Why the binding arbitration game is rigged against customers (2019)

Cory Doctorow has pointed out [0] that binding arbitration clauses leave companies open to legal DDOS “mass arbitration” attacks that end up being very pro-customer.<p>0: <a href="https:&#x2F;&#x2F;pluralistic.net&#x2F;2022&#x2F;02&#x2F;24&#x2F;uber-for-arbitration&#x2F;#nibbled-to-death-by-ducks" rel="nofollow noreferrer">https:&#x2F;&#x2F;pluralistic.net&#x2F;2022&#x2F;02&#x2F;24&#x2F;uber-for-arbitration&#x2F;#nib...</a>

Daniel Berlin (&#x27;DannyBee), who is a lawyer (and compiler designer) and a commenter here worth following, has for years been pushing back on the C.W. that arbitration is just a way big corporations screw the little people:<p><a href="https:&#x2F;&#x2F;hn.algolia.com&#x2F;?dateRange=all&amp;page=0&amp;prefix=false&amp;query=arbitrator%20author%3ADannyBee&amp;sort=byDate&amp;type=comment" rel="nofollow noreferrer">https:&#x2F;&#x2F;hn.algolia.com&#x2F;?dateRange=all&amp;page=0&amp;prefix=false&amp;qu...</a><p>Having been involved in actual civil litigation, a lot of this rings true. The simplest possible civil cases take years to resolve, at tremendous expense.

As a protest, I’ve considered creating a browser plugin that takes the TOS and removes arbitration clause, e-signs it and PDFs it. Then posts it to the “agree” endpoint in addition to other form attributes and emails a copy to legal@BigCo. Basically automating the Dmitry Agarkov approach.<p><a href="https:&#x2F;&#x2F;www.huffpost.com&#x2F;entry&#x2F;russian-rewrites-credit-agreement-sues-bank_n_3728105" rel="nofollow noreferrer">https:&#x2F;&#x2F;www.huffpost.com&#x2F;entry&#x2F;russian-rewrites-credit-agree...</a>

Binding arbitration, it certainly feels like a rigged system.<p>I just went through it and lost. Never thought I would lose against this clearly shady contractor. I had inspection reports, emails and texts from them committing to fix my house, and 400+ pages of photos. The contractor had walked off my job over a year before we ever made it to arbitration… I still don’t have my house back.<p>The mediator, who the contractor got to pick, basically started off saying, “We have to give the benefit of the doubt to these hardworking contractors who came to your aid in your hour of need…” That was a taste of how the whole day would go.<p>Still feels raw. Here’s a little more on my story with binding arbitration.<p><a href="https:&#x2F;&#x2F;www.linkedin.com&#x2F;pulse&#x2F;anyone-have-connections-usaa-damen-gilland-rq2uc&#x2F;" rel="nofollow noreferrer">https:&#x2F;&#x2F;www.linkedin.com&#x2F;pulse&#x2F;anyone-have-connections-usaa-...</a>

According to Matt Stoller [0] we have Alan Kaplinsky [1] to thank.<p>&gt; Kaplinksy’s claim to fame is that he’s the lawyer who figured out you could get rid of the ability of a consumer to go to court by using what’s called a pre-dispute arbitration provision in a contract.<p>I&#x27;m no expert but Kaplinsky sure sounds like a modern day super-villain.<p>[0] <a href="https:&#x2F;&#x2F;www.thebignewsletter.com&#x2F;p&#x2F;ending-junk-fees-the-most-annoying#:~:text=%22I%20am%20very%20tired%20of,to%20stop%20a%20hotel%20from" rel="nofollow noreferrer">https:&#x2F;&#x2F;www.thebignewsletter.com&#x2F;p&#x2F;ending-junk-fees-the-most...</a><p>[1] <a href="https:&#x2F;&#x2F;www.ballardspahr.com&#x2F;People&#x2F;Attorneys&#x2F;K&#x2F;Kaplinsky-Alan" rel="nofollow noreferrer">https:&#x2F;&#x2F;www.ballardspahr.com&#x2F;People&#x2F;Attorneys&#x2F;K&#x2F;Kaplinsky-Al...</a>

The points in the article seem quite obvious. I wonder then, why do arbitrators <i>ever</i> rule against the companies that pay their fees?<p>I asked on Law Stack Exchange, but the answers were not quite convincing.<p><a href="https:&#x2F;&#x2F;law.stackexchange.com&#x2F;questions&#x2F;87589" rel="nofollow noreferrer">https:&#x2F;&#x2F;law.stackexchange.com&#x2F;questions&#x2F;87589</a>

I still don&#x27;t understand how this can be legal in the first place.

The root cause seems to misdirected in my opinion. The article also reads like there are two issues, arbiters can be financially swayed, and contracts can force giving up rights, but the conclusion is vaguely &quot;corporations are evil&quot;.<p>The article suggest big companies gaming the arbitration system. Read any civil (or even criminal) court case, and <i>both</i> sides will do the most possible tactics to win. The disparity of expertise is not an evil behavior of the parties. Yes, individuals with fewer financial means to find lawyers in arbitration are at financial disadvantage compared to corporation, <i>and</i> they would be in the same, if not bigger financial bind if it was done through the court system.<p>The notion that arbiters are beholden to corporation because of compensation is the biggest, glaring problem.

I’m not convinced this study is measuring what it claims. It seems like they identified “pro business” arbitrators as the ones that gave businesses better wins. Then they found that they gave businesses better wins? That could just be random chance.<p>Also ultimately a 12% effect is not the end of the world. Without arbitration you are going to be paying a lawyer a ton more money so it’s not even clear it’s worse for the consumer on average.

I&#x27;m not really buying this informational asymmetry argument. Yes the companies will have been in more cases than the consumer, but that&#x27;s not really a relevant comparison. The consumer isn&#x27;t picking the arbitrator, his lawyer is, and he and his firm will have been involved in a lot of cases.

Because why else would companies do it?

Having worked for a major dispute resolution provider, these conversations generally leave out a lot of context. Lots of Gell-Mann Amnesia.<p>First, 90% of arbitration is between firms, not consumers. Consumer driven arbitration is rare enough that it&#x27;s hard to specialize as a pro-business arbiter. Usually arbiter bias will be pro [big, small, old, new] just like us regular people.<p>Second, like other public facing retail and service management, consumer disputes are generally 80% frivolous. Like &quot;they did not read the contract&quot; level issues. That about 50% of disputes award in favor of the consumer is seen as overly benevolent appeasement.<p>Note: the 20% non-frivolous are usually very clear cases of the corporate participant blatantly or maliciously screwing up; no sympathy there. People are people everywhere.<p>For this reason most industry professionals very strongly suggest mediation rather than arbitration. It&#x27;s quicker, cheaper, and usually ends in a voluntary non-binding settlement. And if you don&#x27;t like it, it&#x27;s non-binding; you can proceed to arbitration. Corporate clients would usually prefer to voluntarily agree to a settlement to make the problem go away, and consumers get the neutral information they need to understand why they misunderstood the situation.<p>However, most people see red and want to punish the other side. That rage makes them want to use as much authority and leverage as they can. Arbitration is seen as &quot;not enough of a punishment, court would be better.&quot; When really, most people would be better served sitting down and talking things over with mediation rather than explicit adversarial intent.<p>I&#x27;ve heard similar things from civil court judges. They don&#x27;t think they&#x27;re biased for or against citizens, police, lawyers, etc. They are used to seeing the most incompetent petty facepalm justifications to &quot;punish&quot; someone, instead of seek justice or restitution. They are biased positively towards anyone who shows the slightest decorum, competence, or noble intent.