Arbitration
Should a small business person be concerned about an arbitration provision in a contract? Answer: yes!
Many large companies routinely include a mandatory arbitration provision in their contracts with smaller businesses and consumers. These large companies thereby become the best customers for the arbitration services and arbitrators. They provide almost all repeat business. You, the small business person or consumer, on the other hand, are someone the arbitration business is not likely to ever see again. Your arbitration with them is a one shot deal. You are not a repeat customer, unlike the big businesses who put those arbitration clauses in their contracts.
Think that doesn't influence the arbitrators? In an ideal world, it would not, and maybe with some arbitrators it does not, but in the real world, do you really think the arbitration services don't know which side the bread is buttered on? Do you think they are not aware of who keeps them in business? Do you think big businesses would keep using them if the results did not tend to favor big businesses?
In addition to this inherent bias against the small business or consumer, the little guy also loses an advantage when giving up the right to a jury in favor of arbitration. The theme of a large business running roughshod over a small company or consumer and acting like a bully will often play well with a jury and sometimes leads to large verdicts or punitive damages. Large companies who act badly have good reason to fear juries. But in front of an arbitration panel, the little guy is far less likely to find any sympathy. Why is that? Many of these arbitrators, by virtue of their own careers as big firm and big company lawyers, tend to be biased in favor of big companies. And they are not swayed by sympathy for the underdog.
Arbitration has its place. It is intended as a faster and less expensive alternative to the court system. Sometimes it meets those goals. And between parties of equal size, where neither one enjoys an advantage as a repeat customer, it can be a viable alternative. But you should always think twice before your sign away your rights to a jury trial. The jury trial is a cornerstone of our liberties as Americans. Talk to a lawyer before you sign away that right.
