The New York Times reported on the attempt to reform arbitration, a private justice system for resolving disputes that is often slanted against consumers, to make it fair to all participants. The special session is part of diverse efforts across the country to prevent companies from inserting arbitration clauses in contracts.
Representative Hank Johnson of Georgia, a ranking member of the House Judiciary Committee, implored Congress to strictly curtail the use of mandatory arbitration, in which judges and juries are replaced by arbitrators who consider the companies their clients. In his remarks, Mr. Johnson cited an investigation by The New York Times, saying that it “pulled back the curtain and cataloged the immense harms of forced arbitration.”
In its investigation, based on thousands of court records and interviews with hundreds of lawyers, judges and arbitrators in 35 states, The Times found that, by using arbitration clauses, corporations can circumvent the courts and quash challenges to elder abuse, discrimination, rape, predatory lending and even wrongful death.
Joined by lawmakers from across the country, Mr. Johnson urged the passage of a bill he introduced that would prevent civil rights cases, like employment discrimination disputes, and other critical lawsuits from being pushed into arbitration. The impact of arbitration clauses, he noted, is especially devastating for women trying to fight gender discrimination in the workplace.
“Buried in the fine print of everything from consumer contracts and employee handbooks to nursing home agreements, forced arbitration clauses insulate corporations from accountability by eliminating access to the courts for untold consumers and workers,” Mr. Johnson said.
Today, it is virtually impossible to rent a car, get a job, borrow money for college or enroll an elderly parent in a nursing home without signing away the right to go to court. The clauses, buried in the fine print of tens of millions of contracts, bar Americans from banding together in a class-action lawsuit, the only realistic way that an individual with limited resources can fight a wealthy corporation.
Corporations, casting the lawsuits as “frivolous litigation”, have said that class actions are not needed because arbitration allows individuals to resolve their grievances, one by one, without the headaches of court. But The Times found that once blocked from going to court, most people simply dropped their claims. The Times found, for example, that from 2010 through 2014, only 505 consumers went to arbitration over a dispute involving $2,500 or less.
Last year, attorneys general from 16 states and the District of Columbia urged the federal government to deny Medicaid and Medicare money to nursing homes that use the clauses. Other efforts to scale back arbitration are underway. In a preliminary step, the Department of Education is discussing whether to deny federal funds to schools that include arbitration clauses in their enrollment contracts.
Representative Maxine Waters, Democrat of California, introduced a bill last year that would cut off student aid funding for schools that use arbitration clauses.
“It is time for Congress to reconsider the value of predispute mandatory arbitration agreements,” Representative John Conyers Jr., Democrat of Michigan, said in a statement arguing that Congress should also back the Arbitration Fairness Act, a bill that would give consumers a choice, once a dispute arises, to go to court or arbitration.
“Legislation that protects consumers and employees is a common-sense solution for all Americans,” he said.