Online Dispute Resolution (Or Why You Can’t Have Nice Things)

Here’s another dirty little secret: the legal system can’t accommodate the world of online commerce.  Do business on the internets with someone in another state and get screwed?  Sorry, pal.

If you use paypal or a credit card, you have their dispute resolution mechanisms available, but if that doesn’t work out for you, your options suck.  It’s left to some kids in a backroom somewhere to decide whether you “win or lose” the dispute based upon whatever strikes their fancy.  The guy who came up with the paypal system took it outside with a start-up called Modria.  It’s not a good system.

In a comment to a post at My Shingle about why lawyers aren’t more affordable, Lance Soskin jumped in to promote another start-up online dispute resolution biz, eQuibbly, headquartered in Canada.  Despite my knee-jerk dislike of promoting business in other people’s comments as cheap and tawdry, my interest in online dispute resolution compelled me to check it out.

equibbly

There are some aspects of the front page that are, well, kinda dubious.  “Former Official Trial Judge”?  As opposed to the former unofficial ones?  Except the two judges named aren’t trial judges, but appellate judges.  Okay, that may be too lawyerly a quibble, even if they go out of their way to say otherwise.  On the other hand, if the business gets any traction at all, two arbs/former judges aren’t going to cut it. So who else?

But then the language in the front page promotion is disturbing.  “eQuibbly is quicker, cheaper and more convenient”?  I’m pretty sure they mean less expensive, not cheaper, but at the same time, the word is there and suggests to me that someone may have made a Freudian slip.

When I reviewed Modria, I created a top 10 listicle of problems confronting online dispute resolution that needed to be addressed, and weren’t.  Here’s the list:

1. Who is deciding things at your small claims court?
2. What are their qualifications? Are they lawyers? Are they nice folks you’ve trained with your special sauce and we should just trust you because you have a cute smile?
3. What makes them neutral, reasonably unbiased, especially with regard to potential corporate account users who might require all disputes be handled there?
4. What “law” is applied in determining disputes? You have no jurisdictional limits, which is good, but then that comes without law. So is there law, or are decisions whatever happens to strike the fancy of one of those nice folks trained with your special sauce?
5. How does a party submit evidence? How does the “judge” know it’s real?
6. How does the opposing party get to see the evidence in advance of being put to the test of disputing it?
7. How does the inarticulate litigant overcome the limits of his skills? Is this done in writing or via live video?
8. Is there an appeal process? Is there anyone to go to when the dispute resolution process falls into the toilet?
9. Does anyone review the “judge’s” determination to make sure it isn’t batshit crazy?
10. What assurance is there that this process can provide a fair, rational and honest means of determining disputes?

Unlike Modria, eQuibbly has at least made the effort to address the first two, and perhaps three, questions above by using ex-judges as arbitrators.  This is a start, though it remains questionable how two old-guy judges will be able to handle volume of any sort, and who else will be brought into the fold.  At the “about” tab, the assertion states:

eQuibbly has assembled a team of highly respected Judges, who presided over trials in courts of law in the U.S. and Canada, to resolve cases on eQuibbly.

A team? That sounds cool. So why are there only two judges identified at the “judges” tab?  Perhaps the rest of the team is shy, too modest to have their robed-likenesses online?  Even so, that leaves them in the dark, if they exist at all.

There is also a question about whether two former appellate judges are really equipped to handle small claims pro se litigants.  Having served as a small claims arb for years and tried more than a thousand cases, I can tell you that they can be totally nuts and monumentally difficult and frustrating to deal with.  That comes from a guy who holds hands in the hallway with regular folk.  Appellate judges don’t do a lot of hand-holding.

But Question 4 not only presents a huge stumbling block, but an answer from eQuibbly that is decidedly unsatisfying.

What laws are used to determine the outcome of a dispute?

Cases on eQuibbly are decided based on North American legal principles and what is fair and just given the circumstances and the facts surrounding the dispute, not the technical laws of any one state or province. Examples of North American legal principles include: the right for private parties to enter into private contracts; a contract consists of voluntary promises between competent parties to do, or not to do, something, which the law will enforce; freedom of speech; equality before the law; separation of church and state, et cetera.

Oh crap. North American legal principles?  WTF?  As in maybe U.S. or maybe Canada, because it’s not like they’re two different countries?  Or because there is no such thing as a federal small claims body of law, because it’s a state thing?  Or because…well, you get the idea.

Unlike in government courts, your case won’t be decided based on a technicality or a rule that doesn’t make sense. Unlike in government courts, Judges on eQuibbly are not influenced by how well-spoken you are, or whether you can afford an expensive attorney who knows how to manipulate the laws and loopholes to one party’s advantage.

Whoa. No technicalities or loopholes?  No rules that don’t make sense? How cool is that? Except, of course, those are the things that we call “law,” and they exist so that people can conduct themselves in accordance with it and rely on the expectation that it will guide their lawful conduct.  But hey, if they only use the rules that make sense to the dumbest nutjob on the internet, shouldn’t that be good enough to provide substantial justice?

Otherwise, eQuibbly suffers from the same failings as Modria.  It’s not that there isn’t a desperate need for the function to be fulfilled.  Clearly, the “official” legal system can’t accommodate such disputes, and given the fact that online commerce isn’t going anywhere, a huge gap remains unfilled.

But as much as I would love to see someone produce an alternative that can survive minimal scrutiny, no such service has as yet been created. And having given a good deal of thought to the inherent problems, it seems unlikely that there is any solution that will overcome the massive obstacles.

 

 

 

32 comments on “Online Dispute Resolution (Or Why You Can’t Have Nice Things)

  1. David Sugerman

    Welcome to my trench. Now, in virtually every written contract, the consumer “agrees” to a private arbitration system. The agreement to arbitrate, which is generally buried deep down, generally waives a right to trial by jury and to bring or participate in a class action, the means through which consumers can level the playing field.

    In this arbitration world, your credit card company, cell phone, mortgage lender plays often. You generally play one time. There is no or very limited discovery, the consumer’s costs vs. benefits make it impossible for a consumer to afford the fight, and the a bad result is nearly impossible to overturn. The net effect is that there is no real means of adjustment, and every reason for financial predation and consumer fraud.

    This was sold as “faster, cheaper, better” under the guise of Alternative Dispute Resolution. The net effect is a private system of civil justice for those who can afford it, heavily tilted toward the repeat players. Oh and yes, SCOTUS thinks this is fine and dandy.

    The rush to cash in via the new North American retired judge system is a variation on a theme. She is cute,though, no? I will sleep well knowing that some form of justice is now a mere click away.

    1. SHG Post author

      She is cute, though, no?

      OMG, you’ve given me a brilliant idea. What about Naked Justice™, an alternative dispute resolution service where the arbs may be clueless and ignorant, but are attractive men or women who decide cases online in varying states of undress based upon the amount you’re willing to pay. Sure, it sucks from a legal efficacy perspective, but it will be HUGE!!!

      If you’re cheap, you get robed wonders, but if you’re willing to pay the freight, you get full Monty justice. What could possibly go wrong?

      1. David Sugermsn

        Sounds like a straight up winner to me. I wonder if nekkidarbitrators.com is available? I imagine (oops, bad word) your spokesmodels/arbitrators start with glasses on? I hear it is a best practice to establish trustworthiness at the front door.

        You will kill this. Do drop me a line when you are filthy rich….

        1. SHG Post author

          Yeah, right. Like I would waste my filthy rich time on a guy who wouldn’t send me a maple bacon donut.

  2. David Woycechowsky

    One thing that kind of makes up for the shoddy dispute resolution for me is Amazon product reviews. Beats the pants off of Consumer Reports, or, say, Gene Shalit. This has markedly improved my satisfaction with products that I buy and receive undamaged (as compared to trad purchases from brick and mortar stores).

    Still, last month I ordered a DVD that I never got and feel powerless. So, yeah . . I hear what you are saying.

      1. David Woycechowsky

        What I am saying is that…

        [Ed. Note: Balance deleted as completely off-topic, despite having been warned.]

  3. Charlesmorrison

    No specific law to apply, no rules of evidence, and retired judges determining disputes between pro se litigants. This is simply judge Judy online, right? Only distinguishing feature is that the parties don’t agree beforehand that they will resolve their disputes on the TV show. Seems to me some producers are missing out on an excellent opportunity.

    1. SHG Post author

      And no enforcement mechanism. Nobody ever mentions that to the pro se litigants. At least on Judge Judy, they pay the claim out of the appearance fee.

      1. Charlesmorrison

        Another, more important distinction you raise. You mean a judgment written on very official-looking letterhead is not given full faith and credit? Mind blown. Boy am I glad I don’t do business litigation.

        1. SHG Post author

          You rub it in the other guy’s face and say, “Pay up, sucker.” If he doesn’t pay immediately, he bursts into flames. It’s really cool to watch. Oh wait, that’s for the mob. Never mind.

          1. Lance Soskin

            It’s obvious that neither of you know much about arbitration laws and how the courts view arbitration awards – i.e. that they are in favor of arbitration and almost always enforce the awards.

            No enforcement mechanism? Of course there is – it is the same mechanism that the prevailing party must use after months or years of litigation and many thousands of dollars wasted. The difference is that with arbitration, instead of all the time and money spent on litigation, it is just a summary motion to the court to confirm the arbitration award and then that person is in exactly the same position as the person who went through years of litigation.

            The U.S. Federal Arbitration Act states:
            “If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected” and “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts”

            Lance Soskin
            president, eQuibbly

            1. SHG Post author

              You can’t really be this big a dope. First,

              Of course there is – it is the same mechanism that the prevailing party must use after months or years of litigation and many thousands of dollars wasted.

              There are no years of litigation and many thousand of dollars wasted in small claims court, Lance. And when you get a judgment from a small claims court, it’s immediately executable.

              When they get an arb award from a private dispute resolution biz, people expect to magically get their money. They do not realize that they then have to go to court to get their award confirmed, and withstand challenge if the loser decides to fight again. And, assuming they win, and the loser doesn’t appeal, if they can’t find executable property or assets, engage in post judgment discovery to locate assets.

              Enough, Lance. You’re not worth this much time.

  4. Ron Dolin

    I understand your objections to current implementations. But I think it’s also important to pit something like Modria against some of the alternatives, such as overloaded courts with no access at all and a legal system that so far is incapable of supplying reasonably priced legal services. It’s also difficult to imagine a non-tech based solution to the millions and millions of typical $10-100 problems such as a phone call error or a broken small-ish product purchased online. If we compare against actual, day-to-day options, the issue perhaps becomes the lesser of evils.

    I’m working with students to gather requirements for DR systems in an effort to promote best practices (e.g. right to appeal, impartiality, etc.). I’m also looking at the evaluative methodologies available to compare ODR systems with existing systems, and with doing nothing at all. When lines at courts are hours or days, then we’re up against justice delayed being justice denied — and a lack of civil resolution leading to criminal actions. As with e-discovery and electronic search — we now have way too many documents to be able to perform manual reviews — technical means are required. It turns out that the electronic systems generally perform at higher quality than the strictly manual procedures in the past — we just hadn’t measured the quality before.

    If you think that ODR is inevitable, then the issue is how to make it fair and scalable. If you don’t think that ODR is inevitable, then I wonder how we might address some of the access problems realistically.

    @legalnoise

    1. SHG Post author

      I think you’re working with some mistaken assumptions, a jumble of concepts that may or may not apply, and one fundamental point of confusion: No DR or ODR service will work if it isn’t found to be both functional and trustworthy. When you want to compare Modria with the alternatives, the court has the ascribed credibility of being THE COURT. Modria has none, and has to earn its trust. So while it may have greater functionality than the court (though not nearly enough to actually fulfill its function properly), it lacks the credibility. And it lacks the ability to earn the cred it needs because its limited ease of use and myriad other failings is inadequate to overcome its lack of trustworthiness.

      I think that ODR is an absolutely necessity, though for somewhat different reason than you do. Over time, some of the issues will resolve themselves, though it’s impossible to say how long that will take. Other issues, however, remains intransigent. Having given a great deal of thought into DR and ODR, and having tried as arbitrator about 1500 small claims cases, I am painfully well aware of the problems. While knowing the problems may be the first step in finding solutions, the second step is a doozy.

      I think many of your points/questions reflect a lack of experience with the people and the system. Will someone eventually figure it out, well enough to overcome the primary trustworthiness obstacle? I think it will happen. But it won’t be easy.

      Outside of a few futurists, no one knows Modria exists. There’s a reason it has no traction.

  5. Lance Soskin

    Scott,

    Thank you for looking at eQuibbly and providing a couple constructive comments. I am going to try and address some of your criticisms and questions about online arbitration and eQuibbly in particular.

    With an online startup, where the target market is non-lawyers and typically low- to middle-income individuals and small business, there’s a constant tug-of-war between providing enough detailed information about the services being offered to be accurate and describing the services in a way that lay-persons will understand and be willing to read. My intent is not to mislead people, nor
    to provide inaccurate information. In fact I have taken some of your comments to heart and made some changes to the way I explain what we’re offering. Some changes still need to be made. As anyone who has ever started an online business can tell you, things are constantly changing and it’s not easy keeping content 100% up to date. There are also some things you think are going to happen imminently, that you account for in the content, that end up taking longer than expected.

    Please also forgive my poor grammar on eQuibbly’s home page…and likely elsewhere. I will be the first to admit my grammar skills ain’t perfect. But if it’s a toss up between getting the the right message across to my audience or getting the grammar right, I’m going to always opt for the former (or is it, “always going to”?). I used the word “cheaper” on the home page, not to say that our service is of a lesser quality – it most certainly is not – but only since no other word seemed to work as a marketing message as well. No, it was not a Freudian slip, as often as they do seem to roll off the tongue. I did think about using “less expensive” but it didn’t seem to work as well; it implies that it is still expensive, just less so – not exactly the message I’m trying to communicate, nor one I think is accurate. I might decide to change it at some point just for the hell of it. Business is often about trial and error to find out what works – pun intended. If you have any other good suggestions please let me know.

    Our judges can handle a decent amount of volume, however at this point our focus is not churning volume. You are correct that we will not be doing hundreds of cases a month with only two judges. I have planned on adding a Canadian judge and a UK judge since we launched a couple months ago. I just have not had as much free time as I thought I would have to find two more great judges. I want the judges to be the right fit and to provide quality service, so it does take quite a lot of time to find the right people. As with most organizations we will add more resources (read: former judges) when our case volume grows. Seems logical to some extent, right? I’m not quite sure why you would find that odd.

    I think what I have explained above addresses your question, somewhat, about why I say that “eQuibbly has assembled a team…”. I was hoping to have three or four judges by now. I’m still slowly working on it when I find time, and we should have at least one more judge in the near future. In any case, I may be mistaken, but I believe a “team” can consist of two or more people. This should also go some way in addressing your concern of how former appellate judges are equipped to handle small claims pro se litigants. I spend time trying to get to know the judges before asking them to join eQuibbly partly for this very reason. I want our judges to be able to provide good customer service and to be able to work with pro se litigants in a constructive manner. There are all kinds of appellate judges – it seems you’re stereotyping a bit – wouldn’t you agree?

    On to criticism number 4 – you have a long list of criticisms! If I’m not mistaken, which I may be, many of your criticisms seem to be based on two premises that are not accurate. The first premise being that what we’re doing with online arbitration, or perhaps arbitration in general, is trying to supplant the whole civil justice system. That’s not the case at all (yes, pun intended again). We are simply trying to offer an alternative in certain circumstances where it might be better for some people/businesses to use a private dispute resolution mechanism rather than the public courts. I do not think it should completely replace all civil litigation. However, given the issues people are experiencing with the justice system, such as excessive delays and excessive cost, in Canada and the US and the Uk, there is definitely a place for arbitration for certain types of disputes – many of which you find in small claims court. The second premise, which I believe to be inaccurate, is that our current justice system is all we need and is serving all manner of people in a fair and competent way. That is simply not true. It might be one of the best justice systems in the world, but that does not mean there is no room for improvement. Nor does it mean that it is impossible to offer private alternatives that serve a particular niche better than they’re currently being served. I know how much you hate self-promotion and providing links in comments to your blog, but you might want to read something I wrote for the Huffington Post about my opinions on the state of our current justice system: “In Our Courts ‘Justice’ Is Bought”. I’m sure you will have a hell of a lot to say about my point of view being completely wrong, especially since you make your living from the way our (yes, again, both U.S. and Canadian, even though I am a Canadian citizen living in Canada. I like to think of myself as “American”) current justice system works.

    You question eQuibbly’s use of “North American” legal principles (perhaps more accurately US and Canadian legal principles). Perhaps I misunderstand what you’re saying. Are you saying that the laws in Canada and the US are so vastly different when it comes to most matters dealt with in small claims court, it would be unfair or practically impossible for an arbitrator to make a decision that makes sense for both parties in a dispute? Are you saying, for instance, that contract laws in the US and Canada are so vastly different that it would be impossible in most situations for one of eQuibbly’s judges to determine whether there has been a breach of contract? I don’t know too much about you, however you seem like someone with a lot of court experience, albeit mostly criminal court experience, so you must realize that the majority of small claims cases deal with landlord/tenant disputes, collection of debt, auto repair, and breach of contract. Are you saying that the laws in each state and province and country differ so much so, that it would be unjust to allow two individuals or two private entities to choose to have their dispute decided by a judge who has either had experience deciding or dealing with such cases in one province or state, but not another? Are you saying that eQuibbly’s judges are not capable of researching anything they may be unsure of? Are you saying that most sitting judges can decide all their cases without doing any research and that they know all the laws in their state and how they should be applied without doing research? Are you saying that there are no similar laws that overlap state, province and national boundaries between Canada and the U.S.?

    Yes, I do realize that the U.S. and Canada are two different countries. Although some would consider the U.S. Canada’s 11th province…or perhaps 4th territory. We are giving some thought to annexing the U.S., but please don’t tell anyone.

    On to your next criticism – I believe we’re at number 5 – although it doesn’t coincide with your top 10 list of questions you asked Modria; questions I’m happy to answer if you would like me to do so. I refer once again to your seemingly idealistic premise that our current justice system is all we need and is serving all manner of people in a fair and competent way. You seem to imply in your criticism of eQuibbly that there are no loopholes in the law. Or perhaps you are saying that it’s good that there are loopholes in the law. It’s difficult to tell from your comment, “Whoa, no technicalities or loopholes? Nor rules that don’t make sense?…Except, of course, those are things that we call “law”.” Are you saying it’s good that there are loopholes that allow people to do things that would otherwise be illegal if legislators had foreseen the loophole, and that a known child molester, for instance, can get off because of a technicality? I realize that’s a simplification of the issue. But so is saying, “hey, they only use the rules that make sense to the dumbest nutjob on the internet, shouldn’t that be good enough to provide substantial justice?” I’m quite certain that a seemingly bright guy like you is aware that simply because we try to take in to consideration the prevailing U.S. and Canadian legal principles and not any one state or province’s codified laws, it does not necessarily mean we throw out all sense and sensibility.

    I don’t like paraphrasing Voltaire, but I believe this situation calls for it: it appears that you are letting the “perfect be the enemy of the good”.

    Lance Soskin
    president, eQuibbly

    1. SHG Post author

      Your baby is ugly, and you don’t appear to understand why. Whether you can make it sufficiently less ugly to invoke Voltaire remains to be seen, but you have far more work to do than you appear to realize. My “listicle” only scratches the surface of issues, blog post depth. There is a whole onion of layers beneath, and you struggle with the superficial problems. An ugly, ugly baby.

      One tip: never explain that the reason you have yet to accomplish a task is that you’re too busy. That’s the slackoisie answer, and its not only unpersuasive, but reflects a slovenly approach to business.

      As you’ve omitted your HuffPo article because I don’t allow links in comments, I will do you the courtesy of including it so anyone who cares can read it. That said, it was absolutely awful. Shallow and ignorant is not the way to impress knowledgeable people. There is no need to argue the point; anyone who reads it will make up his own mind.

    2. Anon Lawprof

      >>Are you saying that the laws in Canada and the US are so vastly different when it comes to most matters dealt with in small claims court, it would be unfair or practically impossible for an arbitrator to make a decision that makes sense for both parties in a dispute?<<

      Perhaps if you were a lawyer, you might appreciate the absurdity of this question. There are monumental differences, across states as well as national boundaries. To suggest such a thing is utterly outlandish.

        1. Anon Lawprof

          Oh. I assumed from his comment that he wasn’t a lawyer. In that case, you’re right. He’s totally clueless.

  6. Lance Soskin

    Scott,

    You seem like such a pleasant guy – accusing my baby of being ugly is like the pot calling the kettle black.

    I don’t struggle with any superficial problems – I was trying to address your superficial criticism and answer your questions. Something you failed to do – my questions to you were not rhetorical. I assume you have no good answers which is why you did not answer them.

    You also seem to have been too “slovenly” to read my comment properly since nowhere did I say that I am too busy to accomplish a task. Although I am very busy. But thanks for the great tip. Nor did you notice that I did in fact include my Huff Post article in my comment – another indication that you did not read my comment.

    Contrary to what you assume I’m trying to do, and apparently what you are attempting to do – although failing miserably – I am not trying to “impress knowledgeable people”. I’m trying to explain how our current justice system is failing a significant group of people and offer a very good alternative to that group. An affordable, convenient, fair, legal, enforceable and less time-consuming alternative to going to small claims court to resolve a dispute.

    What are you doing to help those for whom the justice system is inaccessible in any practical way?
    What are you doing to close the justice gap?
    It’s very easy to criticize. It’s much more difficult to actually do something about it.

    Lance Soskin
    president, eQuibbly

    1. SHG Post author

      Well, at least we agree that you aren’t impressing knowledgeable people. It’s a shame you passed so conspicuously at a minor metacognitive moment, but that’s pretty common with start-up entrepreneurs who feel compelled to defend rather than learn.

      I can only explain it to you. I can’t understand it for you, and you obviously can’t understand it for yourself. Whatever.

      1. Lance Soskin

        You seem to either like putting words in my mouth and mangling what I am saying, or you are having trouble understanding what I am saying. I did not say I wasn’t impressing knowledgeable people – I said , unlike you, I am not trying to impress knowledgeable people. Big difference. If you need me to explain it further to you please let me know. You seem to be having trouble understanding a lot of things.

      2. Sgt. Schultz

        It’s unbelievable how you get people to write the stupidest things, and have absolutely no clue how much of a dumbass they are. It’s a gift.

    2. Andrew

      I just have not had as much free time as I thought I would have to find two more great judges.

      You also seem to have been too “slovenly” to read my comment properly since nowhere did I say that I am too busy to accomplish a task.

      #Fail

    3. Pan

      Wow. There’s nothing I would want more than to have my disputed decided by judges who were vetted by this entitled jerk.

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