When you sign a contract for cell phone or Internet service, sign up for a coupon online, open a bank account, apply for a credit card, sign up to access a product website, buy an automobile, accept a job or even “Like” a company on Facebook, chances are you are signing away your right to sue if you are harmed by that company. The problem is that very few people know about it – and wouldn’t understand if they did.
In other words, if you are injured or inconvenienced by the product, you have no right to bring a lawsuit against Corporation X. Instead, you and X, Inc. take the dispute to a “neutral third party,” a professional known as an arbitrator. The meeting is held behind closed doors. Both parties present their sides to the arbitrator, who then makes a decision. The arbitrator’s decision is legally binding on both parties.
Proponents of arbitration claim it is a faster and more efficient method of conflict resolution. But here is what consumers need to understand: unlike a judge, an arbitrator is not “neutral” – nor is s/he bound by law or legal procedure, such as rules of evidence. An arbitrator’s decision is based on what s/he thinks is right, not legal precedent. In fact, an arbitrator is not even required to have a law degree or any legal experience whatsoever. In some cases, organizations are even forcing employees and consumers to submit to “Christian” arbitration, recalling ecclesiastical trials of the Middle Ages in which rulings were based on “biblical principles.” An arbitrator’s decision, unlike a judge’s ruling, cannot be appealed. Furthermore, it is the corporation that selects and hires the arbitrator, who depends on repeat (corporate) clients in order to stay in business. In many cases, arbitrators have cozy relationships with their regular clients.
How objective would anyone expect that arbitrator to be? It is the privatization of the justice system at its worst.
Here is a secret. In many cases, consumers have the right to opt out of an arbitration clause. However, they have only four to six weeks to do so – and because so few people are even aware of such clauses, they fail to exercise this right.
Arbitration is not new. It has been used in the U.S. since the nation was founded. Traditionally, the courts disapproved of its use. In 1925, however, the Federal Arbitration Act was passed, essentially giving arbitration the same status as litigation in a court of law. Initially, arbitration was used primarily in disputes between labor and management, negotiation of collective bargaining agreements, and matters involving commerce. Over the next 75 years, laws passed by Congress and upheld by the U.S. Supreme Court expanded the use of arbitration to cover issues including consumers’ rights and even medical malpractice. By 2003, arbitration laws were in place in every state. It should come as no surprise that the U.S. Supreme Court under Chief Justice John Roberts was instrumental in allowing corporations to use forced arbitration clauses in order to prevent consumers from bringing class-action lawsuits.
Today, forced arbitration clauses are being used all over Corporate America. These clauses now affect claims over a range of physical and psychological injuries, civil rights violations and even wrongful death. Consumers are giving up their right to a trial in front of a judge and jury of their peers, while job seekers are forced to choose between securing employment and surrendering their Constitutional rights. Often, the injured party winds up getting stuck with a huge bill, since these agreements require each side to pay part of the arbitration fee. Of course, this amount is typically chump change for the corporation – but can be financially devastating for the individual.
“We live in a world where unregulated corporate sociopaths every day make decisions to steal from us, poison us with bad drugs, and sell us dangerously defective products,” says Mike Papantonio, past president and current member of the National Trial Lawyers Association. “Arbitration is the way they finally take everything from the abused consumer. It’s remarkable to me that consumers have sat fat, dumb and happy while they have allowed this to occur.”
Of course, we cannot expect any action on this appalling perversion of the justice system from the current bought-and-paid-for GOP Congress. The Arbitration Fairness Act was first introduced in 2007, again in 2009, and yet again in 2013. Every time, it has failed to pass. This year, Senator Al Franken (D-MN) and Representative Hank Johnson (D-GA) have reintroduced the bill. Senator Franken says,
For years, I’ve been fighting to re-open the courtroom doors to consumers, workers, and small businesses…our legislation is a commonsense reform to our justice system that will restore Americans’ right to challenge unfair practices by corporations and ensure meaningful legal recourse.
He adds, “It’s clear that we’re at a point where big corporations can write their own rules and insulate themselves from liability for wrongdoing—this can’t continue.”
In the meantime, knowledge is power. While we apply pressure to Congress to act on this issue, consumers can vote with their pocketbooks and refuse to do business with corporations that force them into arbitration. Learn more about which companies are using arbitration, see statistics, and read stories about individuals who have been put through forced arbitration at the New York Times. You can view Mike Papantonio’s April 2014 Ring of Fire interview with Linda Lipsen, the CEO of the American Association for Justice on this issue, which Farron Cousins recently discussed on the show with Denver personal injury lawyer David Hersh.