Filter Results CategoriesCart
Highlight Updates

1.4.8 Other Concerns

The prior subsections examine only some of the problems consumers can face in arbitration. For example, arbitration decisions may not comport with applicable law. Because the FAA provides the consumer with a sharply circumscribed ability to appeal the decision maker’s erroneous interpretation of the law,69 arbitrators may effectively ignore state or federal consumer protection statutes and judicial precedent.70 Arbitration has come under significant criticism for the lack of quality control inherent in many arbitral fora.71 The lack of an appeals process means that even grossly erroneous applications of the law are generally binding.72

Another concern is that arbitration, by forcing consumers unwittingly into waiving their right to a jury trial, undermines basic principles of democracy and respect for the law.73 Arguably, an arbitration agreement requires the waiver of several constitutional rights, including the First Amendment right to petition the government, Fifth Amendment due process rights, and the Seventh Amendment right to a jury trial, but the Supreme Court “has never acknowledged the waiver of constitutional rights inherent in an agreement to arbitrate and has never specifically considered the constitutionally required standard for such a waiver.”74 Courts that have considered the matter have concluded that arbitration itself cannot be unconstitutional because it does not involve state action.75

Some corporations tack on unfair provisions to their arbitration clauses that further rig the system against individuals. For example, some corporations impose “loser pays rules” to discourage individuals from bringing claims; some corporations insert provisions into arbitration clauses that strip individuals of substantive statutory rights; and some corporations require people to arbitrate their claims in inconvenient locations far across the country. The enforceability of these sorts of provisions is discussed in Chapter 8, infra.

Footnotes

  • 69 {69} See Ch. 11, infra. See also United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 39, 108 S. Ct. 364, 98 L. Ed. 2d 286 (1987) (arbitration award will stand even if the arbitrator’s factfinding was “silly” or if “court is convinced [the arbitrator] committed serious error”); Nationwide Mut. Ins. Co. v. Home Ins. Co., 429 F.3d 640, 643 (6th Cir. 2005) (standard of review for arbitrators’ decisions is “one of the narrowest standards of judicial review in all of American jurisprudence”); Baravati v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704, 706 (7th Cir. 1994) (judicial review of arbitrators’ decisions is so narrow that “perhaps it ought not be called ‘review’ at all”); Upshur Coals Corp. v. United Mine Workers of Am. Dist. 31, 933 F.2d 225, 231 (4th Cir. 1991) (“[U]nless the arbitrator appears utterly to have failed to execute his duty to interpret the contract or the relevant law, the arbitrator’s decision must stand.”); Michael H. LeRoy, Crowning the New King: The Statutory Arbitrator and the Demise of Judicial Review, 2009 J. Disp. Resol. 1 (in study of employment arbitration awards, finding that federal district courts vacate arbitration awards only 4.3% of the time).

  • 70 {70} See, e.g., Allstate Settlement Corp. v. Rapid Settlements, Ltd., 559 F.3d 164 (3d Cir. 2009) (upholding injunction against arbitration when company “transparent[ly] attempt[ed] to use this arbitration scheme to evade the legislatures’ intentions to protect the recipients of structured settlement payments”); Michael A. Satz, How the Payday Predator Hides Among Us: The Predatory Nature of the Payday Loan Industry and Its Use of Consumer Arbitration to Further Discriminatory Lending Practices, 20 Temp. Pol. & Civ. Rts. L. Rev. 123, 147 (2010) (“By limiting the appeals process, both the procedural and substantive rights of consumers are placed at a high risk of injury.”).

  • 71 {71} Jeffrey W. Stempel, Keeping Arbitrations From Becoming Kangaroo Courts, 8 Nev. L.J. 251, 258 (2007) (“Where arbitration is not specific to a guild, trade, or particular business activity, the traditional rationale of promoting arbitration for its ‘rough justice’ loses much of its force. By contrast, the case for insisting that mass arbitration results be consistent with substantive law becomes overwhelmingly strong.”); Jeffrey W. Stempel, Mandating Minimum Quality in Mass Arbitration, 76 U. Cin. L. Rev. 383, 401–408 (2008) (discussing quality concerns surrounding mass arbitration, and noting that “[a]n inaccurate decision at great variance from substantive rules of law cannot be fair, no matter how unbiased the decisionmaker”); Symposium, The Current State of Securities Arbitration, 76 U. Cin. L. Rev. 589, 596 (2008) (comments of Kenneth E. Meister) (the depth of the arbitrator’s knowledge of the law will “vary from case to case” and that “arbitrators do not usually enforce statutes of limitations that would be applicable in court”).

  • 72 {72} Nat’l Cas. Co. v. First State Ins. Grp., 430 F.3d 492, 496 (1st Cir. 2005) (“[a]rbitral awards are nearly impervious to judicial oversight”); Eric Berkowitz, Is Justice Served?, L.A. Times Magazine, Oct. 22, 2006, at 24 (discussing court cases that allow arbitration awards to stand even in the face of “substantial injustice,” with one former judge and arbitrator noting that: “[Judges] can rule on the basis of the tea leaves . . . the fact is that arbitrators make mistakes . . . and there is no appeal if I make a stupid or diabolical mistake, or one that is made in bad faith. The parties are on their own.”).

  • 73 {73} Richard C. Reuben, When Arbitration Subverts Democracy, Trial, Jan. 2006, at 34.

  • 74 {74} Cliff Palefsky, Separate and Unequal, SCOTUSblog (Sept. 14, 2011), www.scotusblog.com.

  • 75 {75} Roberts v. AT&T Mobility L.L.C., 877 F.3d 833, 838 (9th Cir. 2017).