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The other side of the arbitration story

By: WISCONSIN LAW JOURNAL STAFF//December 30, 2015//

The other side of the arbitration story

By: WISCONSIN LAW JOURNAL STAFF//December 30, 2015//

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By Brian R. Jerome and Jeffrey S. Stern
Special to the Wisconsin Law Journal

CoinFlipA recent three-part series in the New York Times (“Arbitration Everywhere, Stacking the Deck of Justice,” Oct. 31) spotlighted certain abuses and injustices in particular types of arbitration. It has gained wide attention, especially among those who work regularly with alternative dispute resolutions.

Although the series was unquestionably effective in pointing out problems where they exist, it also painted with such a broad brush as to tarnish the arbitration system as a whole, as well as the many respected and ethical professionals who operate within it and who provide just and effective resolutions to conflicts of many types.

The primary emphasis of the Times series was the growing use of arbitration clauses in 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 him or her, and in circumstances that bear no resemblance to freely negotiated agreements.

The articles were particularly critical of corporations that include arbitration clauses that have been interpreted to waive class actions by consumers — a practice upheld by recent, highly controversial Supreme Court decisions.

Reasonable people’s opinions can differ about the merits of class actions — as some critics no doubt believe that they benefit attorneys more than the class members. Still, the Times articles demonstrate that, without the leverage of class actions, it is simply impractical to pursue many claims — using arbitration or other means — against large corporations.

The second installment of the series was particularly troubling to those who work with alternative dispute resolutions. 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-consumer or anti-plaintiff.

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 articles make a case for reform, either by court decisions or legislative response, of the use of mandatory arbitration clauses that are neither prominently displayed in contracts nor understood by the parties, and particularly in circumstances in which the parties have significantly unequal bargaining power.

It is the professional obligation of the ADR community, which we believe is undoubtedly shared by the majority of dedicated professionals who provide arbitration services, to emphasize that the arbitration process has a long and honorable history, and should justifiably remain an often preferred option to litigation and trial for many disputes.

Unlike the situations described in the Times, arbitration is most often frequently and freely chosen by the parties and their attorneys in ongoing cases. There is no need, in other words, for any mandatory arbitration clause. Arbitration is selected as the preferred dispute-resolution process because one or more of its inherent features is appropriate for the case. They can include:

  • 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. These are 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; and
  • The privacy of a conference room over a courtroom, and the finality of an arbitration award, as may be deemed mutually beneficial to the parties.

The Times series places emphasis 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. As such, its main topic was 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 beneficially used and remains appropriate as a fair and effective resolution process.

Brian R. Jerome is the founder of Massachusetts Dispute Resolution Services and chairman of the Massachusetts Bar Association’s ADR Committee. Jeffrey S. Stern is a neutral at The Mediation Group and a member of the MBA’s ADR Committee.

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