A fast-growing service industry based on the commercialized privatization of settling conflicts is called Alternative Dispute Resolution. Known as ADR, for short, its growth over the past 15 years is fed by assertions that the courts are too clogged, judicial procedures too dilatory, and the judicial system too expensive.
ADR’s proponents argue that mediation, arbitration and private discovery of evidence are faster, cheaper and more predictable. Critics say that, between parties of unequal power — such as a consumer vs. a big bank or an injured person and an alleged perpetrator — ADR does not work justly and serves to strip the aggrieved person, who has little power, of important due process protections. These include the right to a public civil jury trial, appeal, and adequate discovery.
The promotional ballyhoo behind ADR touts its so-called advantages and regularly invites business and professional people to seminars at posh hotels all over the country for a hefty fee. These brochures have one main message -ADR is the wave of the future for deciding disputes.
ADR companies, that offer these “rent-a-judge” services, are loath to reply to reporter’s inquiring questions. Now a new article in the California Lawyer magazine titled “The Dark Side of ADR,” by Richard Reuben, starts to unravel this ball of yarn.
Reuben cites a case involving a businessman who wanted to “avoid the lawyers and save time and money” in a dispute with his former partner. He retained an ADR firm to mediate the dispute over the value of stock held by his former partner that was supposed to repay a $330,000 loan.
The rent-a-judge persuaded the parties to switch to binding arbitration, rewrote the deal and rendered a decision that resulted in the plaintiff losing his healthy business and his home. The fiasco cost him his life’s savings of $1.8 million. The point of this case is that, unlike public law, he had no right to appeal.
You may think, well if businesspeople want to take these risks, let them. But would this man have taken these risks if he knew that he had no rights after a very wrong decision? So, at least, let the snares and delusions inside the murky world of ADR be publicized for the business community.
You may also be thinking, well, this doesn’t affect me since I won’t use ADR or don’t need to use ADR. Think again, because if you use a bank, a realtor, a health care institution, a stockbroker, an insurance company or even have a conflict with your employer, mandatory arbitration clauses are often found in those find print agreements you so quickly sign.
Courts have generally upheld these arbitration clauses (that people learn too late have no rights of appeal, short of proving criminal fraud, and limited discovery rights), because they say they are voluntary. Ask yourself, do you have knowledge of these arbitration clauses? Did the bank, HMO or realtor inform you of these clauses and what they mean in case you have a dispute?
Millions of Californians with savings or checking accounts with the Bank of America have no idea that the fine print of the agreement they are asked to sign pro forma contain these clauses. Even if they read the fine print, there is another clause that lets the bank change account terms unilaterally,
It is sufficiently worrisome when these sellers, through their attorneys, slip in these clauses to get you to sign away your constitutional right to file a complaint and go to court; it is downright deceptive to claim that justice will be accomplished quicker, cheaper and fairer.
In his article, Reuben not only shows how costly per hour these “rent-a-judges” are but how expensive the discovery referee can be. Moreover, the disqualification standards for conflicts of interest or financial disclosure rules are primitive in most states. Lawyers for consumers complain that bringing a single case against a large bank or insurance company which frequently uses these rent-a-judge firms can and does result often in biased rulings. The firms prefer the repeat business, the lawyers say.
In the traditional court system, a complainant of modest income at least doesn’t have to pay a court judge by the hour. Under ADR, a rent-a-discovery referee can cost $200 to $350 an hour; a sum large defendant corporations can pay far easier than a small business consumer or laborer plaintiff.
There will be more articles forthcoming about how ADR actually works and more public lawsuits challenging its abuses. But enough is already known to refocus public attention on the many legal safeguards for those who use public law and public courts and the need to make the courts more efficient and expeditious as well. Otherwise, corporate slandering of the law and its institutions will lead to more ADR sleights of hand that leave millions of Americans with no real consent or no choice but to waive their rights to use these laws.