John Fleming sent us the following comments about our post of yesterday (find the post here):
I have a beef with the Solin’s approach. FINRA has a new pilot program that allows customers to choose arbitration panels with only non-industry arbitrators. Guess what? In reality customers and their lawyers are actually choosing to have industry arbitrators on the panels in about 50% of the cases, even when they can exclude them. Privately, lawyers who actively represent customers in arbitration with FINRA have told me they often prefer to have an industry insider-they know really stinky behavior when they see it and may often be tougher on the offender than a public member.
There are really four questions at play here and within the consumer arbitration debate generally. One is how well are consumers and employees doing in these proceedings (and how does this compare to court outcomes)? Here the really good empirical evidence is just emerging. You have to throw out many of the so called studies which have been sponsored by people with agendas. I don’t think that either the Public Watch survey dissing arbitration or the US Chamber survey praising it deserve serious consideration. What little independent research is emerging seems to indicate consumers and employees that proceed in truly neutrally administrative forums such as before the American Arbitration Association (ok, so I am on their panel), and JAMS do as well or maybe a little better than they might in a court setting.
The second question is the question of choice. One of the fundamental principles of the Alternative Dispute Resolution movement is party choice. Regardless of evidence that consumers and employees may do well in arbitration, people resent the fact that the agreement to arbitrate is buried in a contract of adhesion. It just does not feel very much like a choice.
Third is the question of consumer access. I do think there is merit in the argument that for some consumers and employees the arbitration forum may actually be more accessible than litigation. This is especially so when the claims are too small to generate interest of contingent fee lawyers. Of course, forum access fees are an issue in arbitration. However, the courts are generally moving in the right direction by refusing to enforce arbitration clauses where the forum access fees could deter consumers or employees from pursuing their claims.
Fourth, is the real elephant in the room. There is a sense that the driving force for including arbitration in consumer and employee contracts is a hope that large companies can write their way out of being exposed to class actions. I find it interesting that now that we have rules for class arbitration proceedings, you see clauses that say something like “will if it is determined that the waiver of class action is unenforceable, then any class proceeding will be in court.”
John C. Fleming
Hays & Owens, L.L.P
Brazos Suite 500
Austin, Texas 78701
We welcome your comments about this controversial topic!