Binding arbitration … good for corporations, bad for consumers

Cross that “mandatory binding arbitration” clause out.

Like most lawyers who are not in the pocket of big corporations or insurance companies, I am not a fan of “mandatory binding arbitration.”

Arbitration is basically a ‘mini-trial’ in a private court that takes the place of the civil justice system. The decision makers (arbitrators) are usually a panel of attorneys who act as judge and jury. Although in theory arbitrators should be impartial, in my experience arbitration inevitably benefits corporations and insurance companies. After all, if arbitration was truly in YOUR best interest … why would corporations push for it so aggressively?

Almost any terms of service or contract you agree to with a big company will include an agreement to arbitration. And these arbitration clauses will often completely eliminate your right to bring a lawsuit if you are damaged or victimized. Examples of where you may see arbitration agreements include: service providers (cable, internet, cell phones), consumer goods, financial services, and even employment.

Here are some of the problems I see from an individual/consumer standpoint in arbitration:

* Limited Discovery – Discovery is the investigation stage of a case. While your lawsuit is pending, we will have the power of the Court to request documents, ask questions, depose witnesses, and issues subpoenas. Arbitration usually will greatly restrict these powers. This is a critical flaw of arbitration in my opinion – I build my cases on thorough investigation of wrongdoers; arbitration prevents wrongdoing from being fully investigated.

* No rules of evidence or civil procedure – As a trial lawyer, Ohio’s Rules of Evidence and Rules of Civil Procedure are my playbooks and I win cases by knowing and applying these rules better than my competition. They do not apply in arbitration and each forum can create its own rules.

* No jury trial – A trial by jury is the fairest means of dispute resolution in existence. Arbitration always eliminates a jury. Instead of jurors from your community making judgment calls, arbitrators are industry insiders – usually lawyers or regulators. Their decisions tend to favor corporations.

* Class action waivers – Most arbitration clauses include waiver of your rights to participate in a class action claim. This can be significant when you are being damaged a small amount. Few people have the time or patience to pursue a minimal claim and, as a result, class action waivers cost consumers untold millions of dollars.

So… what should you do? Take your trusty red pen out and strike through any agreement to mandatory binding arbitration before you sign the contract. Sometimes you can “opt out” by notifying the other party in writing. It may seem like a hassle but if you get damaged and need our justice system to make things right … you do not want to be denied fairness by an arbitration agreement you signed … “for your own good.”

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