This recent story from NPR is probably the most glaring example of the need for mandatory arbitration reform.
A young Halliburton employee goes to Iraq. She meets some firefighters, who allegedly give her a date rape drug, and brutally rape her. She reports the rape to her employer, and there is an investigation. Halliburton denies responsibility, and allows the alleged attackers to continue her work. The victims wants to sue the company, but she cannot. When this young woman signed up with Halliburton, she agreed that any disputes would be settled by arbitration, and not in court.
What is arbitration? I tell clients that is is a private trial. Both sides agree to submit their dispute to a decision maker, who acts as a judge and a jury. Some arbitrations are non-binding, which means you can appeal the result to court. Others are "binding," which means you live with the result.
This is an issue that affects all of us. If you have a credit card, a cell phone, or rent a car, you probably signed an agreement that any disputes would be handled through arbitration. Sometimes, arbitration is a great tool. It allows the parties to avoid lagging court dockets, the expense of the formal rules of evidence, and the results may be more predictable. However, for consumers, the record is not so good. Arbitrations are rarely reported. I recall once wanting to record a doctor's testimony at an arbitration, and the defense lawyer fought it tooth and nail.
Another problem is bias. This NPR story discusses credit card arbitrations, and how one arbitrator was dismissed after finding for the credit card holder.
The Arbitration Fairness Act is now before Congress, and this statute would ban provisions in any agreement that make arbitration mandatory. Instead, arbitration would be an option. Opponents say this would kill arbitration all together, and clog up the courts. There is no credible data to back this up. Most credit card holders sued in our small claims courts are not represented, and if the amount at issue is less than $50,000.00, it goes to a mandatory arbitration anyway. But in this case, both parties have a say on the arbitrator, and both can appeal their result. If anything, this bill, if passed, will even the playing field.