in case of dispute. In fact, there are now entire industries that refuse to deal with anyone who won’t agree in advance that all disputes be resolved by a private arbitration firm:

All of this is especially nefarious given that the vast majority of consumers who attempt to seek justice in mandatory arbitration lose. The nonprofit consumer group Public Citizen recently analyzed data the NAF provided to the state of California, one of the few states that actually requires arbitration firms to disclose information about their results. Public Citizen found that in 94 percent of 19,000 cases, NAF arbitrators ruled in favor of the businesses that hired them.

….One reason businesses often come out on top in arbitration is that arbitrators who rule for consumers have a tendency to find themselves out of work. Such was the case with Richard Neely, a former chief justice of West Virginia’s Supreme Court, who worked briefly as an arbitrator for the NAF. In an article called “Arbitration and the Godless Bloodsuckers,” Neely reported that he had refused to award a bank arbitration-related fees that he judged to be far in excess of what a court would have charged. He never got another case. Neely is not alone. A 2000 study of forced arbitration in HMO contracts found that on the rare occasion that an arbitrator made a significant award for a patient, the HMO never hired that person to arbitrate a case again.

Fun fact: when car manufacturers tried to insist on arbitration clauses in their contracts with car dealers, the dealers fought back furiously, saying that it would allow big corporations to “unilaterally deny small business automobile and truck dealers rights under state laws that are designed to bring equity to the relationship between manufacturers and dealers.” The dealers lobbied Congress to prohibit this and Congress agreed.

But guess which industry is one of the worst abusers of arbitration clauses when it comes to selling their product to consumers? Yep. Auto dealers. Read the whole thing.