Empirical Study of Non-Employment Arbitration Agreements

Theodore Eisenberg (Cornell), Geoffrey P. Miller (NYU), & Emily Sherwin (Cornell) have just posted on SSRN their article Arbitration's Summer Soldiers: An Empirical Study of Arbitration Clauses in Consumer and Nonconsumer Contracts.  Here's the abstract:

We provide the first study of varying use of arbitration clauses across contracts within the same firms. Using a sample of 26 consumer contracts and 164 nonconsumer contracts from large public corporations, we compared arbitration clause use in consumer contracts with their use in the same firms' nonconsumer contracts. Over three-quarters of the consumer agreements provided for mandatory arbitration but less than 10% the firms' material nonconsumer, nonemployment contracts included arbitration clauses. The absence of arbitration provisions in nearly all material contracts suggests that, ex ante, many firms value, even prefer, litigation over arbitration to resolve disputes with peers. The frequent use of arbitration clauses in the same firms' consumer contracts appears to be an effort to preclude aggregate consumer action rather than, as often claimed, an effort to promote fair and efficient dispute resolution. Other common features of civil litigation reform discussion, avoidance of juries and loser-pays attorney fee rules, find little support in the pattern of contractual terms we observe.

This is a great study -- I only wish the authors had included employment arbitration.  Although in many respects, employment arbitration and consumer arbitration are similar, I doubt that  many companies with employment arbitration agreements are motivated primarily by a desire to avoid class actions, if for no other reason than because employment class actions are less common than consumer class actions. 

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