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California: Equity Arbitration OK!

June 9, 2008
SACRAMENTO, CA -- The California Supreme Court today, in effect approved net-ARB's use of equity arbitration. Equity arbitration guidelines allow arbitrators to decide cases based on fairness and to excuse technicalites when not doing so would produce an unfair result. (see » net-ARB's Arbitrator Guidlines)

The case of Gueyffier v. Ann Summers, Ltd., 43 Cal. 4th 1179 (2008) pitted a lingerie and "adult accessory" store franchisor against a failed franchisee whose store went belly-up immediately after his grand opening was greeted by a hoard of angry neighbors pelting the store with tomatoes.The original case was a routine breach of contract and was decided in arbitration. In reaching his decision, the arbitrator let slide a technicality that would have caused the decision to go the other way, an inequitable result in the arbitrator's eyes..The appellant argued that the arbitrator's "equitable excusal" exceeded his power. The Court disagreed, defining the enormous magnitude of an arbitrator's power to restore equity.
"Absent an express and unambiguous limitation in the contract or the submission to arbitration, an arbitrator has the authority to find the facts, interpret the contract, and award any relief rationally related to his or her factual findings and contractual interpretation."
You can read the entire opinion here » California Supreme Court.

No Lawyers, Please

April 5, 2008WASHINGTON, D.C. -- Confident that a lawsuit will not produce a fair result, most Americans do not want their day in court. When asked in a newly released poll conducted on behalf of the U.S. Chamber of Commerce how they'd like to settle a dispute with a company, 82% chose arbitration, saying they preferred the cheaper, faster method. Only 15% preferred litigation. These latest findings support earlier findings by the American Bar Association showing that 78% of lawyers "believe that arbitration is generally timelier than litigation, and 56% feel it is more cost effective."Despite the overwhelming evidence supporting arbitration, the ABA trial bar is asking Congress to prohibit Americans from agreeing at the start of a business relationship to submit disputes to arbitration. Representative Hank Johnson (D., Georgia) and Senator Russ Feingold (D., Wisconsin) have introduced legislation to do just that. Their bill goes a step further in fact, retroactively invalidating tens of millions of contracts nationwide. Even trial lawyers can dream.71 percent of respondents say they oppose efforts in Congress to remove binding arbitration agreements from consumer contracts. Catholic University professor Peter Rutledge believes that the elimination of arbitration clauses in this manner "unravels the quilt of dispute resolution." Citing numerous categories of arbitration in which consumers already win a majority of cases, Rutledge suggested that the demise of arbitration clauses in consumer contracts would lead to a pandemic of class action lawsuits, making lawyers once again the big winners.Another lost benefit if these special interest groups get their way is lower consumer prices which come about as a result of stripping out the cost of lawyering. "Recognition of this [benefit] has been standard in the law-and-economics literature for at least a quarter of a century," notes esteemed University of Kansas law professor Stephen J. Ware.Larry Akey, spokesman for the U.S. Chamber of Commerce's Institute for Legal Reform, maintains that arbitration has proven to be a fair venue for consumers and businesses to resolve disputes. "The downside obviously to eliminating arbitration is that because so many of these claims are small-dollar claims, (so) claimants would find themselves in a situation where they would be hard pressed to find an attorney to take their case."