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Mandatory Binding Arbitration - Evil or Really Evil?
AngelHedgie
Registered User regular
Registered User regular
So, I don't know how many of you have heard of mandatory binding arbitration clauses. What a MBA clause does is force someone who signs a contract to use arbitration to handle any disputes rather than the court system. Attempting to sue over a contract with a MBA clause allows for a countersuit of breach of contract. What really makes the situation worse is that the arbitration organizations are often stacked against the average Joe - the housing industry (a massive user of MBA clauses) has strong connections to some of the arbitration organizations. So instead of being able to bring your case before a relatively fair court, you're forced to enter into a system that in many ways is stacked against you.
Luckily, the courts are starting to respond. Recently, a CA court declared that T-Mobile's MBA clause was "unconcionable" and therefore unenforceable. This has opened the door for a class action lawsuit over non-prorated early-termination fees. MBAs in the housing industry have come under fire as well.
So, what do you all think?
Luckily, the courts are starting to respond. Recently, a CA court declared that T-Mobile's MBA clause was "unconcionable" and therefore unenforceable. This has opened the door for a class action lawsuit over non-prorated early-termination fees. MBAs in the housing industry have come under fire as well.
So, what do you all think?
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So, it's okay for your right to a civil trial to be stripped away by a bit of legalese?
If the MBAs are legitimately harming consumers, then it is their responsibility to sign contracts more responsibly.
That said -- there's no reason why arbiters couldn't be just as effective as the courts, unless they really are demonstrably and dangerously corrupt. Before they go after the contracts, maybe they should just clean up the arbitration process.
A lot of people just plain don't get it, and if all other realistic options also contain MBA clauses, what are you going to do? I mean, what if every renter in your area uses them? Do you protest by being homeless?
Did you voluntarily sign the contract?
edit: re: ElJeffe-that's where the courts come in and say if it's unconscionable or not. If it's really a case of the small guy being oppressed, he can get out of mandatory arbitration. Usually it's just people not reading the contract and wanting out.
And seriously why is an MBA negative by name alone? Why can't the arbiters -- you know -- arbitrate fairly? Can they really demonstrate that the arbiters decisions frequently go against how a civil court would most likely rule?
You could voluntarily sign a contract allowing me to kill you. I'll still go to jail if I do.
That said, I'm far from knowledgeable enough about the particulars of MBAs in these contexts to form a proper indignant outrage.
It means that one in question has no legal force, assuming it's not appealed.
One of the main problems with arbitration is the problem of who will bear the cost. Should it be the plaintiff, defendant, or whoever loses? In New York, there was a law that required that the contractor bear the cost of the arbitration unless the suit was found to be frivolous. However, you could circumvent it by including a clause in the contract stating the homeowner would bear that cost instead. With some work, a team of lawyers (including my father) made such clauses illegal, upholding the original intent of the law.
I would rather rework the rules of regulating MBA clauses than do away with them entirely. So long as consumer rights are protected, I would say that arbitration can actually be a better alternative to an already overburdened court system.
Right, but remember that arbitration is an alternative to the civil trial-you're not just giving away all rights to bring your complaint forward.
And what's the point of arbitration if it's not mandatory & binding? It wouldn't ever be used. re: Jeffe-it'd be a waste of the arbitration-whoever perceived themselves as losing would go to court, thus making the arb pointless.
You guys are treating MBAs as if they're a completely one sided proceeding in favor of the big guy, which isn't true. If it was, they'd likely be struck down across the board or reformed.
The whole point of arbitration is that it is legally binding. Consumers (especially for things like cell phones) would be bringing nuisance suits all the freaking time and allowing them to appeal decisions would be a ridiculous waste for the general public since it would clog the court systems with trivial stuff. I actually support MBA for things like cell phones provided that the arbitration is paid for by the cell phone company. It's in their best interest (lower costs) and the consumer's best interests (by dint of being taxpayers who would have to indirectly pay for an expanded court system without it).
Btw, if your house fell down and killed someone, the arbitrator would likely find in your favor. You're assuming that arbitrators are in the pocket of big business, which is certainly NOT the case.
Arbitration doesn't really break down. Each sides presents evidence to the arbitrator. You get the two sides together where they argue the case. The arbitrator then asks for more information/arguments until satisfaction is reached. Then after deliberation, the judgment is rendered. The arbitrator is usually paid by the AAA (american arbitration association I think) so they are usually impartial.
You don't get to choose, you get assigned an arbitrator. Normally, you wouldn't get the same arbitrator twice. For example, my dad headed a team of 30 arbitrators who handled a class action against Prudential. It had gone through the courts for about 15 years before both sides agreed to binding arbitration (different rulings on each claim). It took the arbitrators about 2.5 years to hand out all the rulings. Since then, I don't believe any of them have handled a case involving Prudential.
So that would be essentially a non-issue, imho, especially when combined with the fact that you don't get selection privileges.
I would imagine that either side could, but they likely wouldn't unless they'd been seriously screwed. I mean, are you going to risk going to court so you can get $500k instead of $400k? Likely not.
I'm trying to come up with a way of encouraging arbitration while still allowing the possibility of using the court system.
Designate an avenue for appeal of the arbitrator's binding decision. Like, if you can convince a judge that the arbitrator made substantive errors or exhibited bias or what have you, he'll chuck out the decision and the MBA clause and you can then resettle the issue in court.
For all I know, this is probably already possible.
In this case, courts don't set aside arbitration agreements because Congress has already said that arbitration is a valid form of dispute resolution and codified the Federal Arbitration Act. Basically, the act says that if you agree to arbitrate, the government won't step in on your behalf to give you access to the court system.
I think that usually applies to specific things for which you can sue, doesn't it? Like, I can sign something saying that X is a demonstrable risk if I use this service, and I won't sue if X happens to me. If Y happens, though, I can sue all the live long day.
And yeah, there are liability waivers signed constantly that technically say that, but as long as you can prove negligence or maliciousness, said liability waiver is worth about as much as the paper it's printed on.
What if it's printed on a stack of thousand dollar bills?
You can waive your rights to sue in the future as well, provided certain situations. Arbitration is one of those situations. Due to Congress bringing about the FAA, the courts will not look unfavorably on contracting to arbitration vs. taking it to court. I don't want to do an appeal to authority here, but it's the end of the workday and I'm trying to get out of the office. we tackle this pretty extensively in first year Contracts and when I'm home in around an hour or so, I can pull some case law and get into further detail.
There have been cases where mandatory arbitration clauses have been deemed unconscionable, particularly if the contract is grossly one-sided. Take-it-or-leave-it or adhesion contracts where one party has no negotiating power and must accept the contract for the service can often run afoul of this. One such recent case where the mandatory binding arbitration was thrown out was over the EULA of Second Life.
Generally, I think if the arbitration is particularly one sided then the courts do have methods to get around it.
Unconscionable contracts are always able to be thrown out by the courts, but they don't do it just because it's one-sided. It has to be grossly one sided or something else that "shocks the conscious" of the court. That really gets decided on a case by case basis.
I don't know why I didn't think of this when I first read your post, but this happens all the time. They're called "liability waivers" or hold harmless agreements.
Thanatos wasn't saying that liability waivers don't exist. He's saying they don't prevent you from suing in cases of negligence or malice.
the "no true scotch man" fallacy.
You can't waive your right to sue someone as a result of negligence or maliciousness. You can accept a reasonable degree of risk based on whatever activity you're engaging in, i.e., if I go skydiving, I can agree that if a bird flies into me and breaks my arm, I can't sue the skydiving company, or if I go climbing Everest, I can say if I freeze to death or die of exhaustion, it's not the guide company's fault. However, if the skydiving company gives me a backpack instead of a parachute, or the Everest guide forgets the first aid kit at basecamp and I die as a result, the liability waivers, even if they say "I agree not to sue you, for anything, ever," are unenforceable.
I suppose it's more accurate to say that the person who I'm contracting with has a duty to exercise due care, and be held to a professional standard, and cannot waive that duty.