Arbitration is bad for West Virginia consumers, workers and businesses

By Anthony Majestro | Aug 4, 2015

The corporate-funded front group West Virginia Citizens Against Lawsuit Abuse wants West Virginians to give up their 7th Amendment right to trial by jury and opt for arbitration instead. Like the proverbial fox who seeks to guard the hen house, CALA repeats the same worn out distortions of the facts regarding arbitration in an attempt to convince consumers and small businesses that arbitration is cheaper and simpler.

The simple truth is that arbitration means you’re giving up your legal rights. In arbitration, an individual or panel of individuals decide the dispute instead of a judge or jury in a court of law. Arbitration can be a useful tool if, and only if, the parties have equal bargaining positions. That’s not that case when a state consumer, worker or small business owner has a dispute against a corporation. Private arbitration benefits those corporations while leaving West Virginians at their mercy.

First, it often costs thousands of dollars to file your claim. While that’s nothing for CALA’s corporate backers, the majority of West Virginia families could never afford. Those fees don’t include hourly rates for arbitrators, which could range $100 - $450 per hour. Hearing and administrative fees add to these costs. There is also the threat the “loser pays” rules imposed by some arbitration firms that would require you to pay all of the corporate defendant’s fees too if you lose. How many West Virginians would be willing to take that risk?

Despite CALA’s claims, arbitrators are inherently biased in favor of the defendant. While both parties “may” have an opportunity to select the arbitration firm used, the reality is the claimant is most likely a one-time user of the firm’s services. In contrast, the defendant may have hundreds or thousands of potential cases heard by that firm. Arbitration firms are private companies that need to make money—and like in any business you keep your returning customers happy. Think about it this way: would we ever allow an individual on trial for murder to handpick and pay the trial judge?

It is also significantly harder for claimants to prove their cases. Most of the evidence to prove corporate wrongdoing is held by the defendant. Unlike in the courts, where a judge can compel the defendant to hand over internal corporate documents and other information, in arbitration you won’t be able to get it. Corporate defendants with deep pockets are also able to hire counsel for arbitration cases—and they almost always do. It is rare that claimants, who have already spent thousands just to file the case, can afford attorneys too.

Arbitration removes these cases from the public domain of our courts to private venues controlled by arbitration firms. Our courts follow established common law as well as important rules and procedures that ensure that case precedents are followed and that the process is fair for both parties. Arbitrators are not required to follow the law or rules of evidence and procedure. The whole process is shrouded in secrecy. When arbitrators make decisions, they are not required to produce findings of fact about why the case decided in favor of one side over the other. The result doesn’t have to be released publicly.

And, subject to extremely limited exceptions, arbitration awards are not appealable. CALA and its corporate backers have falsely criticized the West Virginia court system because it supposedly doesn’t provide a right to appeal every case. This right to appeal is evidently only important if your case is heard by impartial judges that might actually rule against CALA’s corporate backers. The right of appeal somehow is irrelevant when the consumer or small business loses in the CALA favored private arbitration forums.

Unfortunately, more often than not the decision to arbitrate is not even a choice. You have already signed contracts that include mandatory, binding arbitration clauses in the fine print. They’re buried in agreements with financial institutions and credit card companies, cell phone contracts, employment contracts and many other places. A study released by the Consumer Financial Protection Bureau earlier this year found that 75 percent of consumers didn’t they had signed away their rights in contracts with these hidden clauses. Paul Bland, the director of Public Justice, called forced arbitration “the single biggest problem in all of consumer law in America today.” Our small businesses are hurt by these clauses too. They’re buried in contracts for products and services purchased from larger corporations or in franchise agreements.

The truth is arbitration is bad for West Virginia consumers, workers and small businesses. It benefits only two groups—corporate special interests that don’t want to be held accountable and the arbitration firms they hire.

Tell CALA and its corporate funders that you support your 7th Amendment rights, not increasing their profits at the expense of our Constitution.

Anthony Majestro is the immediate past president of the West Virginia Association for Justice and a partner with the Charleston firm of Powell and Majestro.

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