Arbitration Everywhere, Stacking the Deck of Justice

Forced arbitration is a corporate bullying tactic designed to kick people out of court and
eliminate their right to seek justice. It’s a rigged system set up by corporations to favor
corporations.
Big businesses are using fine print to take away the rights of consumers, patients, and
workers. Unfortunately, forced arbitration has infiltrated nearly all aspects of American life.
Americans are subjected to forced arbitration clauses when they use credit cards, talk on
their cell phones, visit websites, start a new job, and even admit a loved one into a nursing
home. Corporations use forced arbitration because they know that when they lie, cheat,
and steal from the public, the fine print gives them a free pass to break the law and evade
all accountability.
The idea of forced arbitration has been promoted as a way to reduce costs of securities
litigation for public companies and thereby remove a perceived disincentive for
companies to be public. Reportedly, it is too easy for plaintiffs’ firms to bring dubious
cases and win settlements, and some have argued that class action lawsuits, even
meritorious ones, fail to compensate harmed investors in any meaningful way.

There may be some validity to these concerns. But stripping away the right of
shareholders to bring a class action lawsuit seems to me draconian and, with respect to
promoting capital formation, counterproductive.
Some have observed that class actions generally result in “institutional shareholders
effectively suing themselves,” paying high costs for the defense while giving plaintiffs’
attorneys a large share of any settlement. But institutional investors, who presumably
have the economic incentives and resources to pursue individual arbitration, have been
vocal in their opposition to forced arbitration. In a recent letter to the SEC, the Council of
Institutional Investors expressed its view that these clauses represent a potential threat
to principles of sound corporate governance that balance the rights of shareholders
against the responsibility of corporate managers to run the business. In my view, there is
considerable value in seeing companies held accountable for wrongdoing, even if the
compensatory mechanism is imperfect.
 In Arbitration, a ‘Privatization of the Justice System’

Over the last 10 years thousands of US businesses have used arbitration to create an
alternate system of justice. “There, rules tend to favor businesses, and judges and juries
have been replaced by arbitrators who commonly consider the companies their clients.”
In civil court [consumers can] appeal, raising questions about testimony, destruction of
evidence and potential conflicts of interest. But arbitration … often bears little
resemblance to court.” For companies, the appeal of arbitration grew after the U.S.
Supreme Court issued a ruling in 2011 clearing the way for them to use forced arbitration
clauses in agreements with consumers to forbid class-action lawsuits. Prevented from
joining together in groups in arbitration, “most plaintiffs gave up entirely.”
Unfettered by strict judicial rules against conflicts of interest, companies can steer cases
to friendly arbitrators. In turn, interviews and records show, some arbitrators cultivate
close ties with companies to get business.
All it took was adding simple arbitration clauses to contracts that most employees and
consumers do not even read. Yet at stake are claims of medical malpractice, sexual
harassment, hate crimes, discrimination, theft, fraud, elder abuse and wrongful death,
records and interviews show.
Little is known about arbitration because the proceedings are confidential and the federal
government does not require cases to be reported. The secretive nature of the process
makes it difficult to ascertain how fairly the proceedings are conducted.
 In Religious Arbitration, Scripture is the Rule of Law

For generations, religious tribunals have been used in the United States to settle family
disputes and spiritual debates. But through arbitration, religion is being used to sort out
secular problems like claims of financial fraud and wrongful death. By adding a religious
component, companies are taking the privatization of justice a step further.
Those promoting religious arbitration claim the process allows people of faith to work out
problems using shared values, achieving not just a settlement but often reconciliation.
Yet some say religious arbitration may have less to do with honoring beliefs than simply
controlling legal outcomes. There are reportedly religious organizations honor the process
until they lose, at which point they switch to secular courts to overturn previous “faith-
based” judgments.
Religious arbitration clauses … have often proved impervious to legal challenges. This
introduction of a religious component into the arbitration process takes the “privatization”
of justice even further.
Religious arbitration, at its best, ensures that people can resolve their disputes in
accordance with deeply help religious beliefs,” said Michael A. Helfand, an associate
professor at Pepperdine University School of Law and an arbitrator in a rabbinical court
in New York. “But both religious communities and courts need to make sure that the
protections the law has put in place to make it a fair and unbiased process are actually
implemented.
 Arbitrating Disputes, Denying Justice

The editorial further notes that these forced arbitration clauses, requiring consumer
accession before the consumer is permitted to even engage in business with many large
corporations, also preclude aggrieved parties “from pressing their claims as a group in a
class action, often the only practical way for individuals to challenge corporations.”
The insult-after-injury, as The Tiimes further notes, is that “it is extremely difficult to avoid
or get out of forced-arbitration clauses and class-action bans, particularly since they were
upheld by two misguided Supreme Court decisions in 2011 and in 2013.”
“From 2010 to 2014, corporations prevailed in four out of five cases where they asked
federal judges to dismiss class-action lawsuits and compel arbitration, according to The
Times‘s articles. People who were blocked from going to court as a group usually dropped
their claims entirely, in part because class actions are often the only affordable way to file
lawsuits. If successful, they can deter future corporate wrongdoing because even small
payouts, multiplied over all similarly mistreated customers, can be very large. Indeed,
faced with arbitration, it appears that most people do not pursue remedies to their
grievances at all.
As if that weren’t bad enough,
Even more disturbing, the shift away from the civil justice system has gone beyond
disputes about money. Nursing homes, obstetrics practices and private schools
increasingly use forced-arbitration clauses to shield themselves from being taken to court
over alleged discrimination, elder abuse, fraud, hate crimes, medical malpractice and
wrongful death.
 Treasury Faults Arbitration Rule Aimed at Protecting Consumers

Consumers strongly favor the right to go to court to hold banks accountable: Ninety-five
percent say they should have the right to have their cases decided by a judge or jury, and
89 percent want to be able to participate in a group lawsuit.

Most disputes between consumer finance companies and their customers are for small
sums of money. This means that for many consumers, the cost or effort associated with
filing a lawsuit or arbitration challenge may outweigh the benefit

Consumers are largely unable to avoid arbitration agreements, which nearly all major
consumer financial services providers use. Even when a consumer obtains an account
that is not subject to an arbitration agreement, the terms can quickly change. Pew’s
research has found that checking account and prepaid card agreements almost
universally included “change-of-terms” notices that allow the provider to impose new
contractual requirements with little or no notice to the consumer.
It attempts to balance the interests of consumers and financial providers by allowing
companies to require arbitration for individual disputes, including cases in which a court
denies class-action status. The agency also did not regulate voluntary arbitration
agreements, leaving the parties in any consumer finance dispute free to agree to
arbitration after a dispute arises if they choose. Without the rule, mandatory binding
arbitration agreements would probably continue to be nearly impossible to avoid, harms
that are small on an individual basis but large in the aggregate might never be resolved,
and the results of arbitration proceedings would not be reported in a way that helps
researchers and legal analysts form a deeper understanding of the costs and benefits of
arbitration generally.
 Supreme Court Divided on Arbitration for Workplace

Arbitration is a dispute resolution mechanism that is less formal than the court system
which generally favors employers.
Arbitration clauses have become increasingly common in employee contracts and in the
fine-print agreements consumers sign. The court’s four liberal justices are concerned
enough about the trend — and the Supreme Court’s endorsement of it.
Arbitration supporters say that forum is cheaper and more efficient than traditional
litigation. Critics say companies are trying to strip individuals of important rights, including
the ability to band together on claims that as a practical matter are too small to press
individually.
Workers who want to take action against sexual harassment, pay discrimination,
pregnancy discrimination and racial discrimination "may now be forced behind closed
doors into an individual, costly - and often secret - arbitration process
Arbitration was the venue of choice for merchants on equal footing with each other to
hash out disputes behind closed doors. Today arbitration is often forced on employees
and consumers by corporations in order to keep lawsuits private and to keep company
costs down. Employees are less likely to win in arbitration, and if they do win, they’re likely
to receive less money than if they had gone to court.