"Volunteering" to Arbitrate through Predispute Arbitration Clauses: The Average Consumer's Experience

Article excerpt

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INTRODUCTION

Private arbitration, enabled by predispute agreements whereby parties waive their rights to resolve future disputes in a public courtroom, has a long history in the United States. (1) Until recently, arbitration reigned in two domains: commercial transactions and labor-management relations. Businesspersons generally chose arbitration over litigation for several reasons. First, they preferred to select the people who would decide their disputes, often opting for decisionmakers with relevant expertise, rather than having courts assign generalist judges to their cases. Second, they tended to prefer resolutions based on commercial norms rather than legal standards that might be less appropriate for their disputes. Finally, they commonly anticipated that resolution by arbitration would be quicker and cheaper than court resolution, with its potential for protracted pretrial adversarialism, extensive discovery, and multiple appeals.

Labor unions and management included arbitration provisions in collective bargaining agreements for different, albeit overlapping, reasons. Both labor and management believed that resolving disputes through arbitration would minimize industrial conflict over worker grievances. They had more confidence in decisionmakers whom they selected from their own ranks than court-appointed judges from outside the affected industries. Furthermore, they wanted a conflict resolution process that would keep businesses running and avoid losses in productivity and employment. In both the commercial and labor-management domains, arbitration agreements were negotiated by sophisticated parties of approximately equivalent bargaining power who understood the benefits and costs of their bargains. (2)

Over the past several decades, as a result of some remarkable lawmaking by federal and state appellate courts, the profile of arbitration has changed dramatically. (3) Arbitration is no longer the province of sophisticated participants. Instead, individuals pursuing long-established statutory claims, such as those brought under the federal securities (4) and antitrust laws, (5) and newer but long-sought civil rights claims, including race, sex, age, (6) and disability discrimination, (7) may now be forced to arbitrate if the parties are deemed to have assented to a predispute arbitration clause. (8) Consumer claims have followed a similar course, such that consumers who enter into contracts that substitute binding arbitration for the public court system may be required to arbitrate disputes that arise in the course of their relationships with service or product providers. (9)

The merits of this consumer arbitration jurisprudence have been debated heatedly by members of the judiciary, legal commentators, commercial interests, and public advocacy groups. Perhaps most central to the debate are concerns that consumers do not fully understand the terms of these agreements, (10) and that, even if they did, they cannot negotiate those terms, which are offered on a "take-it-or-leave-it" basis. (11) In accordance with the current arbitration jurisprudence, however, consumers are bound by the terms of these contracts unless their terms are deemed unconscionable or otherwise faulty under general principles of contract law. (12)

The debate surrounding consumer arbitration has lacked a strong empirical foundation. For example, although it is generally believed that predispute arbitration clauses in consumer contracts have become ubiquitous during the last decade, (13) discussions of the extent to which consumers are exposed to arbitration clauses have been driven by headline cases, investigations of specific industries, and broader, unsystematic searches. (14) Also lacking is systematic information regarding the features of the arbitrations that are required by these clauses, and what consumers are told about these features. Without such information, it is impossible to determine whether arbitration is simply another forum in which parties can freely pursue their legal rights, as the Supreme Court has held, (15) or whether consumers' rights are being negatively and substantively affected without their true knowledge or consent. …