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When Arbitration Infringes on Your Rights

April 5, 2016

“Arbitration Everywhere”

The use of mandatory arbitration has, in recent years, increasingly allowed companies to “stack the deck” against consumers by depriving them of their Seventh Amendment right to access the U.S. court system. Companies have accomplished this by inserting “mandatory arbitration clauses” into all manner of consumer contracts, and this stealthy method of making consumers agree to forced arbitration has been a source of increasing concern among attorneys, politicians, journalists, and legal scholars in the last few years.

You should also be concerned about this trend. The gradual move toward “arbitration everywhere” prevents consumers from banding together to file class action lawsuits, taking away an important legal tool that lets individual citizens pool their complaints and efforts together when facing the substantial financial and legal resources of a large corporation.

So far, when consumers have attempted to get out of these forced arbitration clauses, the results have been discouraging. An October 2015 investigative piece on mandatory arbitration in The New York Times examined federal cases filed between 2010 and 2014, and Times reporters found that across 1,179 class action lawsuits where companies sought arbitration, judges ruled in the companies’ favor in four out of every five cases. In 2014 alone, judges upheld contract-based class action bans in 134 out of 162 cases.

What Is Mandatory Arbitration?

Mandatory arbitration clauses often hide in everyday contracts, going unnoticed by average consumers until they impact legal proceedings. Usually, their language reads something like, “You or we may elect to resolve any claim by individual arbitration. Claims are decided by a neutral arbitrator.”

This seemingly innocuous clause has huge ramifications. When a judge upholds this language as a way to ban class action lawsuits — as they frequently do — it means that consumers can no longer address dishonest and harmful business practices through class action. Instead, the company can essentially mandate that any claims be settled by arbitration, which is supposed to be a neutral process.

Unfortunately, the neutrality of these arbitrations is highly debatable. The company is usually allowed to pick the arbiter, who is not required to have a legal background (although many do). Furthermore, in presenting claims to the arbiter, the company usually has monetary resources and legal representation that dwarf what the average person can bring to the table, and the arbiter is not required to abide by any legal precedent in reaching their decision. The result is that the odds are heavily against an individual successfully challenging a large company and winning an arbitration proceeding on their own. In fact, many individuals simply drop their (often legitimate) claims entirely when they are forced into arbitration as part of a class action ban.

The Effects of Forced Arbitration

As chronicled by The New York Times in their October 2015 article “Arbitration Everywhere, Stacking the Deck of Justice,” companies have made it almost impossible to apply for a credit card, use a cellphone, shop online, or get cable and Internet service without agreeing to private arbitration. Mandatory arbitration clauses have even made their way into job applications, car rentals, and the process of placing a relative into a nursing home.

Consequently, journalists aren’t the only ones taking note of this erosion of Seventh Amendment rights. In November of 2015, U.S. Senator Al Franken of Minnesota and U.S. Representative Hank Johnson from Georgia penned a joint editorial for the Huffington Post in which they outlined the problem of forced arbitration and legal strategies for dealing with it – including a proposed piece of legislation, the Arbitration Fairness Act, which would prevent companies from requiring consumers to waive their rights to go to court or take class action.

“Americans are beginning to understand that the game is rigged,” the congressmen wrote. “Now we must take action to level the playing field.”

Call The Law Office of William D. Cook if You Have a Grievance

If you or someone you know has been injured or harmed through negligence, regardless of whether it was because of an individual or a company, please contact the Law Office of William D. Cook today. Our office works every day to address the complaints of victims and secure the compensation they deserve. We offer free consultations and will investigate the details of your case to deliver an honest assessment of your situation.

References

Franken, A., & Johnson, H. (2015, November 10). You’re getting ripped off by forced mandatory arbitration — here’s how to stop it. The Huffington Post. Retrieved from http://www.huffingtonpost.com/al-franken/youre-getting-ripped-off_b_8514066.html

Silver-Greenberg, J., & Gebeloff, R. (2015, October 31). Arbitration everywhere, stacking the deck of justice. The New York Times. Retrieved from http://www.nytimes.com/2015/11/01/business/dealbook/arbitration-everywhere-stacking-the-deck-of-justice.html?smid=tw-share&_r=1

Walker, M. (2015, September 29). The arbitration clause hidden in many consumer contracts. Consumer Reports. Retrieved from http://www.consumerreports.org/cro/shopping/the-arbitration-clause-hidden-in-many-consumer-contracts

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