Research on Mandatory Arbitration

Defeating Mandatory Arbitration Clauses

Orig. published in Trial magazine, Jan. 2000, by John Vail

Arbitration clauses can put unwitting consumers at the mercy of a biased decision maker who is not bound to follow the law and who is often in an inconvenient place. A purchase of XYZ electronic equipment can mean submitting disputes to XYZ's affiliated arbitrator in Jefferson, Wyoming-surely a tactic meant to discourage consumers from filing grievances. Moreover, consumers may forfeit discovery, have limited remedies, and pay handsomely for the privilege of engaging this forum.

Mandatory arbitration clauses take dispute resolution away from the judgment of jurors and the scrutiny of the public. They exact waivers of fundamental constitutional rights without meeting the generally required standard for informed consent–that the waivers be knowing, intelligent, and voluntary.

Especially offensive is the federal policy, embodied in a long line of Supreme Court cases interpreting the Federal Arbitration Act (FAA), that immunizes many clauses from state regulation and guarantees their enforcement. Clearly the FAA needs to be amended and restored to its original purpose: to regulate agreements between large commercial entities, not between large commercial enterprises and consumers.

AAJ and other groups are working in Congress to that end. In the meantime, consumers will turn to lawyers to wrest claims from arbitrators and give them back to judges and juries. Full article

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