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Wednesday, June 02, 2021


Richard Faulkner, J.D., LL.M., F.C.I.Arb.

Professor Sovern's suggestions are well founded and would redress the numerous problems plaguing arbitration.

Thus far I have never heard any good response to my favorite point. IF arbitration is so great for small and medium size businesses, (and consumers) then knowledgeable parties will choose to arbitrate AFTER disputes have arisen. They don’t, which speaks eloquent volumes.

My former law firm and I represented auto dealers in over 200 AAA arbitrations to final award, and often beyond in federal district and appellate courts. Based on our own files and AAA bills in cases against Ford Dealer Computer Services a/k/a Dealer Computer Services (now Reynolds & Reynolds) we calculated AAA arbitrations litigating the same case, over the same form contracts, against the same lawyers, who always used the same experts cost our clients over $100,000.00 MORE than when we were able to litigate those disputes in federal court. What was true of arbitration’s benefits and cost effectiveness when I began in ADR in the 1970s and 1980s has not been true for decades.

My auto dealer clients took their problems with being abused in AAA arbitrations to Congress decades ago. We were not originally successful, but we persevered. Eventually in 2002 we were successful in obtaining passage of legislation providing that no agreement to arbitrate disputes between automobile manufacturers and automobile dealers is enforceable unless entered into AFTER the dispute has arisen. Codified at 15 U.S.C. § 1226(a)(2), the law states:

"(2) Consent required

Notwithstanding any other provision of law, whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of or relating to such contract, arbitration may be used to settle such controversy only if after such controversy arises all parties to such controversy consent in writing to use arbitration to settle such controversy."

There are some areas where arbitration is appropriate, IF the parties know and actually understand what they are agreeing to. Small and Medium size businesses (and Consumers) virtually never have that understanding. Neither can Small or Mid size businesses, much less Consumers, afford arbitration specialty counsel.

I can not see how allowing Small and Medium size businesses, and Consumers, the same benefits present law grants to automobile dealers in disputes with auto manufacturers is a problem.

Gregory Gauthier

It's seriously worth exploring whether Congress's attempt to invoke the CRA was a nullity because putative director Cordray's actions were ultra vires (as the Supreme Court held in Seila Law) and never ratified.

Edwin E Bell

I agree with your analysis and perception of arbitration clauses by consumers. Arbitration has turned into nothing but a strong arm meeting by individuals or arbitrators who obviously represent the same industries or institutions consumers are complaining about or have been damaged or who have injured them. There's plenty of examples and testimonials available by consumers describing the exact treatment you posted in this article and or opposition to Mr Levin's comments. Consumers are being attacked, preyed upon, abused, ripped off, and extorted at a growing or exponential rate. It's time to enforce current laws, void bad policies, and protect consumers with rules and laws that are strictly enforced.

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