Just another WordPress weblog

Do you have a cell phone contract? Then you’ve signed a binding arbitration agreement — which you can read about here. Basically, you waive your right to file a class action lawsuit against the company. Consumer groups consider it unjust, but businesses love it since, among other reasons, it means cheaper and quicker legal remedies for them. Bad news for companies, though: The U.S. Supreme Court has ruled that state laws can preempt federal laws regarding binding arbitration agreements.

The problems with binding arbitration are twofold. First, arbitration panels have an incentive to rule in favor of the company, since the company is the body that hires them. Piss off the company, lose their business.

Second, they remove the right of consumer to band together against a company for a common cause. If a problem persists among consumers, they aren’t afforded the right to a proportional lawsuit. Instead, each consumer must enter into battle on his or her own.

Hence, companies come out on top in the vast majority of cases — as much as 95 percent of the time, according to one study. Arbitration Forum managing director Roger Haydock seems to think that this is the same proportion as in court: “Every published study and all empirical data indicate consumers prevail at a rate that is greater than or equal to litigation, where similar subject matter is at issue. Evaluating arbitration outcomes is only meaningful in comparison with court outcomes of similar cases.”

This development could change matters for cell phone companies. We know that California’s state laws — considered the best consumer laws in the country — can now overrule binding arbitration clauses. Which states can and will follow suit?

Share on Facebook | Add to De.licio.us | Digg This! | Technorati