Remember that old joke about military intelligence?

The Pentagon’s excuse for opposing Al Franken’s anti-rape amendment doesn’t pass the laugh test.

The Department of Defense opposes Al Franken’s appropriations amendment that would forbid the Pentagon from contracting with firms that force their employees to arbitrate if they are sexual assault victims.  Not that DoD opposes the idea, you understand: it would just be too complicated because its subcontractors “may not be in a position to know about such things,” i.e., whether contractors employ the mandatory arbitration clauses.  In a letter to members of Congress, the Pentagon claimed that “enforcement would be problematic,” because contractors may not be privy to what’s in their subcontractors’ contracts.

Garbage.

Government contracting is one of the most heavily regulated businesses around.  Major Washington law firms have entire divisions devoted exclusively to understanding these rules — many of which change constantly based upon executive orders.  The bidding rules themselves take up pages in the CFR.  Meanwhile, these subcontractors are supposedly making some of the most complex technological systems around, with detailed specifications and plans.  And somehow we’re supposed to expect that the poor contractors and subs won’t understand this quite simple provision (or check that the businesses they contract with do)?

Try again, fellahs.

To be sure, as Steve Kelman has brilliantly demonstrated, many of the procurement rules are needlessly complex and inhibit performance.  But this isn’t one of them. 

To me, this sounds like some drone in DoD’s legislative affairs office, angling for the “not-the-sharpest-pencil-in-the-cup” award, wrote this thing after talking to a few people.  Generally, agencies don’t like these riders, and this is part of their boilerplate.  This seems like a screw-up, not a policy.  At least I certainly hope so.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

18 thoughts on “Remember that old joke about military intelligence?”

  1. What's really interesting is that Oregon recently passed a law to make violations of the Servicemembers Civil Relief Act (SCRA, f/k/a Soldiers and Sailors law) actionable in Oregon courts WITH ARBITRATION BANNED.

    In other words, we have state policy saying that you can't force service members to honor arbitration clauses. Not to take anything away from the boys and girls in blue, but how about for the rest of us, now that we all agree that mandatory arbitration clauses suck?

  2. Well, if we all agreed that mandatory arbitration clauses "sucked", then we could have a honest discussion, rather than this bizarre side show that Franken is leading.

  3. Perhaps the best policy for all involved would be to not commit rape. I know it's a hard pill to swallow but after all, we are in a war and sacrafices must be made.

  4. This law is unnecessary because the woman featured in the stories about this won on the issue of arbitrability — i.e., she doesn't have to arbitrate. The arbitration clause in question was standard "broad" clause, so there is no need for this law, which will stand as precedent for future cases.

    What I don't understand is the hostility to arbitration in general. I'll concede that some consumer clauses are abusive, but other than that what's so disconcerting? Its not like courts are any bed of roses either.

    JMG – I think that Oregon law is preempted by the Federal Arbitration Act.

  5. Horseball:

    The woman featured in the stories spent several years in court to get a decision that (since it's at the bottom level) will have to be re-litigated by every other person in a similar situation until some employer is pigheaded enough to take the matter to the Supreme Court (at which point it's not at all clear that Roberts, Alito, Scalia, Thomas et al will agree with the lower court). So the law really isn't unnecessary.

    But you have to feel for the poor apparatchik's point: in recent years the DoD has had a great deal of trouble verifying and enforcing simple contract terms like not getting charged for transportation of sailboat fuel or making sure that weapons meet their specifications before being paid for, or even that construction of base facility meets basic electrical safety requirements. So this might be the straw that breaks the camel's back.

  6. The hostility to arbitration in general is present because arbitration represents a deck stacked against the consumer. Arbitrators are hired by the corporations, and the corporations are well aware of which arbitrators lean their way and which don't. So they pick the ones that are their friends. Arbitrators know that they're hired by the corporations, and won't get more work if they back consumers.

    At least the corporations don't get to hire the judge in the courts. Or they don't get to hire them very often, anyway. The courts aren't a bed of roses, but the deck isn't perceived to be as stacked against the consumer there as in mandatory arbitration.

    Arbitration could be changed in a way that would make it fairer to both sides: for example, draw the arbitrator's name at random from a pool of qualified individuals. But the corporations are no more interested in a fair arbitration than Harrah's Casino is interested in playing fair games.

  7. What I don’t understand is the hostility to arbitration in general.

    This . . . this just leaves me whomper-jawed.

  8. I guess I should expound on my above statement a little, but it really is amazing to me that people don't just know the degree to which the deck is stacked against them in arbitration. Not only in the ways Dennis lays out, but also in the fact that there is virtually no way to appeal an arbitration decision. Arbitrators are basically free to disregard case law, stated public policy goals, and uncontested expert testimony. They can do what they want, and you essentially have no recourse available to correct their mistakes. Oh, sure, there are some cases that get reviewed by courts, but those usually concern (a) a question of whether the contract contained procedural provisions that were not followed by the arbitral body; (b) a question of whether this or that kind of case or decision is appealable (answer . . . no); or (c) a screw-up of such massive proportions that even the courts can't look the other way.

    Also, arbitration is massively expensive — often more expensive than court — and often takes just as long, although the chairs are often more comfy and the coffee is better than at court.

    In short, boondoggle.

  9. And also, lets not forget that what we're talking about here is sexual freaking assault! Arbitration is not even remotely constructed to resolve this issue. It's an outrage that they can even sit in judgment on such cases at all — they're the civil dimension to criminal prosecution, and the state has an interest in a just outcome.

  10. I don't know why you guys keep bringing up consumers — I'm willing to concede that arbitration is not suited to resolving most consumer claims. We're not talking about consumer cases. And there are many ways in which arbitrators are chosen, and I'm not aware of any that don't allow for participation by both sides.

    In another post, I linked to an SSRN abstract with empirical studies of FINRA arbitrations, which include claimants for workplace sexual harassment (not sexual assualt, granted, but also a serious issue that the public has an interest in). It shows that arbitration panels awared punitive damages something like 9% of the time. That seems like a lot to me.

    As to the vaunted advantages of an appellate system, I think you guys are deluded that this benefits plaintiffs. The availability of appeals is a benefit to the defendant, not the plaintiff. Here is a study

    http://www.mindfully.org/Reform/Job-Bias-Plaintif

    that shows that federal appellate courts reverse judgments in favor of plaintiffs who prevail in job-bias cases a staggering 43% of the time (thus, handing victory to the defendant after a loss at the trial court), and only reverses judgments against defendants who prevail 5.8% of the time. The report says that plaintiffs judgments overall are reversed 32% of the time, and defendants judgments only 12%. Thus, the availability of an appeal is objectively pro-defendant, as defendants get judgments knocked out on appeal three times as often as plaintiffs do.

    The fact that this case seems to be a serious one, and involves left-wing bogeymen — Iraq and KBR — you guys have let emotions take over. What if you were an American who went to work for, say, a Japanese contractor in Iraq? Would you want to have arbitration in the USA? Or court in Japan or Iraq?

  11. Horseball, we eagerly await the company that's going to bring a challenge in Oregon courts to force a deployed soldier or sailor into arbitration over an alleged violation of the SCRA.

  12. Participation by both sides is meaningless when there is asymmetric information about the arbitrators. Corporations engage in thousands of these events, and undoubtedly track outcomes by arbitrator. Grievants might participate in one or two in a lifetime, and so can't build an experience base. All the grievant knows is that these individuals are labeled as qualified. As far as I'm aware, no body tracks arbitration outcomes and awards and makes that information available to the public.

    And if arbitration isn't suited to settling consumer complaints, why do corporations keep sticking contractual agreements that require binding arbitration? Frankly, I don't view her problem as terribly different from a consumer problem. It's the problem of an individual against a corporation, going into an arena chosen by the corporation.

    I will agree that courts aren't much better than arbitration, but at least some of the patent unfairness of the arbitration system is absent. Arbitration is good at what it was intended for: an alternative settlement venue for more-or-less equally matched parties.

  13. JMG–

    I think you're getting close to the answer here — the Franken bill has nothing to do with this suit and no company is going to want to look bad going after soldiers or sailors. It's not as if the arbitration panels are overloaded with sexual assault cases of the type described. So, while this case may be bad and ugly, its hardly typical.

    Dennis-

    We do know quite a bit about FINRA awards, which are in fact published. These include all of the employment disputes in the securities industry, plus all the people who sue their stockbrokers. These have the elements of consumer cases. Yet, claimants do OK there, perhaps better than court. You might want to look into this case to see how well employee claimants do in FINRA

    http://registeredrep.com/news/waddell-reed-settle

    There, the court consistently tried to lower the arbitration panel's award even taking it away from the panel after they awarded the stockbroker $25 million in punitive damages.

    As far as the asymmetrical information goes, the selection of arbitrators is not made by the parties, but by their lawyers (where this is provided for). Lawyers can specialize in representing plaintiffs or claimants, which reduces any asymmetry. In many three arbitrator panels, each side picks its own who then agree on the third – -who will ultimately be the deciding vote.

    As far as these consumer cases go, my understanding as to why companies, such as credit card issuers, put these in there is primarily to avoid class action suits. I agree that it is not good for arbitration for them to do this. They're not doing this because they like arbitration per se, but because they can exploit some aspects to their advantage. The good news is that its falling apart anyway, as the National Arbitration Forum has fallen to pieces, and the American Arbitration Association will not hear credit card suits anymore.

    As to the class action point, my belief is that eventually arbitrators will figure that they can make a lot more money sitting on a big class action case rather than some piddling little case, so will agree to hear class actions in arbitration. JAMS (one of the arbitration providers) suggested it would do this, but then backed off. I believe that its only a matter of time for them to do this.

  14. One obvious difference is that there are no reporters in an arbitration hearing. So at the very least a corporation that can force a dispute into arbitration avoids a public inquiry into its misconduct. In many cases, the damage from the bad publicity equals or exceeds the monetary loss to the tortfeasor.

  15. Horseball:

    Your data set still doesn't really argue against the asymmetry issue; brokers and holders of significant brokerage accounts are not line employees.

    (And I doubt that arbitrators will sit on class action suits until they can be absolutely sure they're insulated from adverse action; with a hundreds of millions of dollars at stake, a few tens of millions spent hammering the arbitrator or their organization could be an awfully good investment.)

  16. Prof. Kleiman —

    The case under consideration refutes this. Even if she had lost, her entire side of the story got into the press.

    In an earlier comment, I asked if you would oppose confidential settlement agreements? If this case had been settled quietly and generously in favor of the woman, would you oppose that too, if she agreed to confidentiality?

  17. Horseball:

    "Prof. Kleiman —

    The case under consideration refutes this. Even if she had lost, her entire side of the story got into the press."

    Please have somebody explain the difference between an anecdote and data. And note that this the sort of outrage which the press enjoys; rape and bondage.

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