The latest episode of Ballard Spahr’s Consumer Finance Monitor Podcast explores mass arbitration and includes as a guest arbitration champion Andrew Pincus, who argued the industry’s–and winning–position in Concepcion. As I listened to the podcast, which I recommend to those interested in consumer law, it became clear that one of Mr. Pincus’s chief complaints about mass arbitration is that it produces resolutions based not on the merits of who should win but rather on economics. Put another way, Mr. Pincus is troubled that mass arbitration causes parties in a dispute to make decisions based on the cost of asserting their position rather than whether anyone has done anything wrong. Sound familiar? That is one of the chief complaints consumer advocates have about arbitration!
Decisions whether to arbitrate solo small claims are also driven by economics rather than the merits. The CFPB Study, David Horton & Andrea Cann Chandrasekher, and The New York Times all found that almost no consumers bother to arbitrate small claims. The only way small consumer claims can get considered on the merits is in class actions but arbitration clauses make that impossible. As Judge Posner famously wrote “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”
Of course, Mr. Pincus’s clients have a way to block mass arbitrations. They can simply remove arbitration clauses from their contracts. But consumers, who cannot understand arbitration clauses, realistically don’t have that option.
