Overruled


With Enough Money, The Facts Become Irrelevant
March 12, 2009, 10:28 am
Filed under: Ian | Tags:

The Chamber of Commerce is touting a recent study by the Searle Civil Justice Institute, claiming that it “helps prove that arbitration continues to provide consumers with fair, inexpensive and unbiased access to justice.”  It’s unclear, though, how any sensible observer could conclude that the study proves anything other than the opposite.

From the beginning, it’s worth noting that the Searle study relies on questionable methodology.  The study considers only 301 decisions, all of which were decided by the increasingly irrelevant American Arbitration Association (AAA).  According to the Searle study’s data, the AAA decided only 313 consumer cases during an eight month period in 2007, and the study selected 301 of these cases for its study.  By comparison, a single arbitrator employed by the awesomely biased National Arbitration Forum (NAF)—NAF rules in favor of corporate interests at least 94% of the time—handed down 332 decisions over the course of only six days, all of which were decided against the consumer.  So judging the fairness of forced arbitration based on the practices of the AAA is a bit like examining the rate of alcohol consumption in college towns by studying the drinking habits of students in Provo, Utah.

Yet even with its cherry-picked data, the Searle study paints forced arbitration in a very negative light.  Admittedly, the study finds that corporate parties lose approximately half of all AAA arbitrations when they are the defendant, but the study also determines that corporate parties win 83.6% of all AAA arbtrations when they are the plaintiff. An 83.6% win rate is pretty shocking, and in no way indicative of a system that is fair to consumers.  Moreover, the Searle study found that when the corporate party was the plaintiff, it received at least 90% of the award it claimed in over 80% of the cases it won. When the consumer party was the plaintiff, however, that party achieved a similarly favorable result in only 31% of the cases it won. So far from demonstrating that AAA arbitrators are “fair” or “unbiased”, the Searle study shows the opposite. Corporate parties are far more likely to win when they are the plaintiff, and they are almost three times as likely to receive close to the full amount they are seeking in damages when they do win.

In light of the study’s unquestionable evidence that arbitration is a raw deal for consumers, it is a bit surprising that reporters have swallowed the Chamber’s line on the Searle study.  The Wall Street Journal announces “Consumers Rejoice: After All, Arbitration is Fair, Study Says,” and the Chicago Tribune proclaims that “Arbitration favors consumers more than 50% of the time.”  They have probably swallowed this line, however, because the Chamber understands something very important about public relations: it doesn’t matter what the facts are if you have good spin doctors.

The “Searle” in the Searle Civil Justice Institute is Daniel C. Searle, the heir to a pharmaceutical fortune who devoted at least $100 million of his substantial fortune to funding right-wing institutes and think tanks.  The Institute’s board includes such luminaries as Victor Schwartz, who was once declared a “Legal Reform Champion” by the American Tort Reform Association, and Judge Edith Jones, who once held that a capital defendant received a fair trial when his court-appointed attorney slept through significant parts of the proceedings.  Its director is Geoffrey Lysaught, a former investment banker and insurance executive.  So I guess I shouldn’t be surprised that Lysaught distorts his own institute’s study to conclude that arbitration is “relatively inexpensive and expeditious, and outcomes are not biased in favor of businesses.”  Nor, for that matter, should I be surprised that a press release touting the study presents Mr. Lysaught’s absurd conclusion.  After all, Searle apparently hired a former employee of the Chamber of Commerce’s Institute for Legal Reform as their press flack.

Because that’s the great thing about having a shitload of money, when the facts don’t support you, you can drown them out in spin.

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