4 ms·

The point of arbitration is to settle a problem with the help of a trusted, neutral 3rd party. Forced arbitration does not seem as neutral.

DannyBee 8y ago
Courts force mediation as well. For example, a lot of states now force mediation in family law cases. They would (and should) force arbitration if they could. (The vast majority of these cases are people failing to act like reasonable adults, not serious legal issues) It depends a lot on the situation.
- YokoZar 8y ago
  In such cases the court would determine the arbiter, not the company.
  - DannyBee 8y ago
    In most cases, which follow JAMS rules (even when not done by JAMS), the companies do not name the arbiter. See https://www.jamsadr.com/rules-comprehensive-arbitration/ https://www.jamsadr.com/rules-comprehensive-arbitration/ Rule 15. (This is true even when, as in most cases, the company pays for arbitration)
    - dd36 8y ago
      The issue is usually information asymmetry. A repeat player has better information. That’s why we built https://levelplayingfield.io https://levelplayingfield.io
mindslight 8y ago
What I don't understand is that if arbitration has any of its purported merit, then why can't both parties just agree to enter into binding arbitration at the time of a dispute - when it would be worthwhile to actually research whether it makes sense? I do understand this would leave the possibility of expensive court still on the table. But the alternative seems to undermine the very concept of a contract, by asserting that one party has an ability to unilaterally choose the interpreter of the words. As in: "I'll give the first person who responds to this comment $20", but only per my chosen interpreter. (And I choose /dev/null)
- marcoperaza 8y ago
  If you did that, the arbitration decision would get vacated by a court. You can't just choose any arbitrator willy-nilly who will always rule for you. That's just not how this works. Here's a decent-looking article going through some of the bases for getting a court to overturn an arbitration decision: https://www.floridabar.org/news/tfb-journal/?durl=%2FDIVCOM%2FJN%2Fjnjournal01.nsf%2FArticles%2FF2A3DA279CD3A5C485257F45004E49E3 https://www.floridabar.org/news/tfb-journal/?durl=%2FDIVCOM%... As for why not change the law to let parties choose at the time of the dispute, what you prefer ex ante and ex post is rather different. Ahead of time, you don't know who will be the one claiming wrongdoing of the other, so you'll be willing to agree to binding arbitration. After all, most people go into a deal intending to abide by it, and everyone goes into a deal at least trying to convince the other side of that. But after the fact, the party likely in the wrong would prefer to impose the high cost of litigation on the one likely not in the wrong. It can then unfairly capture a portion of this potential cost by proposing a settlement. An example with made-up numbers: say you owe me $20,000 and refuse to pay and that it would cost me $5,000 in court and attorney's fees to sue you in court for it. You could offer me a settlement of $16,000 and it would be irrational for me to decline it, as it would leave me better off than winning the lawsuit (and I might not win). Now you have unfairly but legally taken $4,000 from me. If there was an arbitration option at the time of dispute, providing for a process that would only cost me $1,000, you would never accept it. Why would you? It has to be binding and agreed to before the dispute arises for it to work.
  - chii 8y ago
    For the 16000 settlement case, wouldn't the courts award both the legal cost plus damages incurred, so as long as you win, you'd be ahead?
    - marcoperaza 8y ago
      Attorney’s fees are not awarded in the US. With a few exceptions, each side pays for their own lawyers.
      - 8y ago
secabeen 8y ago
Arbitration should just be banned in contracts of adhesion, where one party dictates the terms and the other party cannot edit or change them. Sure, if you're writing a real contract, where both sides are negotiating terms, arbitration can be something the weaker party can agree to in return for some other concession. It doesn't make sense in one-sided contracts.
- dd36 8y ago
  Agree.

DannyBee 8y ago

Courts force mediation as well. For example, a lot of states now force mediation in family law cases. They would (and should) force arbitration if they could. (The vast majority of these cases are people failing to act like reasonable adults, not serious legal issues) It depends a lot on the situation.

YokoZar 8y ago
In such cases the court would determine the arbiter, not the company.
- DannyBee 8y ago
  In most cases, which follow JAMS rules (even when not done by JAMS), the companies do not name the arbiter. See https://www.jamsadr.com/rules-comprehensive-arbitration/ https://www.jamsadr.com/rules-comprehensive-arbitration/ Rule 15. (This is true even when, as in most cases, the company pays for arbitration)
  - dd36 8y ago
    The issue is usually information asymmetry. A repeat player has better information. That’s why we built https://levelplayingfield.io https://levelplayingfield.io

mindslight 8y ago

What I don't understand is that if arbitration has any of its purported merit, then why can't both parties just agree to enter into binding arbitration at the time of a dispute - when it would be worthwhile to actually research whether it makes sense? I do understand this would leave the possibility of expensive court still on the table. But the alternative seems to undermine the very concept of a contract, by asserting that one party has an ability to unilaterally choose the interpreter of the words. As in: "I'll give the first person who responds to this comment $20", but only per my chosen interpreter. (And I choose /dev/null)

marcoperaza 8y ago
If you did that, the arbitration decision would get vacated by a court. You can't just choose any arbitrator willy-nilly who will always rule for you. That's just not how this works. Here's a decent-looking article going through some of the bases for getting a court to overturn an arbitration decision: https://www.floridabar.org/news/tfb-journal/?durl=%2FDIVCOM%2FJN%2Fjnjournal01.nsf%2FArticles%2FF2A3DA279CD3A5C485257F45004E49E3 https://www.floridabar.org/news/tfb-journal/?durl=%2FDIVCOM%... As for why not change the law to let parties choose at the time of the dispute, what you prefer ex ante and ex post is rather different. Ahead of time, you don't know who will be the one claiming wrongdoing of the other, so you'll be willing to agree to binding arbitration. After all, most people go into a deal intending to abide by it, and everyone goes into a deal at least trying to convince the other side of that. But after the fact, the party likely in the wrong would prefer to impose the high cost of litigation on the one likely not in the wrong. It can then unfairly capture a portion of this potential cost by proposing a settlement. An example with made-up numbers: say you owe me $20,000 and refuse to pay and that it would cost me $5,000 in court and attorney's fees to sue you in court for it. You could offer me a settlement of $16,000 and it would be irrational for me to decline it, as it would leave me better off than winning the lawsuit (and I might not win). Now you have unfairly but legally taken $4,000 from me. If there was an arbitration option at the time of dispute, providing for a process that would only cost me $1,000, you would never accept it. Why would you? It has to be binding and agreed to before the dispute arises for it to work.
- chii 8y ago
  For the 16000 settlement case, wouldn't the courts award both the legal cost plus damages incurred, so as long as you win, you'd be ahead?
  - marcoperaza 8y ago
    Attorney’s fees are not awarded in the US. With a few exceptions, each side pays for their own lawyers.
    - 8y ago

secabeen 8y ago

Arbitration should just be banned in contracts of adhesion, where one party dictates the terms and the other party cannot edit or change them. Sure, if you're writing a real contract, where both sides are negotiating terms, arbitration can be something the weaker party can agree to in return for some other concession. It doesn't make sense in one-sided contracts.

dd36 8y ago
Agree.