case for enforcing 2013 oct
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The Case for Enforcing Adhesive Arbitration Agreements --With Particular Consideration of Class Actions and Arbitration Fees. Journal of American Arbitration, Vol. 5, No. 2, p. 251.TRANSCRIPT
The Case for Enforcing Adhesive Arbitration Agreements
Federal Arbitration Act § 2
"written provision . . . to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
Tension between:
Arbitration Law & Employment Law
(Freedom of Contract) (Restricts Contract)
The Case for Enforcing Adhesive Arbitration Agreements
- Libertarian: Autonomy (Freedom of Contract) over Parentalism
- Utilitarian: Benefits to Adhering Parties Outweigh Costs
The Case for Enforcing Adhesive Arbitration Agreements
The Case for Enforcing Adhesive Arbitration Agreements - with Particular Consideration of
Class Actions and Arbitration Fees
I. The Basic Analysis of Adhesive Arbitration Agreements
II. The Unconscionability and “Effectively Vindicate” Doctrines
III. Class Actions
IV. Arbitration Fees
V. Conclusion
I. The Basic Analysis of Adhesive Arbitration Agreements
A. Reducing Costs and Passing on the Savings
B. The Source(s) of the Cost Reduction
C. Empirical Studies and their Inherent Limits
D. The Importance of Enforcing Pre-Dispute Agreements to Arbitrate
Premise:
businesses using adhesive arbitration agreements do so because those businesses generally find that those agreements lower their dispute-resolution costs
cost-savings to business yield:lower prices
cost-savings to business yield:lower prices
- even if consumers do not notice arbitration clause
because above-normal profits attract investment that
causes an increase in supply
cost-savings to business yield:lower prices
- even if consumers do not notice arbitration clause
- even if “perfect competition” is lacking
under all conditions, even monopoly,
Regulation of consumer arbitration
• looks like lots of other consumer regulation– protects consumer from harsh contract
term, – but
– raises prices, and– limits consumer choice (prohibits
choice of low price/harsh term combination)
cost-savings to business yield:lower prices
are cost-savings due to: - lower awards,- lower process costs,
or- some combination of the two?
Empirical studies:
• consumers/employees win a higher percentage of cases in arbitration
• winning consumers/employees win lower awards in arbitration
• reduced process costs are a significant source of the cost-savings businesses derive from arbitration
Enforcement of Consumer Arbitration Agreements
Winners- Consumers w/o disputes- Consumers w/ meritorious, but low $ claims
Losers- Consumers who would win big jury $ - Lawyers who litigate such cases
Importance of enforcing pre-dispute arbitration agreements:
Social gains from arbitration’s process-cost reduction
Enforcement of Employment Arbitration Agreements
Winners- Employees w/o disputes- Employees w/ meritorious, but low $ claims
Losers- Employees who would win big jury $ - Lawyers who litigate such cases
See Christine Jolls, Accommodation, Mandates and Antidiscrimination Law, 53 Stan. L. Rev. (2000).
I. The Basic Analysis of Adhesive Arbitration Agreements
A. Reducing Costs and Passing on the Savings
B. The Source(s) of the Cost Reduction
C. Empirical Studies and their Inherent Limits
D. The Importance of Enforcing Pre-Dispute Agreements to Arbitrate
II. The Unconscionability and “Effectively Vindicate” Doctrines
A. Unconscionability Generally: Ex Ante, Not Ex Post
II. The Unconscionability and “Effectively Vindicate” Doctrines
A. Unconscionability Generally: Ex Ante, Not Ex Post
B. The “Effectively Vindicate” Doctrine
III. Class Actions
A. Arbitration Agreements that Prohibit Class Actions
III. Class Actions
A. Arbitration Agreements that Prohibit Class Actions
B. The Unconscionability Doctrine
III. Class Actions
A. Arbitration Agreements that Prohibit Class Actions
B. The Unconscionability Doctrine
C. The “Effectively Vindicate” Doctrine
IV. Arbitration Fees
1. The Fundamental Error: Looking at Forum Fees in Isolation
IV. Arbitration Fees
1. The Fundamental Error: Looking at Forum Fees in Isolation
a. courts should compare total cost of pursuing claim in arbitration with
pursuing it in litigation
b. costs-based challenge should fail unless the former is significantly higher
c. this will be rare
IV. Arbitration Fees
1. The Fundamental Error: Looking at Forum Fees in Isolation
2. The Error of Treating Contingent-Fee Cases Differently
a. Sixth Circuit (Morrison) says employee’s only cost is arbitrator because attorney
covers fees of litigation
b. counterargument: costs to plaintiff’s attorney are costs to plaintiff
No. of Cases
$ of award
litig.
arb.
Non-Drafting PartyDrafting Partyform
manifestation of assent