Faculty in the News
In the News
Companies unlikely to use arbitration with each other
Publication date: Oct. 5, 2008
Source: The New York Times
Author: Jonathan D. Glater
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KU law professor Stephen J. Ware is quoted in a New York Times article about the likelihood that businesses will use the same arbitration clauses they use with consumers to deal with one another.
The New York Times writes:
Corporate executives routinely sing the praises of arbitration clauses, the language buried in the fine print of contracts for mobile phones or credit cards, for example, that typically bars a consumer from going to court in the event of a dispute.
"Arbitration is an efficient, effective, and less expensive means of resolving disputes for consumers, employers, investors, employees and franchisees, in addition to the many businesses that use the same system to resolve business disputes," more than a dozen business trade groups wrote in a letter to Congress in May.
Now three law professors suggest that companies are far less likely to use arbitration clauses in contracts with each other than they are in contracts with consumers.
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"If it's a big, important contract, then you don't put in an arbitration clause," said Stephen J. Ware, a law professor at the University of Kansas. A dispute over a significant contract may call for the costlier but more thorough litigation process, he said, while smaller contracts with consumers do not.
"It's entirely possible that businesses are being consistent in using arbitration more for immaterial contracts than for material contracts," said Professor Ware, who is working on an article critical of the conclusions reached by Mr. Eisenberg and his colleagues.
The particular industries that Professor Eisenberg looked at, Professor Ware said, also may affect the findings. The finance and telecommunications sectors are more likely to include arbitration requirements in consumer contracts than are other sectors, he said.