Consumer Law

Jean Sternlight on Governmental Imposition of Arbitration on Companies in Consumer Disputes

By Jeff Sovern

Jean R. Sternlight of UNLV, a frequent critic of binding arbitration clauses, discusses whether it would be acceptable and constitutional for the government to impose arbitration on companies in consumer disputes in "In Defense of Mandatory Arbitration (If Imposed on the Company)," 8 Nevada L. J. 82 ((2007), Here's the abstract:

Having spent much of her academic life battling companies' mandatory imposition of binding arbitration on consumers and employees, the author now switches gears. This Article contemplates whether mandatory binding arbitration is acceptable if imposed by the government on companies (governmental mandatory arbitration) rather than by companies on their employees and consumers (private mandatory arbitration). Specifically, the Article considers the possibility of statutes that would provide little guys (consumers and employees) with an opportunity to take their disputes to binding arbitration rather than litigation. If the little guys chose arbitration over litigation, post-dispute, companies would have to agree to such arbitration, and the results of the arbitration would then be binding on both little guy and company. If on the other hand the little guys preferred to litigate their disputes, they would reserve that right. After first examining the policy implications of this approach, and finding some reasons to favor the proposal, the Article next considers the constitutional arguments that would likely be raised in opposition to such statutes. Specifically, it considers the legitimacy of governmentally imposed mandatory arbitration in light of Article III, the Seventh Amendment, and the Due Process Clause. The Article finds that it may be possible to governmentally impose mandatory arbitration in some situations without violating the Constitution. Nonetheless, the Article concludes that trying to introduce such legislation is probably unwise, as a matter of realpolitik. At a minimum, however, the Article should discourage companies and their lobbyists from insisting, as they often do, that privately imposed binding arbitration is the best way to ensure little guys get access to arbitration. Instead, if such companies and lobbyists truly believe arbitration is better for little guys than litigation they should favor the governmental imposition of arbitration on companies, as discussed in this Article.

Full post as published by CL&P Blog on June 04, 2008 (boomark / email).