How Dispute Resolution System Design Matters: An Organizational Analysis of Dispute Resolution Structures and Consumer Lemon Laws

Abstract

This study demonstrates how the structure of dispute resolution shapes the extent to which managerial and business values influence the meaning and implementation of consumer protection law, and consequently, the extent to which repeat players are advantaged. My analysis draws from, links, and contributes to two literatures that examine the relationship between organizational governance structures and law: neo‐institutional studies of law and organizations and socio‐legal studies of repeat players' advantages in disputing. Specifically, I compare an instance where powerful state consumer protection laws are resolved in private dispute resolution forums funded by automobile manufacturers but operated by independent third‐party organizations (California) with one where consumer disputes are resolved in public alternative dispute resolution processes run and administered by the state (Vermont). Through in‐depth interviews and participant observation in the training programs that dispute resolution arbitrators undergo in each state, I show how different dispute resolution structures operating in California and Vermont give different meanings to substantially similar lemon laws. Although my data do not allow me to establish a causal relationship, they strongly suggest that the form of the dispute resolution structure, and how business and state actors construct the meaning of lemon laws through these structures, have critical implications for the effectiveness of consumer protection laws for consumers.

Rule‐Intermediaries in Action: How State and Business Stakeholders Influence the Meaning of Consumer Rights in Regulatory Governance Arrangements

“…This is especially important since legislatures have codified these various dispute resolution structures into law and made consumer rights essentially contingent on using disputing forums operating outside the court system. As prior research demonstrates, in terms of consumer outcomes in these hearings, consumers do far worse in private rather than state‐run disputing structures (Talesh ). Thus, the institutionalized logics through which consumer rights are filtered in these divergent private‐ and state‐disputing structures appear to have at least some impact on consumers' ability to realize their rights.…”

“…Recent work in this area focuses attention on how organizational field logics influence the legal field, that is, "the environment within which legal institutions and legal actors and in which conceptions of legality and compliance evolve" (Edelman 2007, 58; see also Edelman and Stryker 2005;Stryker 1994Stryker , 2000Clemens 1993Clemens , 1997Leblebici and Salancik 1982). The tensions between the logics of organizational and legal fields, one anchored around efficiency and rationality, the other around rights and justice (and more recently informality in the form of alternative dispute resolution), come into play when organizational and legal actors and institutions interact (Talesh 2012(Talesh , 2014Edelman 2007;Stryker 1994Stryker , 2000. As organizations increasingly "legalize" themselves through the creation of written policies and procedures and lawlike structures, managerial logics come to influence the way in which organizations (Marshall 2005;Edelman et al 1993Edelman et al , 2001, courts (Edelman et al 2011), and legislatures (Talesh 2009(Talesh , 2014 understand compliance.…”

“…Thus, consumer warranty disputes are an ideal site to explore how stakeholders that act as rule-intermediaries in regulatory governance arrangements shape the meaning of public legal rights because relevant stakeholders are simultaneously operating two different dispute resolution structures, one highly private with soft state oversight, and one highly public with active involvement from civil society actors. 2 Unlike prior studies of consumer warranty laws (Talesh 2009(Talesh , 2012(Talesh , 2014, this article inductively identifies the "logics" or ways of thinking operating in this regulatory governance field (which I refer to as "the lemon law field") and empirically explores the extent that field actors adhere to uniform or contested scripts and understandings as to the purpose and meaning of lemon laws and dispute resolution (cf. Akerlof 1970).…”

Institutional and Political Sources of Legislative Change: Explaining How Private Organizations Influence the Form and Content of Consumer Protection Legislation

“…Legislative amendments to the California Lemon Law primarily focused on ways of establishing soft state certification and approval of the third‐party dispute resolution processes. Despite these efforts, as I mentioned earlier, prior studies show consumers won refunds or replacements far less in California than in Vermont from 1996–2007 (Talesh ). Thus, while this study does not attempt to make causal claims, the legislative process and, in particular, the institutional design of these processes, may matter in terms of who wins in these forums.…”

Legal Intermediaries: How Insurance Companies Construct the Meaning of Compliance with Antidiscrimination Laws

“…Existing empirical research reveals how managerial conceptions of law broaden the term diversity in a way that disassociates the term from its original goal of protecting civil rights (Edelman, Fuller, and Mara‐Drita ), transform sexual harassment claims into personality conflicts (Edelman, Erlanger, and Lande ), deflect or discourage complaints rather than offer informal resolution (Marshall ), and even shape the way public legal institutions such as legislatures (Talesh , ), courts (Edelman et al. ; Edelman , ; Edelman, Uggen, and Erlanger ), and arbitration forums (Talesh ) understand law and compliance.…”