Binding Arbitrations Are Unfair, Because Arbitrators Make More Money By Ruling In Favor Of Companies So They Can Get Repeat Business

I’ve written before about how forced binding arbitrations are unfair and that contract provisions taking away citizens’ Constitutional right to jury trials should be outlawed.  See my prior blog articles here and here.

In Part II of its lengthy piece exposing the injustice involved in forced arbitration clauses entitled “Beware The Fine Print,” the New York Times gave many more examples of how citizens’ constitutional rights are routinely being taken away, and why Americans need to get their lawmakers to change the rules to ban this perversion of justice.  The article gives many good examples of how unfair and un-American arbitration process is.

When they wrote our Constitution, the Founding Fathers thought long and hard about the best way to construct our government.  After much thought, they decided that the best plan was to make federal judges appointed for life, and embedded that principle in our Constitution.

They did this because  they realize that it was crucial to have an independent judiciary.   If citizens or lawmakers  can remove judges from office, or reduce their salaries, the Founding Fathers realized, then those judges’  decision-making processes will be corrupted by self-interest.   Instead of feeling free to do the right thing, judges would instead be worried about pleasing the people who could remove them from office or retaliate against them.

The  Founding Fathers recognized that a system where the decision-maker is not impartial cannot consistently dispense real justice.

And that, in a nutshell, is exactly why binding arbitration is unfair.  The New York Times articles do an excellent job  giving examples in explaining that  arbitration is fundamentally unfair because arbitrators are not independent; they have a significant financial interest in keeping big companies happy, because  the arbitrators profit from repeat business.   Why should an arbitrator ruled in favor of an individual who they will never see again?  By ruling in favor of the individual and against the company,  the arbitrator is financially shooting himself in the foot.

Binding arbitrations create the same system of self-interested decision-makers that our Founding Fathers worked so hard to prevent.

The series of detailed articles, written by Jessica Silver-Greenberg and Michael Corkery, is well worth reading, and can be found by clicking these links: Part I and Part II.

Here are a few  important quotes from the second article:

“Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, The Times found.”

“The change has been swift and virtually unnoticed, even though it has meant that tens of millions of Americans have lost a fundamental right: their day in court.”

“This amounts to the whole-scale privatization of the justice system,” said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. “Americans are actively being deprived of their rights.”

“Winners and losers are decided by a single arbitrator who is largely at liberty to determine how much evidence a plaintiff can present and how much the defense can withhold. To deliver favorable outcomes to companies, some arbitrators have twisted or outright disregarded the law, interviews and records show.

“What rules of evidence apply?” one arbitration firm asks in the question and answer section of its website. “The short answer is none.”

“Like the arbitrator in Ms. Pierce’s case, some have no experience as a judge but wield far more power. And unlike the outcomes in civil court, arbitrators’ rulings are nearly impossible to appeal.”

“When plaintiffs have asked the courts to intervene, court records show, they have almost always lost. Saying its hands were tied, one court in California said it could not overturn arbitrators’ decisions even if they caused ‘substantial injustice.'”

“Unfettered by strict judicial rules against conflicts of interest, companies can steer cases to friendly arbitrators. In turn, interviews and records show, some arbitrators cultivate close ties with companies to get business.”

“Other potential conflicts are more explicit. Arbitration records obtained by The Times showed that 41 arbitrators each handled 10 or more cases for one company between 2010 and 2014.”

“Private judging is an oxymoron,” Anthony Kline, a California appeals court judge, said in an interview. “This is a business and arbitrators have an economic reason to decide in favor of the repeat players.”

“Who Has Arbitration Clauses?

“Many of the companies and brands you interact with have arbitration clauses built into their terms of service. Here are several:”



Time Warner




Budget Rent A Car

Discover Card

EA Games


One arbitration company, “JAMS, a for-profit company, said it did the same and put extra protections in place for consumers and employees. “Their core value is neutrality — their business depends on it,” Kimberly Taylor, chief operating officer of JAMS, said of its arbitrators.”

But in interviews with The Times, more than three dozen arbitrators described how they felt beholden to companies. Beneath every decision, the arbitrators said, was the threat of losing business.”

“Victoria Pynchon, an arbitrator in Los Angeles, said plaintiffs had an inherent disadvantage. “Why would an arbitrator cater to a person they will never see again?” she said.”

“‘ It was a kangaroo court,’ Ms. Brenner said. ‘I can’t believe this is America.’In April 2014, a Florida appeals court upheld a decision to force Ms. Santiago into arbitration. “I obey what appears to be the rule of law without any enthusiasm,” wrote one of the judges, Chris Altenbernd, adding that he feared ‘I have disappointed Thomas Jefferson and John Adams.’

“Cliff Palefsky, a San Francisco lawyer who has worked to develop fairness standards for arbitration, said the system worked only if both sides wanted to participate. “Once it’s forced, it is corrupted,” he said.”

After losing in arbitration, the claimant’s “lawyers wrote to [the arbitrator’s] arbitration firm questioning [the arbitrator’s] qualifications. The firm, American Health Lawyers Association, responded that it was not its responsibility to verify the “abilities or competence” of its arbitrators.”