Is Binding Arbitration always bad?

The Consumerist’s Chris Morran has a post up about why they believe consumers should always opt out of what they call “forced arbitration” clauses. Here is one of the reasons they give:

Companies want you to arbitrate because the system has been shown to be heavily unbalanced in favor of businesses — who have the legal knowledge, experience, and funding to put up a proper defense — while harmed consumers often enter into the complicated process without legal representation.

Here’s the thing: I’m not a lawyer, but neither is Chris Morran. So neither Morran’s post nor this one should be mistaken as legal advice.

Unlike Morran however, I have been involved in hundreds of legal disputes—most of which involve consumers, typically homeowners. I have been involved with cases that ended in a jury trial and cases that ended up in binding arbitration. At least 95% of the cases I worked on ended up settling out of court, typically as a result of mediation.

When a consumer suffers damages as a result of a defect or poor workmanship, the legal aspects of presenting such a case typically involves a great deal of technical analysis and expert opinion. In most cases, the outcome often depends heavily on interpretation of these technical details.

What most people fail to consider

In a jury trial, it is the jury that must decide the merits of a particular case. As we all know from grade school, juries are made up of “peers” selected at random from the populace. As attorneys will tell you behind closed doors, most juries are made up of people (and this is a direct quote) “too stupid to get out of jury duty.”

Here is the point: If the experts can’t agree on the merits of certain highly technical issues, how is the average citizen supposed to make a determination?

A better option?

In a binding arbitration, my experience has been that the arbitrators are generally more knowledgeable and informed. Every attorney and expert I have worked with prefers arbitration over jury trial—regardless of whether they are representing plaintiff (consumer) interests of defense (business). In fact, some attorneys and experts I know representing consumers report that they typically see awards that are 50% more than what they would expect for similar cases before a jury. Also, the costs for legal fees and expert costs are typically much less for an arbitration than for a jury trial.

Regardless, the key to a successful outcome depends on the attorneys, their staff, their experts, and most importantly, the evidence at hand. The reason most cases I have been involved in have settled out of court is because nobody in their right mind wants to gamble with the unpredictable outcome of a jury trial.

Again, I’m not an attorney, so you should really check with your attorney before making a decision either way.

search previous next tag category expand menu location phone mail time cart zoom edit close