Cutting Edge Issues (Continued from page 36)


such as situations where corporations have drafted particularly unfair contract terms and put them into arbitration clauses. This article provides a brief overview


of several cutting-edge issues surround- ing the use of mandatory arbitration clauses, starting with the reasons why many trial lawyers are reluctant to have their cases handled in mandatory arbi- tration, and how some plaintiffs’ lawyers have successfully challenged the enforce- ability of certain clauses. This article will also examine a disturbing new trend (the abuse of arbitration to collect debts from consumers), and will briefly summarize some of major new legislative proposals that address issues relating to mandatory arbitration.


Why Do Many Trial Lawyers Resist Arbitration?


According to the U.S. Supreme Court,


arbitration is cheaper and easier than litigation in the civil justice system, and it’s better for consumers and employees in a variety of ways. In light of these statements from our highest court, why do so many individuals continue to fight against the enforcement of arbitration clauses in particular cases? There are a couple of important reasons. First and foremost, private arbitration


companies are under great pressure to devise systems that favor the corpora- tion over the individual consumer or employee. It is the corporation that drafts the arbitration clause, and more often than not, these clauses designate a specific arbitration company to adju- dicate any and all disputes. Arbitration companies are well aware of the value of being named as the arbitrator of choice in a consumer or employment contract, and often compete for this very lucrative business. Arbitrators know that if they rule against a corporate defendant too frequently or too generously (from the standpoint of that corporation), they will lose the work, and will be replaced


38


by another arbitration company that is more receptive to the corporation’s demands. Even within the arbitration com-


panies, arbitrators who rule against corporations and in favor of consumers or employees are often blackballed from


NAF to serve as one of its independent- contractor arbitrators, and he agreed to do so. He reported that when he did not award a bank the full amount of at- torneys’ fees it requested, that he found himself barred from handling any more cases involving that bank.


Most people first learn that they have lost the right to sue – and thus have “waived” their constitutional right to trial by jury – only after a dispute arises.


serving as arbitrators in future cases. This trend was revealed by a study of mandatory arbitration in managed care cases in California, which found that only a small number of cases existed in which an arbitrator awarded a plaintiff more than one million dollars against an HMO. Marcus Nieto & Margaret Hosel, Arbitration in California Managed Health Care Systems 22-23 (2000). In each one of these cases, this was the only HMO case that the arbitrator ever handled, id., suggesting that every time an arbitrator entered a substantial verdict against an HMO, the arbitrator was unable to get any further work from an HMO in the state. Additionally, in the last few months,


there have been two publicly disclosed episodes of arbitrators who had handled cases for the National Arbitration Forum (“NAF”), and who were then subsequently blackballed after ruling for consumers against NAF’s most prominent client, MBNA Bank. The first such episode of an NAF arbitrator was described in the deposition of Harvard Law Professor Elizabeth Bartholet, taken on September 26, 2006, by a lawyer challenging NAF as being biased in a consumer case against Gateway Com- puters.4


The second recent disclosure


came in an article written by Richard Neely, a former justice of the West Virginia Supreme Court in the 2006 September/October issue of The West Virginia Lawyer. After retiring from the bench, Justice Neely was approached by


Trial Reporter


While many arbitration service pro-


viders are very secretive about the identity and background of their ar- bitrators, a good deal of anecdotal evidence indicates that arbitrators are very disproportionately drawn from lawyers who specialize in representing corporate defendants. In a medical malpractice case, for example, a typical trial lawyer is likely to prefer that a jury hear her or his client’s claims, rather than to have those claims decided by an attorney who principally makes her or his living representing doctors, hospitals and HMOs. Further contributing to this distrust is


the fact that some arbitration companies have undertaken advertising campaigns aimed at prospective corporate clients which make a number of inappropri- ate promises of favorable treatment. For example, one NAF solicitation sent generically to multiple potential corporate clients states in huge print that NAF is “The alternative to the million dollar lawsuit.” This purported neutral arbitrator has been written into countless contracts between doctors and HMOs and patients, yet before they heard a single case they promised an “alternative” to a large recovery for victims. Similar language appeared in a letter dated April 16, 1998, from NAF’s


4


Please contact the author if you would like a copy of this deposition transcript. Phone: 202-797-8600, Email: pbland@ publicjustice.net.


Fall 2007


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