Category Archives: Arbitration

EarthJustice had an interesting article about how the country’s biggest companies are preventing Americans from getting their day in court. Millions of consumers who interact with companies such as Amazon, Apple, Walmart, CVS, Best Buy and Coca-Cola cannot sue these corporate giants over anything, from fraud or personal injury to harassment or discrimination. Eighty-one of the 100 largest companies in the U.S. prohibit their customers from bringing seeking compensation for wrongdoing, according to a new study published in the University of California Davis Law Review.  A full 78 of these 100 companies also prevent consumers from banding together in a class action if they feel they’ve been wronged.

Hidden in the middle of these long terms and conditions documents are policies known as arbitration agreements. When people accept an arbitration agreement, they are giving up any right to bring a civil lawsuit against the company at any time.

“Arbitration agreements make it harder to hold companies accountable for wrongdoing,” says Imre Szalai, a law professor at Loyola University New Orleans and author of the new study. “It destroys our consumer rights.”

Arbitration is a private process that does not involve courts, judges or juries. There is no requirement to follow the same procedures that lawyers would in court, and there is no real appeals process, meaning the arbitrator’s decision is almost always final. There is also virtually no government oversight.

Studies have shown that very few consumers win in arbitration, and that when they do, they often get much less money than they would in court. Critics argue that arbitration takes power away from the consumer, and that its secretive nature makes it difficult to challenge companies’ bad behavior.

“The publicity makes a big difference. If it’s public what Amazon is doing, that can have a shaming effect, a deterrent effect,” says Szalai. “But if all these disputes are being heard in private arbitration, you lose some of those values from a public proceeding in court.”

With the large number of companies now using this tactic, Szalai estimates that more than 826 million individual consumer arbitration agreements exist in the U.S., more than two and a half times the country’s population. A majority of households are subject to these agreements, according to the study.

Szalai took his list of companies from the Fortune 100, and examined which companies have used arbitration agreements in connection with customers since 2010. Given how many of the largest retail companies use these agreements, the study found that at least a majority of online sales in the U.S. are now covered by arbitration agreements.

Arbitration has received increased attention over the last year or so as various tech companies have come under fire for imposing these policies on their employees and on consumers in cases of sexual assault. Last May, Uber and Lyft said they would stop requiring victims of sexual assault and harassment to pursue claims through arbitration, and in December those companies each saw pushback from thousands of drivers claiming the company prevented them from suing and then refused to pay the required fees to start their arbitration cases.

A slew of companies including Google, Facebook, Microsoft, Airbnb and eBay also announced last fall that they were ending their policies requiring employees to handle sexual harassment claims through arbitration. Just this month Google ended forced arbitration for all its employees.

But even as companies are starting to feel pressure to let their workers take disputes to court, this has largely not extended to their dealings with customers. Progress on the issue has been slow in Congress. Grassroots pressure like what Uber and Lyft faced may start to make a difference, Szalai says, but for now, millions of Americans have unknowingly given up their rights to publicly pursue claims against many of the companies they interact with on a daily basis.

“Every one of our rights are at risk if they’re being sent to these secret tribunals,” Szalai says. “All of your rights become meaningless if you can’t enforce them. And these tribunals are designed so you don’t have robust enforcement.”

 

 

 

Democrats in the U.S. House and Senate have unveiled legislation aimed at quashing the practice of forced arbitration.  Rep. Hank Johnson (D-GA) and Sen. Richard Blumenthal (D-CT) announced their Forced Arbitration Injustice Repeal (FAIR) Act. The bill would eliminate such arbitration clauses in all employment, consumer and civil rights cases, but allow individuals to agree to arbitration after a dispute occurs. The bill is supported by 147 cosponsors in the House and 35 in the Senate.

Forced arbitration agreements undermine our indelible constitutional right to trial by jury, benefiting powerful businesses at the expense of American consumers and workers,” Johnson said in a statement. “Americans with few choices in the marketplace may unknowingly cede their rights when they enter contracts to buy a home or a cellphone, place a loved one in a nursing home or start a new job. We must fight to defend our rights and re-empower consumers.”

Lawmakers planned to introduce or reintroduce other measures tied to specific industries, including the Fairness in Nursing Home Arbitration Act, HR Dive reported. The White House Office of Management and Budget has reportedly been reviewing that final rule, which would reverse a ban on pre-dispute arbitration clauses for nursing home operators, McKnight’s noted in February. A previous version of this reversal was met by opposition from both industry trade groups and resident advocates. However, the OMB is marching forward with the new rule, which it says “strengthens requirements regarding the transparency of arbitration agreements in LTC facilities.”

McKnight’s reported on the AARP’s letter to the Senate Committee on Finance stating that nursing home residents are at risk due to the Trump administration’s plans to allow nursing homes to take away a resident’s right to a jury trial as a condition of being admitted.   The industry spent a lot of money trying to get Trump to lift a ban on pre-dispute arbitration agreements.  AARP said pre-dispute, binding arbitration is not appropriate where abuse and neglect are at issue.

“We were alarmed that the provisions of the proposed rule would very likely have dangerous and harmful impacts on nursing home residents, as well as their families,” wrote David Certner, legislative policy director in government affairs for AARP.

Democrats earlier this month also proposed legislation aimed at eliminating arbitration clauses in employment, consumer and civil rights cases, called the Forced Arbitration Injustice Repeal (FAIR) Act.

Democratic senators are introducing a bill that would modify the Federal Arbitration Act by barring pre-dispute arbitration agreements and class-action waivers in consumer, employment, antitrust, and civil rights disputes.  In these four areas, the proposed legislation, entitled The Forced Arbitration Injustice Repeal Act of 2019 (the “FAIR Act”), S. 635, H.R. 1423.

The FAIR Act likely faces the same opposition from Republicans that have defeated similar proposals, including the renditions of the “Arbitration Fairness Act” that were rejected from 2007 through 2018.  Although the FAIR Act may garner attention in the current political climate, in large part due to its nursing home consumer and employment-related provisions, it likely faces an uphill battle in the current Republican-controlled Senate and White House.

The New York Law Journal had an interesting article written by Kimberly Kalmanson, the principal attorney of Kalmanson Law Office. The article mentions that the New York State (NYS) legislature amended the NYS Human Rights Law earlier this year to strengthen protections for employees who allege claims of sexual harassment and attendant discrimination. The amendment prohibits employers from forcing victims to arbitrate their claims. Nevertheless, while the new NYS law invalidates mandatory arbitration provisions in employment agreements that include discrimination claims and also provides that non-disclosure agreements in discrimination settlements are invalid unless they are requested by the employee, it is not without controversy.

These laws will be challenged as pre-empted by the Federal Arbitration Act (FAA).  Of course, Congress could act to amend the FAA to exclude matters of sexual harassment from its reach. The use of what effectively constitutes forced arbitration undercuts the entire spirit and policy underlying ADR.

Of course, arbitration does constitute a waiver of due process—arbitrators are not required to follow the law or the rules of evidence. The decision of the arbitrator is final and binding with little ability to appeal or overturn an arbitrator’s decision.

“It is not uncommon for parties to an arbitration to engage in malfeasance or miss deadlines without consequence, and for the other side to be left with little avenue for relief. It is easy to find oneself between the proverbial rock and a hard place; anger the arbitrator by asking for penalties he or she may not be wont to impose, or go to court for relief and risk being countersued for violating the confidentiality or non-disparagement provisions of the underlying contract.”

“Those in favor of mandatory arbitration provisions will no doubt argue that no party is forced to arbitrate, but rather, that it is a function of contract. Technically, that is true, but that argument assumes that employees are able to engage in arms’-length transactions with their prospective employers.”

The contracts are contracts of adhesion. This is not an arms’-length relationship. “ADR is an excellent avenue to elect when both parties truly elect it. Arbitrators handling matters as a function of unequal bargaining power ought to be vigilant in policing employers who may not take the matter as seriously as they would had the case proceeded in traditional litigation. Congress should consider the will of the States and carve out an exception in the FAA to ensure that victims are not further victimized without access to their day in court with the full light of day.”

Last month, the Alabama Supreme Court held that an enforceable arbitration agreement was never formed because the resident lacked capacity and the daughter who signed on his behalf lacked power of attorney.  In Stephan v. Millennium Nursing & Rehab Ctr., 2018 WL 4846501 (Ala. Oct. 5, 2018), the decedent’s estate sued the nursing home for wrongful death. The nursing home moved to compel arbitration. The trial court granted the motion to compel, and the Supreme Court of Alabama reversed.

The decedent’s daughter had signed the admission paperwork but did not have power of attorney or any other legal authority to contract in his name at the time the contract was signed. In reviewing the record, the court found decedent was incapable of entering into a contract on the date of the admission documents due to his dementia. In addition, the decedent could not have understood the effect of allowing his daughter to agree to arbitrate, so she lacked apparent authority. Furthermore, the daughter was not personally bound to the arbitration clause, and thereby precluded from suing as personal representative, because she signed in her capacity as her father’s relative, not in her own capacity. Therefore, the arbitration agreement never existed and could not be enforced.

 

The Nation had an article about “Non-disclosure agreements” (NDAs) which effectively bound victims to secrecy, barring them from publicly revealing their stories.  NDAs are part of an arsenal of legal tools that employers and insurance companies have at their disposal to protect both their reputation and their bottom line—but those tools often come at the expense of victims.  Another is “forced arbitration,” a provision in many contracts that requires victims to channel their disputes through an extralegal negotiation process, rather than through the courts. Under Obama, the Consumer Financial Protection Bureau had banned forced arbitration in employment contracts, but last month Trump and Congress killed that protection.

According to the National Women’s Law Center (NWLC), both forced arbitration and NDAs have in many workplaces become a standard tactic to preempt workers from taking legal action or disclosing sexual-harassment and -assault charges. These agreements force workers to sign away their rights in exchange for a job, by making them agree to settle future disputes outside the courts through an opaque negotiation process controlled by management and lawyers—effectively sentencing women to silence before they ever step into a courtroom.

“The Equal Employment Opportunity Commission estimates that 75 percent of abuse incidents go unreported, yet “anywhere from 25 percent to 85 percent of women report having experienced sexual harassment in the workplace.” Many are deterred by fear of retaliation—three in four respondents feared being re-victimized, in other words, for speaking out. But the commission also stresses that forced arbitration works against the public interest “by requiring individuals to submit their claims to private arbiters rather than public courts,” and the ability to rely on forced arbitration “can also weaken an employer’s incentive to proactively comply with the law.” Both policies, non-disclosure and mandatory arbitration, drive consumers and workers into silence and powerlessness by keeping their cases out of court.”

According to NWLC Vice President for Workplace Justice Emily Martin, “Congress could act to prohibit employers from requiring mandatory arbitration of harassment and discrimination complaints.”

Time reported the story of Catholic nun Sister Irene Morissette, a resident of Chateau Vestavia, an assisted-living facility near Birmingham, Ala.   Sister Irene told a staffer that she was raped in her bed.  What added insult to injury was her inability to sue the facility that failed to keep her safe.

Morissette told police that someone held her 5-ft. 2-in., 140-lb. frame to the bed by her shoulders. She recalled the “terrible experience of being penetrated,” according to a recorded police interview reviewed by TIME. “I was so scared,” she said. “She was afraid to call anyone,” an examiner wrote later, “because she was afraid that the assailant would be the one to come back to her room.”

“Police and medical records paint a disturbing scene. Police investigators found two semen stains in Morissette’s bed and blood on the “inside rear area” of her green-and-pink-flowered pajama bottoms, which had been shoved underneath the mattress. A sexual-assault examiner at a local hospital reported that Morissette had sustained multiple abrasions inside and outside her vaginal canal, wounds that could be consistent with rape. “The genital exam was very painful for the client,” the examiner’s report said.”

“After a criminal investigation by local police failed to produce enough evidence to identify a suspect in the alleged attack, Morissette’s family tried to file a civil suit against Chateau Vestavia, alleging everything from negligence to outrageous conduct. They felt there was plenty of evidence to back up those charges. The semen on the nun’s bedsheets was enough to suggest sexual contact, and Morissette, because of her dementia, could not legally consent to any sexual act. But none of it would see the light of day in a courtroom.”

When Morissette first came to Chateau Vestavia, she had signed the facility’s standard admissions contract. Buried in pages of terms and conditions was what is known as a pre-dispute binding arbitration agreement. By signing it, the elderly nun gave up her Seventh Amendment right to trial by jury and any right to bring a civil suit against Chateau Vestavia or its then parent company, Trinity Lifestyles Management, for any reason and at any time in the future.

More than a million other elderly Americans may have waived away their rights in the same way Morissette did.  More than half the 2.5 million Americans in nursing homes or senior living centers are likely bound by them. Legal advocates who work on behalf of seniors estimate that as many as 90% of large nursing-home chains in the U.S. now include arbitration agreements in their admissions contracts.

With arbitration, there is no courthouse, no judge and no jury. There are no requirements to follow state or federal rules on procedure, and effectively no appeals process. Whatever the arbitrator decides is almost always final.

 In June, the Trump Administration proposed a new rule that would allow nursing homes to require residents to sign arbitration agreements as a condition of admission to a facility: either sign it or find somewhere else to live. With the number of elderly Americans projected to double over the next 30 years, mandatory arbitration clauses in nursing homes will likely affect millions of people. Which means some may find themselves in the same private system of dispute resolution that Morissette and her family fell into.

“This is blatantly a sellout to the big CEOs and the Wall Street guys,” says Kenneth Connor, a self-described conservative and a South Carolina trial attorney.

As for Sister Irene’s case, Reed Bates, one of Chateau Vestavia’s lawyers, argued ridiculous theories to defend the failures of the nursing home.  He argued that Sister Irene was lying and had not bee raped.  Bates then argued that the traumatic vaginal abrasions were caused by Sister Irene’s masturbation.  Bates then offered speculation that the semen stains on the nun’s bedsheets got there while being laundered or handled by staff.  Ridiculous.

The arbitrator sided with the facility claiming Chateau Vestavia was not accountable. Neither the assisted-living facility nor Trinity Lifestyles Management would be required to compensate Sister Irene nor issue an apology.  And with that, the case was closed.

As a final indignity, Morissette’s family was handed a bill for roughly $3,000 to cover the cost of renting the Marriott room where the arbitration had taken place.

Medscape published an article from Margaret R. Nolan, DNP, GNP about taking away nursing home residents’ right to sue for abuse and neglect.  Margaret R. Nolan. Nursing Home Residents: No Right to Sue for Unsafe Care, and It’s Wrong – Medscape – Nov 14, 2017.

Litigation or Arbitration When Nursing Home Care Is Unsafe?

The Centers for Medicare & Medicaid Services, under the new administration, has announced changes to nursing home residents’ and families’ ability to sue for episodes of substandard care. Under this new plan, incoming residents and their families will sign away the right to litigate upon admission and, instead, agree to solve disputes through arbitration rather than through the courts.

Unsafe levels of care in nursing homes are, unfortunately, common. The federal government attempts to provide close oversight of nursing homes; but, in spite of being placed on a strict oversight status, in many states, hundreds of nursing homes still provide unsafe care to patients. The courts are viewed as a fail-safe option for patients’ protection. Litigation is often the only means to force nursing homes to provide standard, safe care.

The new administration is supporting arbitration settlements alone for wrongful care of residents. Many consumer groups and attorneys general strongly oppose this plan and believe that litigation is an effective way to ensure that nursing homes deliver appropriate care to vulnerable residents.

 Viewpoint

The elderly residents of nursing homes or long-term care are highly vulnerable to abuse. The Obama administration attempted to make it easier for nursing home residents to litigate for suspected negligence or abuse, but the bill never became law. A particular concern was that the promise to arbitrate was often buried in nursing home admission documents so that families were often unaware of this option. Under the Trump administration, nursing home residents will continue to sign arbitration agreements instead of having the option of suing. If new residents refuse, they could be denied admission to the facility. The Trump administration has asked for more understandable language for incoming nursing home residents so that they can better understand what they are signing, but opponents argue that without choice, it’s still mandatory for the incoming resident to sign.

On a larger scale, the current administration is trying to cap medical malpractice claims and shorten the statute of limitation to 3 years. Many fear that this will also lead to more deaths and injuries and weaken safety for patients, especially those who reside in nursing homes.

This is a critical time for nursing leaders to speak up about geriatric care, safety, and abuse. Nurses need to help educate our leaders to make good decisions that will protect vulnerable residents in nursing homes.”

The U.S. Court of Appeals for the Eleventh Circuit concluded that a confidentiality provision in an arbitration clause in a bank account holder agreement was substantively unconscionable. Larsen v. Citibank FSB, 871 F.3d 1295 (11th Cir. Sep. 26, 2017). The case concerned a putative class of account holders who challenged the bank’s overdraft policy. The arbitration clause in the account holder agreement required both parties to keep confidential any decision of an arbitrator. The account holder argued that this provision disproportionately favored the bank as a repeat participant in the arbitration process. The court agreed, concluding that where the outcomes of prior arbitration proceedings remain concealed, as the arbitration clause purported to require, prospective claimants have little context in which to assess the value of their cases, to avoid repeating past claimants’ mistakes, or to leverage prior successes. The court further reasoned that the information disadvantage that the bank holds at the outset of a dispute may have the effect of discouraging consumers from pursuing valid claims. The court concluded that severing the confidentiality clause would not significantly alter the tone or nature of arbitration between the account holders and the bank. Accordingly, the court severed the confidentiality clause and enforced the remainder of the clause.