Jeff Sovern, through his Consumer Law & Policy Blog, recently responded to our criticism that the St. John’s study didn’t include arbitration provisions with opt-out features. Jeff makes the point that since consumers don’t understand the significance of arbitration provisions, they would not understand what they are opting out of.
While we (and the more than 20 courts that have found opt-out procedures to be understandable and fair) challenge the premise of their argument, we would urge consumer advocates to strive to increase consumer knowledge about arbitration rather than reflexively criticizing it.
Jeff readily acknowledges that his study did not attempt to weigh the relative merits of arbitration and class actions. That is unfortunate, since that is an area that is critically underserved by empirical analysis. A step in filling that void was a lengthy report released last December by an affiliate of the U.S. Chamber of Commerce that set forth “strong evidence that class actions provide far less benefit to individual class members than proponents of class actions assert.” It concluded that the vast majority of the class actions it studied “produced no benefits to most members of the putative class” but did enrich the attorneys.
Do consumers understand what they may (or more likely, may not) achieve if they resolve their disputes as members of a class and decline to opt out of the class? What is the Flesch-Kincaid score of the typical class action opt-out notice or settlement agreement? Studying questions such as these would help shed light on how consumer arbitration compares to class action litigation in the real world and would provide a more meaningful context for evaluating the results of the St. John’s study.
Finally, Jeff’s co-author, Paul Kirgis, has written separately to make the point that our comments on the study “don’t actually address the core problem we address in our article–that citizens are being unwittingly and unwillingly forced to give up important (and constitutionally guaranteed) procedural rights.” But we did address that point, in stating that: “Typically, if an individual agrees to a contract and receives its benefit, he or she will not be heard to complain that the contract is unenforceable because it could not be understood. If a contract is understandable enough to bind a consumer to its business terms, it should be understandable enough to bind the consumer to the contract’s dispute resolution provision. Contracts as a whole are legal documents that affect the parties’ rights. Taking the arbitration clause out of context ignores that the entire contract is supposed to be based upon consent, a meeting of the minds.”
Congress passed the Federal Arbitration Act in 1925 precisely because arbitration had been treated differently than other contract terms and arbitration agreements were rarely enforced because they were singled out for special treatment. Paul appears to be advocating a return to those “good old days” when arbitration agreements were routinely discriminated against, even though he acknowledges in his blog comments that it “may very well be true, at least some of the time” that arbitration is better for consumers than litigation. Given his acknowledgement that arbitration can benefit consumers, we again hope that Paul and his colleagues will assist in implementing constructive solutions. Paul writes that “[i]t is certainly true that citizens can choose to give up their adjudicative rights, but those choices have legitimacy only if they are knowing and voluntary.” We would welcome suggestions from Paul, Jeff and their colleagues on how consumer arbitration language could be drafted in order to pass muster under the criteria they applied in their study. If wordsmithing is the main issue, there may be a way to bridge the gap between arbitration advocates and consumer advocates.