Mencimer on Mandatory Arbitration Clauses
Stephanie Mencimer has an article in Mother Jones on mandatory arbitration clauses entitled "Suckers Wanted: How Car Dealers and Other Businesses are Taking Away Your Right to Sue."
Mandatory arbitration clauses are designed to take fraud cases into a world of private justice, where big corporations hire the arbitrators that hear their cases and there's no right to appeal. Most importantly, unlike court proceedings, arbitration is secret, with no transcripts or written decisions, so that nosy reporters or other potential plaintiffs can't learn what's going on behind closed doors. . . .
Mandatory arbitration clauses are so insidious that car dealers actually furiously lobbied Congress to get them banned in their contracts with auto manufacturers.
The National Automobile Dealers Association wrote members of Congress in 2000 that if they weren't outlawed for the dealerships, mandatory binding arbitration clauses would allow "multinational motor vehicle manufacturers…to be able to unilaterally deny small business automobile and truck dealers rights under state laws that are designed to bring equity to the relationship between manufacturers and dealers." Congress agreed and passed legislation protecting the dealers.
Apparently, though, the car dealers didn't see a problem in using the same sort of underhanded contracts with their own customers. (Some of them may also be forced to use the clauses whether they like it or not. Several major auto manufacturers' credit divisions have told their dealers that they won't provide financing to any dealerships that don't have arbitration clauses in their sales contracts, says Paul Bland, a lawyer and expert on arbitration at the nonprofit law firm Public Justice. . . .
One reason businesses often come out on top in arbitration is that arbitrators who rule for consumers have a tendency to find themselves out of work. Such was the case with Richard Neely, a former chief justice of West Virginia's Supreme Court, who worked briefly as an arbitrator for the NAF. In an article called "Arbitration and the Godless Bloodsuckers," Neely reported that he had refused to award a bank arbitration-related fees that he judged to be far in excess of what a court would have charged. He never got another case. Neely is not alone. A 2000 study of forced arbitration in HMO contracts found that on the rare occasion that an arbitrator made a significant award for a patient, the HMO never hired that person to arbitrate a case again.