Mandatory Binding Arbitration's Super Critic

I’m sure if Lex Luthor thought about it, in his quest for world domination he would have insisted on mandatory binding arbitration to resolve all of his disputes. Only the mind of a power-mad, evil scientist could have come up with a system like this, where consumers and workers are forced to give up their legal rights to sue in court against misbehaving corporations who harm them. (See the Center for Justice & Democracy’s new fact sheet for more background.) In fact, back in the late 1990s, Superman himself did battle against this evil device!  (OK, not really Superman, but close.)

You may recall that in May 1995, the actor who famously played Superman, Christopher Reeve, was rendered quadriplegic after falling from a horse in a riding accident.  Sadly, he has since passed away.  But in 1998, when the Alabama law firm Beasley Allen challenged the state's mandatory binding arbitration rule on constitutional grounds, Christopher Reeve filed an amicus brief in support of Beasley's case.  He wrote,

One of the hardest things I have had to do since my disability is to deal with insurance companies.  I found them to be callous and to try to set up any roadblocks they can to keep from paying legitimate claims. I am totally against binding, mandatory arbitration in insurance policies.

Unfortunately, the scourge of mandatory binding arbitration continues to this day and while we no longer have the Man of Steel to come to our aid, we do have Amalia D. Kessler, professor of law and legal history at Stanford University.  Kessler has a butt-kicking op ed in today’s New York Times called “Stuck in Arbitration," writing:

[A] growing number of consumers and job seekers discover, when something does go wrong, that they have unknowingly agreed to waive their right to file a lawsuit. Instead, they must submit to arbitration.

For some, arbitration proves too costly to pursue. Among those who can afford the fees, many learn they cannot enforce their legal rights because arbitration decisions do not need to be based on the law; arbitrators have their own procedures, and some studies have found that they are systematically biased in favor of the companies that hire them. Lawyers are often unwilling to represent arbitration complainants because of award caps in the agreements. And increasingly, these accords bar class-wide arbitrations. Because arbitration decisions are typically not disclosed and not subject to appeal, consumers and workers are left without recourse and must bear the cost of unfair, deceptive and harmful practices.

What’s more, she writes, “It wasn’t always this way.”

While the [1925 Federal Arbitration Act] was initially envisioned as applying primarily to disputes between commercial equals, since the 1980s, the United States Supreme Court has interpreted it in ways that have facilitated corporate America’s efforts to force consumers and employees into arbitration. This trend has accelerated in the last few years.

She concludes,

But as deployed by corporations against many thousands of individual consumers and employees, it bears a troubling likeness to the 19th-century concept of conciliation as a practice suited only for a subservient underclass.

It is long past time for Congress to intervene. The Arbitration Fairness Act is no panacea, but it’s a start.

One can only hope.  For more information, go to Fair Arbitration Now.

Comments

[Frederick S. Schwartz]

Lex Luther's evil twin is "AT&T" bearing its "class-action ban" shield made of Supreme Court kryptonite.

WARNING - Many "Mandatory Arbitration Clauses" are buried in the agreement and coupled with a prohibition on bringing a class action. While, consumer cases involving larger amounts of money can often be remedied by bringing a personal/individual claim, there are many other smaller claims or instances where consumers are unable to have a remedy without being able to join together and bring a class action.

State consumer protection laws should not be wiped out by federal preemption.