Make Mandatory Arbitration Illegal

On April of 2007 I wrote, “Many hotel franchise agreements stipulate arbitration over litigation.  At first glance, this may appear to be more beneficial to franchisees but nothing could be further from the truth." I went on to say, "Compulsory arbitration protects franchisor interests while diluting franchisee remedies.”

What are the disadvantages of mandatory arbitration?

• Arbitrators may be friendly with your franchisor since the choice of venue is usually in the franchisor’s HQ City.  In court, however, the dispute will be resolved by a jury of your peers.

• Arbitration is very expensive because arbitrators receive $250 to $500 per hour while judges in state and federal courts are compensated by taxpayer dollars.

• The discovery process is very limited.

• The normal rules of evidence and procedure do not apply as they would in state or federal court.

The bipartisan Arbitration Fairness Act 9 (H.R. 1020 and S. 931) was introduced in Congress on April 29, 2009.  The bill aims to make pre-dispute agreements requiring mandatory arbitration for any franchise, consumer, employment or civil rights disputes unenforceable.  Hotel franchisees complain that there is little opportunity to negotiate the terms of an arbitration clause in franchise agreements.  It is a “take it or leave it” situation.

Don Sniegowski, editor of Blue MauMau reports:

Consumer advocates say there is widespread support across party lines for the Arbitration Fairness Act.  They cite a recent poll from Lake Research Partners that shows that some six in ten voters support the act and that 59% of likely voters oppose the use of mandatory binding arbitration clauses like those found in franchise contracts and credit card agreements.