Bound & Gagged How will the battle over mandatory binding arbitration affect you?

You're taking legal action against a large company. Butinstead of a jury trial, you're facing an arbitrator.

It's a growing trend, as credit card companies, banks, automanufacturers and other big businesses inform customers in fineprint that any claim, dispute or controversy will be settled inarbitration, where there's no jury and no right to appeal. Theresult: Just 3 percent of U.S. civil cases now make it to trial."A trial is very expensive," says Judge William Huss, amediator and arbitrator in Los Angeles and author of Start Your Own Law Practice. Arbitration, he contends,"is fast, fair and final."

Consumer advocates dispute its fairness, however, sincearbitration clauses prohibit class action lawsuits, limit complaintperiods and include filing fees. Plaintiffs pay at least $750 justto get a case started, according to Public Citizen, a nationalpublic interest organization based in Washington, DC.

Arbitration can work for and against entrepreneurs, who can useit to limit lawsuits against their firms, but can also findthemselves forced into arbitration as the plaintiff if, forexample, they're in a dispute with their credit card company."The small-business community probably does feel there's arole for binding mandatory arbitration. With costs going up forinsurance and liability, they would like to limit the downside ofbeing sued," says Linda Sherry of Consumer Action, a SanFrancisco-based public interest group. "The problem witharbitration is that it puts high costs on the plaintiff."

Battles over the role of arbitration are heating up. A coalitioncalled Stop Binding Mandatory Arbitration wants to raise awarenessof arbitration abuse. And in November, the U.S. SupremeCourt--which has generally ruled in favor of arbitration--wasscheduled to hear arguments in Cardegna v. Buckeye, aFlorida case involving quick-money lenders. In the case, the 4thU.S. Circuit Court of Appeals first ruled that arbitration termsare enforceable even if a contract is illegal, but then itoverturned that decision.

"[This] is an issue about whether arbitration clauses aregoing to be treated differently than other types ofcontracts," says Paul Bland, attorney for the plaintiffs inthe Cardegna case. "We're saying there have to be limitsto arbitration." For now, make sure to read the fineprint.