Below is a NY Times editorial on forced arbitration.
In recent years, America’s corporations have created a private system for handling disputes that benefits them greatly while denying consumers their day in court.
Worse, according to a recent series in The Times, that system has become vast and more entrenched as companies increasingly require customers, employees, investors, patients and other consumers to agree in advance to arbitrate any disputes that arise in their dealings with a company, rather than sue in a court of law.
Such forced-arbitration clauses, found in the fine print of contracts, also typically bar aggrieved parties from pressing their claims as a group in a class action, often the only practical way for individuals to challenge corporations. In addition, corporations effectively control the arbitration process, including the selection of the arbitrator and the rules of evidence, a stacked deck if ever there was one.
From 2010 to 2014, corporations prevailed in four out of five cases where they asked federal judges to dismiss class-action lawsuits and compel arbitration, according to The Times’s articles. People who were blocked from going to court as a group usually dropped their claims entirely, in part because class actions are often the only affordable way to file lawsuits. If successful, they can deter future corporate wrongdoing because even small payouts, multiplied over all similarly mistreated customers, can be very large.
Indeed, faced with arbitration, it appears that most people do not pursue remedies to their grievances at all. Verizon, with more than 125 million subscribers, faced 65 consumer arbitrations between 2010 and 2014, The Times’s report found. Sprint, with more than 57 million subscribers, faced six. Time Warner Cable, with 15 million subscribers, faced seven.
Even more disturbing, the shift away from the civil justice system has gone beyond disputes about money. Nursing homes, obstetrics practices and private schools increasingly use forced-arbitration clauses to shield themselves from being taken to court over alleged discrimination, elder abuse, fraud, hate crimes, medical malpractice and wrongful death.
For the most part, Congress has looked the other way. Federal regulators, however, are starting to fight back. The Consumer Financial Protection Bureau is expected to propose a rule soon to forbid arbitration clauses that ban class actions in cases involving financial services and products. TheCenters for Medicare and Medicaid Services, which is expected to issue updated nursing home regulations next year, is considering a ban on forced arbitration clauses in nursing home contracts.
Reversing the broader trend of forced arbitration, however, will require public outcry loud and long enough to stir the White House and Congress to action. Many people interviewed in The Times’s series did not realize that their right to sue had been lost until they needed it. A common refrain was the disbelief that this could happen in America. But it is happening, and it needs to stop.