In Arbitration, a ‘Privatization of the Justice System’

http://mobile.nytimes.com/2015/11/02/business/dealbook/in-arbitration-a-privatization-of-the-justice-system.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=1&referer=https://t.co/dCBa0wODBb?t=1&cn=ZmxleGlibGVfcmVjc18y&sig=0412b03d682114f12acb7519cc2a36701c44f4cc&al=1&iid=644b959be5494f2fb4c7ed16f404ec86&autoactions=1446991361&uid=321660521&nid=244+288

by yesplorer • 11 years ago

119 57 11 years ago

mobile.nytimes.com

leesalminen• 11 years ago

The United States is essentially an oligarchy. Why is this surprising? Are we stuck with the nationalistic sentiment that America is the Best TM and are blind to the issues that affect all of us?

webkike• 11 years ago

How does the second part of what you said relate to the article?

fiatjaf2• 11 years ago

It's great to know something like this exists. We should have arbitration like this here in Brazil too, instead of arbitrarion subjected to public courts.

borkabrak• 11 years ago

I find this viewpoint surprising, given the problems with arbitration pointed out in the article.

What are your reasons for preferring arbitration? Are the courts in Brazil that corrupt? If so, how would arbitration be better?

fiatjaf2• 11 years ago

They are very very slow, both in judging and in executing decisions, and at the same time consume a huge bunch of State money. They are probably corrupt as well.

PaulHoule• 11 years ago

It's an issue that has more than one position.

For a long time I was a volunteer at a mediation center where maybe 70% of the cases we did were parenting plans for divorced or separated parents.

The scientific evidence is that mediation is much more effective, for parenting plans, than court both in terms of (i) people being happy with the results, and (ii) people following their plan and not winding up back in court.

The family court in the county has a close relationship with the mediation center and tries to send as many cases to it as it can because it is cheaper and faster, never mind getting the better outcomes that are mentioned above.

Now in the case of that center people can always go to court if they don't come to an agreement, but I would say that the NYTimes assessment of alternative dispute resolution is pessimistic and reflects the viewpoint of the lawyers who are 99% of democratic congressmen and nearly 50% of the republicans.

lazaroclapp• 11 years ago

Sure, but surely there is a significant difference. What you describe is essentially voluntary mediation process (you can always take it to court if you really really want to) between parties with a similar level of power (ideally...). What the article complains about is clauses in contracts of adhesion that force people to use a private tribunal without the option to appeal to the public courts for civil suits. A tribunal which is furthermore designed to resolve disputes between individuals and large corporations on which the private tribunal depends for business.

It's not so much more than one position as it is "more than one kind of settlement procedure", some of which are reasonable and some of which are quite obviously crooked.

Edit: In fact, even a private arbitration tribunal would be OK if you could: a) guarantee that the costs of the process in time and money are not unreasonable, b) reserve the right of appeal to the public courts for both parties. Just the additional leverage to the consumer of being able to appeal the arbitration tribunal might remove a lot of the incentives for it to deliver unfair results, and most people would likely settle for a fair resolution by arbitration anyways, only going to the public courts when they believe it would produce a very different result than arbitration.

bsder2• 11 years ago

Now in the case of that center people can always go to court if they don't come to an agreement

This is the key. Most arbitration clauses in contracts, however, seek to prevent going to court. And, in addition, arbitrators side with companies what appears to be far to often.

If people are required to seek arbitration, but can still go to court afterward, I have no issue at all with arbitration.

NhanH2• 11 years ago

And, in addition, arbitrators side with companies what appears to be far to often.

Of course the arbitrators have to side with the companies often, otherwise the company will change the arbitrator.

Natsu2• 11 years ago

There's no point to it if a lawsuit will follow, as it doesn't save any time over going to court. Half of the problem is with how the arbiters are chosen: ideally, neither party would get to choose and all arbiters would be held to standards.

DannyBee9• 11 years ago

"This is the key. Most arbitration clauses in contracts, however, seek to prevent going to court."

Most mediated settlement agreements have the same clause.

The goal is finality.

"And, in addition, arbitrators side with companies what appears to be far to often."

Based on what data do you think it is far too often?

IE why is it bad that they side with companies often if the companies are right?

In my experience, most of what our justice system deals with are bullshit or worthless claims, and so if the private arbitrators agree with the companies, instead of the company settling, that's good not bad.

I'd love to see some independent org do an independent review of the strength/merit of the claims of each arbitration case, and whether there is still bias "accounting for that"

I realize how difficult such a thing would be ;)

Without such a thing, at least, given what i've seen, i remain unconvinced that most complainers are is not just the whining of plaintiffs lawyers and people they sold a bill of goods to.

Because arbitration is cheaper, faster, and probably better for everyone.

(plus, you don't need lawyers to represent you. In fact, i could start a company that handled thousands of arbitration claims for folks much more effectively than i could handle thousands of class action lawsuits. Because i don't need $500 an hour lawyers to manage the case, legally.

It happens that lawyers are really slow and haven't noticed this yet, but i expect arbitration will end up better long term for people once they do)

"If people are required to seek arbitration, but can still go to court afterward, I have no issue at all with arbitration. "

If they could, there would be no point in arbitration!

Someone is going to lose. If the next step is to go to a judge and have them re-decide the whole thing, why bother with the arbitration step?

aljones• 11 years ago

Their assessment is based on direct evidence and statistics.

mapt• 11 years ago

I offer you an alternate interpretation which may fit your data:

The easy cases where both parents are likely to agree and be happy with the results, end in mediation.

The difficult cases where both parents are likely to dispute the results, accept mediation less often, and end up in court.

Binding arbitration is a different thing entirely, because the parties have no recourse and one of the parties set up the system, which loses revenue if it cannot be useful to that party.

jccc• 11 years ago

Businesses with experienced legal departments duping gullible individuals into giving up their right to trial is not comparable at all with individuals first considering then agreeing to resolve their issues between themselves out of court.

The NYT article discusses the former, not your example of the latter.

Spooky23• 11 years ago

Arbitration is great if the selection of arbiters is fair and influenced by both sides.

In many cases, the arbiters end up being cozier than appropriate with one side or another. Without a system that accounts for that or has sufficient transparency to discourage misbehavior, it doesn't work.

crdoconnor2• 11 years ago

Actually it doesn't have more than one position.

For arbitration to work effectively the two parties need to be of roughly equal power - which in a marriage is mostly (not always, but mostly) the case.

When it's an individual up against a large corporation with a multimillion dollar legal team it's the privatization of jurisprudence. End of story.

r_sreeram• 11 years ago

And unlike the outcomes in civil court, arbitrators’ rulings are nearly impossible to appeal.
When plaintiffs have asked the courts to intervene, court records show, they have almost always lost. Saying its hands were tied, one court in California said it could not overturn arbitrators’ decisions even if they caused “substantial injustice.”

This seems like a really serious problem. If arbitrations are, as they are claimed to be, generally better on the average (cheaper, faster, better compromises, etc), one could tolerate even "forced" arbitrations (by way of fine print that few people read). But the lack of avenues to appeal (if true) seems to me a fatal flaw.

Is this generally true of all arbitrations? Or is this only a few unusual cases?

microcolonel• 11 years ago

If you read the line carefully, they don't say that they lack an appeals process. They just want to paint the picture that that's the case without saying it.

Note that they say "nearly".

It's odd that they do this in their writing, even though their own style guide advises against it.

DannyBee9• 11 years ago

Most arbitrations are binding. That means they can't appeal the facts and the result.

If the arbitration process was unfair, they can appeal that. But if the process was fair, ....

wfo2• 11 years ago

For a definition of "fair" set by the arbitrator.

6stringmerc• 11 years ago

In my view, "binding arbitration" is a very lopsided concept by which a large entity can use an intimidation tactic against a smaller entity or individual at, essentially, a lower cost than going through the US court system. This doesn't mean that the large entity is incapable or unwilling to spend capital in defense of a position, but it's akin to an "up front" legal investment to save money later. Why bother fighting in court, where an entity like the EFF or ACLU might be willing to provide financial means to support a fight in pursuit of justice, when there's an avenue to block such a process from even happening?

Thus, I've been happy to have my own "Personal Terms and Conditions" on file (somewhere around here, it was written several years ago) that intends to help tilt the scale back to even. What do I mean? I mean that as a condition of taking my money in Good Faith, whatever business entity I'm working with will have to abide by my own parameters of negotiation - as in, if I'm dealing with a large conglomerate, their means are significantly disproportionate to those that I have. So, as a rule of doing business with me, should there be a dispute, the corporate entity agrees to only use the same budget that I have available. It's highly subjective whether such things could be defensible in court, but it's just one way that I believe it's a US Citizen's right to declare when there's a fight, it's going to be as fair as it can be.

For example, a friend recently had a dispute with their major healthcare provider over a short vs. long-term prescription issue. The friend's Doctor wrote out a 90 day supply prescription for the incurable issue requiring maintenance medication. The insurance company refused to fulfill the 90 day supply, and said that they would only approve a 30 day supply. If you know about US health insurance programs, you'd know that a 90 day has a copay of $XX, and a 30 day has a copay of $YY. Thus, this person would have to pay nearly 2x in copay monies out of pocket simply because the insurance company didn't want to fund the actual, written prescription. Eventually the mail-order fulfillment service started calling up this friend, demanding $X,XXX in back co-pays. The friend pointed out that the fulfillment service had emptied out the Health Savings Account for several years, taking co-pays for each 30 day supply, which was unfair because the actual amount to be billed shouldn't exceed the 90 day cost. 5 phone calls later, and with the stubbornness of a ram, the friend finally got the company to give up on trying to extort him for money that wasn't owed. To this day, the insurance company refuses to fulfill the 90 day prescription, and he's simply waiting, fangs sharp, for if they try to come at him again.

How would the above situation work out in arbitration paid-for by the insurance company? They broke the binding agreement of fulfillment, then wanted to make it the responsibility of the party with the least means. That's injustice, and it's important for individuals to understand, or be willing to stand up and argue, when a large entity decides to "change the rules" to benefit themselves, it's fair game to change the rules right back and punch hard. I'm not presenting this kind of stuff as some kind of quick-fix or blanket approach for each and every person, life is more complex than that. However, the erosion of rights and personal liberty is another complex subject, one that I'm glad to study for its nuances and application in small and large battles.

Natsu2• 11 years ago

Problem is, the much of the same can be said about lawsuits themselves. They also favor the larger party, especially when you factor in court costs.

I do wonder if it would be more fixable by requiring arbitrators to adhere to certain standards and register, then pick one at random for each arbitration request so that no one can stack the deck with their choice of arbiter.

wfo2• 11 years ago

Truly disgusting -- so unimaginably perverse injustice that I can't imagine a coherent lucid defense being presented that this should be legal, though if you have one please prove me wrong. If you want to protect rights, it's vital to not only have a statute against certain entities violating them (primarily government), but to ensure people cannot sign them away. If something is permitted, it will occur -- there will always be people desperate enough or uninformed enough to agree to anything that's permitted for them to agree to, and all of a sudden your rights only exist if you're wealthy enough to avoid being forced into a contract like this.

In our case it's become so ubiquitious that in job offers, not having binding arbitration is a perk -- companies sometimes choose to allow their employees the ability to exercise their rights in order to attract better talent. That's not good enough.

littletimmy• 11 years ago

"[Capitalism] has resolved personal worth into exchange value, and in place of the numberless and indefeasible chartered freedoms, has set up that single, unconscionable freedom — Free Trade. In one word, for exploitation, veiled by religious and political illusions, naked, shameless, direct, brutal exploitation." - Karl Marx, The Communist Manifesto

This is quite the end game of capitalism, isn't it?

Individuals do not matter, capital does. Given that corporations have capital, they're the ones who matter. People, especially the disadvantaged ones who lack capital, are not important. Justice means the service of capital. If we agree to that, we'd see that this "new" system is not that unusual. If you have unfettered capitalism, you give up all other values to capital, including individual justice.

colindean• 11 years ago

Assertion: the rise of arbitration is caused by the rise in the expense and time-to-resolution of the government judicial system.

Thoughts?

narrator• 11 years ago

More evidence for Joseph Tainter's "Excessive and growing complexity in the face of diminishing marginal returns leading to civilizational collapse" theory[1].

[1] https://en.wikipedia.org/wiki/Joseph_Tainter#Social_complexi...

mannykannot• 11 years ago

Having one of the parties to the dispute being the primary and continuing source of income for the decision-maker does seem likely to improve those two measures of the process.

deciplex2• 11 years ago

The courts often suck, but the answer ought to be to fix the damn courts, rather than the default knee-jerk answer of American politics: "let the market decide".

forrestthewoods• 11 years ago

People who think the "normal" legal system is "fair and honorable" have very clearly never dealt with it. It's many things but neither fair nor honorable are among them.

Arbitration can be good and can be bad. I'm not sure the best way to reduce the bad. It best not come at the expensive of Freedom of Contract.

zyxley• 11 years ago

"Freedom of contract" is a silly thing to uphold as an absolute principle. The reason to uphold contracts is for the general good of society, not just "because a contract is a contract", and companies being able to put mandatory arbitration clauses in contracts of adhesion to circumvent the standards of normal courts is not generally good for society.

onetwotree• 11 years ago

"For many people, when the choice is between giving up the right to go to court or the chance to get a job, it is not a choice at all."

Nice that we have luxury tech careers and can tell employers to fuck off. Remember to read your contracts before you sign them!

In general, I'm sure that voluntary mediation works well, but to take away a persons right to seek legal recourse is deeply wrong.

learc83• 11 years ago

To really make arbitration fair (or at least as fair public courts) you'd need so many regulations and oversights that you'd just end up with a parallel court system that would likely have the same problems that arbitration tries to solve in the first place (mainly time and expense).

MichaelBurge• 11 years ago

People should be encouraged to use the courts. It's a good thing that people use the court system to resolve their disputes. At least they're not dueling in the streets - or worse, leaving their disputes unresolved and suffering without any way to resolve them. Court systems are how modern societies resolve their disputes.

I think the US court system is - on average - fair to the parties involved. One example: The US doesn't award legal fees to the winner, because then everyone would immediately hire the most expensive lawyer to get a higher chance of winning. This would raise the stakes of any lawsuit, and make people far more scared to go to court. This means people might genuinely be suffering from some issue that they can't get resolved.

There's a legitimate issue where companies are afraid of losing millions on legal fees from one of their millions of customers that paid $20 for a cable and got shocked or hurt. Maybe the product was genuinely flawed or the company genuinely treated the customer poorly. Maybe the company is in the right but the customer feels slighted and wants their righteous indignation, or is just greedy for a payout.

For smaller claims, there is small-claims court which is supposed to handle this at much lower cost.

For larger claims: Well, the stakes are intrinsically higher, so maybe it makes sense for the legal system to be expensive.

But for mid-claims - claims too large for small claims court and too small to spend millions on a legal campaign - maybe there is room for improvement. And maybe that room involves arbitration companies. If two parties of equal power consent to using them to save money on a $100,000 contract, that seems okay to me.

But if a million dogs get shocked to death by defective dog collars, it seems wrong that people couldn't use the court system to get resolution. Maybe it's a bad example - but companies engaging in some trouble worth tens of millions of dollars should end up in court. Society doing this is a good thing, even for the companies involved - although they might not feel like it at the time.

When you hear about some large corporation getting off the hook with what seems to be a slap-on-the-wrist million dollar fine, it's almost a good thing: it means you can use the court system to sue large companies to resolve disputes and get them to change their behavior without burdening everyone with a draconian court system.

I say arbitration should either always be appealable to a real court, or we should set up a new cheaper court system that reviews the evidence and makes a preliminary opinion but doesn't set precedent and can be appealed.

crdoconnor2• 11 years ago

There's a genuine issue where companies are afraid of losing millions on legal fees from one of their millions of customers that paid $20 for a cable and got shocked or hurt.

That's a feature not a bug. That paranoia has probably saved many tens of thousands of lives, maybe more.

Tomte• 11 years ago

The US doesn't award legal fees to the winner, because then everyone would immediately hire the most expensive lawyer to get a higher chance of winning.

Not in Germany.

If you pay your lawyer more than the normal amount (as provided by a special law) you aren't reimbursed for that. Only the normal amount.

tn13• 11 years ago

I think this is a very one sided view of things (its NYTimes after all).

The purpose of arbitration is not to take away customer's right to seek justice. The purpose is to reduce costs of fighting a lawsuit in court which is far too expensive.

I do see the risk that arbitrators might favor the right of company more than the customer but such a company and arbitrator eventually lose credibility and market share.

Imagine we had to outlaw the whole arbitration process, what would happen that ? Courts will have more cases to address and both involved parties end up spending more money than usual which increases the cost of business for everyone.

I would rather opt in for arbitration and get my car for $500 less than see the arbitration process go away.

In Arbitration, a ‘Privatization of the Justice System’

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