Arbitration Works for Consumers and Employers, Lawmakers Should Reach Same Conclusion
By Chip HoughConsumers win. Consumers won their cases slightly more than 70 percent of the time when they chose arbitration.
If personal injury lawyers and their advocates in Texas have their way, employers and consumers here may lose their ability to seek alternatives to costly and time-consuming litigation.
Right now, lawmakers are studying the use of arbitration clauses in Texas contracts and how they affect the ability of consumers and employers to resolve their disputes.
This interim study comes on the heels of a legislative effort by State Sen. Royce West (D-Dallas) to make such clauses illegal in Texas contracts. While West's bill did not see the light of day, the powerful House Committee on the Judiciary and Civil Jurisprudence is now studying the issue.
As personal injury lawyers lobby against arbitration in Texas, the American Association of Justice (also known as the American Trial Lawyers Association) is waging a battle on the national level. In early January, this trial lawyer group announced that making arbitration clauses illegal would top their agenda for 2010.
Why the focus on arbitration? It's been clear for years that personal injury lawyers chafed at the system. They don't like arbitration because it provides solutions without lengthy and expensive litigation. Employers and consumers, on the other hand, embrace arbitration for the very same reasons.
Briefly, arbitration, common in many consumer contracts, is an alternative to litigation. Arbitration is generally binding and, according to a 2008 report, it is the keystone for a system of alternative dispute resolution in the United States as court dockets have exploded and litigation costs dramatically increased. Personal injury lawyers argue that arbitration hurts consumers by denying them access to the courts.
However, the 2008 report ("Arbitration – A Good Deal for Consumers" by Professor Peter B. Rutledge, prepared for and released by the U.S. Chamber Institute for Legal Reform in April 2008) clearly shows that arbitration works for consumers, and for employers.
According to the report:
Consumers win faster. In contrast to the sluggish pace of litigation, the average time from filing to disposition of case taken to arbitration was approximately 100 days (litigation took three to four times longer other studies showed).
Consumers win more often with arbitration than in litigation. Conversely, when an employer initiated the case, their win rate in arbitration was almost equal to that in litigation.
Lower costs. In a study of employer and securities litigation, arbitrated disputes cost less than litigation, even when attorney fees are included.
And voters like arbitration. In 2008, the U.S. Chamber's Institute for Legal Reform released a survey of voters across the United States which showed that 82 percent of voters said they prefer arbitration to litigation as a means to settle a serious dispute with a company and 71 percent oppose efforts by lawmakers to remove arbitration agreements from consumer contracts.
The bottom line? Arbitration works. Consumers clearly benefit from the system as do employers large and small who provide the jobs that feed, clothe and educate Texas families. We hope Texas lawmakers come to the same conclusion.
Chip Hough is Managing Partner of Basic Industries of South Texas with operations in Corpus Christi and San Antonio. He currently serves on the Board of Directors of Citizens Against Lawsuit Abuse of Central Texas.
CALA is a nonprofit, grassroots public education movement dedicated to raising awareness about the cost and consequences of lawsuit abuse. The movement is supported by more than 25,000 Texans. For more information, visit www.tala.com.
The Southeast Texas Record is owned by the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.