Businesses are increasingly inserting arbitration provisions into contracts to prohibit the employees and consumers from resolving important disputes in courts of law. Such arbitration provisions compel the employees and consumers to present his or her case to an “private arbitrator,” who need not even be an attorney. There is no jury trial. There is no automatic right to engage in pre-trial discovery. There is no public access. There need not even be an in-person hearing (unless you pay extra). The arbitrator often has the right to decide the entire case by merely looking at paperwork and you might not even have a right to be there when it happens.
If the arbitrator fails to apply the law correctly or if the arbitrator refuses to consider important evidence, too bad. There is no appeal. There is no accountability. Your claim against a big company will simply disappear. And here’s another huge concern: the big corporations are repeat customers to the big arbitration companies, while you will be a one-time player. Under these circumstances, who is the arbitrator likely to favor?
Wouldn’t it be terrible if arbitration clauses started showing up everywhere? Well, they are. Arbitration clauses are increasingly appearing in consumer and employment contracts. Too often, these clauses take the form of unreadable fine print boilerplate, slapped onto the back of the contract. Almost no one reads such fine print, yet large corporations are increasingly killing off important legal claims in Court based on that unreadable fine print.
Powerful corporations increasingly filing “Motions to Compel Arbitration,” asking Courts to throw important cases out of court and into the hands of arbitrators. The effect? For too many people, it’s like putting a padlock on the doors to the courthouse. If this trend keeps up, our courthouses will become empty museums, places where we used to allow citizens to present their grievances against the rich and powerful.
Senator Russ Feingold and Representative Hank Johnson have both filed bills in Congress to restrict the use of arbitration clauses in certain types of contracts. The proposed legislation is entitled the “Arbitration Fairness Act of 2007.” The new law would amend the Federal Arbitration Act. Senator Feingold’s website describes his bill as making sure that Americans are not forced into signing agreements that mandate arbitration:
to resolve employment, consumer, franchise or civil rights disputes. The bicameral Arbitration Fairness Act of 2007 amends the Federal Arbitration Act to make pre-dispute agreements to arbitrate employment, consumer, franchise, or civil rights disputes unenforceable.
The proposed legislation does not prohibit arbitration, but limits it to situations where it is “knowingly and voluntarily” entered by both parties. Limitations are focused on employment, consumer and franchise disputes, as well as “transactions between parties of unequal bargaining power. The proposed legislation would also restrict bans on consumer class actions. The bill seeks to ensure Americans are not forced into mandatory arbitration agreements in employment, consumer, franchise or civil rights disputes.
Groups supporting the Act include the American Association for Justice, Center for Responsible Lending, Consumer Federation of America, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center.
Binding mandatory arbitration is an issue that affects each citizen of each state. Whether you are an employee who is being asked to sign an arbitration agreement even to apply for your job, or if your are taking out a loan, or if your are a franchisee who is required to arbitrate disputes with the franchisor, binding mandatory arbitration is a real problem that can deprive you of your hard-earned money and your legal rights.
You can step up and do your part to stop binding mandatory arbitration. You can click here to send an email to your representatives and senators. Please take the time to help fight for our right to open, accessible, and accountable justice. For the full text of the House version of the proposed legislation, go here.
In my “other” life, I work as a consumer lawyer. To learn more about other developments in consumer law, you are welcome to check this Consumer Law Blog (where I am one of several contributors) at my law firm’s website.