Recently one of my creditcard companies sent me a notice that they woud be switching to Mandatory Arbitration to solve disputes. It included an opt-out form which I’ve sent back. (I’m waiting for them to cancel my card )This brought to mind a series in the SF Chronicle I’d read recently. Here’s the first installment. The article was kind of alarmist. But I tend to agree with it’s premises.
Namely that:
It’ll close the doors for people of moderate income to have there disputes heard in court.
That it’s possible that it could be used as an end-around for established labor practices and civil rights.
That it may cause inappopriate behavior by judges or at the very least the appearance of “conflict of interest”.
It’s possible that the Arbitures (sp?) could ignore the rule of law and find in favor of the guys footing the bill.
All together, now … Puuuuhhh-leaze. This is utterly disingenuous on the part of the SF Chronicle, and indeed casts suspicion on the other good points the article makes. Yah, the filing fee in court is considerably lower than the filing fee for some arbitrations. And that has almost nothing to do with the cost of a lawsuit. The filing fee is a miniscule part of the overall costs of a lawsuit - even an arbitration filing fee of $3,000 equals approximately one day of work of a decently experienced New York attorney. Indeed, the primary reason that corporations like arbitration is the reduction in legal expenses, not because they think they have a natural advantage in arbitrations. This reduction in legal expenses apply to both parties. (The lower legal fees are generally caused by more informal pleading requirements, limited discovery, and the severe restrictions on appeals).
In many cases, the plaintiff, because he/she is on a contingency fee basis with their attorney, does not directly see the benefits, because they aren’t paying the attorney out-of-pocket anyway. But even here, it benefits the plaintiff - an attorney is more likely to take on an iffy case in arbitration, where the attorney would have less out-of-pocket if they lose, than in litigation.
Overall, this is my problem with arbitration. (BTW, I’m responding to point 4 here as well - it is the same issue, but with a different emphasis.) The standard for getting an arbitration decision in court is not the (oversimplified) normal “should the decision have come down the way it did?”, but instead “under the law, could a rational decision-maker possibly have decided the case the way the arbitratorts did?” This is a much nastier standard, and to my mind, an inappropriate one.
But there is a caveat I must note. A decently-administered arbitration isn’t biased towards the corporation. In every one I’ve been involved in, both parties choose one arbitrator, and the two arbitrators choose the third, so the panel should be balanced. Indeed, in normal circumstances, Renee Cacalla, mentioned in the article, should be infuriated at her attorney for letting such an incompetent arbitration board be empaneled, not the arbitration system as a whole.
As I noted above, generally speaking, corporations prefer arbitration because of the reduction in legal costs, not because they are more likely to win.
This is a very serious charge, and I don’t think it is valid without more than the opinion evidence presented in the article. If it turns out to be accurate, then arbitration in America has serious problems.
Very reasoned arguements Sua but I’m not sure I agree with you on point 1. It seems obvious to me that someone making minimum or barely a living wage isn’t going to have the resources to come up with a $3000 filling fee.
I agree with you on points 2 and 4.
Btw, I forgot to mention that the article has the rest of the series linked on the side bar under “Private Justice” including the first story which was the inspiration for the series. The last article “High-Paying jobs…” has anecdotal information regarding point 3. While not iron clad, reading it did not make me comfortable.
Lots of contracts have those arbitration clauses stuck in them.
My car’s warranty manual mentions one, but it ain’t valid in CA, so it’s not relevant anyway! Of course, I only found this out after filing my lawsuit anyway…
I am sure it happens but I have never seen an action brought against the financial institution by a card holder. In the case of someone with low income the standard action would be a small claims suit initiated by the company. In such a case the standard arguements in favor of arbitration have little application and the costs of arbitration may be problematic for the card holder.
A lawyer is much more likely to accept a contingency case in arbitration than in court, because the amount of time he’ll spend on it is far less, and the award, if he gets one, will permit him to recover his epxenses… just as it would in court.
The point is, then, that if the minimum wage person can get a lawyer to take the case on a contingency basis, he probably won’t quibble over advancing the $3,000 filing fee.
Having never worked in civil law, or, indeed, having rarely been directly paid by my clients, I will bow to a more experienced opinion. But it seems a pretty safe assumption to me.
It doesn’t matter if you’re rich or poor - if a company screws you out of $250, the arbitration filing fee is a big barrier.
For small disputes, the cost of counsel isn’t that big a deal, because most people represent themselves in small claims court.
Of course, the real reason that credit card companies are imposing binding arbitration on their cardholders is to prevent class actions.
Once arbitration is in place, a company can screw every customer, just a little bit, with near impunity. It’s very common for unscrupulous companies to cheat every customer just a little bit. And I’ll be happy to give examples if anyone asks. Without class actions, it’s very difficult, IMHO, to keep this sort of behaviour in check.
This is one of my pet issues. I’ll make an effort to be brief. I read the Chronicle articles when they came out and I was greatly gratified to see the issue getting some press.
Arbitration is wonderful if everyone agrees and is ideal for disputes between equally situated commercial parties. But forcing consumers to arbitration is simply a way for companies to say to the arbitrators: “we arbitrate all our disputes, if you want us to hire you again and if you want to make a living doing this, you will be as favorable toward us as you can”. The consumer is not in a position to have repeat business. Judges and juries are paid for by the government and are not beholden to the litigants for their pay.
In any society, resolution of disputes is central to determining who holds real power over day to day matters. In arbitration, it is private arbitrators answerable to no one.
A computer company might promise 24 hour live technical support, but staff the phone lines with insufficient personnel.
An internet service provider might oversell its services, so that when you try to dial in you get 10 or 15 minutes’ worth of busy signals.
A credit card company might require that payments be received by a certain date, but still charge late fees to customers whose payments are received that afternoon.
A bank might set up procedures so that customers’ checks are honored in order from highest amount to lowest amount, regardless of chronology, thus resulting in the greatest possible number of bounced checks.
Now, a lot of these wrongs can be remedied by government regulation/prosecution. Frequently such prosecution amounts to an ineffective “slap on the wrist.” (Sometimes it works, however)
Also, the marketplace can correct some of these problems. For example, of the two computer companies that have been notorious for poor customer service, one is out-of-business, and the other is having serious problems.
But, IMHO, the class action lawsuit is an important weapon against the type of abusive practices described above.
Bricker Not to keep flogging this horse, but… It seems to me that the opposite would be true. The article implies that awards made by arbitures are generally smaller that those in a civil court. I think due to no punitive damages. It seems to me that a low income person seeking a lawyer on contigency for arbitration would have a harder time than one seeking the same for a civil trial. If my logics faulty, would someone please point it out.
Everyone I don’t realy mean to focus on Credit Card companies. It’s just that that reminded me of the Chronicle series.
I think the real dangers in Arbitration lies in those Civil Rights and Labor standards Sua spoke of earlier. Look at the sexual harrassment case mentioned in the article.
I can’t say your logic is faulty, as the answer is dependent on the attorney. But, let us say, your hypothetical is probably inaccurate. It’s really a question of risk-taking for the attorney. Do I (a) work arbitration cases on a contingency basis, where the potential award to me is lower, but in which I will have to invest less hours and therefore not be so much out of pocket if I lose (and also be able to handle more clients), or do I (b) work court cases where the potential award is huge, but where I must invest much time and resources, thus increasing the risk to me if I lose?
And there are many, many firms out there who go with option A. As an example, I know of several firms who specialize in representing clients trying to prove their eligibility for Social Security disability benefits. The payoff to the attorney is miniscule - by law, the fee award to the attorney is (IIRC) 25% of back benefits owed, which generally comes out to a few thousand dollars. OTOH, these cases don’t take much time, and the attorney makes a profit through volume.
)This brought to mind a series in the SF Chronicle I’d read recently. Here’s the first installment. The article was kind of alarmist. But I tend to agree with it’s premises.