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April 08, 2008


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J. Michael Young


Today's Wall Street Journal has an article on nursing homes using arbitration agreements to reduce awards:

Now that seems like a classic disparity in bargaining power. An elderly, potentially incapacitated, individual against a corporate nursing home.

J. Michael Young

Andrew Golub


I did a longer and more cogent post but the kind folks @ typepad seem to have eaten it. Here's a shorter version.

This "study" is a colossal joke. The questions were all skewed to obtain the desired results, such as the 'which would you prefer' question making arbitration sound simple and user friendly, whereas litigation required both a lawsuit (as if an Arbitration Demand ISN'T a lawsuit) and 'going to court' (horrors!).

How much different do you think the study results would have been had respondents instead been offered the choice of:

a) arbitration, which may be unilaterally imposed upon you, thereby denying you your Seventh Amendment right to trial by jury, as well as any right to appeal an incorrect decision by the arbitrator(s), and in which arbitrators have an incentive to rule for the repeat-user because they want to be picked for the next case, and the case after that?; or

b) lawsuit, in which you will receive a neutral, randomly appointed judge who has no financial incentive to handle your case, who will do all work necessary for nothing more than your $255 filing fee, and in which you can have both a jury and the right to appeal incorrect rulings by the judge?

Arbitration is great, so long as two parties of equal bargaining power agree to go use a rent-a-judge. But for consumers and employees, who have their rights stripped simply for buying a $100 toaster or showing up for a minimum wage job, it represents a quintessentially bad deal.

The pending legislation -- the Arbitration Fairness Act -- intends to restore balance by preventing big business and big employers from forcing consumers and employees -- by fiat -- into an unfair forum in which the repeat player effect puts them at a huge disadvantage. With luck it will soon become law.

Andrew S. Golub
Dow Golub Berg & Beverly, LLP
8 Greenway Plaza, 14th Floor
Houston, Texas 77046

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