Arbitration Without Illusions

By Michael Elias Shammas (Research Fellow)

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A recent decision from the District of Massachusetts (UBS Fin. Servs. Inc. v. Asociacion de Empleados del Estado Libre Asociado de Puerto Rico, 2019 WL 7000027 (D. Mass. Dec. 20, 2019)) included some interesting—and illuminating—language on arbitration.
In a section titled “Arbitration Without Illusions” (inspired by District of Maine Judge D. Brock Hornby’s essay, “Summary Judgment Without Illusions”) Judge William G. Young outlines several issues with arbitration:
“Arbitration is to justice as a metronome is to Stradivarius. But what of it? So long as it is quick, easy, and private, big business will go for it, especially since, when deployed against a lone consumer, it effectively bars the little guy from the courts of justice and the constitutional guarantee of a jury of his peers.”
Id., at *16.
The opinion is well worth reading in its entirety. But the most interesting part concerns Judge Young’s view of the role of judges and the civil jury in contrast to that of arbitrators. Judge Young ties the value of judges in our constitutional scheme to the right to trial by jury:
“[J]udges are the guardians of humanity’s most audacious attempt to achieve true justice—the American jury trial: the purest, fairest, most inclusive and robust expression of direct democracy the world has ever seen.”
Id., at *17.
He then goes on to posit why—despite the benefits of a jury trial—so many judges and defendants, especially businesses (and especially large businesses), opt for arbitration:
“The trouble is [that] in our constant attempts to make the run up to trial ever more just, we’ve rendered the whole process so ponderous and expensive in federal court that only the elite can ever get to trial. Face it, we’ve priced ourselves out of the market. “
Id., at *18.
Judge Young notes that—while he respects arbitrators—arbitrators are not judges. He cautions that we make a mistake to the extent that we believe the two are interchangeable:
“Arbitrators are interested in justice too; they certainly try to be fair. But arbitrators are not judges; they are not even like judges and it is a fallacy to think that they are. They have neither tenure nor job security. They are people paid by the parties. Most are part time, drawn from many learned professions (and the continuing incessant demands of those professions). Their awards, especially in the context of securities arbitration awards—rarely supported by reasoned decisions—add nothing to the development of the law in the traditional sense.”
Perhaps the most interesting part of Judge Young’s opinion is his take on arbitrators’ potential biases:
“[T]he bias of arbitrators in favor of repeat players like banks who may hire them again is well-documented.”
Finally, in footnote 10, Judge Young discusses what he sees as one of the greatest threats to a transparent system of justice—forced arbitration:
“Of course, this is what makes forced or mandatory arbitration so unconscionable; millions are forced into it without understanding that it effectively bars them from the courts their taxes are supporting and juries of their fellow citizens.”
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