By Brian R. Jerome, Esq. and Jeffrey S. Stern, Esq.
A recent three-part series in the New York Times, (Arbitration Everywhere, Stacking the Deck of Justice October 31, 2015), which spotlighted certain abuses and injustices in particular types of arbitration, has gained wide attention in the ADR community, the broader legal community and with the public. While the series was unquestionably effective in pointing out problems where they exist, it also painted with such a broad brush as to tarnish (perhaps inadvertently) the arbitration system as a whole, and the many respected and ethical professionals who operate within it, and who provide just and effective resolutions to conflicts of many forms.
The primary emphasis of the series in the Times was the growing use of arbitration clauses being placed into commercial and consumer contracts among parties with unequal bargaining power, such as low-wage employees against their employers, credit card or bank customers against large financial organizations, and the like. Such arbitration clauses are being inserted in an ever-widening range of contracts, often buried in fine print and unbeknownst to the consumer or not understood by them, and in circumstances that bear no resemblance to freely negotiated agreements. The articles were particularly critical of corporations including arbitration clauses that have been interpreted to waive class actions by consumers, a practice which has been upheld by recent, highly controversial, Supreme Court decisions. While reasonable people’s opinions can differ about the merits of class actions, with some critics believing that they benefit attorneys more than the class members, the Times articles demonstrate that without the leverage of class actions, it is simply impractical to pursue many claims, by arbitration or otherwise, against large corporations.
The second installment of the series was particularly troubling to the ADR community. It highlighted a small number of cases, the outcomes of which seemed particularly unjust, and strongly suggested that the process of arbitration, and arbitrators as a whole, were somehow biased and that the system itself was anti-consumers or plaintiffs. Obviously, unjust outcomes are not unique to the arbitration process, as evidenced by the unpredictability of jury decisions. However, a few anecdotes of inequitable arbitration awards should not characterize the work of so many dedicated arbitrators who objectively follow the evidence and make unbiased and reasoned decisions.
The Times articles makes a case for reform, either by court decisions or legislative response, as to the use of mandatory arbitration clauses in contracts that are neither prominently displayed nor understood by the parties, and particularly in circumstances where parties have significantly unequal bargaining power.
It is the professional obligation of the ADR community, which we believe is undoubtedly shared by the populous of dedicated professionals providing arbitration services, to emphasize that the arbitration process has a long and honorable history, and should justifiably remain a viable and often preferred option to litigation and trial for many disputes. Unlike the situations described in the Times, arbitration is more frequently and freely decided upon by parties and their attorneys in ongoing cases, without any mandatory arbitration clause. It is selected as the preferred dispute resolution process because one or more of its inherent features is appropriate for the case, such as:
– the time, expense, and costs saved by choosing arbitration over extensive litigation, discovery, and trial in the court system;
– the ability to mutually select the arbitrator or panel of arbitrators to hear the case, customarily neutrals with legal expertise in the area of the law involved and with track records of integrity and fairness;
– the convenience and efficiency of selecting the time and place of the hearing;
– the privacy of a conference room over a court room, and the finality of an arbitration award, as may be deemed mutually beneficial to the parties.
The Times article focuses on abuses pertaining to a narrow segment of the arbitration field, the regrettable hallmark of which is the use of arbitration clauses in contracts involving parties with unequal bargaining power and where the agreement is neither fully understood nor freely bargained for. As such, its focus is not — and should not —be seen as representative of arbitration or arbitrators as a whole. As attorneys and ADR providers we are bound by strict ethical rules and believe that authentic neutrality is at the very center of our mission and professional life. Indeed, those are the reasons why ADR has become so progressively utilized and appropriate as a fair and effective resolution process, and that it is trials in the courtroom which are now viewed by many as “the alternative.”
Brian Jerome is the Founder of Massachusetts Dispute Resolution Services (MDRS) and Chair of the MBA’s ADR Committee. Jeffrey Stern is a neutral at The Mediation Group and a member of the MBA’s ADR Committee.