It’s the holidays. It's the end of the year. It’s winter solstice. It’s Hollywood award season. Around this sacred time of year, we always think about whether there’s a deserving group or industry worthy of a PopTort accolade. (Here’s last year’s!) We almost passed up the opportunity this year. Then, the New York Times came.
First, let me set the stage. For decades now, industry groups and corporations who want to block consumer and injury lawsuits, have been engaged in a pretty relentless campaign to turn the American public's mind against the civil justice system. They call us all “sue happy” and try to breed fear, anger and contempt for injured people who file lawsuits.
Yet take a look at the data on who actually files lawsuits, according to the National Center for State Courts and the U.S. Department of Justice, Bureau of Justice Statistics. (See here, here.) For years, the data have shown that personal injury and other tort cases account for only a tiny percent of cases filed in civil court. Most recently, that percentage was 7 percent of all civil cases. So what are the other 93 percent? Turns out that debt collections and other suits based on contracts account for a large majority of civil caseloads today.
A few years ago, NCSC took a close look at caseloads in Kansas, for example - a state that closely tracks data on the kinds of cases in its court system. In 2009 in Kansas, 80 percent of new cases were contract disputes, and 75 percent of those were debt collections. In its most recent report, NCSC found that “contract and small claims cases comprise 80 percent of civil caseloads. … [and that] contract caseloads consist … primarily of debt collection (37%), landlord/tenant (29%), and foreclosure (17%) cases.” And these kinds of cases are climbing.
As NCSC explains, “The picture of contemporary litigation … is very different from the one suggested in debates about the contemporary civil justice system.” Among the “more likely explanation[s] is the focus on high-value and complex litigation by the media (especially business reports), much of which is filed in federal rather than state courts. Lower-value debt collections, landlord/tenant cases, and automobile torts involving property damage and soft-tissue injuries are rarely newsworthy.”
I would say "rarely newsworthy" until perhaps today. Following it’s extraordinary three-part series on the corporate use of forced arbitration clauses (see our earlier post here), the New York Times today published a new article, which not only finds debt collections plenty newsworthy but also explains these statistics in a way we’ve never seen before. Specifically, writes reporters Jessica Silver-Greenberg and Michael Corkery, debt collection companies “are using the courts to sue consumers and collect debt, then preventing those same consumers from using the courts to challenge the companies’ tactics.” Even if those tactics are flat-out illegal. They write,
The New York Times found in an investigation last month … that banks, car dealers, online retailers, cellphone service providers and scores of other companies have insulated themselves from challenges to illegal or deceptive business practices. Once a class action was dismantled, court and arbitration records showed, few if any of the individual plaintiffs pursued arbitration.
In the last few years, debt collectors have pushed the parameters of that legal strategy into audacious new territory. Perhaps more than any other industry, debt collectors use the courts while invoking arbitration to deny court access to others. The companies file lawsuits seeking to force borrowers to pay debts. Because borrowers seldom show up to challenge the lawsuits, the collectors win almost every case, transforming debts that banks had given up on into big profits.
In the case of debt collectors, the arbitration clauses that companies are invoking are often in contracts that borrowers presumably agreed to with their original lenders — not with the debt collector. Additionally, debt collectors often cannot produce a copy of the agreement in court, according to records and interviews.…
Because the tactic is still in its early stages, there is no data tracking the cases. But The Times, examining thousands of state and federal court records, and interviewing hundreds of lawyers, plaintiffs, industry consultants and judges, found that debt collection companies have already used the strategy to great success.
In the cases that The Times examined, judges routinely sided with debt collectors on forcing the disputes into arbitration. …
“It’s beyond hypocritical that the companies can use arbitration to avoid being held accountable in court, all the while using the courts to collect from consumers,” said Peter A. Holland, a lawyer who ran the Consumer Protection Clinic at the University of Maryland’s law school.
How many of these cases are flooding the courts, you might wonder?
In 2014, the industry filed roughly 20,000 lawsuits in Maryland and more than 67,000 in New York, according to court records.
Philip S. Straniere, a civil court judge in Staten Island, called some of the cases that crossed his desk “garbage.” Some debt collectors, Judge Straniere said, have sought to recoup payments from the wrong person.
Little of that matters, because many defendants do not show up to defend themselves. Some never read nondescript legal notices informing them of the lawsuits. Others who do are too intimidated or ill-equipped to go to court.
Once it begins, the litigation machine is virtually impossible to stop. When defendants are absent, judges have little choice but to find in favor of the debt collectors, according to interviews. Industry consultants estimated that collectors win 95 percent of the lawsuits.…
In an industry podcast, two lawyers discussed the benefits of using arbitration to quash consumers’ lawsuits. The tactic, they said, is emerging at an opportune time, given that debt collectors are being sued for violating federal law.
The beauty of the clauses, the lawyers said, is that often the lawsuit “simply goes away.”
I hate to leave on this depressing debt-focused note during what should be a joyful gift-buying season. But there is one thing you can do right now to feel a little better.
The U.S. House leadership just decided to schedule a vote on an extremely dangerous bill that would wipe out virtually all class actions. In other words, to the extent that class actions exist anymore given how forced arbitration clauses have blocked so many of them, this bill would wipe out the rest of them. This is not an exaggeration. (A large number of groups are expressing their opposition.) The bill, H.R. 1927, has been renamed the "Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2015," because House leaders apparently also want to wipe out the rights of asbestos victims. Yes, it’s that bad.
The House plans to schedule a vote on this horrendous bill the first week of January 2016, as if this is one of the important things our nation can do right now. If you have a moment, please let your member of Congress know how you feel. We hope that becoming active and doing something positive might make you feel a bit better.
And please have a very happy holiday. Peace.