Two recent papers published or financially supported by the U.S. Chamber Institute for Legal Reform paint a grossly inaccurate picture of the empirical evidence on binding mandatory arbitration, a comprehensive study by Public Citizen reveals. Both papers were written by Catholic University law professor Peter B. Rutledge. One was issued by the Chamber Institute as an official response to a September 2007 Public Citizen report that found that consumers lost nearly 94% of credit-card disputes administered by the National Arbitration Forum. The second paper was published as a law review article. Collectively, these “Chamber papers” purported to show that the broad sweep of empirical academic research suggests that individuals enjoy “superior” results in arbitration, notwithstanding anecdotal evidence suggesting otherwise.
In mandatory, binding arbitration – which consumers unwittingly agree to when they obtain a credit card, cell phone, bank account or a number of other goods and services – consumers lose their right to settle disputes in court and instead are routed to a private, secretive system that favors the company. Congress has a number of pending bills that would give consumers a fair shake when it comes to arbitration. Congress should ban any consumer arbitration and go back to what arbitration was originally supposed to cover – business disputes between businesses.
Public Citizen’s new study analyzes the empirical evidence on arbitration and finds that it proves that individuals fare worse in arbitration than in court. Significantly, not a single study cited in the Chamber papers showed individuals receiving higher average payments in arbitration than court. Individuals also fare worse in most other measures comparing arbitration and court, the actual text of the academic research indicates. David Arkush, director of Public Citizen’s Congress Watch division, observed:
This debate is not just academic. It’s critical to anyone who owns a cell phone, has a bank account, buys a computer or engages in any basic transaction with a large corporation. The Chamber is trying to fool Congress into thinking that arbitration is generally fair, despite some well-publicized injustices. But the evidence flatly contradicts the Chamber’s claims.
The study also reveals that in his past scholarship, Professor Rutledge has voiced many of Public Citizen’s criticisms of arbitration. For example, he has previously expressed views that arbitrators may have incentives to favor certain parties and that arbitration lacks meaningful appeal provisions and can be excessively secretive. Rutledge even called for revoking arbitrators’ immunity from lawsuits in part because they too often ignore the law or their own rules. Despite their celebration of the “empirical evidence,” the Chamber papers take significant liberties in reporting that evidence. Some of these liberties include:
Taylor Lincoln, Research Director of Public Citizen’s Congress Watch division, had this to say concerning the group’s report:
The Chamber has expressed a great deal of concern about ensuring that people of modest means have access to justice. Hopefully, our report will disabuse the Chamber of the notion that mandatory arbitration is part of the solution.
Congress has the opportunity to stand up to the powerful lobbyists who are opposing all of the arbitration legislation on behalf of their corporate clients. Hopefully, we will see some legislation passed on the arbitration front that favors consumers for a change.
Source: Public Citizen
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