The Judicial System May Be Bad, But The Privatized Judicial System Of Arbitration Is Worse
from the bad-news-all-around dept
Back in 2011, we wrote about a troubling ruling in the Supreme Court in AT&T Mobility v. Concepcion, the case which basically said that it's perfectly fine for businesses to put in place "binding arbitration" clauses, that take away people's rights to take a company to court over some sort of wrongdoing. As I noted at the time, ever since taking a series of classes on arbitration in college, I've been fascinated with the process, which sounds like a good idea. But it's yet another case where theory and reality don't necessarily match up.The theory is that arbitration is a cheaper and more efficient way to deal with disputes between two private parties. Rather than submitting yourself to an overburdened, slow court system, with tons of rules and limtiations, you bring in a "neutral" arbitrator who can help go through both sides of the story and decide who is right. The problem is in the reality. In cases between businesses and individuals, businesses win nearly 97% of the time. Think about that for a second. It's not hard to see why: arbitrators are usually chosen jointly by both parties, but the companies are the ones who are going to be going back for more arbitration over and over again, and if an arbitrator rules against them, they won't even be on future lists at all. It doesn't take a genius in game theory to recognize that the arbitrator will be under tremendous pressure to side with the company, and the stats support that.
This weekend, the NY Times took a deep dive into the mess that has become this private judicial system known as binding arbitration, demonstrating horror story after horror story of how the system has failed ordinary people to the benefit of large corporations. Basically, the fears I wrote about four and a half years ago have become true. As we noted at the time, we agree that the class action judicial system in the US is broken, but replacing it with private arbitration is quite clearly a much worse solution that would certainly lead to companies regularly being able to get away with horrific behavior, leaving individuals with basically no recourse.
The Times story further supports the idea that arbitrators are under pressure to side with companies, even getting a few to admit that:
But in interviews with The Times, more than three dozen arbitrators described how they felt beholden to companies. Beneath every decision, the arbitrators said, was the threat of losing business.The article is full of story after story after story of crazy things happening in arbitration situations that would never be allowed in real courts.
Victoria Pynchon, an arbitrator in Los Angeles, said plaintiffs had an inherent disadvantage. “Why would an arbitrator cater to a person they will never see again?” she said.
Behind closed doors, proceedings can devolve into legal free-for-alls. Companies have paid employees to testify in their favor. A hearing that lasted six hours cost the plaintiff $150,000. Arbitrations have been conducted in the conference rooms of lawyers representing the companies accused of wrongdoing.In one of the key examples (though there are many) in the article, this story is revealed:
Winners and losers are decided by a single arbitrator who is largely at liberty to determine how much evidence a plaintiff can present and how much the defense can withhold. To deliver favorable outcomes to companies, some arbitrators have twisted or outright disregarded the law, interviews and records show.
For Ms. Pierce, the most astounding moment came when her lawyers asked Mr. Kalogredis to impose sanctions on the defense for breaking the rules of discovery and destroying evidence. He fined the defense $1,000 after investigating the matter, then billed Ms. Pierce $2,000 for the time it took him to look into it.There's a lot more craziness as you read through the article. Again, I'm no fan of class action lawsuits, generally speaking. The vast majority of them tend to be boondoggles to help lawyers cash out, rather than actually help the members of the class. But that problem can be dealt with in other ways rather than forcing people to give up their right to petition a court in a dispute through a "binding arbitration agreement" in a clickthrough terms of service no one actually reads.
As one lawyer in the article notes, the whole arbitration process is corrupt because it's forced on people. If two parties willingly agree to go to arbitration, that's one thing. But that's not what's happening.
And this is a problem that isn't just about companies and individuals. As we've been discussing, trade agreements like the TPP and TTIP have a thing we've been calling corporate sovereignty, and which is officially called "Investor State Dispute Settlement" (ISDS). In reality, it's just an "arbitration" system for disputes between companies and countries -- where the arbitrators will often face the same pressures to side with the companies over the countries (at least one hopes that countries will have slightly more bargaining power). As the NY Times article details, companies have learned to play this game pretty well over the last few years, and they must be excited about the possibilities to do it on a wider scale:
Unfettered by strict judicial rules against conflicts of interest, companies can steer cases to friendly arbitrators. In turn, interviews and records show, some arbitrators cultivate close ties with companies to get business.The court system is far, far, far from perfect. But a secretive, private judicial system that is rigged to companies? That's much, much worse.
Some of the chumminess is subtler, as in the case of the arbitrator who went to a basketball game with the company’s lawyers the night before the proceedings began. (The company won.) Or that of the man overseeing an insurance case brought by Stephen R. Syson in Santa Barbara, Calif. During a break in proceedings, a dismayed Mr. Syson said he watched the arbitrator and defense lawyer return in matching silver sports cars after going to lunch together. (He lost.)
Other potential conflicts are more explicit. Arbitration records obtained by The Times showed that 41 arbitrators each handled 10 or more cases for one company between 2010 and 2014.
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Filed Under: arbitration, binding arbitration, private judicial system, tilted scales
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Re: What's the answer?
That removes the direct financial incentive of the company being the one "hiring" the arbitrator, and the arbitrator needing to encourage future business.
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Re: Re: What's the answer?
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Re: Re: What's the answer?
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Writing their own laws,
Writing their own trade agreements,
Setting up their own courts,
Building their own prisons,
Recruiting their own armies,
Putting their own people in government seats...
All that's left is simply to declare the world as theirs.
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Re:
Writing their own laws,
Writing their own trade agreements,
Setting up their own courts,
Building their own prisons,
Recruiting their own armies,
Putting their own people in government seats...
All that's left is simply to declare the world as theirs.
Why do you so hate capitalism?
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Liber8!
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Hail them as kings.
Then we could admit that only they are in a position to respond to poverty, social injustice, decaying infrastructure, systemic injustice and so on.
An it would be their responsibility to do something about it, or know that the rest of us languish in misery while they live in luxury.
And it would mean that they would have no cause to cry foul when we knife them at night because they failed to act to better the common state.
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The simple answer....
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Re: The simple answer....
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97% Win Rate?
It's not like consumers are suing to vindicate their rights and only succeeding 3% of the time; as the Public Citizen report indicates, consumers win those cases somewhere between one-third and two-thirds of the time.
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It's not just internet terms of service that includes this. Check damn near every paper contract and damn near every insurance policy and you'll likely find an arbitration clause.
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What could go wrong?
I still remember when some people tried to disagree with my assessment of 6 Strikes that charging $35 to 'prove' people were serious in disputing claims and those claims then going before an arbitrator selected by CCI was nothing but an illusion of legality and justice.
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Oh, and also the judges would be like Judge Dredd.
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A picture of a clock is right twice a day.
You can also just have them each pay $1000 a ball and run it through a lottery ball machine.
There are many ways to make a legal system cheaper. But that doesn't mean it's more just.
Maybe rather than trying to circumvent our slow cumbersome justice system, we should fix our justice system to be less slow and cumbersome?
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Great story. The 97% number is quite misleading however, because it doesn't reflect the question of merit. It would be more informative to see how many of the cases actually involved an actual problem that did not have a clear resolution within the contract, and how much was just someone pushing to get something the contract did now allow.
It would also be interesting to see what percentage of the disputes were resolved because the complainant didn't actually show up or actively follow through on the cases.
I think that one of the big reasons why the arbitration system has such a high win for the companies is that it quickly and efficiently weeds out the stupidity, which might otherwise end up in a protracted legal action and finally an out of court settlement otherwise. Shortening the cycle generally means you get actual resolution and not a private deal.
Is it any surprise that the results are heavily tilted towards the party that wrote the contact terms to start with?
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I think the question of merit is one that would wreck any courtroom
In the US justice system we see a cornucopia of police perjury that isn't prosecuted, we see a system ground down to plea-bargaining, posthumous reviews and acquittals of capital crime and a penal system refusing to review cases when new vindicating evidence is uncovered.
The US justice system is lousy with corruption and misconduct and yet it cannot be challenged except by the grace of those within it.
And by challenging the merits of a case by an external service, you'll be raising the question as to its validity. Of course it is going to conclude that all its rulings are perfect, even though we have arbitrators who have essentially confessed to favoring returning clients in their adjudications.
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Re: I think the question of merit is one that would wreck any courtroom
This isn't a system to deal with police corruption, hard criminal acts, or anything like that. It's a contract resolution system, one set up to bypass the insanely slow legal system and cut to the chase of getting resolution.
The biggest problem (I think) with the US legal system (and many others) is that there is a near endless number of ways to drag your feet, to appeal, to seek rulings for or against everything in the case, and so on. Yes, it's good to have these options, but the system itself is slowed so badly by them that a good many cases either never make it in front of a judge, or one or the other party gives up and walks away licking their wounds and settling out of court. That isn't a good system either, it's based on who spends the most money and is most willing to wait out the insanely long, drawn out process, followed by an insane, long, and drawn appeals process.
it's pretty reasonable to have a system that can handle, in a relatively short amount of time, disputes based on a signed contact.
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Re: Re: I think the question of merit is one that would wreck any courtroom
All I did was purchase a music CD or a PC game or anything else that comes with clickwrap EULA bullshit claiming all sorts of things after the transaction takes place.
I thought a contract had to be agreed to by both parties prior to becoming enforceable.
Is this not correct?
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The only way to stop this is for people to be educated and to reject contracts containing arbitration clauses because the corporate-owned politicians sure as hell aren't going to fix it.
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