Arbitration

  • November 10, 2016
    Guest Post

    by Karla Gilbride, Cartwright-Baron Staff Attorney at Public Justice

    In the aftermath of Tuesday’s surprising election results, several key themes seem to be emerging: a large segment of the population is frustrated with the status quo and is demanding change and people from across the political spectrum are concerned about the divisiveness of the campaign and are looking for ways to come together. In the spirit of moving forward on a bipartisan basis, I suggest that the time is right for Congress to take action to curtail forced arbitration provisions.

    Forced arbitration provisions are those “agreements” that we all make when we purchase products or download software or apps, usually found in the small print on product packaging or in the Terms of Service we accept during the download process. These provisions deprive consumers of the right to sue a corporation in court if a dispute later arises about the product or service and they usually also ban consumers from joining together with similarly affected people to bring class actions.

    The vast majority of consumers across the political spectrum find these provisions unfair. In a 2015 study, the Pew Charitable Trust found that 95 percent of consumers surveyed wanted to be able to pursue a dispute against their bank in court and nearly 90 percent of consumers (including 93 percent of Republicans) wanted the right to participate in a class action.

    And based on what they have had to say in their recent opinions, some federal judges find forced arbitration unfair too. But just like the consumers who accept these ripoff clauses as a condition of obtaining basic goods and services, the judges do not feel they have any choice but to enforce them—that is, until Congress steps in and changes the law.

  • October 19, 2016

    by Caroline Fredrickson

    From First Lady Michelle Obama’s speech in New Hampshire to accusations by Fox News’ Gretchen Carlson against Roger Ailes, sexual harassment and sexual assault have been dominating the headlines for months. 

    Also in the news has been the topic of forced arbitration agreements that limit victims’ ability to have their day in court. Very much a part of the Wells Fargo scandal has been the bank’s argument that it shouldn't have to face its clients at trial.

    These two stories actually have more in common than is often mentioned. First, of course, Fox tried to shut down Carlson’s suit by saying her contract’s arbitration clause prevented her from using that public forum. Few realize how common it is for women and men who allege harassment at work to be shunted into a secretive process that often prioritizes the interests of the employer.

    As I described in my book, Under the Bus: How Working Women Are Being Run Over, while many Americans may think that they can always bring a lawsuit if their employer violates the law, for almost a third of nonunion workers (or approximately 36 million people) that is no longer true. Using a new weapon to undermine workers’ rights, more and more companies are forcing prospective and current employees to sign away their right to sue in order to get hired or to avoid being fired and to agree that all disputes will be resolved in private arbitration, rather than in normal courts.

  • February 19, 2016

    by Nanya Springer

    As part of its Access to Justice series, ACS on Thursday hosted Director of the Consumer Financial Protection Bureau Richard Cordray for a discussion of how forced arbitration and other anti-consumer measures are harming average Americans. Cordray, the agency’s first director, has overseen the birth and growth of the CFPB, which sprung directly from the financial crisis of 2007-2008. During the ensuing years, the cumulative wealth of middle-income Americans fell drastically, and many families saw their net worth cut in half.  The CFPB, he noted, was forged to ensure “consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

    A burgeoning threat to consumers is mandatory arbitration agreements. Cordray explained that originally, arbitration was used primarily “in commercial disputes between businesses that bargained with each other to create tailored contracts; it was rarely used in disagreements between businesses and consumers.” Over the last two decades, however, “banks started including arbitration clauses in their consumer contracts, requiring any disputes or disagreements to be resolved through private arbitration.” He noted that the attorneys who advised these banks specifically pointed out that arbitration clauses can be used to block class action lawsuits.

    To investigate the impact of increasingly common arbitration clauses, the CFPB undertook the most extensive study of consumer finance arbitration ever conducted, finding that tens of millions of consumers are subject to at least one mandatory arbitration clause—and most don’t even know it. Most importantly, the CFPB found that “arbitration clauses restrict consumers’ relief in disputes with financial service providers because companies are using them to block class proceedings in any forum – whether court or arbitration.”

  • January 29, 2016
    Guest Post

    by Ross Eisenbrey, vice president, Economic Policy Institute

    *This post originally appeared on epi.org.

    Employers are increasingly forcing employees to give up their right to sue in court and to accept private arbitration as their only remedy for violations of statutory and common law rights. Private arbitration can forbid class actions, limit damages, allow the employer to choose the arbitrator, and cut off appeals, resulting in a system unfairly tilted in the employer’s favor. As Stone and Colvin find, employees are much less likely to win in mandatory arbitration than in federal court: employees in mandatory arbitration win only about a fifth of the time (21.4 percent), whereas they win over one-third (36.4 percent) of the time in federal courts.

    Differences in damages awarded are even greater. The typical award in mandatory arbitration ($36,500) is only 21 percent of the median award in the federal courts ($176,426). While there are additional factors to consider in comparing the two systems, at the outset it is important to recognize that in a simple comparison, mandatory arbitration is massively less favorable to employees than are the courts.

                       

  • November 18, 2015
    Guest Post

    by Doron M. Kalir, Clinical Professor of Law, Cleveland-Marshall College of Law

    The fact that the Roberts Court is business-friendly is, by now, well documented. It is also no secret that the Court is generally hostile to the once-venerable institution of class actions. And most recently, as The New York Times ably demonstrated, the Court has moved to elevate arbitration as the preferred mode of dispute resolution. The accumulated effect of these three trends has been devastating: Millions of Americans – customers, employees, patients, and investors, among others – are routinely denied their fundamental right to have a day in court. Some call that the privatization of the justice system.

    DIRECTV, Inc. v. Imburgia, a case emerging out of an intermediate state court in California, is another case reflecting these trends. At first sight, it may not seem a likely candidate to become one of the Term’s blockbusters. Allegedly a typical state contract-interpretation case, it looks benign, almost boring to read. Yet it is anything but. It represents nothing short of a last-ditch effort by state courts to shield consumers from these emerging trends. Will it be successful or – as some predict – destined to fail? Only days will tell.

    The facts of the case are somewhat complicated. In 2007, Amy Imburgia contracted with DIRECTV to receive programming services. Predictably, her Customer Agreement contained an arbitration-only, no-class action clause. Unpredictably, it also contained language abolishing that clause should “the law of your state . . . find this agreement to dispense with class action procedures unenforceable.” And that is precisely what happened – the California Supreme Court held such provisions to be “unconscionable” and therefore unenforceable.

    Four years later, in AT&T Mobility v. Concepcion, the U.S. Supreme Court reversed the California rule. Class-action waivers in arbitration agreements, the 5-to-4 decision held, are enforceable, reasoning that the Federal Arbitration Act (FAA) preempts state law. Despite Concepcion, however, the California Court of Appeals ruled in this matter that the individual-only arbitration clause is still unenforceable. Why? The court reasoned that the term “the law of your state,” as included in this particular consumer contract, should not be interpreted to include federal interpretation of that law (the “Supremacy Clause” version), but rather only state law as interpreted by state courts.