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Senate Committee Hearing on Binding Arbitration and Supreme Court Favoring Big Business |
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Thursday, 24 July 2008 |
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Senators Question "Pro-Business" Supreme Court Rulings
The Senate Judiciary Committee Wednesday questioned a series of Supreme Court decisions that Democrats on the panel said were unfair to workers and individual citizens who were damaged by big business. Sen. Patrick Leahy, D-Vt., faulted the court for slashing the punitive damages awarded against Exxon for the Exxon Valdez oil spill. He also spoke out against decisions upholding provisions requiring debtors to submit to mandatory binding arbitration and a ruling that barring investors and pension funds from suing accounting firms that "facilitated fraud" in cases like the Enron collapse. When the court upheld contracts requiring credit card holders to submit to arbitration of disputes, Bartholet said the court forced them into a system rigged in favor of the corporations who select and pay for the arbitration process. She said that even though she ruled in favor of credit card companies virtually all of the time when she worked as an arbitrator for the National Arbitration Forum, she was blacklisted after a single case in which she ruled for a consumer who had filed a counterclaim against his creditor.
Senators Question "Pro-Business" Supreme Court Rulings
7/23/2008 |
(RTTNews) - The Senate Judiciary Committee Wednesday questioned a series of Supreme Court decisions that Democrats on the panel said were unfair to workers and individual citizens who were damaged by big business.
Sen. Patrick Leahy, D-Vt., faulted the court for slashing the punitive damages awarded against Exxon for the Exxon Valdez oil spill. He also spoke out against decisions upholding provisions requiring debtors to submit to mandatory binding arbitration and a ruling that barring investors and pension funds from suing accounting firms that "facilitated fraud" in cases like the Enron collapse.
When the court capped the punitive damages in the Exxon Valdez case to the same amount of the compensatory damages awarded, Leahy said it was the equivalent of someone destroying a town and being given a $5 parking ticket.
"If Congress had wanted to cap punitive damages for disasters that impact thousands of Americans, of course we could have but we did not," Leahy said. "A jury found for the victims of the Exxon Valdez disaster. … But the Supreme Court displaced [that] judgment with their own. "
He added, "Worse than that, by doing this they don't deter the kind of conflicts that create this in the first place. Significant financial consequence is a deterrent corporations tend to understand."
Sen. Arlen Specter, R-Pa., was less critical of the court's decisions, noting that in many cases the court left the door open for Congress to revisit the issues by ruling on statutory rather than constitutional grounds.
However he did fault the ruling in the case of Lilly Ledbetter, in which the court decided that the statute of limitations starts to run out as soon as employment discrimination begins, rather than when the employee first discovers it.
"I would like to see the Congress move forward on the Ledbetter case," Specter said. "She didn't know she had a claim. How can you pursue a claim if you don't know that the claim even existed."
The committee heard from three witnesses in its investigation Wednesday: Osa Marie Schultz, an Alaskan who was a member of a fishing cooperative that was bankrupted by the Exxon Valdez oil spill; Elizabeth Barthole, a Harvard Law School professor who spoke about flaws she observed while working in financial arbitration; and Patricia Millett, an attorney who had worked in the U.S. Solicitor General's office under Presidents Bush and Clinton.
Schultz said the court's decision in the Exxon Valdez case was particularly egregious because the initial economic damage award undercounted the effects of the spill.
"Exxon would have everyone believe that they cleaned up their mess and paid their dues for their wanton disregard of safe shipping practices," Shultz said. "Nothing could be further from the truth. The spill has never been fully cleaned up and its victims have not been fully compensated for their losses. Exxon's's vast power and influence has tipped the scales of justice."
The spill devastated many fishing-related industries in Alaska, with wide-ranging economic effects, she said, but the compensatory damages were calculated based only on a few years of losses. In particular, the herring fisheries were destroyed but the scientific evidence linking the fisheries collapse to the spill had only been developed recently.
"Exxon has delayed justice for nearly 20 years and it seems likely now to end up paying just a fraction of the damages they actually caused," Schultz said.
Choking up with emotion as she concluded her testimony, Schultz decried the "corrupt and divisive" influence of corporate power and said the potential for high punitive damages is the only way to get the attention of big corporations like Exxon.
"In its ruling the court has said that the punishment should be equal to the losses of the victims. As great as our losses are, and they are substantial, equating punishment to a multi-billion dollar corporation with the losses of self-employed fishermen such as my husband and me, is in no way punishment or deterrent, much less justice," she said.
When the court upheld contracts requiring credit card holders to submit to arbitration of disputes, Bartholet said the court forced them into a system rigged in favor of the corporations who select and pay for the arbitration process.
She said that even though she ruled in favor of credit card companies virtually all of the time when she worked as an arbitrator for the National Arbitration Forum, she was blacklisted after a single case in which she ruled for a consumer who had filed a counterclaim against his creditor.
"The supreme court approval of mandatory pre-dispute arbitration has given banks and credit card companies a private justice system in which they can purchase the result they want at the expense of the debtors," she said.
That line of reasoning drew questions from Sen. John Cornyn, R-Texas, who wondered whether Bartholet disagreed with the whole prospect of arbitration as a way to avoid jury trials that can be time consuming and expensive.
"So you just think the fix is in, there is no such thing as an impartial decision by an arbitration panel," Cornyn asked.
But Bartholet drew a sharp line between arbitration forced by contract before a dispute has arisen and cases in which both parties agree once they know what is at stake.
"If two parties genuinely agree to arbitration, it's completely different," she said.
The final witness before the panel, Millett, questioned the premise of the hearing, that the court was biased in favor of big business.
She said over the last year the court had split about 50-50 in decisions that might be considered pro-business and decisions that generally favored individuals.
In fact, Millett said, the court had issued a higher percentage of decisions in favor of criminal defendants than it had in favor of business, yet no one was accusing the court of being soft on crime.
What she saw in the recent rulings was "an enormous deference to Congress."
"What the court made clear was it was taking the statutory text that this congress enacts at its word," she said.
She also saw a deference to the precedents of previous courts, especially when Congress chose not to revise laws on which earlier rulings were made.
"When the court makes a decision, if the Congress doesn't react, Congress goes along with the decision, doesn't change the law, then it's not for the court itself to change course without Congress' lead," she said.
by RTT Staff Writer
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