Arbitrators Find Flaws in Mediation Process
Arbitrators Find Flaws in Mediation Process

Feb. 25, 2005 — The spread of mandatory arbitration to so many corners of consumer life has been good for Lucie Barron, CEO of Action Dispute Resolution Services Inc. in Los Angeles.

"There has been a phenomenal increase in this industry," said Barron, who owns one of the fastest growing arbitration and mediation companies in California.

The company tries 25 new cases a day, which are heard mostly by retired judges at a rate of $350 to $400 an hour. The fee is many times what the judges might have earned on the bench.

"You don't have to be a retired judge to be an arbitrator," said retired judge-turned-arbitrator Robert Thomas. "You can be anything."

Lack of Appeal Raises Concerns

Like most arbitrators, Thomas has faith in his own fairness. But he has doubts about a fundamental part of the arbitration process: lack of the right to appeal.

"I've had some tough cases where I kind of wish that maybe somebody would take another look at it," he said. "It's a big responsibility deciding these cases."

Celeste Hammond, an arbitrator in business cases who is also a professor John Marshall Law School in Chicago, has serious reservations about the process.

"[Litigants are] giving up their right to a trial," she said. "They're giving up their right to an appeal."

Hammond said she's disturbed by the secrecy of the hearings. She says she learned only by chance that a lender accused in one of her cases of fleecing a customer had been accused many times of the same abuse.

"[The cases are] not open to the public," Hammond said. "They're not open to the press, and usually there is a confidentiality agreement between the parties not to disclose the outcome."

But Barron says arbitrators do not write the rule book: They only apply it.

"It's not really our decision to make," she said. "It's made by the courts and it's made by the legislature."

Nonetheless, until the law is changed, mandatory arbitration clauses are likely to appear in more of the contracts Americans sign.

ABC News' Betsy Stark filed this report for "World News Tonight."