MANDATORY ARBITRATION VS. VOLUNTARY MEDIATION

I recently received a call from a friend who said she was being forced into arbitration and would rather mediate. She asked if there was anything she could do about that.

 First, I had to be sure she understood the processes. In arbitration, a neutral third party reviews evidence, hears arguments and renders a decision. The rules of evidence used in court are relaxed. The use of arbitration is frequently agreed to in advance when parties enter into a contractual relationship. In this usage there is very limited opportunity, if any, to appeal the decision. The advantages of this form of arbitration are speed, having an arbitrator with specific expertise in the area of the dispute, and cost.

In contrast to mediation, a third party neutrally facilitates communication between the parties and helps them work out a mutually agreed upon solution.

 In recent years, mandatory arbitration clauses have become common in contracts that now require the parties to arbitrate their disputes. These mandatory clauses have become common in employment, insurance, construction, car loans, leases, credit cards, retirement accounts, investments, nursing facilities, and more. Usually these clauses prevent claimants from participating in class action suits, impose a cap on damages and require confidentiality with a non-disclosure agreement.

 Unfortunately, my friend, like many others, didn’t read her contract and was not aware she was agreeing to a mandatory arbitration clause.

Such clauses have been challenged in legislatures and in the courts. Perhaps the most well-known challenge is Siperavage v. Uber Technologies. Edward Siperavage bought a $71,000 Chevrolet Tahoe in order to participate in the Uber Black SUV program. Uber later informed him his Tahoe would no longer qualify as an upscale vehicle. He sought to file a class action suit but a federal judge ruled that it must be handled through the mandatory arbitration clause. His attorney called the ruling another example of aggrieved individuals being forced into arbitration.

 Siperavage and others who signed mandatory agreements are taking their disputes to arbitration as required. But businesses who hoped to avoid large class actions cases now are dealing with thousands of arbitrations with nearly identical circumstances.

So, can my friend avoid mandatory arbitration and use mediation? I can’t provide a legal opinion, but my layperson’s view is both parties would have to agree and it’s unlikely the company will do so. Some state legislatures have acted to ban mandatory arbitration in sexual abuse cases and some are reviewing the uses of the clauses in employment contracts as well.