Wednesday, June 11, 2008

Further discussion on Arbitration

I originally talked about arbitration in this thread, after having responded to this posting. There has since been a post here that includes discussion from Ted at the first posting, and there has been another post from Ted here.

I won't rehash all of it. I will add my most interesting observation at this point. Ted has been arguing (amongst other things) that adhesion arbitration clauses are fine because they allow both parties to agree to the arbitrators. I took that to mean that such a thing was required. But in actuality, under the law (at least in Michigan) it is not required at all. An arbitration clause can let one party pick the arbitrator and it will be fully enforceable under Michigan law. I suspect it is the same in other states as well. Thus, I think Ted's argument falls apart for the simple reason that, if it isn't required, you are basically trusting the good graces of the other party not to screw you when writing an adhesion arbitration provision. Forgive me if I don't simply just trust that this won't happen. Absent a law requiring it, I simply don't think you can make a sweeping claim like Ted does. Even if it is true that 99% of arbitration clauses now include such language, tomorrow it could be 1%. It is totally up to the whims of whomever writes the arbitration clause - and in the case of an adhesion clause, the other party has no say in the matter and probably doesn't even know about the clause. That concerns me.

However, the bright side is that if it truly is almost all clauses that have Ted's language, then there should be no problem getting a law passed to make that language required. But until that happens, I don't see why the public should be eager to enforce adhesion arbitration clauses. "Just trust us" is not good business, particularly where you have no recourse in court if it turns out that trust was misplaced.

Oh, and as the post at simple justice highlights, there has been a recent article in Business Week (talked about in the WSJ Law Blog) about who really comes out ahead in arbitration in the NAF. Ted has already dismissed the article as just some trial lawyers whispering evil words into the Business Week reporter's ear.

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