Diffusing disputes: the public in the private of arbitration, the private in courts, and the erasure of rights.

Author:Resnik, Judith
Position::Continuation of IV. Metrics of Effective Vindication, Adequacy, and Unconscionability D. "Mass" Arbitration Clauses Without a Mass of Claims through Conclusion, with footnotes, p. 2894-2939 - Arbitration, Transparency, and Privatization: Contextualizing and Analyzing Recent Developments in U.S. Arbitration Regimes
  1. Public Access to, and Confidentiality in, Arbitration

    An account of the route to the data is in order because, as Frances Kellor recounted in her 1948 book on the AAA, arbitration is a private process. The businesses that shaped it preferred to have their disputes off screen, and they obliged arbitrators to keep confidential what they learned and did. (449)

    Decades later, that aura of privacy persists, even as the rule structure about confidentiality has become more complex. By authorizing disputants to go to court to confirm or vacate awards, (450) the FAA itself "appears to presume that arbitration materials could become public." (451) Lawsuits filed about arbitration are, however, a small fraction of the claims arbitrated. Thus, public access relies primarily on the rules of ADR providers, the text of arbitration clauses, custom, and some federal and state regulations.

    As noted, the major providers describe arbitration as a private process and authorize arbitrators to limit third-party access to hearings. (452) In addition, specific arbitration clauses may require confidentiality. Illustrative is one imposed in 2002 and since withdrawn by AT&T, instructing that: "Neither you nor [the company] may disclose the existence, content or results of any arbitration or award, except as may be required by law [or] to confirm and enforce an award." (453)

    The legality of such rules is a subject of debate. In 2003, the Ninth Circuit held this provision unconscionable under California law, (454) but other circuits (the Second, Third, and Fifth) have not objected to such provisions. (455) Instead, those courts approached "confidentiality clauses [as] so common in the arbitration context" (456) that limited confidentiality would undermine the "character of arbitration itself." (457) Moreover, although the Supreme Court's case law does not much discuss confidentiality, the few references assume its existence and importance. For example, in 2010, Justice Alito quoted the AAA class arbitration rule, that "the presumption of privacy and confidentiality" did not apply to class actions as an example of the "fundamental changes" distinguishing bilateral and class-action arbitrations. (458) Likewise, Justice Scalia commented in AT&T v. Concepcion that confidentiality "becomes more difficult" with class action arbitrations. (459)

    In practice, however, mandates to keep consumer information confidential are infrequent. The 2015 study by the CFPB concluded that in consumer debt, confidentiality was required in seven percent of the credit card clauses reviewed and in none of the arbitration obligations imposed by the wireless service providers. (460)

    Yet, unlike courts, obliged by statutes and constitutions to account for their work, ADR providers are subject to fewer regulations, and First Amendment and Due Process rights of access have not thus far been read to apply directly to them. ADR providers do not routinely create public venues for observation of their proceedings, and many providers decline to make public the number and kinds of claims with which they deal, or do so only by way of a special arrangement with selected researchers. (461) Arbitrators continue to be bound by obligations of non-disclosure; companies do not routinely post decisions and disposition data, and individuals can only learn about filings and outcomes through networks linking similarly situated individuals and lawyers.

    Important exceptions--from transnational conventions, federal regulations, and state law--permit windows into a few segments of the arbitration market. In 2013, UNCITRAL issued rules to govern transparency in treaty-based investor-state arbitration. (462) Domestically, federal regulation of public companies and rules of the Financial Industry Regulatory Authority (FINRA) (463) require some disclosures. Further, as noted, a few states call for ADR providers to publish data on consumer arbitrations in "a computer-searchable format" (to use the terms of California's 2002 statute) on the web. (464)

    California's 2002 mandate has become a key source of data. Arbitration providers are asked to furnish, for "each consumer arbitration," the name of the "nonconsumer party" (if "a corporation or other business entity"); the "type of dispute" (and for employees, details about their wage brackets); whether an attorney represented the consumer; the time from the demand made to disposition; the mode of disposition ("withdrawal, abandonment, settlement, award after hearing, award without hearing, default, or dismissal without hearing"); the prevailing party; the amount sought; the amount awarded and other relief provided; and the arbitrator's name, fee, and the fee's allocation among the parties. (465)

    Yet information remains spotty. A 2013 study, Reporting Consumer Arbitration Data in California, concluded that most providers were not in compliance with the state law; (466) only eleven of the twenty-six entities identified as arbitration providers filed any of the required information. (467) Not surprisingly, the AAA is a leader in compliance. As it describes on its webpage, Consumer Arbitration Statistics, the information is "made available pursuant to state statutes" and "updated on a quarterly basis, as required by law." (468)

    The web-based materials are a revolving set; when a new quarter is posted, the older quarter is taken down, such that only five years of data are online. To understand the use of arbitration, we evaluated a lengthy chronicle of claims from across the country that were filed and closed from July 2009 to June 2014. (469) That list totaled 17,368 individual claims (sometimes related to the same case (470)), of which 7,303 (or forty-two percent) fell in the consumer category, excluding real estate and construction. (471) The spreadsheets delineate seven categories: three kinds of consumer arbitrations (consumer, consumer construction, and consumer real estate), "employer promulgated employment," "other industry," residential construction, and residential real estate. (472)

    Reading the entries, one generally learns the names of the business entity (473) and of arbitrators and lawyers (if appearing), (474) as well as whether the claim closed by settlement or award, the amounts sought, the fees, (475) and fee allocations between the disputants. (476) Of the 5,224 claims "terminated by an award," about half included a dollar figure. (477) The information on prevailing parties comes with the caveat that arbitrators are the source; the AAA has not "reviewed, investigated, or evaluated the accuracy or completeness" of such information. (478)

  2. Accounting for Individual Consumer and Employee Arbitrations

    Below, I detail some of the results of parsing these data as well as materials gathered by other researchers. My focus is on the use of arbitration, the rules and fee structures of the AAA, the provisions made for indigent claimants, and compliance with awards. The density of this account aims both to provide information not otherwise available and to make plain the challenges entailed in doing so.

    By way of a preview, seven conclusions emerge from this brief survey of available data. First, obtaining the information is labor-intensive, and the results are partial at best. Second, public records indicate that almost no individual consumers use arbitration. Third, navigating the sea of arbitration clauses and governing rules requires sophistication. Assistance--such as easily accessible forms on fee waivers and consumer-friendly user guides--is hard to find. Fourth, no comprehensive provisions enable indigent consumers to obtain waivers of filing fees. Fifth, the major ADR providers have little current capacity to administer a large number of arbitrations. Sixth, deciding on the optimal numbers of arbitrations requested or completed is difficult. But, and seventh, if the justification for applying the FAA to consumers is that it opens doors to dispute resolution that were otherwise closed, little evidence comes from the number of claimants using arbitration individually in the years since the Supreme Court expanded the aegis of the FAA and closed off collective action.

    1. Finding the Filings

      To create a manageable, focused inquiry, we reviewed the five-year span of AAA data to identify consumer arbitrations involving AT&T. Within the set of 7,303 consumer claims unrelated to commercial real estate or residential construction, the AAA 2009-2014 spreadsheet listed 1,283 brought against AT&T in any of its corporate forms. (479) Because one law firm confirmed that it filed 1,149 individual claims against AT&T Mobility, (480) a question emerged about whether those claims represented individual use of the system. (481) After learning from the firm that it had filed hundreds of arbitration claims (some related to "phantom" data charging and others to oppose a proposed AT&T merger with T-Mobile) in an effort to create two de facto class actions, we excluded that firm's filings from our count. (482)

      Holding those filings aside, consumers brought 134 claims against AT&T, or an average of 27 per year. (483) (AT&T did not initiate any claims against consumers during the five-year period studied but did file a counterclaim in one of the consumer-initiated claims. (484)) That rate of consumer filings fits the picture provided in the record in Concepcions' litigation. Then, AT&T had almost seventy million customers by 2007 and, in the five years between 2003 and 2007, some 170 consumers--or about 34 a year--arbitrated under the AAA procedures with AT&T Mobility, AT&T Wireless, or Cingular Wireless. (485) (How many used the available pre-arbitration processes was not clear.)

      During much of the period between 2003 and 2014, AT&T and its predecessor companies also noted that customers could use small claims court. (486) We sought to learn about those filings for a five-year period running from 2010 to 2014 in two jurisdictions, California and...

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