Should there be a public rating system for arbitration programs tied to consumer goods and services or for individual employment contracts? Like it or not, we live in a society that is obsessed by, and makes key choices on the basis of, ratings. Recently I proposed the idea of an “Arbitration Fairness Index,” a multi-dimensional system to rate and rank consumer and employment arbitration programs.
Building on many years of pro-arbitration precedents, recent Supreme Court decisions support broad enforcement of class action waivers, permit companies to give arbitrators virtual plenary authority over challenges to arbitration agreements and place new limits on the ability of courts to police arbitration agreements in standardized contracts of adhesion. Meanwhile, although binding arbitration agreements are widely used in consumer contracts and individual employment contracts, most individuals probably have little or no understanding about what an arbitration agreement entails. Because fundamental fairness hinges on many characteristics of dispute resolution systems, arbitration programs may or may not provide an effective means of achieving an appropriate remedy.
Developed and implemented by a respected independent institution with broad-based input, a Consumer Reports-like reputable rating system for consumer and employment arbitration programs might:
· Help inform the public about arbitration programs and their workings, as well as key differences between programs;
· Put pressure on businesses to “open up” and provide more information about their arbitration programs, including rules and procedures, arbitration panels, administrative practices, and case statistics;
· Provide incentives to businesses – and business sectors – to develop and maintain fair, effective dispute resolution programs and more carefully weigh the cost of that “extra bite of the apple”; and
During the first meeting of last year’s National Roundtable on Consumer and Employment Dispute Resolution (See Welsh and Lipsky in this issue), there was a good deal of interest in such a rating system. Some thought published arbitration ratings, like posted Health Department letter grades for restaurants, might help alert consumers and encourage companies to improve their practices. It was also suggested that a respected organization or regulatory agency might issue a “trustmark,” the equivalent of a Good Housekeeping Seal of Approval for a business’s consumer dispute resolution system.
A Possible Template
The chart on the opposite page lists key elements upon which corporate arbitration programs might be rated in an Arbitration Fairness Index. This model was derived from a variety of sources – “due process exemplars” including judicial opinions, Due Process Protocols and leading procedures. It consists of five categories of elements of procedural fairness that may be critical to consumers or employees in dispute resolution, including many aspects that would not appear in published arbitration procedures.
Arbitration Fairness Index (for Binding Arbitration Programs under Pre-dispute Arbitration Agreements in Consumer and Employment Contracts)
Meaningful consent to arbitration
Adequate notice, disclosure
Clear guidance for program users (“roadmap”); access to helpline/hotline
Ease of court oversight
Published program statistics
Independent and Balanced Administration
Independence, impartial administration
Balanced input in rules and policies
Qualified, Suitable Arbitrators
Balanced input in pool of arbitrators
Experience & Training
Neutrality; disclosure and challenge mechanism
Ethics standards, complaint mechanism
Reasonable costs and fees
Reasonable hearing location
Access to information/discovery
Availability of class or collective action
Fair Outcomes (Awards, Remedies)
Availability of remedies
Questions and Concerns
All this said, one wonders whether a workable Arbitration Fairness Index could be developed and sustained. The recent firestorm over US News rankings for university and graduate programs reminds us of the difficulties associated with constructing meaningful ratings systems and obtaining accurate and truthful data. What institution(s) would sponsor the activity, and how would it be funded? Who would collaborate or be consulted on the design? What adaptations to the template would be required for different transactional scenarios (such as, for example, small consumer claims versus disputes involving larger amounts in controversy)? To what extent should hotlines, mediation and other useful dispute resolution mechanisms be addressed in a ratings system? How would helpful, reliable information (such as statistics on case disposition and outcomes) be obtained regarding the actual operation of programs?
Moreover, if we build a system to rate and rank arbitration programs, will anyone come? Is it possible to develop a mechanism that would not only reach and inform members of the public but motivate businesses to improve their dispute resolution programs? What, if any, means of communication – a website, a TV broadcast or online program, or a print publication – might be effective in conveying information and influencing public opinion and decision-making by businesses? Is there value in some form of “trustmark” system, a seal or badge of quality, that could render an assurance that certain companies’ consumer or employment dispute resolution systems meet certain standards of fairness and transparency?
What Do You Think?
What do you think about the concept of an Arbitration Fairness Index? Do you have ideas for implementing a meaningful and sustainable program? If you’d like to offer comments or suggestions, please contact me at email@example.com.
Thomas J. Stipanowich is William H. Webster Chair in Dispute Resolution and Professor of Law at Pepperdine University School of Law and Academic Director at the Straus Institute for Dispute Resolution. He can be reached at firstname.lastname@example.org.
 See generally Thomas J. Stipanowich, The Arbitration Fairness Index: Using a Public Rating System to Skirt the Legal Logjam and Promote Fairer and More Effective Arbitration of Employment and Consumer Disputes, 60 Kan. L. Rev. 985 (2012) (published in Symposium “Perspectives on the Current State of Arbitration Law”), available at SSRN: http://ssrn.com/abstract=2004543. This article is adapted in part from that source with the permission of the Kansas Law Review.
 See Thomas J. Stipanowich, The Third Arbitration Trilogy, Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration, 22 Amer. Rev. Int’l Arb. 324 (2011), available at http://ssrn.com/abstract=1919936.
 See Thomas J. Stipanowich & Ryan J. Lamare, Living with ADR: Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations 31 (Pepperdine University Working Paper Series, Posted Feb. 21, 2013), available at http://ssrn.com/abstract=2221471 (Forthcoming, Harvard Negotiation Law Review) (observing apparent increase in number of companies in Fortune 1,000 arbitrating consumer ad products liability cases in recent years).
 See Stipanowich, supra note 2, at 328 n.15 (observing that arbitration agreements in individual employment contracts may affect as many as 15 percent to 25 percent of employees).
 See id. at 427-32 (discussing potential alternatives to the current scheme of binding arbitration consumer and employment disputes).