WSJ's Recent Run on Forced Arbitration

Originally published by David Arkush and Taylor Lincoln at the Watchdog Blog [1].

Wall Street Journal readers have heard a lot about binding mandatory arbitration recently. On Saturday, the newspaper’s editorial board used the Chamber of Commerce's biased survey [2] on arbitration as justification for a fact-twisting polemic against the civil justice system. The paper reported on a lawsuit against the National Arbitration Forum [3] by the city of San Francisco, and readers weighed in with views on arbitration far more reasonable than those of the editors.

The Journal's editorial touted a recent Chamber survey claiming that 82% of voters would prefer to resolve a dispute with a company in arbitration in contrast to only 15% in litigation. Of course, survey participants were not informed that if a company forces you into arbitration, the company picks who resolves the dispute. Participants also weren’t told that these biased decisions are binding and almost always final -- meaning no appeals even if the decisions contain “silly factfinding” or are just plain “wacky.” (The are quotes from the Supreme Court [4] and a federal appeals court [5]!) Needless to say, the Journal’s opinion writers didn’t mention these flaws in the survey.

As in the Journal's November broadside against our Arbitration Trap [6] report, the editorial writers once again blur the distinction between voluntary and mandatory arbitration. The difference is huge. In voluntary arbitration, parties choose after a disagreement has arisen to settle it through a mutually agreed-upon arbitration process. No one opposes this, of course. But in mandatory arbitration -- the kind at issue in Congress right now -- consumers are forced to “agree” to arbitration as a condition of doing business. Or courts hold that consumers agreed to arbitration when they didn’t agree at all -- like when they didn’t know about or didn’t understand an arbitration requirement buried in fine print. Apologists for binding mandatory arbitration have repeatedly pulled this sleight-of-hand, using studies on voluntary arbitration to defend forced arbitration.

The Journal reported [3] that the city of San Francisco filed sued the National Arbitration Forum last week, accusing it of all manner of abuses. The lawsuit’s charges, as rehashed in the story, echoed those in our Arbitration Trap report. Among the city's claims is that NAF only ruled in favor of consumers 0.2 percent of the time in the period studied.

The Journal blogged [7] on the lawsuit, kindly using the numbers and a photo from our Arbitration Trap report (but failing to mention us or the report). The blog attracted dozens of comments which, on the whole, show that the Journal's readers understand forced arbitration pretty well in spite of the paper's opinion page:

“0.2% of arbitration cases won by consumers? Fire that weak kneed arbitrator, our goal is 0% consumer victories.”

“Juries tend to favor a consumer who has been wronged by big business, while arbitrators seem to like the business side of things.”

“I have no problem with fair arbitrations that are freely bargained for between economic equals; those can be beneficial because they generally are faster, less expensive than real litigation, and, unlike this type of arbitration, largely unbiased. This sort of arbitration, however, is just a kangaroo court set up to circumvent the legitimate justice system because consumers would win too frequently, what with juries being made up of other consumers and all.”

“I agree that people should be responsible for their own debts and actions, but due process of law and the appearance of fairness in dispute resolution is just as important.”

“The NAF arbitrations don't really occur in any place as they are ‘paper drop’ arbitrations. The NAF picks some pre-approved arbitrator that does business their way at $250 per and forward the paper work to that person's location, sometimes a PO Box. Most of these folks are semi-retired or retired lawyers from corporate or large multi-city law firms. At $250 per 15 minutes, not bad work.”

We couldn’t have said it better ourselves.