Why the binding arbitration game is rigged against customers (2019)
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0: https://pluralistic.net/2022/02/24/uber-for-arbitration/#nib...
The courts have not looked favorably on the US Chamber of Commerce and other orgs attempting to weasel their way out of fulfilling their contractual obligations.
In any case, I hope DDOS attacks on arbitration start up hard. But so far the problem has been that companies refuse to comply with their own rules. It seems very one-sided. This is something the supreme court needs to rule on.
In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.
If they somehow refuse to perform the binding arbitration for whatever reason, then you have a constitutional right to take them to normal court. The Binding Arbitration system is an agreement to not go to court.
If one side of the agreement doesn't live up to the agreement then the agreement is null and void. Since typically binding arbitration is favorable to the company by way of preventing emotionally motivated massive damages judgements, aka "nuclear" verdicts (like the totally justified McDonald's "hot coffee" verdict, for instance) they are still an alright deal for the average person because they typically can resolve things quickly and effectively, and the arbitrator isn't going to just side with the company when they did something wrong.
Points for thinking the hot coffee verdict was reasonable, though!
This isn’t true for any agreement not drafted with macaroni and crayons [1].
Trivial example: you not paying your rent per contract doesn’t nullify your lease.
Severability clauses, which specifically say that nullification of a single part of the contract affects only that part, not the whole, are standard.
In a case where one million people were legitimately harmed though, this can be absolutely disastrous for the company unless the wronged agree to waive the arbitration clause with the company and pursue something like a regular class action lawsuit. It'd still be more expensive than a regular class action lawsuit however.
What? Just go read the PayPal one. It says very clearly you can only bring arbitration cases on an "individual basis". Which was directly in response to this issue.
"Unless both you and PayPal agree otherwise, the arbitrator(s) may not consolidate or join more than one person’s or party’s claims and may not otherwise preside over any form of a consolidated, representative or class proceeding."
Edit: maybe PayPal was the wrong example here - I definitely saw clauses change after the Uber court case, but it seems the PayPal one had been there longer?
For example, if there are 31,000 arbitration requests made by Uber Eats customers https://www.reuters.com/legal/litigation/uber-loses-appeal-b... or 12,500 arbitration requests made by Uber drivers https://gizmodo.com/ubers-arbitration-policy-comes-back-to-b... and each arbitration request costs Uber $1500-$3000 in fees.
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
Having been involved in actual civil litigation, a lot of this rings true. The simplest possible civil cases take years to resolve, at tremendous expense.
"We can go to court if you want to, just know that we will spend half of what we think your case could go for if you win defending ourselves and use every tactic in our arsenal to drain your war chest until you are financially unable to continue the lawsuit, so unless you've got big bucks to burn or a darn good case and a lawyer willing to fight for you you are better off choosing an arbitrator and getting a simple and just settlement in 3 months vs 3-8 years from now even if we did wrong"
There is mediation. But it’s non-binding.
Mediation is not the same as arbitration. Mediators are negotiators. Arbitrators pass judgments.
PROTIP: It's not "mediation" if the mediating attorney represents the other party, nor is it arbitration. That's an Interrogation held under the pretense of "being reasonable." Like talking to the cops, it's a trap-- GTFO of there immediately and don't come back without your own attorney. (My wife's ex pulled this one.)
Mediation is two parties sitting down with an attorney (who represents neither of them) to work something out and have a judge sign off on it. Both parties have the right to select or reject the attorney involved. This is done to save court time more than anything. You always retain the right to flip the table and take the dispute to court. (IANAL, just former staff for a district ADR program.)
By contrast, I was involved in one arbitrated dispute around the time the concept first hit the scene. It was a kangaroo court where they made the rules up as they went. There is a formal process to it but the rules and procedures are completely foreign to you, and you can't hire an attorney to represent you. Mine was a wage dispute where they inexplicably wouldn't let me introduce timesheets as evidence. Instead, I pled my case orally and got a letter a few weeks later stating I lost because I couldn't prove my claims (lol), and helpfully reminding me that was as far as I could go with the issue. I was set up to be completely railroaded. To be fair, while I was undeniably wronged, I'm not saying I was unquestionably entitled to recourse-- I'm saying I have no idea who's really in the right or who should have done what since it's not like the proceedings can be reviewed by anybody or conclusions were based on any case law.
My impression of it is that companies found a way to get the more-disarming parts of magistrate court to apply to claimants that could otherwise claim significant losses or become class-action, to divert them from the legal pipeline altogether to Judge Judy, who has no qualms admitting she's ruling against you because despite the merits of your case, she just doesn't fucking like you and her word is final.
Which arbitrator required this? To be clear, this is unconventional and should be illegal.
The other side had their attorney present, but he was not a participant in the proceedings, if that makes it any clearer. On-record it was just me, my former boss and the arbitrator.
This should be fixed. But in the meantime, mechanically opting out of consumer arbitration is immensely stupid.
Fixing the system would be much better than banning arbitration, but it's also probably very, very hard.
So here we are.
So what happens instead? Each company comes up with their own detailed, up-to-date, heavily skewed set of rules. And we agree to use their private court system or go to another company that does the same thing but slightly different.
https://www.huffpost.com/entry/russian-rewrites-credit-agree...
V2 could use rocketreach to find individual lawyers at bigco and mail each individually with slightly different messages to create more confusion.
The plugin developer is more likely to be sued than any company lose material amounts of money. That or one would just ignore requests matching that form.
> V2 could use rocketreach to find individual lawyers at bigco and mail each individually with slightly different messages to create more confusion
This is intentionally generating frivolous requests with the intent of causing damage. You’ve escalated from civil to possible criminal liability.
Individually doing something like this is fine. But you have to do it with the intent of resolving an issue. Not causing damage.
Anyway, just a thought experiment. Most protests achieve nothing.
Likely wouldn’t get approved by browser vendors.
I just went through it and lost. Never thought I would lose against this clearly shady contractor. I had inspection reports, emails and texts from them committing to fix my house, and 400+ pages of photos. The contractor had walked off my job over a year before we ever made it to arbitration… I still don’t have my house back.
The mediator, who the contractor got to pick, basically started off saying, “We have to give the benefit of the doubt to these hardworking contractors who came to your aid in your hour of need…” That was a taste of how the whole day would go.
Still feels raw. Here’s a little more on my story with binding arbitration.
https://www.linkedin.com/pulse/anyone-have-connections-usaa-...
Mediation is not binding. Arbitrators are picked by both sides.
They picked 2 mediators, we got to pick a mediator from the 2 they originally picked.
At the end of the day we were at an impasse... and I was told it was 18+ months to get in front of a judge for a trial, and it would cost me another $100k. So the mediator said she could help with a arbitrators decision, but I had to agree to it before she would pitch it to the other side -- to be clear, I had to agree to it before I knew the terms of it. And I figured she'd just factor in where we were at that point in the negotiations and split it down the middle. But that's not how it played out. It was painful.
So as the alternative you’d prefer only having the latter?
> I had to agree to it before I knew the terms of it
I strongly doubt you did, though I do not suspect that this was the suggested. Did your attorney confirm this?
They don’t have to and they’re in a dispute. In arbitration, they have to.
> Kaplinksy’s claim to fame is that he’s the lawyer who figured out you could get rid of the ability of a consumer to go to court by using what’s called a pre-dispute arbitration provision in a contract.
I'm no expert but Kaplinsky sure sounds like a modern day super-villain.
[0] https://www.thebignewsletter.com/p/ending-junk-fees-the-most...
[1] https://www.ballardspahr.com/People/Attorneys/K/Kaplinsky-Al...
I asked on Law Stack Exchange, but the answers were not quite convincing.
If you had your hand cut off by your manager for being 5 minutes late to work and sued your company only to find out it had to be dealt with by binding arbitration, and in the course of discovery you found an email from the CEO and the board telling managers to start cutting off people's hands if they are 5 minutes late to work, and then the binding arbitrator said that the company did no wrong, then they have exposed themselves to a potential lawsuit without the protection of a binding arbitration agreement.
So, just like a fiduciary financial manager, they have a responsibility to act and judge in a way that will stand up to possible external scrutiny.
But even so, all an arbitrator need to do is rule in favor of the corporation whether there is a thread of an argument in their favor, then ruling against the corporation in the remaining tiny fraction of cases.
Both sides choose the arbitrator. If an individual arbitrator consistently rules against one category of claimants or defendants, lawyers will steer clients against them and they won’t get paid.
The arbitration service is paid by the company, usually, which is a win for the consumer. But the arbitrator is individually paid only if they’re selected. (They’re also usually retired judges, et cetera.)
If a basically every company insists that you waive your employee rights to work for them, then the only people with those rights are the unemployed, rendering those laws a bit moot.
You gain a competitive advantage over your peers by being willing to waive your rights, in the sense that a company of course would like to not have to respect your rights. The point of employee protection laws is to take that off the table.
I suppose that arbitration lowers the cost of a dispute very seriously. It makes sorting out small issues affordable and much faster. I see it as a good tradeoff as long as I don't depend on it in potentially serious cases, where hiring a lawyer would be the least of my troubles.
1. https://www.uber.com/legal/en/document/?name=uber-connect-te...
2. "Notwithstanding the foregoing, where you allege claims of sexual assault or sexual harassment[...]"
The part about cutting off your counterparty's access to the justice system
There's nothing wrong with arbitration as a first choice to avoid court, to the benefit of both parties. There's something very wrong with binding arbitration.
Ultimately I’d rather take the position that if you don’t like the terms of a contract you are free to not agree to it.
The article suggest big companies gaming the arbitration system. Read any civil (or even criminal) court case, and both sides will do the most possible tactics to win. The disparity of expertise is not an evil behavior of the parties. Yes, individuals with fewer financial means to find lawyers in arbitration are at financial disadvantage compared to corporation, and they would be in the same, if not bigger financial bind if it was done through the court system.
The notion that arbiters are beholden to corporation because of compensation is the biggest, glaring problem.
Also ultimately a 12% effect is not the end of the world. Without arbitration you are going to be paying a lawyer a ton more money so it’s not even clear it’s worse for the consumer on average.
This is the defendant choosing the judge and jury.
Both sides have a say on paper.
But the company gets to pick 2, but then you only get to pick from the 2 they suggested.
You don’t have a real choice. It’s just rigged to make it sound like you do.
This article is talking about the net effect, which is that the fact that there _is_ asymmetry means that arbitrators have an interest in _being_ biased against the individual, which means that even if you are paying for an arbitration lawyer, they are simply ruling out the _most_ biased firms, while the corporate arbitration lawyer is ruling out the _least_ biased firms. Think natural-selection, rather than game theory.
The idea of going into arbitration against a company without a lawyer seems absolutely insane to me and I would bet that the number of plaintiffs with representation is close to 100%. I also do not have actual data on this, though.
At the end the situation isn’t so great for people who fall through the cracks with unusual issues, but for common scenarios it’s great. The unusual issues should still have access to the ad-hoc market and usually there, producers (with all their resources and organization) have the advantage.
I personally object to binding arbitration - but it is certainly less expensive to engage in arbitration than a full lawsuit. Additionally it may be possible to recoup your legal fees as part of the final arbitration, though this is not guaranteed (and shouldn't be for very good reasons).
could it be that there are simply more pro-buisness arbitrators than pro-consumer? so a random list would have too many for customer representative to strike off?
First, 90% of arbitration is between firms, not consumers. Consumer driven arbitration is rare enough that it's hard to specialize as a pro-business arbiter. Usually arbiter bias will be pro [big, small, old, new] just like us regular people.
Second, like other public facing retail and service management, consumer disputes are generally 80% frivolous. Like "they did not read the contract" level issues. That about 50% of disputes award in favor of the consumer is seen as overly benevolent appeasement.
Note: the 20% non-frivolous are usually very clear cases of the corporate participant blatantly or maliciously screwing up; no sympathy there. People are people everywhere.
For this reason most industry professionals very strongly suggest mediation rather than arbitration. It's quicker, cheaper, and usually ends in a voluntary non-binding settlement. And if you don't like it, it's non-binding; you can proceed to arbitration. Corporate clients would usually prefer to voluntarily agree to a settlement to make the problem go away, and consumers get the neutral information they need to understand why they misunderstood the situation.
However, most people see red and want to punish the other side. That rage makes them want to use as much authority and leverage as they can. Arbitration is seen as "not enough of a punishment, court would be better." When really, most people would be better served sitting down and talking things over with mediation rather than explicit adversarial intent.
I've heard similar things from civil court judges. They don't think they're biased for or against citizens, police, lawyers, etc. They are used to seeing the most incompetent petty facepalm justifications to "punish" someone, instead of seek justice or restitution. They are biased positively towards anyone who shows the slightest decorum, competence, or noble intent.