Arbitration is wrong for America

Arbitration is an illogical procedure for dispute resolution in our society. Arbitration clauses are buried in consumer contracts of all sorts and, until you have a legal problem, most people either don’t notice the clauses or assume they are a reasonable alternative to our “costly” legal system. In truth, arbitration is frequently more expensive than our court system and the result dramatically less predictable.

The United States has an advanced judicial system and to abandon it in favor of arbitration makes no sense. First, our judges are either appointed by the President of the United States with the advice and consent of congress or, in Alabama, elected by the people. Neither is a guarantee of integrity but both provide dramatically more vetting and assurance than the ad hoc procedure for selecting arbitrators. AAA, the most widespread arbitration organization, gives the parties the right to deselect from a panel provided by AAA. Unlike Judges who are paid with tax dollars, arbitrators are paid $150 to $300 per hour by the litigants. In my experience, arbitration is dramatically more expensive than our judicial system.

In addition to economy, predictability is sacrificed to arbitration. Judges take an oath to follow the law and if one party thinks the judge failed to do so, she can raise the issue on appeal. Appeal is very restricted in arbitration and getting worse. On March 5, 2009 the U.S. Court of Appeals for the 5th Circuit ruled in Citigroup Global Markets Inc. v. Bacon http://www.ca5.uscourts.gov/opinions/pub/07/07-20670-CV0.wpd.pdf that even if the arbitrator shows a “manifest disregard for the law that is no basis for appeal”.

Why in the world do we want to sidestep a sophisticated set of laws enacted by elected officials and interpreted by qualified judges in favor of allowing some random arbitrator to do as he sees fit?