The Difference Between Walking Out the Door, and Being Pushed
February 13, 2009, 2:12 pm
Filed under: Ian | Tags: ,

I’ve written a lot lately about binding mandatory arbitration, the biased, privatized justice system which many companies force their customers and employees to participate in.  If you are tricked or trapped into signing a mandatory arbitration clause, and many companies will refuse to do business with you unless you do, you lose the right to hold that company accountable in court if it breaks the law—and instead must bring your case to a secret tribunal that overwhelmingly favors corporations.  Presently, the corporate lobby is fighting very hard to block a bill which will stop abusive arbitration.

One strategy the corporate lobby uses is to blur the line between mandatory arbitration, which frequently allows corporations to violate laws intended to protect ordinary Americans with impunity, and other, consumer-friendly ways of resolving disagreements that don’t involve taking someone to court.  Unfortunately, the Des Moines Register appears to have adopted this line:

All Marie Burgy wanted was her gutter fixed.

The improperly installed rain spout dangled from her Amana home. Water spilled from the roof and splashed on her lawn. The gutter company would not return her telephone calls.

But Burgy, 87, did not call her lawyer. Instead, she called a friend, who called a mediator, who called the company in Cedar Rapids that fixed the problem.

“It was wonderful,” she said. “I was ready to sue, but that was really something I didn’t want to do. I didn’t want to go to my attorney if I didn’t have to. I just wanted to settle it peacefully.”

Burgy’s situation reflects what lawyers, legal scholars and mediators see as a growing trend in small-scale legal spats. Iowans, like many Americans, have turned increasingly in the last decade to out-of-court solutions such as arbitration and mediation to resolve civil disputes with less cost and hassle. . . .

Christina Doucet, spokeswoman for the National Arbitration Forum in Minneapolis, said allowing customers to settle disputes with hired experts, usually lawyers or retired judges, is “really removing the taxpayer from the equation.”

The National Arbitration Forum is not a reliable source on arbitration.  The NAF is notorious for employing arbitrators are nothing more than rubber-stamps for corporate parties.  One NAF arbitrator awarded $11,000 to a debt collector against a woman who owed no money whatsoever, but who had the same name as a woman who did.  Another handed down 68 decisions in the same day, all favoring credit card companies and debt collectors.

Setting that aside, however, my biggest concern with the Register‘s article is that it presents arbitration and mediation as two perfectly benign ways of staying out of court without explaining the difference between the two.

Mediation is a voluntary process where two people agree to resolve their differences with the help of a neutral party or mediator.  Because mediation is completely voluntary, either party can walk away from the discussion if they think they are getting a raw deal. Arbitration is binding; once two parties enter into arbitration, they are stuck with whatever decision the arbitrator makes.  Sometimes, two parties will submit to voluntary arbitration, meaning that they both agree to let their dispute be decided by an arbitrator after that dispute arises.  There is nothing wrong with this.

Binding mandatory arbitration occurs, however, when a company either traps a person into arbitration by refusing to do business with them unless they agree to arbitrate any future disputes, or tricks a person into signing an arbitration clause buried somewhere in a lengthy contract.  In some of the most appalling cases, nursing homes have thrust arbitration clauses into the hands of stroke victims and told them to sign.  In other cases, workers have been ordered to sign a binding mandatory arbitration clause or they will be fired on the spot.  Moreover, when a person is trapped or tricked into signing an arbitration clause, they are giving the company a virtual carte blanche to violate the law.  According to study of almost 20,000 binding mandatory arbitration decisions, the corporate party prevails a massive 94% of the time.

When speaking about mediation and arbitration, it’s important to keep in mind one very simple point: it is fine to ask someone to walk through a door, but it is never ok to push them out of the room.  Hopefully the Des Moines Register will publish a follow up piece making this distinction clear.


2 Comments so far
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Ian – another distinction to consider is when corporate entities or other sophisticated parties mutually agree to arbitrate claims arising out of a commercial contract. Surely you don’t want to waste judicial resources for a lawsuit between Big Company A and Big Company B, when the two signed a complex, well-negotiated deal, including a binding arbitration clause, and relations between A & B eventually sour.

I strongly disagree with you on the merits of arbitration; putting that aside, you’ve got to consider all sides to binding mandatory arbitration — including what even you should think is a positive.

Love the blog — it’s a great way to keep up with you. – A Duke friend

Comment by Marie Anderson

I respond to Marie here.

Comment by Ian

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