Readers, you may know that in addition to serving as an arbitrator in commercial cases, I hear consumer cases under the American Arbitration Association’s consumer arbitration rules. My own experience, which I hope is shared by the parties that appear before me in consumer cases, is that done right, a consumer arbitration can provide a very high quality of justice to the parties in a reasonable time for a reasonable cost. But consumer arbitration is different than most arbitration, because in many cases, the consumer does not want to be there. Yes, the consumer has signed the agreement to arbitrate, and yes, under the law the agreement to arbitrate is, in most cases, valid and binding. But many consumer contracts are really contracts of adhesion—contracts drafted by the business and presented to the customer on a take-it-or-leave-it basis, with no possibility of negotiation and often no real understanding of what the consumer has signed. I was at the 2019 annual meeting of the American Law Institute, where we debated the proposed restatement of the law of consumer contracts, and if there is one thing everyone agreed on at that very contentious meeting, it is that no one, not even ALI members, read the many consumer contracts we all sign, or these days click on, all the time.
The other day, I was at the Folkman LLC fileroom, otherwise known as my local self-storage place.1 I had to wait in line, because I was upgrading from a small storage space to a larger space to accommodate my case files better. There was a gentleman in line in front of me signing his contract to rent a space. The clerk made a show of taking him through all the key points of the contract. It was clear to me that the customer was not a lawyer, and that he didn’t know what “arbitration” meant. When the clerk got to the part of the contract where the customer had to decide whether or not to agree to the “optional” arbitration clause, he asked for an explanation. The clerk said, “if we ever have a disagreement, arbitration means you and we would sit down together and work it out. Otherwise, you have to go to court.” “Okay,” the customer said, “I guess I’ll choose arbitration.”
Consent is the basis of arbitration. Has this customer validly consented? The bad news for the consumer, if he ever wanted to challenge arbitrability, is that the “choice” he was given likely increases the chance that an arbitrator would find that the consumer had consented, unless the consumer were able to recall what the clerk told him.
I don’t have any easy answer to this problem, but it is a problem—one that should concern everyone in the pro-arbitration community who understands that consent is not just a legal necessity but also the principle behind the rule that parties who have agreed to arbitrate cannot have a public trial before a judge and jury.