three-part series of articles on arbitration clauses, and how such clauses "buried in tens of millions of contracts have deprived Americans of one of their most fundamental constitutional rights: their day in court." (You can also listen to an interview with the articles' author on NPR.)
What's an Arbitration Clause?
Here's one example, drawn from a contract I saw recently:
If any dispute shall arise between the Author and the Publisher regarding this Agreement, the Publisher and Author will first attempt to resolve such dispute through mediation, and, if that fails, such dispute shall be referred to binding arbitration in accordance with the Rules of the American Arbitration Association, and any arbitration award shall be fully enforceable as a judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties shall have the right to conduct reasonable discovery as permitted by the arbitrator(s) and the right to seek temporary, preliminary, and permanent injunctive relief in any court of competent jurisdiction during the pendency of the arbitration or to enforce the terms of an arbitration award.They don't all include such dense legalese:
Recognizing the expense, distraction, and uncertainty resulting from litigation of disputes which may arise under this Agreement, AUTHOR and PUBLISHER agree that AUTHOR and PUBLISHER shall submit any and all disputes arising in any way under this Agreement to the American Arbitration Association for final disposition in accordance with its rules.Where will you find an arbitration clause in your publishing contract? Anywhere. It may appear under a separate caption (for instance, "Arbitration and Dispute Resolution") but more often is buried under other headings, such as "Reversion and Termination" or "Miscellaneous", where it can easily be glossed over.
How Arbitration Clauses Limit Your Rights
Arbitration is often portrayed as an easier, more friendly method of dispute settlement, allowing the parties to avoid the hassle and expense of litigation. But as the Times points out, this reasonable-sounding explanation leaves out some darker truths.
- Arbitration clauses are binding, and supersede your right to go to court to settle a dispute. If you sign a contract with an arbitration clause, you are waiving your right to legal action. Many people don't realize this.
- People often assume that arbitration is similar to appearing before a judge. But, says the Times, "arbitration...often bears little resemblance to court....Winners and losers are decided by a single arbitrator who is largely at liberty to determine how much evidence a plaintiff can present and how much the defense can withhold."
- Arbitrators--many of whom are retired judges--are supposed to be impartial, but often they're not. Plaintiff and defendant choose an arbitrator from a list supplied by the arbitration company; for obvious reasons, defendants prefer to choose arbitrators with a history of defendant-friendly rulings, and plaintiffs, who may not have that inside knowledge, may not know enough to object. In turn, arbitrators feel pressure to favor defendants, since this makes it more likely they'll be chosen--and paid.
- Arbitrators' decisions are hard to challenge. Courts have proved reluctant to reverse them, even where they are obviously unfair.
- Arbitration can cost you, even beyond any judgment that may go against you. In addition to travel and filing fees, you may have to pay the arbitrator.
- Christian organizations sometimes require Christian arbitration, such as that provided by Peacemaker Ministries. Prayer and scripture may be given preference over law and evidence. (I've seen publishing contracts with Christian arbitration clauses.)
- Increasingly, arbitration clauses include bans on class actions. "By banning class actions," says the Times, "companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination....Corporations said that class actions were not needed because arbitration enabled individuals to resolve their grievances easily. But court and arbitration records show the opposite has happened: Once blocked from going to court as a group, most people dropped their claims entirely."
10.1 Disputes. Any dispute or claim relating in any way to this Agreement or KDP will be resolved by binding arbitration, rather than in court, except that you may assert claims in small claims court if your claims qualify. The United States Federal Arbitration Act and federal arbitration law apply to this Agreement. There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages), and must follow the terms of this Agreement as a court would. ... You and we each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. If for any reason a claim proceeds in court rather than in arbitration you and we each waive any right to a jury trial. You or we may bring suit in court on an individual basis only, and not in a class, consolidated or representative action, to apply for injunctive remedies. You may bring any such suit for injunctive remedies only in the courts of the State of Washington, USA.Lulu's TOU also includes an arbitration clause with a class action ban. By contrast, Kobo Writing Life, Smashwords, Draft2Digital, Bookbaby, and IngramSpark don't have arbitration clauses at all (though some do qualify authors' ability to seek legal redress, such as requiring them to waive the right to a jury trial or restricting the amount of damages they can claim).
Things to look for in an arbitration clause: language that ensures you can go to small claims court for qualifying amounts; that the chosen arbitrator must have publishing expertise; and that if the parties can't agree on an arbitrator within a reasonable period of time, either party can proceed to court. Be sure, also, that arbitration will be conducted by an established group, such as the American Arbitration Association. A nonprofit like the AAA is preferable to a for-profit, such as JAMS, another major arbitration firm.
If your contract includes a Christian arbitration clause, see if you can get the publisher to substitute non-religious arbitration. If they refuse, seriously consider walking away.
UPDATE: Passive Guy (of the Passive Voice blog) has responded to this post, acknowledging that arbitration can be abused but suggesting that it offers some advantages:
Cost. In civil litigation, the panoply of procedural roadblocks and discovery tools are available to the wealthiest party to the lawsuit. Common defense practice is to delay, delay, delay. In some cases, an individual may simply be unable to afford the attorneys fees necessary to make it through the preliminaries to trial. In a complex case, arbitration can take time and cost money, but arbitration is intended to be a faster and less-expensive alternative to litigation. The arbitrator is able to cut through the preliminaries and move to a hearing on the merits in ways a judge can’t.I would point out, though, that while these advantages may exist in ideal situations, one of the points the Times articles make most strongly is that situations are often not ideal. Also, Big Publishers may specify NY or federal courts, but of the many, many small press contracts I've seen, I've yet to encounter one that requires a federal court filing, or is not governed by the laws of whatever state the press is located in.
Expertise. The judges that hear contract disputes of the type that are likely to occur between authors and publishers or authors and etailers are generalists. Your judge may handle a hearing on a drug case in the morning and your contract dispute in the afternoon. There are no judges that only handle contract disputes involving books. Very few Intellectual Property attorneys ever become judges (PG doesn’t know any who have). One of the reasons for the rise and continued success of AAA and JAMS is that they offer arbitrators with substantial knowledge and expertise in a variety of specialized areas. In an author/publisher dispute, it would be reasonable to expect that the arbitrator might be a practicing or retired IP attorney who comes to the case knowing 95% of what an attorney would have to explain about copyright and publishing practices to a judge in a civil trial.
Time. Big Publishing contracts always specify New York state or federal courts as the place where an author must go to pursue his/her legal claims. PG is not familiar with detailed backlog statistics for New York courts, but he feels confident in saying if you file a suit against a publisher today and the publisher wants to delay, it will be several years before you actually get to trial. Federal judges are overwhelmed with criminal cases, primarily drug cases. Because of constitutional requirements for speedy trial, etc., in criminal matters, etc., the drug cases will bump civil cases down the calendar over and over. 99% of arbitration hearings are completed months or years before the same matter would be resolved by the courts.
Privacy. Unlike courts, which are open to the public, arbitration hearings and files are private. During the recent litigation between Ellora’s Cave and Jane Litte of Dear Author, several different blogs followed the court filings and commented about what they said. Indeed, for many, the Ellora’s Cave suit revealed Jane’s identity as the person behind Dear Author. In some cases, PG has used publicity or the threat of publicity to the advantage of his clients, but a great many authors don’t necessarily want to see their names and faces associated with a court case and spread all over the internet.
As to privacy--the Ellora's Cave lawsuit was filed in federal court. For lawsuits filed in state courts, court documents are not nearly as easy to get hold of.