Originially from: World Arbitration and Mediation Review (WAMR)

AAA Waves the Rules, and Consumer Arbitration May Never be the
Same
by
Edward A. Dauer
It has been a year of maturation and leadership for the American
Arbitration Association. In May, the Association issued its Consumer Due
Process Protocol, a statement of principles describing "fundamentallyfair"
ADR procedures for consumer transactions in goods and services. In
July, a consortium of the AAA, the ABA, and the AMA released the Draft
Final Report of the Commission on Health Care Dispute Resolution, also a
set of principled guidelines for the application of ADR to consumers'
disputes with managed care organizations over access, treatment, and
health care coverage. For reasons that lurk in that interplay of public law
and private contract which describes modern arbitration, these two reports
may have an influence beyond what the AAA's substantial leadership
alone could bring. They are likely to bring maturity to the law itself.
From a purely legal point of view, the problems that are most disturbing
about pre-dispute agreements to arbitrate consumer disputes do not have to
do with traditional abuses of market power or the exploitation of inferior
linguistic or contracting skill. Where one party uses fraud, duress, or
particularly unconscionable tactics to secure the bargain, the legal tools to
right the wrongs are tolerably good enough. Even in the sure-to-beseminal
case of Engalla v. Kaiser Permanente, 938 P.2d 903 (Cal. 1997),
the courts were able to corral the uniquely outrageous with good old
common law rules of fraud.
The more serious problems are two in number:
First, to the extent that arbitration agreements privatize what has most
often been the public function of adjudication, the pervasive use of
arbitration in consumer markets alters the traditional balance between
economic and legal forces. Absent private agreements to submit disputes
to binding ADR, the world of private contract is one in which the law
polices at the edges of private behavior and transactional tactics.
Individuals may strike almost any bargain they like. Superior market
position makes for unbalanced exchanges. So be it. When disputes arise
about the content of the agreement, either the law or its shadow has been
available, not to balance the deal, but to act as fair umpire to call the deal
foul when the manner in which it was struck exceeded the bounds of
decent behavior.