Thursday, March 8, 2012

Arbitration under fire on NPR

According to recent news reports and The Diane Rehm Show today, an ever growing number of companies are including 'forced' or mandatory arbitration clauses in their contracts. What consumers and job seekers give up when they sign these contracts is their right to sue. Her guests included Professor Morrison, of GW Law School, who cited Kaiser's California health care plan arbitration that is working well. (But when asked by Ms. Rehm, he didn't know whether his own contract with the school includes and arbitration clause). Andrew Pincus, who represented AT&T in the Concepcion case before the Supreme Court, a former Assistant to the Solicitor General in the United States Department of Justice, who prevailed. The Court upheld the clause in that case on federal preemption grounds. Mr. Pincus felt the small claims represented by the plaintiff's class provided an incentive to utilize the process in bringing legitimate litigation. Richard Naimark, SVP of the American Arbitration Association, defended the process which he said has been growing the past dozen years. AAA's neutrals are independent third parties not beholden to anyone according to Mr. Naimark and have existed since the Federal Arbitration Act was passed in 1925. The process has evolved into consumer and employment rules which have differing fee structures, with businesses paying most fees. He argues arbitration is cheaper and easier than access the courts. AAA is taking a neutral position on the issue of mandatory clauses and primarily focuses on consensual arbitration. He maintains a common-sense explanation is all that is required on forms to get before an arbitrator. Christine Hines, a consumer and civil justice advocate at Public Citizen's Congress Watch wishes people to understand access to the courts. She seeks restoring rights of choice to the consumer, who unknowingly gave up their rights, when a dispute arises. She argues there is no transparency and that no public knowledge of corporate misconduct is bad for consumers. She is also worried about repeat business for private arbitrators favoring the corporation. However, arbitrators are required to disclose factors affecting neutrality according to AAA. Ms. Rehm said the process feels constricting and that transparency is lacking with regard to achieving justice which is not true in the courts. Mr. Naimark said courts are under budget stresses and are increasingly difficult for average people to navigate such that justice is best served through arbitration. Finally, though unlikely to pass, the guests discussed the introduction of the Arbitration Fairness Act last year as S. 987 and H.R. 1873 calling for arbitration to be agreed upon by both parties after the dispute arises and not just inserted in the fine print of often one-sided adhesion contracts. Listen here: and also read an NY Times editorial on this subject here: