No, Not Legal Advice (Obv)
I want to start this off with the usual, I’m not a lawyer, this isn’t legal advice, blah blah, the usual. This is just by observations on a system that seems to be tilting judgements to take advantage of a system to save money.
What is Arbitration?
Per ChatGPT, arbitration is a method of resolving disputes outside of court. In this process, both parties present their case to a neutral third party, known as an arbitrator. The arbitrator then makes a decision, which can be either binding or non-binding, depending on the terms agreed upon before the arbitration process began. Binding arbitration means that the decision is final and can be enforced by a court, while non-binding arbitration means that the parties can choose to ignore the arbitrator's decision and take the case to court.
Upsides
There are some upsides to arbitration. Per Nolo:
Arbitration is often faster than a court proceeding, providing a quicker resolution to disputes.
It's a private process, which can protect sensitive information from becoming public.
The parties have more control over the process, including the ability to choose their own arbitrator.
Downsides
There seems to be more downsides that would benefit the business rather than the customer.
Arbitration tends to cost more to even start the claim. Per a Nolo report, it would cost about $9k to arbitrate an $80k claim. In state court it would cost about $250 to start a legal claim.
Arbitration (in many of the descriptions I’ve seen) are binding, meaning if you don’t like the decision, you can’t appeal the ruling.
Arbitration also means you remove your ability to be part of a class action, typically the only way a common group of people can get the attention of a big business.
Arbitration cost is usually divided evenly, regardless of outcome, whereas court claims typically get paid by the loser.
Based on some other reporting, you are far less likely win with binding arbitration.
Those that brought arbitration action typically were awarded less money if you did win than if you were to take it through the legal system.
Experience
The first time I got a “Notice of Arbitration” was with my credit card. It was similar to the wave of Chase notices that was sent out about notice of arbitration in 2019. I looked at it and was like “No, that doesn’t seem fair”. If I had a major legal issue with what the credit card provider did that would ruin my financial wellbeing, my understanding is that I wouldn’t be able to take them to court because in typical legal speak, it says something to the effect of “by continuing to use our services you agree to this binding arbitration.”
In a report from Grubhub’s arbitration, only 2 of the thousands of Grubhub drivers chose to reject the arbitration. These companies know that if they want something to happen that benefits them, they 1) make it difficult to opt out 2) bury it in legal talk and 3) put a time restriction on it.
One instance of this coming up is with LG, who is currently embroiled in failing linear compressors in their fridges. They pulled this ace out when people started class action lawsuits, referring back to their arbitration that was put on the side of their boxes, saying that this was sufficient notice to customers about the binding arbitration. The jury’s still out whether this will work, but either way, I can’t imagine it won’t work in every product that uses arbitration.
Final Thoughts
When there is no signed document saying you saw the letter of arbitration, and it looks like the updated Privacy Policy we all get and ignore, and its something that “by continuing to use, you accept the new policy”, of course people aren’t going to understand what they are signing, or recognize the loss of legal recourse. It’s a pretty trash way of forcing us into something we likely won’t use until we need it and now its not a viable option.
When the rejection clause require two steps short of smoke signals to reject it, and the rejection letter has to be mailed within a certain time of receiving the letter, who’s going to spend the time to send it? Then, once you spend the time and money to send the letter, you don’t get any response back from the company saying the letter was received, so they could essentially ignore the letter and say “Oh, we didn’t get it”.
The problem with this is I keep seeing these arbitration clauses. Most recently Roku, Disney (who specifically listed Class Action Lawsuits), CashApp, Hulu, Stripe, Spotify, McDonalds and a bunch more. If we were to spend the time to send a letter for each of these we would be doing it for the dozens or even tens of dozens of services we use, for that one time we have a problem with their service that may cause us massive financial issues. Nobody’s going to do that.
The likelihood that an individual will sue the company and win is low, so individual cases typically aren’t a problem for these businesses. What this is likely trying to stifle is the class action lawsuits. If you are unable to bring a class action lawsuit against a big company, because you signed binding arbitration, then it will reduce the chances a business has to “agree” or pull out the no-fault clause and pay out in the class action lawsuit.
It is a way to divide and conquer their user-base. While we as the users don’t typically see the financial success of a class action lawsuit, it still is a line item businesses have to contend along with the negative press that it brings. If companies can stop this from even seeing light of day, they have a better chance of controlling the narrative, and stopping other users from being aware of defects in their products, or even changing their design and production methods to reduce failures and improve product quality.
If this continues and generally succeeds, it will be down to our government to voice our concerns, corporate failures, and support consumer protections, which at this point I’m not quite sure that will happen at the level and speed these companies are changing the game.
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