Forced Arbitration: Corporations Opting Out of Justice and Fairness

Washington, DCThere are two distinct messages to be taken away from the whole debacle of forced binding arbitration: 1) The basic ideals of our forefathers are going to hell in a hand basket, and 2) Equality is dead.

How could anyone watch the video below and think otherwise?

Alliance for Justice (AFJ), producer of the film, is a national association of environmental, civil rights, mental health, women’s, children’s and consumer advocacy organizations in the USA. It’s been around for a while - 1979 - and has some pretty influential friends.

Not the least of these is Robert Reich, who hosts Lost in the Fine Print. Currently serving as Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley, Reich has served three Presidents and was the 22nd US Secretary of Labor in the Clinton Administration from 1993 through 1997.

So what is forced binding arbitration?

In a nutshell, it’s a contractual cause, usually well-buried in the fine print of any contract that holds that the signatory waives any and all rights to pursue a dispute through the courts. Instead, a dispute has to be settled through an arbitration process that one assumes would be neutral and without bias.

However, that doesn’t appear to be the case, either. There are reports of defendants - the retailer, manufacturer, corporation or entity against which a consumer has a dispute - holding the right to select their own arbitrator, set the parameters of the process and driving what should be an unbiased process, dictating the outcome in the end.

The plaintiff, for lack of a better word, doesn’t stand a chance.

This is America? Land of the free and protector of civil rights?

“[Forced arbitration] is really an exit clause from the civil justice system - and people aren’t aware that they’re even entering into these contracts.” says Deepak Gupta, an appellate attorney who appears in the film.

“It actually leads to the establishment of a ‘for profit’ system of justice,” says Hank Johnson (D-Georgia), another participant who lent his voice to the film.

Paul Bland, an attorney and the Executive Director of Public Justice, a rights advocacy group, appears in the film as well and says forced arbitration clauses are literally everywhere - from the cars you buy to the nursing home into which you place your loved ones for care. “[Forced arbitration cases] are just omnipresent in American society now.” Including your employment contracts, student loan agreements, banking relationships and even pre-nuptial agreements!

The devil is really in the details

It is a sad reality that most Americans don’t read the fine print. They don’t have time. Or there’s too much of it. Or it’s so small (fine print is aptly described…), they just can’t read it. The language is often several grade levels above their degree of comprehension.

Besides, say you, “I’m just buying a car.” Or, “I’m putting my mother in a nursing home, and yes there is this contract with a myriad of fine print, but there are fresh flowers everywhere and the people seem really nice…”

Don’t bet on it.

The inherent problems with fine print lend to the complexity of the issue at hand. Basically, you may have trouble comprehending the language, or it may be so small and there may be so much of it that you have to book a week off work and cozy up with a magnifying glass just to get through it. But as long as it is there, it’s legal. The manufacturer or service provider does not have to make it easy for you.

What’s more, if it’s in the fine print and you signed it, then you are generally bound to it regardless of how unfair it might be.

The video, expertly hosted by Reich, is rife with incomprehensible examples of real people and the heartbreak, frustration and sheer unfair treatment they have been shown when forced arbitration is, well - forced upon them without their knowledge.

Affecting many sectors, this has nonetheless been a growing phenomenon in the nursing home industry. Elder-care facilities have been increasingly turning to arbitration clauses in contracts as a means to stem the costs of litigation and the size of compensation awards. Nursing homes will tell you they do this in the face of cuts in funding from Medicaid and Medicare, and that such mitigation of legal and liability costs is the only way to ensure quality care.

Bland suggests that more than 90 percent of nursing homes in the country subscribe to these clauses.

Is it unfair to the consumer? Consumer advocates say, yes. Does it contravene long-held rights and statutes of Americans? Yes. Is it legal? As long as it’s in the fine print and you’ve agreed to it, yes.

Is it a level playing field?

Absolutely not.

Americans are beginning to fight back

In recent months and years there have been a few court cases where arbitration clauses have been successfully challenged. With nursing homes, for example, judges have ruled that arbitration is more appropriate for nuts-and-bolts issues, and not for issues of alleged neglect, health, harms or abuse suffered by a resident. The point has also been made in recent decisions that a clause or waiver has to be fully understood by the individual agreeing to it; otherwise the lack of understanding invalidates the waiver.

No matter. The reality of it all is that forced arbitration is at such a high prevalence, it’s almost impossible to find a contract without it.

And again, says the AFJ, it’s the company telling you that you do not have a right to sue. “You can’t take us to court. Your dispute will be arbitrated with an arbitrator that we choose and we pay for, thus working for us.”

How do you think they’re going to rule on your case?

In about 94 percent of the cases, arbitration awards find for the company.

“You have two parties in a dispute, and then the more powerful party writes a contract where they pick who’s going to decide the dispute, they pick the rules under which the dispute is going to be decided and they rig those rules in their favor. It’s just an incredibly unfair system.”

With forced binding arbitration, major corporations are simply opting out of the justice system in a way that everyday Americans have no right to or would ever think of doing. Yet not only are they doing so, they’re getting away with it.

What can you do?

Read the fine print. Don’t agree to something you’re not sure about or don’t understand. Watch the video. Form your own opinions, and then make your voice heard.

The court of public opinion is perhaps the most powerful court there is…