Academic highlight: Resnik on mandatory arbitration
on Jul 22, 2015 at 11:04 am
In her contribution to the Yale Law Journal’s symposium on arbitration, Judith Resnik analyzes the last thirty years of the Supreme Court’s cases interpreting the Federal Arbitration Act and reaches a surprising conclusion: Although these decisions have encouraged the “mass production of arbitration clauses” requiring hundreds of millions of consumers and employees to use arbitration to resolve disputes, these groups almost never do so. In other words, Resnik finds that the practical effect of the Court’s arbitration jurisprudence has been to replace a system of public judicial dispute resolution with no dispute resolution at all.
Resnik’s article begins with a discussion of the Court’s recent decisions construing the Federal Arbitration Act (FAA). The Court has steadily expanded the scope of arbitration, holding that the FAA permits arbitration clauses that bar access to courts for breach of federal securities laws, for employees’ claims of sex discrimination, and for claims under state consumer protection laws. In many of these cases, the Court assumed that arbitration is an efficient and effective means of vindicating statutory and common law rights. For example, in AT&T Mobility LLC v. Concepcion, the Supreme Court upheld an arbitration clause banning class actions, in part because the majority believed that individuals have “sufficient . . . . incentive for the individual prosecution of meritorious claims” in arbitration.
And yet Resnik’s research reveals that consumers and employees rarely engage in arbitration, suggesting that arbitration is not an attractive method of dispute resolution for those obligated to forgo judicial remedies. For example, she found that only 134 individual arbitration claims (about 27 each year) were filed against AT&T between 2009 and 2014, a period in which the number of AT&T’s wireless customers increased from 85 to 120 million people. The American Arbitration Association (AAA), which is the largest non-profit provider of arbitration services in the United States, reports fewer than 1500 consumer arbitrations each year on average despite the fact that hundreds of millions of consumers sign contracts containing mandatory arbitration clauses each year. The statistics are similarly stark for employees. Although approximately 30 million employees have signed employment contracts containing mandatory arbitration clauses, the AAA reported that between 2010 and 2013 approximately 1600 claims were filed by disputants to an employment contract.
Resnik suggests that private arbitration is unattractive to consumers and employees because it lacks the benefits of oversight, fair procedures, and public access to the process and results — all of which are required when litigating in a court. She concludes that these flaws “render[] arbitration not a vindication but an unconstitutional evisceration of statutory and common law rights.” But she does not consider arbitration automatically inferior to litigation, which she recognizes can often be both slow and expensive. Instead, Resnik argues that the Supreme Court should find that arbitration as it currently operates is unconstitutional and implement changes to improve it. For example, she argues that courts should mandate that private arbitration ensure equal access to justice by providing fee waivers for indigent parties and by allowing parties to proceed through collective action. In addition, arbitration must be made transparent and accountable, enabling the public to observe both the process and the outcome. If these changes were implemented, Resnik believes arbitration could live up to its claims of providing a viable alternative forum for dispute resolution.
