Arbitration Fees: Do Companies Breach Duty to Pay Them?
Via Art Hinshaw at ADR Prof, and Jean Sternlight of UNLV writes that Public Justice's Paul Bland (here) argues that although many companies promise to pay arbitration fees incurred by their customers and employees, "quite a few fail to pay those fees on the rare occasion when someone actually brings a claim against them in arbitration. The post further discusses how the AAA has begun to send letters to such companies demanding that they stop using the AAA name in company documents. Bland identifies car dealers as a common culprit,"
California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration
California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration are important because our largest state is a leader in arbitration and these are both rules of ethics and rules of law. They are made rules of law by California Code of Civil Procedure section 1281.85.
California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration have recently been amended.
Bruce Wardhaugh writes "some argue that pre-dispute agreements in consumer (and employment) matters are consumer welfare enhancing: they decrease the costs of doing business, which is then passed on to the consumer. This Article examines these latter claims from both an economic and normative perspective. The economic analysis of these arguments shows that their assumptions do not hold. Rather than being productive of consumer surplus, the use of arbitration is likely to have the opposite effect. The industries from which the recent Supreme Court cases originated not only do not exhibit the industrial structure assumed by the proponents of expanded arbitration, but are also industries which exhibit features that facilitate consumer welfare reducing collusion."
"The Problem with Class Arbitration" is an article by Neil Troum, an adjunct professor at Temple University's Beasley School of Law. He makes what seems to me a powerful point:
"The current state of the law is: where the parties have consented to class arbitration, an arbitrator can enter a class award that a court will confirm and that will have the same res judicata effect as a class action judgment in court. There is a problem with this. The problem is not the incompatibility of the class action's traits with those of the arbitral realm, however--which is how a majority of the Supreme Court currently sees things. It is instead that an arbitrator possesses what power he has only with the consent of the parties whose claim he will resolve. As a result, a class arbitration judgment should not be deemed to have preclusive effect on absent (i.e., nonconsenting) class members, like a class judgment issued from a court. This is not the law, however."
Today, the Supreme Court decided BG v. Argentina, in which an arbitration panel awarded BG $185 million in damages.
The basic issue is who—court or arbitrator—bears primary responsibility for interpreting and applying an investment treaty provision providing for arbitration 18 months after litigation in Argentina’s courts.
The Supreme Court today holds that investment treaties should in some respects be treated like ordinary contracts. "A treaty is a contract between nations, and its interpretation normally is a matter of determining the parties’ intent. Where, as here, a federal court is asked to interpret that intent pursuant to a motion to vacate or confirm an award made under the Federal Arbitration Act, it should normally apply the presumptions supplied by American law."
The relevant presumptions are those the Supreme Court articulated, primarily in its Howsam decision:
In an ordinary contract, the parties determine whether a particular matter is primarily for arbitrators or for courts to decide. If the contract is silent on the matter of who is to decide a "threshold" question about arbitration, courts determine the parties’ intent using presumptions. That is, courts presume that the parties intended courts to decide disputes about "arbitrability," e.g., Howsam v. Dean Witter Reynolds, Inc., 537 U. S. 79, 84, and arbitrators to decide disputes about the meaning and application of procedural preconditions for the use of arbitration, see id., at 86, including, e.g., claims of "waiver, delay, or a like defense to arbitrability," and the satisfaction of, e.g., " ‘time limits, notice, laches, [or] estoppel,’ " Howsam, 537 U. S., at 85. The [treaty] provision at issue is of the procedural variety.
Yale Law Professor Judith Resnik in the New York Times objects to "the growing privatization of judging and the closing of access to courts." She says "The Supreme Court has accelerated this trend through its expansive interpretation of the Federal Arbitration Act." She asserts "the court stretched that law to apply to consumers and employees." In contrast, I defend the Court's arbitration decisions on that question here where I wrote in fn.76:
It is true, as Jean Sternlight argues, that when the FAA was enacted “the economy looked substantially different than it looks today. There were very few transactions between large merchants and individual consumers that would have involved interstate commerce and thus fallen under the jurisdiction of the FAA.” The great number of transactions now held to involve interstate commerce reflects not only an increase in long-distance consumer transactions, but also the Supreme Court's expansion of the CommerceClause to cover transactions previously considered beyond the reach of federal legislation. See Henry C. Strickland, The Federal Arbitration Act's Interstate Commerce Requirement: What's Left for State Arbitration Law?, 21 Hofstra L. Rev. 385, 459 (1992) (“Consumer disputes (and other disputes that are the subject of special consideration in state arbitration statutes) were unlikely to find their way to federal court in 1926, because they seldom involved citizens of more than one state[,] and they usually did not meet the requisite amount in controversy. Indeed, Congress may have considered such disputes beyond its commerce power in 1925.”). If applying the FAA to consumer contracts is inconsistent with the intent of the Congress that enacted it, that inconsistency is more properly blamed on the Court's interpretation of the CommerceClause than on the Court's interpretation of the FAA.
Yale Prof. Resnik also complains that "purchasers of cellphones and prospective employees are frequently required to sign 'contracts' replacing court access with [arbitration] procedures companies choose. These are take-it-or-leave-it deals. If you want a cellphone or a job, you have to agree to private dispute resolution." Maybe if you want that cellphone or that job then arbitration is part of the take-it-or-leave-it offer to the consumer or employee, however, some cellphones (prepaid) and many employers do not include arbitration clauses in their contracts. Arbitration is one of many factors a consumer or employee may consider in choosing which contracts to form. I'm generally happy to see arbitration clauses in contracts. For some reasons see here
