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How can cell phone companies and car rental places force someone to arbitrate? Don't we have a right to a jury trial in America?Mark from California wrote:
It seems every doctor I see asks me to sign a "physician-patient arbitration agreement" which clearly states it's a "contract to have any issue of medical malpractice decided by neutral arbitration and you are giving up your right to a jury or court trail." Obviously, doctors want to avoid being sued for malpractice. What is your view of what patients have given up, and what might individual patients do? Will arbitration adequately protect patients' rights?Thanks for the great questions. Most of us have signed contracts such as cell phone agreements that contain these arbitration clauses. Today, I will discuss what an arbitration clause is, when it is binding, and briefly answer Mark's questions. The short answers are that arbitration clauses effectively waive your right to a jury, and most arbitration clauses today are enforceable. An arbitration clause is simply a clause in a contract that binds both parties to arbitration should a dispute arise out of the contract. These clauses are generally enforceable as contract terms that you agreed to. Arbitration is a form of dispute resolution, agreed on by all parties, in which one or more neutral arbitrators hear evidence from the parties, and give an award based on that evidence. It is basically a substitute for going to court and presenting your evidence to a jury or judge. Most often, the arbitrator's decision is final and cannot be appealed. Arbitration is often cheaper than going to trial, and many arbitration clauses require that any grievance you have must remain confidential. By contrast, court proceedings are public.
First, turning to our caller's question about the right to a jury trial. The Seventh Amendment to the United States Constitution provides: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." On its face, this text seems to say that you get a jury if you want it. That is true.However, the right to a jury trial is waiveable. When you sign an arbitration agreement, you are effectively waiving your constitutional right to a jury. So, if the arbitration clause is valid, then you no longer have right to a jury trial in that case. But, as Mark's question suggests, these arbitration clauses do not seem fair because you do not always have a choice. Mark has basically asked, "When does an arbitration agreement become so unfair that it is not enforceable?" There are several reasons that a contract is not enforceable. The one that Mark has hit upon is called unconscionability, which basically means grossly unfair. While the law varies from state to state, a contract is unconscionable, and thus unenforceable, where there are both unfair procedural and unfair substantive elements. Procedural unconscionability exists when either inequality of bargaining power or surprise prevents real negotiation or assent. Substantive unconscionability exists when one-sided or oppressive terms have been imposed. Applying this rubric to Mark's situation, it is clear that there is an element of procedural unconscionability because the doctor has a superior bargaining position than the patient. When a patient comes into a doctor's office, he is typically sick, and needs the services of that doctor. Also, the patient does not usually have the luxury of shopping around because most insurance carriers limit which doctors you may see. Last, the doctor simply hands you the contract with the arbitration clause in it, and you take it or leave it. If you do not agree to the arbitration clause, the doctor will not treat you. Take it or leave it contracts like this are sometimes referred to as "contracts of adhesion." Turning to the question of substantive unconscionability, courts that are reviewing your arbitration agreement will generally inquire into the bilateral nature of the agreement. That is, the question is whether the arbitration clause contains the same benefits and burdens for both parties. So, arbitration clauses that give the doctor the right to choose the arbitrator at his discretion, or allow the doctor to choose which law will apply, are substantively unconscionable. Most companies are smart enough to write their arbitration clauses such that they grant the same rights under the clause to both parties.