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Tort Reform and Avoiding Lawyers: Good and Bad Ways To Do It April 6, 2011

One of the features of our legal system is that if an organization or business rips you off for $3 million, it’s pretty easy to get justice, but if it rips you off for $30, you’re out of luck unless you can inflate the worth of pain and emotional distress to $3 million.  And one way that organizations have been doing their own tort reform, according to this report from The American Prospect, is to demand agreement to arbitration as a condition of doing business or being hired.  And whatever the arbitrator declares is the law, without appeal to the civil court system, which automatically ratifies it.

Incidentally, a major source of ‘law’ in our society is not the government, but private organizations establishing the conditions under which they will do business or hire or keep an employee; sometimes businesses do compete against each other in these areas, but not always, especially when organizations are few and large.  Racial discrimination outside the South, when it was strong, was maintained not so much by the government as by private agencies, companies, boards of real estate agents, and in many cases CC&Rs on residential real estate; these were invalidated in 1947, the one case where CC&Rs have been overruled.  [For those who do not live in such places, in newer planned communities today, the land is sold  to you minus a long list of {your} rights which the developer-seller retains and then vests in a committee consisting of your neighbors, and potentially yourself if you wish to run for office.  This is not considered to be a ‘civil government’ or subject to the limitations we place on a civil government.]  But it can be more complicated than that.  Federal housing authorities after World War II, who guaranteed conventional mortgages, even as the discriminatory CC&Rs of earlier times were knocked down, favored residential neighborhoods of one race and income, believing those would be more stable investments for the owner and the lender.  Insurance companies impose nanny-state-like [or should I say ‘nanny-company?’] because courts have allowed large rewards over absurd things (e.g., if I go swimming without a life jacket, and anything happens, I or my heirs get a huge reward at the expense of the pond owner – so no one goes swimming without a life jacket).

On the other hand, the fact that arbitration agreements, being private law, bar one from taking part in ‘class action’ suits is disturbing.  I favor all kinds of tort reforms on outrageous awards, but ‘Class Action’ is something else again.  It aids the people who have been victims of small injustices, not big ones, by assembling enough of these people to make it worth the time of lawyers and courts to pay attention to them.  This way the voice of those who have been ripped off for $30 can be heard without inflating their claims to $3 million.  Arbitration law should allow for (a) ‘class action arbitration’ – all the other similar claims are automatically included in the one claim, and all resolved at once, and (b) arbitration decisions should have the same status that I believe administrative law rulings now have – presumptively valid, but they can be appealed.

The Christian reader, when reading about this subject, cannot help contemplating 1st Corinthians 5 and 6, in which St. Paul declares that the church ought to have an arbitration network enforced by excommunication and expulsion, if necessary, and that Christians ought to rely on it rather than the civil court system.  And, historically, there is evidence that they often did so.  But it was the farthest thing from St. Paul’s mind that the civil government would ever validate or enforce the church ‘canon law’ decisions – or, for that matter, ‘sharia’ law or anything like it.  Now a possible threat to this system is being raised in certain circles that would question the ‘freedom of association’ of religious and faith-based organizations (i.e., that the enforcement of certain doctrinal and moral standards at canon law constitutes ‘discrimination’ at civil law and may be overruled by the state).  And yes, this is predicted to be the next front in religious liberty.  But I think that we have a strong chance of winning this particular battle.

Related: “Signing Away Our Rights” by Katherine V. W. Stone at The American Prospect

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