Arbitration's Summer Soldiers: An Empirical Study of Arbitration Clauses in Consumer and Nonconsumer Contracts
Cornell University, Law School (deceased)
Geoffrey P. Miller
New York University School of Law
Emily L. Sherwin
Cornell University - Law School
December 18, 2007
Cornell Law School Legal Studies Research Paper No. 08-017
NYU Law and Economics Research Paper No. 08-28
We provide the first study of varying use of arbitration clauses across contracts within the same firms. Using a sample of 26 consumer contracts and 164 nonconsumer contracts from large public corporations, we compared arbitration clause use in consumer contracts with their use in the same firms' nonconsumer contracts. Over three-quarters of the consumer agreements provided for mandatory arbitration but less than 10% of the firms' material nonconsumer, nonemployment contracts included arbitration clauses. The absence of arbitration provisions in nearly all material contracts suggests that, ex ante, many firms value, even prefer, litigation over arbitration to resolve disputes with peers. The frequent use of arbitration clauses in the same firms' consumer contracts appears to be an effort to preclude aggregate consumer action rather than, as often claimed, an effort to promote fair and efficient dispute resolution. Other common features of civil litigation reform discussion, avoidance of juries and loser-pays attorney fee rules, find little support in the pattern of contractual terms we observe.
Number of Pages in PDF File: 34
Keywords: Arbitration, Contracts, Consumer
JEL Classification: K00, K12, K41
Date posted: December 20, 2007 ; Last revised: June 2, 2008
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