Arbitration's Summer Soldiers: An Empirical Study of Arbitration Clauses in Consumer and Nonconsumer Contracts

34 Pages Posted: 20 Dec 2007 Last revised: 2 Jun 2008

Theodore Eisenberg

Cornell University, Law School (Deceased)

Geoffrey P. Miller

New York University School of Law

Emily L. Sherwin

Cornell University - Law School

Date Written: December 18, 2007

Abstract

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.

Keywords: Arbitration, Contracts, Consumer

JEL Classification: K00, K12, K41

Suggested Citation

Eisenberg, Theodore and Miller, Geoffrey P. and Sherwin, Emily L., Arbitration's Summer Soldiers: An Empirical Study of Arbitration Clauses in Consumer and Nonconsumer Contracts (December 18, 2007). Cornell Law School Legal Studies Research Paper No. 08-017; NYU Law and Economics Research Paper No. 08-28. Available at SSRN: https://ssrn.com/abstract=1076968 or http://dx.doi.org/10.2139/ssrn.1076968

Theodore Eisenberg (Contact Author)

Cornell University, Law School (Deceased) ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Geoffrey P. Miller

New York University School of Law ( email )

Center for the Study of Central Banks
40 Washington Square South
New York, NY 10012-1099
United States
212-998-6329 (Phone)
212-995-4590 (Fax)

Emily L. Sherwin

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Paper statistics

Downloads
647
Rank
30,808
Abstract Views
5,080