'Underdog' Arbitration: A Plan for Transparency
40 Pages Posted: 6 Mar 2015 Last revised: 24 Mar 2015
Date Written: March 4, 2015
The use of mandatory, pre-dispute arbitration clauses in consumer, employment, health care, and even nursing home agreements is ever-increasing, even though the general public has distrust and a lack of understanding as to the nature of arbitration. The Supreme Court in AT&T v. Concepcion, and then in American Express Company v. Italian Colors Restaurant, has signaled to us firmly and without doubt that mandatory pre-dispute arbitration is here to stay. This is true even for individual low-value claims in which one party, say the consumer or employee, has little or no bargaining power. I call these claims “underdog claims.” There have been numerous proposals to amend the Federal Arbitration Act to exclude such claims and numerous criticisms raised in reaction to the Court’s jurisprudence. But with the Supreme Court’s theoretical view that arbitration of underdog claims is fair, those proposals are likely to go nowhere. The question now is how should we approach this new field of dispute resolution in which so many of our claims will be resolved? This paper analyzes the meritorious criticisms of underdog arbitration which include bias, the repeat-player effect, the removal of publicity, the lack of judicial oversight, and a general concern about the lack of transparency. Then I propose a three-part solution for promoting transparency to establish a system in which underdog arbitration can work. I propose that the FAA be amended to require transparency in consumer and employee claims through (1) uniform data reporting at the arbitration-service provider level; (2) requiring a written statement of decision in such disputes; and (3) data-reporting requirements by the business entity imposing mandatory pre-dispute arbitration on the employee/consumer stake-holder.
Keywords: arbitration, consumer, mandator, transparency
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