Industry Response to Consumer Arbitration Study

Alan Kaplinsky and Mark Levin, Ballard Spahr attorneys writing on their CFPB Monitor blog, have offered their initial thoughts on the study of consumer understanding of arbitration agreements that my St. John’s colleagues and I recently posted.

My colleague Jeff Sovern has posted a full response at the Consumer Law & Policy Blog. I’ll just add that, in my view, Levin and Kaplinsky don’t actually address the core problem we address in our article–that citizens are being unwittingly and unwillingly forced to give up important (and constitutionally guaranteed) procedural rights. Their point–and it is the point arbitration advocates almost invariably make–is that arbitration can be better for consumers than litigation. That may very well be true, at least some of the time. (See my post on the benefits of limited consumer arbitration here.) But it doesn’t answer the right question.

The constitution guarantees a right to a jury trial in civil disputes. More broadly, the rule of law depends on access to public adjudication to enforce private rights. Citizens cannot be forced into alternative processes simply because someone has made a determination that they would in fact be better served by the alternatives. It is certainly true that citizens can choose to give up their adjudicative rights, but those choices have legitimacy only if they are knowing and voluntary. Our research suggests that consent to arbitration is seldom knowing and voluntary.

4 thoughts on “Industry Response to Consumer Arbitration Study”

  1. The Ballard Spahr attorneys say that your survey is wrong “because it does not even attempt to examine how consumers actually fare in individual arbitrations, or how their experience compares with how class members fare in certified or settled class actions.”

    From what I can tell, you measured people’s pre-dispute understanding of their arbitration rights, but Ballard Spahr wants a measurement of the strength of post-dispute arbitration rights.

    There are too many variables and individual differences to meaningfully study post-dispute arbitration rights. Furthermore, post-dispute, consumers’ fates are already sealed—by the pre-dispute arbitration agreements that they have already signed.

    The value in measuring pre-dispute understanding is that it reflects public perception. It reflects people’s true knowledge about arbitration, which should be held as a virtue in our justice system.

    The solution? Adopt the 2009 proposal for the Arbitration Fairness Act, which protects pre-arbitration agreement rights, but also preserves post-dispute arbitration.

  2. I agree with Becky, Mr. Kirgis, and Mr. Sovern that the CFPB Monitor Blog has missed the main issue addressed by the consumer study. The question is not whether the result of the arbitration cases land in the consumer’s favor, rather, the point at issue is to what extent consumer’s constitutional rights are being taken without their knowledge. The CFPB Monitor blog is essentially using the ends to justify the means.

    While the points put forth by the CFPB Monitor Blog do appear to indicate that binding arbitration may not be the “corporate boogie man” some of us have been led to believe, that does not alter the fact that the vast majority of people (as signified by the consumer study) are relinquishing rights without full knowledge of what they are giving up. Just because a certain percentage of consumers leave with a favorable decision or smaller legal bill does not nullify the injustices done to those who are unable to pursue a claim through a constitutionally guaranteed procedure they inadvertently surrendered.

    With that said, it would appear the CFPB Monitor Blog has provided one of the stronger arguments for encouraging meaningful consent in these situations. If the results are truly as promising as the CFPB Monitor Blog suggests, surely there would be no issue having consumers sign up and waive such rights.

  3. While I enjoy discussing legal theories and constitutional issues, the argument that arbitration clauses deny consumers a right to a jury trial is something of a strawman.

    While consumers have a right to a jury trial, in theory, in practice, no one has a jury trial in a consumer suit – it just doesn’t happen in our court system.

    So, is it really an issue that we have given up something that we were never going to have?

  4. Mark, I’d say a couple of things about that. One is that rights can have meaning even if they are rarely invoked; the mere possibility of invoking a right can provide deterrence. The shadow of a jury trial is different from the shadow of arbitration.
    Further, the right to a jury trial presupposes a right to judicial process. No one at the founding saw a need to explicitly protect the right to access to court, because arbitration agreements were not specifically enforceable. But the protections for due process and the jury trial in the fifth, sixth, and seventh amendments mean nothing if parties have no right to judicial process in the first place.

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