Socialism is defined as a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. The goal of socialism is to engineer outcomes.
The New York Times, as the archetype of a liberal organization, advocates socialism in every possible way, except when it’s with their money or investors. This time, they’re poo-poohing corporations using arbitration clauses in their agreements with customers.
“Beware the fine print,” reads the ominous lede. They go on to slam American Express for including an arbitration clause “on Page 5” of their contract. Basically, NYT is saying that arbitration clauses are bad because they prevent “little people” from joining huge class action suits to force big companies to cough up money for things like selling foot-long sandwiches that are really only 11 inches long (Subway was sued for this, and to be fair, NYT didn’t cite that example).
They did cite Taco Bell, because the company uses arbitration clauses in their employment agreements, preventing class action suits on behalf of racial groups or gender.
Their argument? That arbitration claims tend to be dropped by claimants instead of pursued.
Corporations said that class actions were not needed because arbitration enabled individuals to resolve their grievances easily. But court and arbitration records show the opposite has happened: Once blocked from going to court as a group, most people dropped their claims entirely.
There are two reasons one could claim that arbitration “by a neutral third party” is bad. One is that there’s no such thing as a neutral third party. And if that’s true, then the American Arbitration Association is the biggest liars’ club in the country. The non-profit AAA exists to administrate, mediate, and ultimately decide cases through arbitration. By definition, an arbitrator is neutral, representing neither the company nor the consumer. So what’s unfair about that?
With a whole set of rules, and drawing from a national roster of arbitrators, a claimant can present their case and receive a fair hearing (and result). Of the many things both parties are entitled to under AAA rules, arbitrators must provide this information:
(a) Any person appointed or to be appointed as an arbitrator, as well as the parties and their representatives, must provide information to the AAA of any circumstances likely to raise justifiable doubt as to whether the arbitrator can remain impartial or independent. This disclosure of information would include
1) any bias;
2) any financial interest in the result of the arbitration;
3) any personal interest in the result of the arbitration; or
4) any past or present relationship with the parties or their representatives.
And an arbitrator can be disqualified if they show any partiality or lack of independence. Arbitration, done right, is fair, square, and above board. There is such a thing as a neutral party, and businesses, among themselves, have used arbitration for many decades as an alternative to running to the courthouse on every possible issue that could be considered a breach of contract.
The only remaining reason anyone can claim arbitration is bad is because the outcome is not the same as what you get with for-profit law firms constructing huge class action suits against corporations. And when you engineer outcomes, that’s socialism.
Why is the outcome different? Well, for one thing, arbitrators aren’t really in it for the money. Not the kind of money law firms make on class action suits. Courts typically award the law firm in a class action suit 25 percent of the money recovered in a “common fund.” The bigger the suit, the more the firm makes. Some firms spend millions to gather a giant list of class members, who may only get pennies back (or some discounted merchandise), while the law firm gets cash money for their trouble.
In fact, The New York Times published a 2010 story railing against the excesses of the very institution they are defending in 2015.
Large banks, hedge funds and private investors hungry for new and lucrative opportunities are bankrolling other people’s lawsuits, pumping hundreds of millions of dollars into medical malpractice claims, divorce battles and class actions against corporations — all in the hope of sharing in the potential winnings.
Oh, the filthy lucre!
In the wake of 9/11, lawyers circled like vultures to sue on behalf of workers exposed to various chemicals and other health hazards. And, yes, they borrowed millions to pay for the suit so they could have a payday.
Lawyers led by Napoli Bern Ripka sued the City of New York and a host of agencies and companies on behalf of more than 9,000 ground zero workers. When Mr. Flammia signed up as a client, the paperwork included a general notice that the lawyers might borrow money to pursue the case, and that they might bill clients for the interest.
Mr. Flammia said he did not see the general warning, and there was no further notice as the lawyers borrowed more than $35 million.
In June, the city and other defendants agreed to settle the case for up to $712.5 million. The workers have until Tuesday to approve the settlement. Workers received letters detailing how much they would receive, and how much the lawyers would keep to cover the costs of pursuing the case.
Among the costs billed to clients was $6.1 million of the $11 million in total interest payments, which the law firms said reflected the share of the borrowed money covering the workers’ expenses.
Huge lawsuit, huge payday. That’s a profit motive, which the socialist newspaper thinks is bad. But when companies decide to use a neutral party for arbitration, thereby cutting out the profit-driven lawyers seeking class action suits, that’s bad too.
In most areas of debate and life, holding these two views simultaneously would make the NYT a huge hypocrite. Yes, I believe it would.
Not only a hypocrite in their positions, but a hypocrite in action. The NYT’s web subscriber agreement is a masterful document, full of “fine print” which the paper’s editorial staff seems to believe is evil. While there’s no mention of arbitration in the document—that would be an improvement should they add it.
The agreement is so one-sided and “take it or leave it” in nature, that if the writers who wrote the arbitration story were to read it, with all the references to “NYT” changed to some anonymous company, they’d hold it to be patently unfair and predatory.
Perhaps some clever lawyer will find fault with it and start a class action suit. Then the socialists at 620 Eighth Avenue will wish they added an arbitration clause to their agreement.
(crossposted from sgberman.com)