Arbitration – Whether You Like It Or Not

As American citizens, each of us owns a very special and powerful “key.” That key opens the door to the courthouse, and gives every person the right to present his or her case to a neutral judge, or to a jury. Our jury system, in particular, was very important to the Founding Fathers. Thomas Jefferson famously wrote: “I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.” Much more recently, Ohio Supreme Court Justice Paul Pfeifer commented: “The power of every citizen in the United States to seek redress in our open courts for injury done, be it by our government, another citizen, or a large corporation, is a source of some amazement and great envy in many parts of the world. That the resulting decisions by judges and juries are respected and enforced without police or military intervention is incomprehensible in some quarters.”


Sadly, we are in an era where our government is mostly controlled by those with money. Large business interests, and wealthy individuals, have political access and influence which ordinary citizens simply do not have. The exception to this is our court system. Once in court, a school teacher, construction worker, or even a small child, can stand as an equal to a big company, large hospital or wealthy bank, and can hold them accountable for the wrongs they do.


Some businesses do not particularly care for this annoying right we all possess – the right to publicly question what they do, and to bring them before the courts. Those companies would much rather have disputes resolved behind closed doors, in a place they select, using rules they select, and through a private system they select. To make this happen, they employ a clever solution: “binding arbitration.” The idea here is to get their customers to agree to give up the constitutional right to go before the courts as part of the deal. If the parties have agreed in advance to binding arbitration, any disputes will be submitted to a private panel of arbitrators, rather than to a judge or jury. Legally speaking, the customer has “waived” the right to go to court.


But how to do that? Businesses realize that people will not like a deal that strips away fundamental legal rights when they buy a car, subscribe to cable TV, or move a loved one into a nursing home. The “answer” is to put a “binding arbitration clause” in the fine print of the paperwork. Most of us don’t have the time or the legal ability to review the lengthy contracts that often accompany even the simplest transaction. In fact, in this computerized day and age, the “legalese” we bind ourselves to may come with a pen stroke on a digital cash register, or with a quick click of our computer’s mouse. We sign or click in good faith, not realizing that buried deep (often very deep) in the contract is a binding arbitration provision that strips away our constitutional rights.


If arbitration were as fair and efficient as its proponents claim, this might all be fine. After all, who wouldn’t like to avoid the hassle of going to court.

But the reality is that most binding arbitration provisions are only fair to the company that wrote the fine print. The “arbitration panel” hearing your case may have been selected by your opponent, or may be loyal to that company (which, after all, keeps the arbitrators in business). Costs may be higher than they would be in an open court. Matters may be kept confidential, so others will not be able to see the corporation’s misconduct. And often the contract will specify that the “loser” must pay the “winner’s” legal fees. That might sound fair in the abstract, but imagine taking on a large corporation knowing that if you do not win your case you could be on the hook for many thousands of dollars in attorney fees run up by that company’s legal team.  Big business can afford that risk – most ordinary folks cannot.


So, in a nutshell, binding arbitration provisions that hide in the fine print of many transactions these days are really just a way for big businesses to lock the courthouse door, and rig the game in their favor.

This unfair yet pervasive trend is not likely to slow unless and until Federal and State lawmakers take action. Until they do, be careful what you sign, and what you may be signing away. You might be able to strike that language from the deal. If not, there is always the choice to do business with companies that respect true fairness, and who don’t think access to the courts is only for them.