Many everyday Americans have no idea that their signature on the agreement they just signed or accepted when they clicked on “Agree” online, whether it be for a new job, credit card, cell phone service or student loan, is, in fact, signing away many of their basic rights as American citizens. In pages upon pages of fine print, many major corporations found another way to line their pockets at the expense of consumers. Hidden in countless consumer products and service agreements are mandatory arbitration clauses that forfeit the right to access our American justice system, in favor of private, secret, forced arbitration.
Where Are Forced Arbitration Clauses Used?
Fair Arbitration Now lists some of the common places forced arbitration clauses can be found, including:
- Automobile sale contracts and leases
- Checking and savings account contracts
- Cable and satellite service agreements
- Cell phone contracts
- Credit card agreements
- Employment contracts
- Homebuilders contracts
- Home warranty policies
- Medical agreements needed for treatment
- Nursing home contracts
- Student loan agreements
What Is Forced Arbitration?
Forced arbitration is a type of dispute resolution that is mandatory if you want to seek compensation for bad service, a defective product, harm caused by a product or company, etc. The company that caused the harm also picks the decision-maker, also known as an arbitrator, writes the rules, and results are final. There is no judge, no jury, no appeal, and winning is nearly impossible. A study mentioned by the Alliance for Justice found that arbitrators rule in favor of companies an overwhelming 94 percent of the time.
Ronald L. M. Goldman, a consumer advocate, attorney, and former arbitrator/mediator, describes in a blog post how “Forced arbitration starves justice at every level. The individual does not get a fair hearing, the public has no way to redress epidemic corporate stealing, and society is deprived of one of its most powerful tools: public dispute resolution that debates and develops the common law.”
In the film Lost in the Fine Print, the filmmakers highlight the story of Debbie Brenner who wanted to take action against Lamson College because, according to Debbie, what the school promoted was not what they ended up providing. Her time and money were wasted. Buried in the school’s fine print was an arbitration clause that gave her no choice but to be forced into arbitration. The arbitrator ruled in favor of the school and Debbie, suffering a severe loss, was also ordered to pay their legal fees which totaled $700,000. It was later reduced to $362,000, but the damage had already been done.
Companies put these clauses deep in the fine print and make it nearly impossible to understand. F. Paul Bland, Jr., the Executive Director of Public Justice, commented in the film that he worked on a case where the first sentence of the clause was 256 words long. There is no “seeking justice,” when people have to play by the defendant’s rules.
While the attempt by General Mills was resolved, forced arbitration is still widely used as a predatory practice on an unsuspecting public by a majority of companies. In an article examining the impact of forced arbitration on consumers, attorney Goldman said: “Corporations can extract their pound of flesh from the public, freely looting a little at a time from each, amounting to vast sums over the years in the aggregate, comfortable in the knowledge that there is not, as a practical matter, a damn thing you can do about it.”
This is what Justice Elena Kagan said in her dissent in the 2013 case of American Express v. Italian Colors about forced arbitration clauses that deprive a victim or class of victims of effective vindication of their rights:
- “The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.
- “And here is the nutshell version of today’s (majority) opinion, admirably flaunted rather than camouflaged: Too darn bad.”
With more than 50 years of experience practicing law, attorney Ronald L. M. Goldman continues to dedicate himself to defending consumer rights. Currently, he focuses his practice on commercial transportation accidents, pharmaceutical and medical device product liability as a senior partner at Baum Hedlund Aristei & Goldman.
Mr. Goldman believes a severe bias keeps arbitrators from ruling in favor of patients for three possible reasons: reluctance to find medical negligence, disinclination towards finding negligence casually to harm or awarding an amount far less than one could expect from a jury trial (excluding California medical malpractice cases where the maximum award is $250,000).
“Our Supreme Court has handed to corporations the unbridled ability to shift consumer disputes out of the justice system; consumers have no say as a practical matter. If forced arbitration is not in a consumer contract, it is solely due to the largess of the corporate master—who retains the power to stick it in (or back in) at any time.”
“Consumers have thus become second class citizens when it comes to contesting wrongs visited upon them, often in the form of phony fees imposed on millions of people. We need to demand that arbitration be returned to its roots: an agreement between two or more of equal bargaining power, and prohibited altogether in contracts of adhesion,” Mr. Goldman said.
Previously, he commented on issues with forced arbitration in an article published by Law360 and on his blog. He is also a member of many plaintiffs’ organizations including the American Association for Justice (AAJ), Consumer Attorneys of California (CAOC), Alliance for Justice (AFJ), and Consumer Attorneys Association of Los Angeles (CAALA).
Lost in the Fine Print will premiere in Los Angeles on May 7, 2015 beginning at 6:00 pm at the Beverly Hilton. Mr. Goldman will be among the knowledgeable speakers discussing the issue at this event.