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5-Year Study Shows You’re More Likely to be Struck By Lightning Than Win Forced Arbitration

Every day, consumers in America are faced with contracts they have to sign. Every digital service and every business agreement has terms of service agreements that are dozens of pages long. Many of these agreements have arbitration clauses that force parties to speak to an arbiter rather than go to court. It should come as no surprise that such provisions benefit the business, but forced arbitration is shockingly worse for consumers than people realize. 

Recently, the American Association for Justice released a groundbreaking report based on five years of data that details the fundamental truths of forced arbitration. The report Truth About Forced Arbitration examines data on consumer and employment forced arbitrations reported by the nation’s two largest arbitration providers. The analysis found that “Americans are more likely to be struck by lightning than they are to win in forced arbitration.”

Arbitration clauses exempt employers and businesses from the more critical eyes of courtroom juries. One thing the study showed is that these court-bypassing clauses are becoming more prevalent. The report estimates there are more than 800 million arbitration clauses in effect. These clauses may discourage litigation. This new study found there are only 6,000 consumer arbitration claims filed every year. This low figure doesn’t mean that only cases that are likely-to-win get filed. On average, only 382 consumers a year win a monetary award in forced arbitration, which is around 6.3 percent.

Forced arbitration is also an increasing part of employment agreements. Similarly, 60 million workers (a sizeable chunk of the U.S workforce) are subject to forced arbitration. These agreements have the same chilling effect on litigation, as only 0.02 percent of these workers tried to pursue a claim. Over the five years studied, only 282 employees were awarded monetary damages in forced arbitration. According to the report’s authors, this is less than one-ten-thousandth of one percent of covered workers.

Over the five years studied in the reports, consumers brought 6,012 claims, which were valued at at least $3.7 billion in damages. They won monetary awards in just 131 cases; in other words, only 2.2 percent of the time. In contrast, banks brought 137 cases, yet somehow won monetary awards in 314. This surprising figure about bank award suggests that banks are being awarded money during arbitration, even when they aren’t the ones bringing the claim. It’s clear that mediation is far better for banks than it is for their customers. 

Forced arbitration clauses are also used in the contracts signed by patients entering nursing homes. The report didn’t have much information on these claims, but what they did have wasn’t good for patients. In the five years studied, there were only 16 nursing home arbitrations reported at AAJ. Consumers brought ten, and six were brought by corporations. No consumers won any of their cases while corporations won four of the six they initiated.

Given how prevalent forced arbitration clauses are, evidence of just how few cases are ever pursued through forced arbitration makes it clear that forced arbitration is providing virtual immunity to Corporate America. As this report shows, there is a clear reason for the disparity between the number of forced arbitration clauses in effect and the number of cases that are ever filed by consumers and workers: forced arbitration is a rigged, secretive, corporate-designed system in which the odds are stacked against Americans. As an article from the Huffington Post notes, the report “shows that not only do companies typically emerge victorious from arbitration but, perhaps more damning, they rarely even have to use the process.”

 

If you’re asked to agree to a contract with forced arbitration, be aware that it will make it harder for you to seek compensation in the event something goes wrong. Be sure to talk to a trusted lawyer, like Steve Watrel, P.A., before you agree to a forced arbitration agreement. And if you find yourself in arbitration, you should have the best legal counsel to improve your odds of success.