Why Fight Arbitration?
Our clients sometimes ask us why we almost always fight arbitration agreements, which force people into private arbitration rather than allowing an injured party to have a day in court in front of the jury. There are several reasons, but the two most important are cost and a disturbing lack of impartiality on the part of some of the larger arbitration services which are required by many arbitration contracts.
In our practice, this most often comes up in the context of nursing or care home admissions, when a person who is already in need of assistance, and possibly mentally compromised, is given a pile of documents to sign which includes an arbitration agreement. Sometimes that person is lucky enough to have a younger family member along who might read through the stack of documents and might see the arbitration agreement, but will be suckered in by the facilities admissions person, who will often, in our experience, misrepresent the contents of the arbitration agreement, and what the person is giving up– the important right to a jury trial.
Arbitrations are often not cheap. Some contracts call for a three-person panel of arbitrators to decide any claim against the facility. If each one of those arbitrators is charging for $400-500 per hour, it doesn’t take much time before the cost of arbitration greatly exceeds the cost of taking a case to a jury.
Since the defendants also have to pay half of the arbitration costs, you might ask yourselves: “Why would a nursing home want to spend more money on the arbitration process?” Good question. The answer is that statistically several of the major arbitration services which are specified in arbitration contracts have a history of finding in favor of the party who insisted they be hired. You don’t have to take our word for it. The State of California sued one such national arbitration service on behalf of the consumers of California. The California complaint states: “Defendant [arbitration service] purports to act as a provider of neutral arbitration services that are fairly administered and characterized by integrity and high legal and ethical standards. In reality, [the arbitration service] is retained by debt collectors and serves their interest alone in a non-neutral, biased and unfair manner. [The arbitration service] is actually in the business of operating an arbitration mill, churning out arbitration awards in favor of debt collectors and against California consumers, often without regard to whether consumers actually owe the money sought by the debt collectors. [The] arbitration process is the antithesis of fair.”
These problems are why we fight arbitration agreements when we believe the process will cost our client an unfair amount to bring a legitimate claim, and when we believe that the arbitration service will not be fair. Not all arbitrations and arbitrators are unfair, or even more expensive, but it happens enough that we must stay vigilant.