The Real Cost for Private Justice
Would you play in a game where your larger and more formidable opponent gets to pick all the rules and then pay the referee?
What is Mandatory Binding Arbitration?
Arbitration is an alternative means to litigation for resolving disputes. The Federal Arbitration Act (FAA) was passed in 1925 to encourage businesses to participate in arbitration
on equal footing. However, the FAA has been interpreted broadly, beyond congressional intent, and now mandatory binding arbitration has become a tool used by big businesses to strip away consumers’ and employees’ constitutional rights. Individuals must sign mandatory binding arbitration clauses to obtain many products and services, agreeing to give up their rights to go to court when they are injured and, instead, to allow an industry insider to make a binding ruling regarding any dispute.
The Real Cost for Private Justice
Who does Mandatory Binding Arbitration affect?
Everyone. These clauses are found in many common contracts, including employment contracts, contracts for medical services such as nursing home care, and many consumer contracts such as cell phone, credit card, and insurance contracts.
Why is Mandatory Binding Arbitration unfair?
Companies pick the arbitration company, pick the panel of arbitrators from which consumers choose, and provide repeat business to arbitrators who find in their favor. Usually the arbitration awards are not public, leaving other consumers unaware of any previous cases.
High Costs:
Government funding helps to lower the cost of filing a lawsuit in a public court system but with arbitration, private companies are free to charge as much as they like for filing fees. Arbitration is a pay as you go system which quickly becomes prohibitively expensive for most consumers.
Limited Discovery:
Liberal discovery rules govern lawsuits within the federal court system and allow the plaintiff to receive broad access to information important to their case. This is not the case with arbitration – the arbitrator has discretion to decide what information will be made available, and many mandatory binding arbitration clauses specifically limit discovery.
Bans on Class Actions:
Normally used as a litigation tool to combine claims against one large company where individual plaintiffs would be unable to afford such a lawsuit, many arbitration agreements expressly forbid this practice, immunizing companies for their potentially wide-spread misconduct. Also, in many cases mandatory arbitration clauses limit available remedies.
Limited Appeal Rights:
One of the most fundamental functions of the legal system is its ability to fix errors through the appeals process. But most arbitration awards cannot be appealed. A judge will never look at the award to ensure that the law was followed and that the decision was just.
What Can You Do?
Encourage your members of Congress to support bills that amend the FAA and prohibit mandatory binding arbitration clauses where they are most harmful.
Encourage your state representative to support legislation that would make mandatory binding
arbitration fairer for consumers.
Share your mandatory binding arbitration horror stories at:
www.givemebackmyrights.com/bmatellus.
For more information, please visit:
www.afj.org or www.givemebackmyrights.com
Rigged System:
~ by ebragg on September 26, 2008.
1.
Hello, I am sorry you had the horrible experience. I too have had a terrible arbitration experience but I am still living mine as it is not over yet. We went through September of this year, received the “award” in October 2008. The repairs are to be completed by December 10, 2008. The only thing I have heard is from the builder is a letter from his attorney offering $2600 to repair my house, which is NOT near enough to fix the 39/188 items. The attorney also states in order to get the check forwarded to me, we must sign a release exempting the builder, the insurance company and the warranty company from current and future defects. Now our experience with arbitration, oh what a joke that was. We paid $1500 for a a complex arbitration meaning we wanted a decision and the method of repair for the defects. We turned in our paper work, with the documentation, and photos, our defect list had 188 items. The builder responded to our defect list he agreed 65 items are “covered defects”. The day of arbitration we had my husband, our structural engineer, and myself. For the builder he had the operations manager, the regional manager, two customer service managers, the framer, the finisher, a heating/cooling guy, a flooring guy, and an attorney. At the beginning of arbitration the arbitrator wanted to sit down and discuss the items, which we did. As we went down the list the builder agreed to a number of items he would repair. We then looked at the defects in the house, the items the builder agreed to repair were breezed over without true inspection. Almost all the items required measuring but, the arbitrator NEVER measured a single defect in our home. We have mounds and dips in the kitchen floor he did acknowledged the mounds and dips in the floors. We have studs pushing though walls, walls not nailed to studs, cracks in walls and ceilings, every door in my house has gaps you can see daylight through, showers/tubs that leak, the back door leaks water, we have obvious mold growth in two bathrooms and the back door. We were not awarded the 60 items the builder agreed were covered defects, nor the numerous defects he agreed to repair during arbitration. When I called to find out how we were not awarded those defects and how I wasn’t awarded defects based on measurements when the arbitrator never measured any defects. I was told the builder must have backed out of his agreement to repair and the arbitration company “can not obligate the builder.” I was also told that the arbitrator has been an engineer for over 20 years, and has been doing arbitration for over 10 years he can eye ball defects and decide if they meet tolerance. When I told her that was not possible she proceeded to tell me if I wanted I could pay $150 for clarification, which would not change the decision or I could pay $1000 for an appeal. I wrote a letter essentially protesting the award. I was called by the arbitration company the lady told me she talked with the arbitrator, he was standing by his ruling, he told the woman that he measured all the defects in our home with equipment provided by the builders representatives. Also the woman told me that when the builder stated the items were covered defects really meant to say “could be covered defect.” When I asked her to put the phone call in writing she refused stating that is not her job. Again she told me I could pay $150 for clarification or $1000 for an appeal. All of which would have been due the day after the phone call. Now the awarded items cover our back door that leaks, the showers that leak, and some dry wall issues. The defects that were not awarded to us were the kitchen floor with the mounds, the studs pushing through walls, the walls not nailed to studs, the doors with gaps, the spalling crack under the ceramic tiles, along with dozens more defects. The defects that were awarded have not been repaired and I have NO doubt that the builder is going to force me into filing a compliance hearing, which is another $1000, and uses the original arbitrator. WOW talk about not fair. Homeowners with defective houses are screwed.
Michelle Rechtien said this on Your comment is awaiting moderation. November 16, 2008 at 9:34 pm