Businesses souring on arbitration

May 7, 2012 | By | Reply More

The website Arbitration Nation has reported on the cognitive dissonance experienced by businesses when it comes to arbitration of commercial disputes. Based on a new survey, only 60% of companies arbitrated commercial disputes in 2011, compared to 85% in 1997. Why aren’t businesses clamoring to arbitrate their disputes with other businesses?

The most common reasons given by survey respondents (general counsel and senior corporate lawyers) for not using arbitration included: the difficulty of appeal, the perception that arbitrators tend to compromise, the concern that arbitrators may not follow the law, a lack of confidence in neutrals, and high costs of arbitration. The study, conducted through Cornell’s Survey Research Institute, was co-sponsored by Pepperdine’s Straus Institute for Dispute Resolution, Cornell University, and the International Institute for Conflict Prevention & Resolution (CPR). (Its results are not currently available on-line.)

Arbitration Nation noted that while businesses are increasingly avoiding arbitration, the United States Supreme Court is making it more making it increasingly difficult to avoid the application of harsh arbitration contracts. Of course, most of the new court holdings enforcing pre-dispute mandatory arbitration clauses victimize non-businesses, such as consumers, employees and victims of civil rights abuses. Arbitration Nation links to a new article by Thomas Stipanowich that proposes a rating and ranking system for arbitration processes. We already have ample evidence exempt these group from mandatory arbitration. It is palpably clear that big businesses are using mandatory arbitration to take advantage of consumers, employees and victims of civil rights abuses, using their disparate bargaining power.  They are using “arbitration” as a method of gaining immunity for their illegal actions. They are doing this, even as they vote with their feet that they don’t like arbitration for themselves.

Instead of gathering more data, we completely carve out consumers, employees and civil rights plaintiffs from being required to arbitrate.  Sure, give them the option of arbitrating a case, but only after a dispute has arisen; never force them into mandatory, binding, pre-dispute arbitration.  What I have just described is the approach of the Arbitration Fairness Act.

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Category: Court Decisions, Law, Social justice

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

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