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Fine Print of Predatory Binding Mandatory Arbitration
Thursday, 12 February 2009

Screwed by the Fine Print
Arbitration does not grant the three main safeguards guaranteed by our public courts: fairness, accountability and neutrality. The corporation chooses a private individual--who is not necessarily a judge or lawyer--to hear and decide the case. Corporations are repeat customers whose appeasement generates steady business. Studies show that arbitrators have financial reason to rule in their favor. Corporate clients get preferential treatment; regular people do not get anything resembling neutral decision-making.

The National
Screwed by the Fine Print

By Kia Franklin

February 10, 2009


Despite the new Ledbetter Fair Pay Act, corporations can still get away with employment discrimination and other harmful action through binding mandatory arbitration agreements in which Americans sign away their right to resolve disputes in a court of law. Nestling arbitration clauses in the fine print of credit card agreements, patient consent forms and employment contracts is a deceitful tactic used against an estimated 30 million Americans nationwide. It sends disputes between a person and a corporation to a closed-door, unregulated resolution process hidden from outside view.

Congress and President Obama should provide a much stronger check against corporate power. They can do that by passing The Arbitration Fairness Act (AFA), first introduced in 2007 by Senator Russ Feingold (D-WI) and Representative Hank Johnson (D-GA).

Arbitration does not grant the three main safeguards guaranteed by our public courts: fairness, accountability and neutrality. The corporation chooses a private individual--who is not necessarily a judge or lawyer--to hear and decide the case. Corporations are repeat customers whose appeasement generates steady business. Studies show that arbitrators have financial reason to rule in their favor. Corporate clients get preferential treatment; regular people do not get anything resembling neutral decision-making.

In typical court proceedings, there is something called the discovery process: it allows both sides to demand information and documents from each other to prove their case. This crucial procedural tool plays no role in the secretive, informal proceedings of arbitration: no obligation for the arbitrator to issue a written opinion, no requirement that the arbitrator rely on the law to decide cases; and, worse yet, no opportunity for meaningful review or appeal in a real court of law. Nothing is a matter of public record. All disputes are privatized so they can be kept out of sight, away from objective scrutiny.

In recent years, the Supreme Court has generally leaned toward enforcing arbitration clauses, even those between a corporation and consumers, workers, service purchasers and other individual parties with less bargaining power. As a result, lower courts tend to block the enforcement of state consumer protection laws limiting mandatory arbitration agreements and federal laws providing a right to access the courts for certain grievances.

Arbitration between similarly situated corporations can be an appropriate, even helpful, dispute resolution tool, but a significant body of research has found arbitration to be neither fair nor cost-effective when average citizens confront corporations. Thousands of dollars in filing costs, lawyer fees and other expenses are just the beginning. The process can quickly become a financial nightmare for families struggling to make do with less.

Arbitration does not offer balanced resolution of high-stakes issues like the type of employment discrimination that cost Lilly Ledbetter over $200,000 in wages. Instead, at its most extreme, it can lead to job loss, inadequate health services and no actual legal recourse for severe injuries suffered. This is especially true of nursing home patients forced to resolve claims of abuse, sexual assault and medical negligence in arbitration. In one such case, a New Mexico district court ruled that an elderly husband could have placed his wife in a different nursing home that did not require arbitration, even though visiting her in the new facility would have required him to drive 120 miles round trip.

The Ledbetter Fair Pay Act and the Arbitration Fairness Act pursue the same overarching goal: to replace the empty symbolism of unenforceable legal rights with real substance. The right to sue is an invaluable instrument in our democracy, especially in a time of economic crisis. It enables all Americans, regardless of income or background, to combat discrimination in the workplace, and it strips large corporations of the power to hide behind the fine print, where legal jargon all too often limits liability for illegal behavior.

http://www.thenation.com/doc/20090223/franklin

 
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