Repealing arbitration

Christine Varney:

Congress is taking up legislation this week that will wipe out arbitration provisions in hundreds of millions of consumer contracts -- for everything from credit-card agreements to cell phones to health-insurance policies, even a contract for the purchase of a kitchen sink. The bill is so sweeping that it wouldn't apply just to contracts consumers may sign in the future. It will cancel arbitration agreements agreed to in the past.

The Arbitration Fairness Act of 2007, sponsored in the Senate by Russ Feingold (D., Wis.) and in the House by Hank Johnson (D., Ga.), is scheduled to be marked up by a subcommittee of the House Judiciary Committee tomorrow and could be taken up by the full committee on Wednesday.

This legislation is a top priority of plaintiffs' lawyers, since arbitration keeps big-dollar disputes out of the courtroom. But it's a bad deal for consumers. The law will not make arbitration "fairer"; it will make it go away, because it is very difficult to get two sides of a dispute to agree to much of anything once a dispute has started. That inconvenient reality is one that some of our lawmakers are simply ignoring.

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I don't think they are ignoring the reality, it is what they want.

I have been arbitrating cases for 30 years. The more complex the case the more important it is to have good lawyers on both sides. Because such lawyers are usually busy, it become harder to schedule the cases in a timely manner, but they usually do move along quicker than most trials.

I usually act as chairman of a three man panel which requires that I handle a lot of prehearing matters and decide on objections at the hearing. For the most part the lawyers do a good job and I rarely have to give them a timeout for bad behavior. The most difficult cases are those where one of the parties represents them self. Even when the opposing counsel does not aggressively take advantage of their ignorance it is still tedious to keep reminding someone that cross examination requires that they ask questions of the witnesses instead of hurling insults at them.

The real advantage of arbitration is the finality they afford the parties. Appeals are rare and hardly ever successful. What some of the trial lawyers do not like about this is they lose some of their settlement leverage which is based on driving up the respondent's cost. Settlements are usually based on eliminating risks. Contianing the costs of those risks makes for smaller settlement offers.