Protect Your Rights: No Forced Arbitration

At Leopold & Associates, we represent families fighting for their rights against insurance companies and other corporations who have caused injury or other harm.  The cornerstone of our American system of civil justice is the idea that any person who feels that have been wronged can file a lawsuit in a court of law and have that suit heard by a jury of their peers.  However, over the last decade, billion-dollar corporations have been making it harder for consumers to have their day in Court through a process known as arbitration.

A recent study by the University of California Davis Law School found that 81 of the largest 100 corporations in America stick legal clauses in the fine print of their customer agreements that bar customers from suing the company in Court if a dispute arises.  Instead, consumers are forced into out of court arbitration where a single arbitrator, often picked by the company, can decide everything from whether a consumer can be compensated for a terrible injury caused by a defective product to whether an employee can seek relief for unpaid wages or discrimination.  Last month, the United States House of Representatives took the first step in banning this practice and ensuring people’s rights to allow their disputes to be heard before a court and a jury.

What is Arbitration? Arbitration happens outside of the court system.  The process is often secretive meaning there is no public court file and no judge to enforce rules of discovery or document production that is often vital to a plaintiff in a civil lawsuit.  As Vox analyzes, instead of public hearings and the ability to compel witnesses to testify, Plaintiffs “likely have a few weeks to gather evidence and will be limited to one or two witnesses and one or two depositions.”  There is no subpoena power to require the corporation to turn over documents or produce witnesses and oftentimes, the arbitrator, who is generally picked and paid for by the company, decides what burden of proof the Plaintiff must meet.

The results are big victories for corporate America.  A Vox’s analysis found that in employment dispute cases before the American Arbitration Association, workers received a monetary award in only 1.8% of cases.  A study by Alexander Colvin at Cornell University found that employees who were able to litigate their disputes before a jury received ten times more compensation than employees forced to use arbitration.  In arbitrated cases where a company was found to have wronged an employee, through discrimination, wage theft or sexual harassment, the public often has no idea of the company’s behavior because the arbitration proceedings are not public.  And in mandatory arbitration, the arbitrator’s decision is final and not appealable.  The justice system is shut out of the process.

Unfortunately, this unfair process is expanding.  Many common disputes are now being ushered into mandatory arbitration.  A large number of credit card agreements, mortgage companies, health insurance providers, student loan lenders, home protection service contracts and automobile purchases all require mandatory arbitration as a condition of the business agreement. As Congressman Jerry Nadler, Chairman of the Judiciary Committee told the Associated Press, arbitration is “a legal nightmare for millions of consumers… By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it consumer and employment contracts, companies can evade the court system, where plaintiffs have far greater legal protections, and hide behind a one-sided process that is tilted in their favor,”

What is the FAIR Act? The Forced Arbitration Injustice Repeal (“FAIR”) Act attempts to reverse this trend.  The Act prohibits “predispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes.”  Instead, it makes arbitration a purely voluntary process by which all parties must agree to bring their suits before an arbitrator. Without this mutual agreement, a plaintiff can bring a lawsuit in a civil court.  Congressman Hank Johnson, who sponsored the bill hopes that this law will level the playing field for workers and consumers.  In essence, everyone, regardless of income, class, or position of power can once again bring a case in a court of law if the person feels they have been wronged and have all of the important protections of the justice system applicable to them as they attempt to resolve their dispute.

The FAIR Act passed the House of Representatives on September 20, 2019 by a vote of 224-186.  It now heads to the Republican controlled Senate where it is expected that Republican Senate Majority Leader Mitch McConnel will refuse to bring the bill to the floor for a vote.  President Donald Trump has also signaled his fierce opposition to the bill.  As the elections in 2020 approach, consider which candidates are fighting for workers and consumers and the kind of justice system that allows everyone to have a say.  That is one of the most important ways we can make the justice system fair for all.