Dennis Kucinich and his House Domestic Policy Subcommittee just released a report on arbitration abuse in the National Arbitration Forum (PDF). In the report, the subcommittee stated that “[c]onsumer arbitration lacks the safeguards that have been designed into our judicial system by our Constitution, by state and federal statutes, and by centuries of judicial decisions” and provided a chart purporting to show those safeguards.
But the chart is almost completely wrong.
While NAF’s exit from consumer arbitration is welcome, and I am thrilled that pre-dispute, mandatory arbitration in consumer contracts may be facing extinction, Kucinich is fooling himself if he thinks consumers will get a fairer hearing in the courts. In part, court rules ensure consumers will not get that hearing in the first place. Also, most state courts are simply too under-funded, under-staffed, and overworked to do anything but rubber stamp collection lawsuits.
Here is what consumers can expect to find in the court system, contrary to what the report states:
“Case is randomly assigned to a judge who has no interest in the proceeding”
In fact, in Minnesota, the vast majority of collection lawsuits are never assigned to a judge. The same may be true in many other states. Instead, a court clerk decides the matter on the creditor’s application for a default judgment. The subcommittee was concerned that consumers rarely respond to arbitration claims. But the same is true in the courts, and so is the outcome: an administratively-entered default judgment.
“The entire proceeding is open and public”
Some states, like Minnesota, allow “pocket filing,” so that the entire lawsuit takes place outside of the court system, and nobody knows of it except for the parties involved. In states with pocket filing, that means the lawsuit is completely hidden from the public.
“The process is familiar to anyone who has watched television”
This is grossly inaccurate. Many consumers served with a summons and complaint default because they are waiting for a notice of a court hearing—just like on television. In fact, few civil lawsuits involve a hearing unless the defendant serves an answer and the case goes to summary judgment or trial.
Television is woefully inadequate to prepare consumers to litigate a lawsuit according to courts’ real procedural rules.
“Due process is required and is enforced by neutral parties”
While technically true, civil procedure is complicated, intricate, and full of nooks, crannies, and loopholes in which the average consumer will be hopelessly lost. Few consumers understand their rights or the steps they must take to enforce them in court.
When consumers rarely understand their rights, it is difficult to assert that they have received due process.
“Decisions must be based on reliable evidence”
Since few cases end up in front of a judge, the same hearsay and incompetent evidence that wins arbitrations will suffice in courts. If a consumer defaults, the only “evidence” most courts (well, court clerks, anyway) will see is an affidavit of service and an affidavit of no answer, which purportedly show that the defendant actually received the summons and complaint, but did not answer.
“Consumer incurs virtually no cost”
This may be one of the most egregious misstatements. While arbitration is expensive, so is court. In Minnesota, for example, a defendant must pay $350 to file an answer, $75 for a jury, and $100 to file or respond to a motion. That is about $525 for a typical lawsuit, more than enough to deter those consumers who are actually served with the summons and complaint, understand the rules of civil procedure, and have the legal savvy to competently represent themselves.