"A Formal Attack on the Practice of Binding Arbitration in the United States"

Written on behalf of all of the victims of Binding Arbitration inequity

By: John M. Taylor

In the United States, Binding Arbitration Agreements have become a standard attachment to purchase and lease agreements for a wide array of goods and services. In many cases, such Binding Arbitration Agreements are a prerequisite demand by the seller or leaser of such goods or services.

This would not be problematic where the same or like goods and services were available through a seller or leaser who made no such demand; henceforth, the people retain the power by natural attrition to rid the market of such demands, provided enough found such demands to be problematic. However, when the vast majority of the members of an industry of the same or like goods or services decide unilaterally to demand Binding Arbitration, then by the nature of things, Binding Arbitration becomes an integral component of the goods or services offered by such an industry, for no one component of their goods or services can be obtained independently. By its nature, such unilateral endeavor has the direct intent of alienating the general public from their power to rid the market place of products or services, or any components thereof, which they deem undesirable or harmful to their general welfare.

However, the purpose for this discussion is not to convince people that the promulgation of Binding Arbitration poses a formidable danger to individual rights. This discussion will instead focus on the reason why, as such is practiced, that the Arbiter [or private person] is predisposed to favor those who integrate such alleged agreements or components into the goods or services they sale, sell, offer for sale or lease to the public.

Whenever a dispute is brought before an Arbiter who favors one party to the dispute, even by the slightest of margin, equity is lost. Is perfect equity in the Law obtainable; probably not, but when safeguards against capricious inequity are within reach, it can do no harm to reach out and grasp such safeguards.

As will be discussed, the imperfections of humankind have provided those who are the most vehement supporters of Binding Arbitration with a capricious inequity that affords to them an advantage in disputes brought before [a given Arbiter] (emphasis added).

While this is understood, it still seems prudent to restate that Arbitration is a private service, and as such a service, it is subject to the same influences, partialities, and corruptions of the market place, just as any other business.

History, as our unimpeachable witness, forces us to concede that where the power lies to improve, also lies the power to diminish. The logic of this statement is so inescapable that it precludes the need for a historical essay on the subject.

As Binding Arbitration is practiced in the United States, the outcome of such proceedings is not simply a question of which party was injured, or whether the amount awarded, if any, is just. When such services are subjected to the influences, partialities, and corruptions of the market place, another element surreptitiously enters into the equation that fundamentally changes the equation and, therefore, the answer.

The surreptitious element is the power to improve or diminish the creature comforts of the Arbiter. Human nature forces us to concede that any party or entity to a dispute that wields such power over the Arbiter will be the party or entity that is favored by the Arbiter. It is also fair to say that Arbiters [or private persons] are keenly aware of this undue influence, but as practiced, they are reaping a windfall from it, so they have little, if any, motivation to see this undue influence vanquished.

The list of laws that have been established throughout human history to counteract this basic human instinct is long, but nowhere does a more perfect example of this evil--and the measure established to counteract it--present itself than does an example presented by our Declaration of Independence and Constitution.

"HE has made Judges dependent on his Will alone, for the tenure of their offices, and the Amount and Payment of their Salaries". [Declaration of Independence]

The U.S. Constitution, Article III, clause 1—"The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.

The British Aristocracy sought to exploit the basic human instinct [to improve one’s own creature comforts] by making the Judges dependent solely upon the King for those creature comforts. Whereby, a Judge who was dependent solely upon the King for his creature comforts was unlikely to bite the hand of the King or those closest to the King (British Aristocracy). As with any Quid Pro Quo, Judges who handed down rulings favorable to the King, or those closest to him, were rewarded. Vice versa, a Judge who ruled unfavorably would find his creature comforts diminished, or could even find himself dismissed from his post.

In spite of the clandestine nature of the objective of the King and those closest to him, there was no question, whether in the conscious or subconscious mind of the Judge, as to who was to be favored in proceedings brought before such Judges.

A person needs look no further than the Private Market to discover who has the greatest influence upon the creature comforts of the Arbiter. Ultimately, as is the case with all businesses, the consumers of a business’s goods or services have the greatest influence upon a business’s financial condition. If few, or none, are consuming a business’s goods or services, then it is not a question of if, but on what day the business will forever close it doors.

Vice versa, if a sufficient amount of business were entering the Arbiter’s establishment, then the Arbiter’s creature comforts would at worst remain the same, although (just as with any business) the objective is not a stalemate. If one of the parties to disputes being brought before [a given Arbiter] (emphasis added] were in the position to direct more business into [a given Arbiter’s] establishment, then such Arbiter would naturally look favorably upon such a party.

However, the mere act of one party deciding which Arbiter will be used to settle a dispute does not in itself significantly upset the delicately balanced scale of justice. On the other hand, when the party who selects the service is empowered to bring a number of disputes into the Arbiter’s establishment, then the dynamics of the relationship between the Arbiter and such a party are fundamentally changed.

To understand the dynamics of this relationship, one only needs to explore the dynamics of the customer merchant relationship, as it relates to Arbitration. I give John Doe money and tell him to go buy groceries. Unless I specify which grocery merchant John Doe is to patronize, then the choice of which grocery merchant will be the beneficiary of my money belongs to John Doe. By empowering John Doe to choose which Merchant would be the benefactor of my money, my importance diminished; John Doe’s importance increased.

The traditional understanding of the customer merchant relationship leads to the natural conclusion that if I were dissatisfied with the merchant’s product, I could simply tell John Doe not to patronize this merchant again, and so be it in a free market. In the case of Arbitration, it is unlikely that I will purchase this service more than once, or perhaps twice in my lifetime; therefore, whether or not I am dissatisfied with the Arbiter’s service is of minor relevance to the Arbiter. What is relevant to the Arbiter is whether the party empowered to direct more business into the Arbiter’s establishment was satisfied with the Arbiter’s service.

While a small or low volume business would not necessarily provide a significant conscious, or subconscious, incentive for an arbitrator to show favoritism, a large or high volume business provides boundless possibilities. The higher the volume of sales, the more likely it is that a higher number of disputes will arise.

Those who vehemently defend Binding Arbitration assert that--because no money changes hands until after the Arbiter has made his or her decision--neither party was to be favored. As discussed, this claim is utter fiction, and it is doubtful if those who are making such claims are unaware of this fact.

As evidenced by the alleged Binding Arbitration Agreements, the Arbiter is almost completely dependent on the sellers of goods or services for the volume of their business and, therefore, it is the sellers of goods or services that hold the power to improve or diminish the Arbiter’s creature comforts.

The Benefactors of Private Market Place Arbitration

As vehemently asserted by big business, binding Arbitration is equitable and cheaper for consumers and big business alike, and this is why the people should support it. As has been pointed out, Arbitration as it is currently practiced provides a significant inequity that favors the sellers of goods and services. Thus, from a business perspective, this favoring inequity is a much more plausible explanation for why big business vehemently supports and defends Binding Arbitration.

Business, as a matter of physical and financial responsibility, does not invest the enormous sums of money being thrown at Binding Arbitration Laws if the best they can hope to achieve is an advantage no greater than that which they can obtain in less expensive Government Courts of Law. Simply stated, businesses have no interest in equality—it is about winning and making money and the more they win, the more money they make. If arbitration did not provide them with greater odds of winning and thereby, higher corporate profitability, then it is this simple—there would not be any arbitration agreements, or at the least, there would be far less exuberance to make it a national standard, thereby abridging the Seventh Amendment to our Constitution.

Ending with a Quote by James Madison, who authored both the U.S. Constitution and the Bill of Rights:

"In suits at common law, between man and man, the trial by jury, as one of the best securities to the rights of the people, ought to remain inviolate"

People should reflect deeply upon the objective of those who are seeking any system designed to abridge "one of the best securities to the rights of the people," before electing representatives who lend their support to those who are seeking such a system from sea to shining sea.