WSJ's Recent Run on Forced Arbitration
by David Arkush and Taylor Lincoln
Wall
Street Journal readers have heard a lot about binding
mandatory arbitration recently. On Saturday, the newspaper’s editorial board used the Chamber of Commerce’s biased survey on
arbitration as justification for a fact-twisting polemic against the
civil justice system. Today, the paper reported on a lawsuit against the National Arbitration Forum by the city of San Francisco, and readers weighed in with views on arbitration far more reasonable than those of the editors.
The Journal’s editorial touted a recent
Chamber survey claiming that 82% of voters would prefer to resolve a
dispute with a company in arbitration in contrast to only 15% in
litigation. Of course, survey participants were not informed that if a company
forces you into arbitration, the company picks who resolves the dispute (what
would Memphis think if Kansas got to pick the referees for tonight’s NCAA
championship game?). Participants also
weren’t told that these biased decisions are binding and almost always final —
meaning no appeals even if the decisions contain “silly factfinding” or are just plain “wacky.” (The are quotes
from the Supreme Court and a federal appeals court!) Needless to say, the
Journal’s opinion writers didn’t mention these flaws in the survey.
As in the Journal’s November broadside against our
Arbitration Trap report, the editorial writers once again blur the
distinction between voluntary and mandatory arbitration. The difference is huge. In voluntary arbitration, parties choose after a disagreement has
arisen to settle it through a mutually agreed-upon arbitration process. No one
opposes this, of course. But in mandatory arbitration — the kind at issue in Congress right now —
consumers are forced to “agree” to arbitration as a condition of doing business. Or courts hold that consumers agreed to arbitration when they didn’t agree at all
— like when they didn’t know about or didn’t understand an arbitration requirement
buried in fine print. Apologists for binding mandatory arbitration have repeatedly pulled this sleight-of-hand, using studies
on voluntary arbitration to defend forced
arbitration.
Today, the Journal reported that the city of San Francisco filed sued the
National Arbitration Forum last week, accusing it of all manner of abuses. The
lawsuit’s charges, as rehashed in the story, echoed those in our Arbitration
Trap report. Among the city’s claims is that NAF only ruled in favor of
consumers 0.2 percent of the time in the period studied.
The Journal blogged on the lawsuit today, kindly
using the numbers and a photo from our Arbitration Trap report (but failing to mention
us or the report). The blog attracted dozens of comments which, on the whole,
show that the Journal’s readers understand forced arbitration pretty well in spite of the paper’s opinion page:
“0.2% of arbitration cases won by consumers? Fire that weak
kneed arbitrator, our goal is 0% consumer victories.”
“Juries tend to favor a consumer who has been wronged by big
business, while arbitrators seem to like the business side of things.”
“I have no problem with fair arbitrations that are freely
bargained for between economic equals; those can be beneficial because they
generally are faster, less expensive than real litigation, and, unlike this
type of arbitration, largely unbiased. This sort of arbitration, however, is
just a kangaroo court set up to circumvent the legitimate justice system
because consumers would win too frequently, what with juries being made up of
other consumers and all.”
“I agree that people should be responsible for their own
debts and actions, but due process of law and the appearance of fairness in
dispute resolution is just as important.”
“The NAF arbitrations don’t really occur in any place as
they are ‘paper drop’ arbitrations. The NAF picks some pre-approved arbitrator
that does business their way at $250 per and forward the paper work to that
person’s location, sometimes a PO Box. Most of these folks are semi-retired or retired
lawyers from corporate or large multi-city law firms. At $250 per 15 minutes,
not bad work.”
We couldn’t have said it better ourselves.