I have read with interest the reporting on the legislation proposing to add "voluntary" binding arbitration agreements to the admittance paperwork for nursing homes.
One of my practice areas is securities arbitration, where for the last 25 years investors with grievances against their stockbrokers have been forced into mandatory arbitration due to judicial enforcement of pre-dispute arbitration clauses signed when opening a brokerage account. Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987).
Recent United States Supreme Court jurisprudence has further opened the door to allowing industry to divert consumer disputes to arbitration where there is a pre-transaction written agreement. See, e.g., AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011). Our legislators would do well to consider the public policy implications resulting from forcing consumers to arbitrate.
Arbitration generally lacks the public scrutiny and transparency of judicial proceedings, offers limited discovery that is not overseen by a judicial officer with the power to sanction obstreperous parties, results in decisions which may or may not have any written rationale and are of no precedential value, and offers limited opportunities for the appeal and correction of arbitrator misconduct or error.
We risk becoming a society where those with bargaining power will have the option, either pre- or post-dispute, to agree to arbitrate or litigate, while ordinary consumers are presented with contracts of adhesion requiring arbitration. The 30-day "opt-out" proposed in the nursing home legislation is of little value. How many consumers will actually take the time to evaluate and consider exercising that option, when they are in the midst of one of the most stressful times in their and their loved one's lives?
William Galvin, secretary of the Commonwealth of Massachusetts, has said "[t}he term 'arbitration' as it is used in [securities arbitration] is really a misnomer. Most often, the process is not about two evenly matched parties to a dispute seeking the middle ground and a resolution of their conflict from knowledgeable, independent and unbiased fact-finders. Rather, what we have here in America today is an industry-sponsored damage containment and control program, masquerading as a judicial proceeding." (Hearing Before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises of the Committee on Financial Services, U.S. House of Representatives, 109th Congress, 1st session, March 17, 2005).
It is likely that other categories of consumers whose rights to a judicial remedy are denied by pre-dispute arbitration agreements will reach a similar conclusion.
It is thus no surprise that on March 5, 2013, the North American Securities Administrators Association (NASAA) announced that they are urging Congress to prod the Securities and Exchange Commission to propose regulation or support legislation that would ban pre-dispute arbitration clauses in brokerage contracts. Unfortunately, prior federal legislative efforts to amend the Federal Arbitration Act to prohibit pre-dispute arbitration agreements of employment disputes, consumer disputes, or civil rights disputes have failed (Arbitration Fairness Act of 2011).
If our goal is to encourage the operation of a free market system where "choice" is a primary goal, then both arbitration and litigation ought to be available for parties to consider as options for resolving their disputes. Let the parties evaluate and voluntarily select which procedure might provide the fairest, most cost efficient and timely resolution of their disputes. If arbitration does indeed provide a dispute resolution option that meets those goals, then consumers and their lawyers would embrace it.
The fact that industry desires that it be given the right to force consumers into arbitration, before a dispute has even arisen, suggests that perhaps arbitration is not an option presently in consumers' best interest.
Robert C. Port, Atlanta
