Arbitration: Fair or a Scam Against the Public?

By: The VNN Team  //  Human Rights Watch, Investigative Reports

(Story by Carol Thompson) The intent of the American Arbitration Association (AAA) is to relieve the justice system of its case burden, but for many who have gone through the process, they claim all it relieves them of is their money.

When determining a case, the arbitrator does not have to give reason for his decision nor does his decision need to be based on the law.

The not-for-profit AAA has been the subject of numerous complaints over the past two decades from plaintiffs who claim they weren’t given a fair shake.

In 1996, Terry Chilton, president of Wand Electric, Inc. used the American Arbitration Association in his case against the Clinton County, New York Highway Department. The case was heard by three AAA arbitrators.

In an April 10, 1996, letter of complaint to the AAA, Chilton wrote, “These three arbitrators, after two years of delay, eleven days of testimony, and nearly $50,000 in arbitration fees between both parties, arrived at a one sentence determination with no damage award and absolutely no clarification whatsoever.”

Chilton alleged that the panel failed to address the issues presented in testimony, in written and photographic evidence, and the actual breach of contract with the Clinton County Highway Department. Chilton stated that his 19-year-old business, which employed 16 people, was ruined due to the arbitration.

In his letter to AAA, Chilton outlined the points that had been overlooked in his case. His complaint resulted in a brief response from Deborah Brown, regional vice president of AAA.

“I looked into the files of each arbitrator and find nothing to indicate any problems or complaints regarding service on previous cases. I wish there were something I could say to give you a better opinion of our services and the arbitration process, but unfortunately for you, the case stands and has had a devastating effect on your business,” Brown wrote.

In 2000, a woman in Berkeley, California, received a notice from AT&T that the company was cutting off her right to sue and that her claim for more than $5,000 against the company would have to be resolved through AAA.

The company failed to disclose that the AAA had invested $100,000 in AT&T bonds the previous November. At that time, company officials denied any conflict-of-interest, despite holding millions of dollars in stocks and bonds for the very companies the association has provided its service.

The association also has reportedly owned shares of Bank of America, Aetna, Cigna Corp., General Electric, and other corporations whose disputes its arbitrators have heard. Some corporate officers have served as directors of the AAA.

Dubbed the “kangaroo court” by its critics, the AAA states on its website, “Since our founding, the AAA has been at the forefront of the development and refinement of the court-tested rules and procedures that are the bedrock of any successful alternative dispute resolution process. When used in conjunction with our neutrals and AAA-administered case management, they provide cost-effective and tangible value to users across a wide variety of industries and cases.”

Tomorrow: Arbitration: An Unfair Advantage?

(Image: Flickr | DonkeyHotey)