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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.

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Comments

Nocat

All the facts are finally out. Research reinforces that arbitration is strongly preferred by consumers over litigation, and that outcomes in arbitration are virtually the same as in court read more at arbitration-forum.blogspot.com

Cindy

No surprise that "Nocat's" link is to the National Arbitration Forum. I volunteer for a consumer group, Homeowners Against Deficient Dwellings. Before I got involved with these issues, I also might have been naively steered to give the desired answer in this "poll." However, I did learn about the drawbacks of private, industry controlled arbitration. I have since seen many homeowners financially damaged by arbitration. I've seen far fewer destroyed when they retained their right to use the courts, even though most who did retain that right settled before having to go to the expense and stress of a trial. Those who went through arbitration almost without exception report that it was a biased farce. The way most of them get trapped by it is the arbitration clause in 10 year warranty policies purchased by builders, on new homes. The home buyer doesn't even get to bargain for these terms because the builder buys the policy. There have been many problems with the arbitration firms they specify, being biased. Repeat business wiht the industry is in itself a conflict of interest.

The cat is out of the bag on these pre-dispute mandatory arbitration clauses. People are getting wise to what it's about and I think the poll was just spin. Businesses money paid for it and now they're mad because not as many people swallowed it as they thought would. What's that saying about 'not being able to fool all the people all of the time?'

Jordan Fogal


Arbitration an atrocity
Articles on the housing debacle seem to purposely leave out and ignore some of the main reasons for the "sub prime crisis" . Reasons which led to the lenders' chaos. The banks, the hedge funds and the builders cry out for help like something out of Danes' inferno. All the while taking their bonus checks, of our hard money and stuffing them along side what they have already gleaned from us ...with their thrown up, defective housing. Now since the gravy train has derailed they cry out," help us we wanted more.".Yet the cries and wishes of the middle class go unheard.. It is doubly diabolical that we the tax payer should once again be forced to pay the perpetrators. The government thinks they should help the people who cheated and robbed us of our homes. We hear that consumer confidence is down, and the government seems to be baffled as to the why.. Greed, of course, is at the helm of this perfect storm, prefect for everyone except the once, home owning tax payer.

The general population has been preyed upon by the greed of shoddy construction, and further destroyed by arbitration clauses which hide the builders role in this housing debacle. I am sickened by the articles on arbitration all written by people who have not endured this diabolical process.
My husband and I have been there. And it is not fair or cheaper, but some times you can get screwed a lot faster, they even have a name for it, it is called," fast track arbitration". As we are dragged behind these closed doors, many of us who are not silenced by gag orders,( carefully termed secrecy agreements) tell of the unbelievable goings on . Most of these so called secrecy agreements conveniently cover up what has occurred inside. Inside, where the rules of law no longer apply, where fraud and perjury are standard fare and the arbitrators turn a blind eye because of...greed. The big builder is their constant meal ticket. We the home owner will never financially recover to be subjected again to this incestuous farce. A farce that is touted as being so good for the consumer they made it mandatory. If in fact this privatization of the justice system is so wonderful why is it mandatory?
Arbitration is a sin against the constitution and the general public. One way to get us out of this crisis is to get the arbitration companies to pony up their unbelievable earnings... after all they tout them selves as non -profit facilitator. Non Profit? We know how much they profited off us.Then check the bank accounts of these lenders and builders and make me feel sorry for them. Sorry they have made only 3 million this year instead of the 25 million the year before. These insidous leaches have made millions off us. The builders and lenders are screaming now because their greed became so insasable they have driven this county into a recession. And once again we the people are screwed.
If you would like more on this crisis please google my name Jordan Fogal an read my testimony for the congressional hearing... on the effects of arbitration on the consumer. You may also go to HADD.com or HOBB.org and remember the home you save most likely will be your own.


Nocat

I was just trying to say arbitration can and does work. There all kinds of examples of cases and big dollars don't always have to be involved. Consumers can and do win in arbitration here is the case of arbitration-forum.blogspot.com/2008/04/video-empowered-consumer-tells-her.html Sharon Kruse, a 63 year old consumer from Michigan who had a issue with Sears over a boiler maintenance contract

Sharon

I posted a comment on The Arbitration Forum Blog. I think they are afraid to let consumers who actually have a problem with arbitration post anything! They made comments about Public Citizen.... that your statistics about California Arbitrations were in fact lies! Following is the comment I tried to leave and as yet they have not posted... so I have decided to post it anywhere online that I can. This is what is happening to my husband.

I saw this and had to leave a comment! My husband was recently sued by Chase Bank who wants a judgment against him because of an arbitration agreement, which by the way he never agreed to. (This supposed legal binding arbitration is in your credit card contract in very tiny print that most people do not see, including my husband.) My husband does not disagree that money is owed to Chase Bank, we are just having some really difficult financial times and turned our debts over to a credit council company. Instead of working with the credit council company, Chase Bank went for the "Arbitration". This supposed better alternative to going to court might cost us an extra $6000 tacked onto a bill in 1 years time! Now you tell me if this is better than hiring an attorney, which the previous comment says you have to do anyway, and not be able to have your day in court. There are some pretty hefty charges added on here. Chase Bank's attorney and my husband, representing himself, attended the pretrial hearing today for Chase to obtain their judgment against my husband. The Honorable Judge told Chase's attorney he would not grant the Motion for Summary Disposition and gave Chase's attorney 60 days to produce documents showing a brake down of the fees granted. There is still justice in our court system and we as Americans still have our legal rights and one of them is our right to a day in court to present our case before an unbiased judge with or without an attorney!

I would truly like to see our country protect consumers from these predators, but upon checking where the Arbitration Fairness Act of 2007 stands right now does not look very good! What can we do to see to it that this law is passed? Please help!!!!

A concerned citizen!

linyer

Any contract which mandates something to one party over another should be a red flag.
The fact that a bill was filed in D.C. in July of 2007 supports that MBA is unfair and in my opinion unconstitutional. Any consumer should have a choice to go to arbitration or through the court system.
The new thing now is the BBB pushing MBA. One should be careful there as the companies involved are paying dues. I never made arbitration there as the mediation I went through was horredendous and blatanly biased toward their client.
Not too long ago I watched a story on our local news in which a person was killed. Something went wrong in their new car. I emailed the reporter stating that poor family will probably never see the inside of a courtroom as the corporation uses arbitration. The reporter wrote back he checked several car companies and found the ones he checked were all using MBA. He stated he did not know this was going on and is changing his stories to work on something related to MBA.
People, including reporters do not even know the extent to which corporations and other companies are pushing MBA.
It needs to stop and citiziens need to take their rights back.

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