By: Morgan Gaynor
TheNew York Times published a two-part article last weekend which illustrates the dangers of arbitration. Arbitration is supposed to be an informal process for deciding legal disputes which is quicker and less expensive than a court battle, but theTimes article shows it is really just a way for corporations to stack the deck against consumers.
Horror stories abound in the articles. Arbitrators write crazy decisions favoring corporations which cannot be reviewed by appeals courts; arbitrators socialize with employees of the corporations whose cases they are hearing; and consumers are thwarted because they cannot band together to claim small amounts of money.
Some of the material in theTimes article contained the same criticisms of arbitration which we’ve made in this blog for years. For example, we described the huge loss suffered by consumers when the U.S. Supreme Court upheld arbitration provisions and blocked a class action inAT&T v. Concepcion in 2011. We similarly criticized Halliburton in 2010 when it tried to force a female employee into arbitration after she claimed a coworker raped her.
The Times article goes into the history of arbitration and how it became the monster it is today. It was first conceived as a way to avoid courtrooms by corporate lawyers serving the banking finance industry. Since then, it has spread to all kinds of businesses such as medical practices, rental car companies, sellers of computer products, and even funeral homes.
Corporations who use arbitration are some of the most familiar names in American business: Starbucks, Netflix, Discover, Ebay, and of course AT&T. A huge number of consumer transactions now require buyers of goods and services to unknowingly forfeit their legal rights.
Consumers aren’t the only ones subjected to arbitration. Many people are now required to agree to arbitration when they get hired by corporate employers. For example, Taco Bell thwarted a discrimination suit by African-American employees by invoking arbitration agreements they were forced to accept when they hired.
The “take it or leave it” nature of these agreements has so far made no difference to our courts. The U.S. Supreme Court has been downright dismissive about such concerns. In the Concepcion case, the court’s opinion upholding arbitration said “the times in which consumers contracts were anything other than adhesive are long past.” As we said at the time, the plain English translation of this phrase is: consumer contracts have been unfair as hell for a long time, and we’re not going to do anything about it, so get over it.
Many lower court judges have been more troubled by this “get out of jail free” card for corporations. However, they are constrained from doing anything about it, because the U.S. Supreme Court and other higher courts have upheld arbitration agreements over and over again. We’re hoping theTimes article will bring some much-needed attention to the abuses of this privatized legal system. Maybe legislatures will then be compelled, or shamed, into making some real reforms.
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