Well, I see that Ms. McCann makes another post that begs the same question as her other post: namely, what does she propose? Is she seriously arguing that bankruptcy ought to be abolished? If so, she should come out and say so -- and then explain what she thinks ought to happen when someone with whom she's doing business runs out of money.

If she doesn't think bankruptcy ought to be abolished, she hasn't explained why she thinks she's special and should get an exemption when all other creditors are out of luck.

As for being able to afford to hire a lawyer, that may indeed be a problem -- though again, not in this case. If a lawyer had taken her case for free, out of the goodness of his heart, what good would it have done her? The contractor was bankrupt. Ever heard the expression, "Can't get blood from a turnip?"

In any case, I repeat what I asked earlier: what do these posts have to do with the raison d'etre of "Tort Deform"?

I can't claim expertise in bankruptcy law myslef, but here is a comment left by Cindy on Sharon's first post which responds to David's point.

"Excellent article which describes how corporations escape responsibilities through the use of bankruptcy. When bankruptcy laws were tightened in 2005 it really only affected consumers, NOT companies! We're seeing more than usual numbers of builders going bankrupt lately, too. Kara Homes in NJ, Betty's Homes in AR, and many more, quite a few in FL, and at least one in CO, one in NE, & Turner-Dunn in AZ. This often leaves home buyers with a devastating financial loss because they are unsecured creditors who usually get nothing. The surety bond idea is a great one to share with other consumers. I don't know if you'll find many homebuilders willing to go to the lengths consumers should be demanding, but then there are always existing homes for sale, and many are better built."

I also realize that for a new vistor to this site, they may not have the background context to understand the larger implications of this post.

Here's an overview by Public Citizen on why mandatory arbitration is not good for American consumers, or for that matter a fair and equitable system of justice.

http://www.citizen.org/congress/civjus/arbitration/articles.cfm?ID=7332

Mandatory Arbitration Clauses:

Undermining the Rights of Consumers, Employees, and Small Businesses

Today most Americans are bound by at least one mandatory, pre-dispute arbitration clause. Buried in the fine print of a billing insert, employee handbook, health insurance plan, or dealership or franchise agreement, these clauses waive one’s right to access the courts, diverting cases to a costly private legal system that favors defendants. Arbitration clauses are achieving their intended purpose—undermining consumer protection, civil rights, and other laws that level the playing field between big businesses and individuals. The individual is left with no choice but to waive these rights, because arbitration clauses are presented on a take-it-or-leave-it basis.

How Individuals Are Disadvantaged by Arbitration:

Arbitration was conceived as an informal, expedited process for resolving routine disputes between businesses. But when it is imposed on a weaker party, such as a consumer, arbitration can be used to defeat valid claims. Arbitration has several unique characteristics that make it harder for individuals to prevail in a dispute with a business:

High costs: A claimant must pay steep filing fees just to initiate a case—seldom less than $750. These fees do not cover the arbitrator’s hourly charges, which are generally in the range of $200 to $300 per hour, split between the parties. All these fees must be deposited in advance, and almost always amount to thousands of dollars. Because the claimant has usually sustained a serious loss in the dispute with the business—foreclosure on a home, firing from a job, termination of a franchise or dealership—most individuals covered by an arbitration clause cannot afford these costs and are forced to drop their cases.

Bias: Arbitration providers are organized to serve businesses, not consumers. Their marketing is targeted entirely at businesses, and their panels of arbitrators consist primarily of corporate executives and their lawyers. Since only businesses will be repeat users of an arbitrator, there is a disincentive for an arbitrator to rule in favor of a consumer or employee if he expects further retentions. There is also a long-standing custom among arbitrators to “split the difference” between two sides’ positions. The result is that arbitration awards to consumers and employees are substantially lower than court awards. Comparisons of average awards by arbitrators and courts in employment cases and medical malpractice cases show that arbitration claimants receive only about 20 percent of the damages that they would have received in court.

Limited discovery: Discovery is the process by which litigants obtain information and evidence in the possession of their opponent or third parties. In arbitration, discovery is a privilege, not a right, and many businesses draft arbitration clauses to severely restrict the claimant’s ability to obtain necessary evidence. Moreover, since arbitrators do not have the power to enforce subpoenas, claimants must sometimes file lawsuits to get compliance—defeating the purpose of arbitration.

Prohibition of class actions. Nearly every arbitration clause prohibits participation in class action lawsuits. Class actions are the only effective remedy for wide-scale scams that rip off individual consumers or farmers in small amounts. Individuals do not have the time or resources to recognize, investigate, or prove the existence of such fraudulent practices.

Inconvenient venue. Arbitration clauses often require that hearings be held in a location inconvenient to the claimant. Individuals may have to bear the cost of long-distance travel to have their case heard. For example, the Internet auction site e-Bay requires its customers to travel to its home turf of San Jose, California, to arbitrate any dispute.

One-way requirements. Most arbitration clauses require only the weaker party (the consumer, employee, or franchisee) to arbitrate its claims, while allowing the dominant party (the corporation) to sue in court on its claims. Thus, a sexual harassment victim can be forced to arbitrate a discrimination claim against a former employer while litigating identical issues in court if the employer sues to stop her from joining a competitor.

No public record. While proceedings and records of the courts are open to the public, most arbitration clauses and provider organizations require that proceedings be kept confidential. As a result, only the businesses that impose arbitration can track past decisions and know which arbitrators have ruled for them. Public discussion of the fairness of an arbitration ruling is discouraged, even if the case raises policy issues of wide concern. Moreover, arbitration sets no legal precedents to guide a company’s future conduct.

Limited judicial review. Parties are allowed only limited judicial review of an arbitration award. A decision may only be overturned when there is fraud or “manifest disregard of the law.” This is a high hurdle, because arbitrators need not issue written findings of fact or legal conclusions. Oddly enough, courts will refuse to hear appeals of arbitration decisions even when both sides have agreed to let a court do so!

Limited remedies. Courts can provide a range of remedies that are not available to a claimant in arbitration. Injunctive relief—a court order compelling the offending party to do something, or prohibiting that party from taking some action—cannot be obtained through arbitration. Punitive damages, which may be awarded by a judge or jury to “punish” particularly egregious behavior, are also not available in arbitration.

Cyrus, arbitration had absolutely nothing to do with Cindy's problem. She attempted to collect from a bankrupt corporation. She would have had the same result in court, except it would have cost her more money in legal fees, and may even have taken longer.

That's not to say she doesn't have a remedy. The remedy is to obtain a surety bond up front. If she had a surety bond, she would collect from the surety company, be fully compensated, and the problem with the bankruptcy would be one for the surety company, who was compensated in advance when it sold the bond to the builder.

Except the existing law already permits her to contract for a surety bond, so no change in law is needed. Cindy had an incompetent lawyer who failed to advise her of this basic elementary protection. Her complaint is really with the lawyer who gave her bad advice, and she may even have a legal remedy against her lawyer that would compensate her, and this site is somehow encouraging her and others to think that the status quo has given her no recourse.

David's point is also correct: what does this have to do with anything? What would you change? The only legal proposal you made so far is to ban arbitration, but that wouldn't fix Cindy's problem of the lack of a surety bond, and just make other people worse off.

Ted, I think you're missing the broader point: Mandatory arbitration isn't as neutral as it should be. Because it's funded by and for defendants, it tends to be partial to defendants.

Nothing is wrong with arbitration as a concept, but the execution of it often is flawed. More importantly, there's no valid reason why arbitration should be mandatory.

Ted, I think you're missing the broader point: Mandatory arbitration isn't as neutral as it should be. Because it's funded by and for defendants, it tends to be partial to defendants.

There's absolutely no empirical evidence of this. I've heard plenty of defense attorneys and corporate in-house counsel complain about arbitrators who made rulings adverse to them. AAA, for example, unilaterally decided not to enforce contract provisions barring classwide arbitration.

there's no valid reason why arbitration should be mandatory.

There are plenty of valid reasons why people should be allowed to consent to agree to arbitrate their disputes. I doubt you've looked into any of them.

There are no empirical studies to support or refute such a claim b/c arbitration decisions and awards, if any, are mostly unpublished.

I know of two people attempting to create such studies at this time.

It may be the case that arbitration awards are generally lower, and that this reflects the judgment of a legal professional, rather than a jury of lay persons. More likely, arbitors, like any other wise business person will tend to treat repeat clients favorably. Unpublished decisions that cannot be appealed leave little in the way of deterrence.

Also, I would like to read any studies that claim mandatory arbitration agreements have in fact created consumer value (lower price without decreased quality) since they have become so widely used.