Like Sarah (see her 10/8/07 post), I also noticed that Public Citizen released a report on the credit card industry’s use of mandatory arbitration clauses. The report uses plenty of inflammatory language: consumers are being “forced into the shadowy world of binding mandatory arbitration,” arbitration firms “hire arbitrators to rubber-stamp rulings that favor business,” and ultimately, binding mandatory arbitration is “a deliberate strategy to substitute a secret, pro-business kangaroo court for an open trial on the merits of a claim.” ADR, meet Raymond Chandler.
But there’s more here than hyperbole.
For a while now, people have raised concerns about the “structural bias” that arbitral firms and arbitrators may show toward the repeat players who serve as their primary sources of cases and income. (The same sorts of concerns also have arisen in cases involving administrative adjudication and, I believe, are likely to arise in mediation that is sponsored by a particular agency or corporation.) In Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968), a plurality of the Supreme Court declared that “any tribunal permitted by law to try cases and controversies not only must be unbiased but also must avoid even the appearance of bias [my emphasis].” Earlier, in Tumey v. State of Ohio, 273 U.S. 510 (1927), the Court noted that “the requirement of due process of law in judicial procedure is not satisfied by the argument that men of the highest honor and the greatest self-sacrifice could carry it on without danger of injustice.” Instead, the Court announced that “[e]very procedure which would offer a possible temptation to the average man as a judge [again, my emphasis] to forget the burden of proof required . . . or which might lead him not to hold the balance nice, clear, and true . . . denies . . .due process of law.” Despite the low threshold for appearance of bias that is suggested by these quotes, most courts seem to respond skeptically to vague claims that “structural bias” is sufficient to demonstrate the “evident partiality” required by the Federal Arbitration Act for vacatur of arbitral awards. The courts demand concrete evidence that will move these claims of bias from the realm of speculation to plausibility.
Public Citizen obviously is advocating for its own position. Nonetheless, its report–which cites to information from court filings and case reports published by the National Arbitration Forum (NAF) on its website to meet
It’s important to add that these data do not show that any arbitrator or arbitral firm handling credit card matters is biased—and Public Citizen goes too far in making such assertions. But that is not the point. If the numbers reported by Public Citizen are accurate—and I must admit I have not had the opportunity to validate them—I fear that arbitral firms and arbitrators involved in the mass processing of cases will find it increasingly difficult to argue that people’s concerns about the appearance of bias are just not plausible.