Consumers Denied “Right-to-Sue”
Chances are if you signed a contract to buy a cellphone, purchase internet service, applied for a new job or obtained a loan from Payday Loan Service, you most likely signed a binding contract included with a provisional clause prohibiting you from filing a lawsuit or class action lawsuit against the company or employer if you have evidence to prove you were cheated, defrauded or discriminated against in the workplace.
Arbitration can be a fair and effective dispute resolution when both parties agree to handle matters this reasonable way. Unfortunately, forced mandatory arbitration agreements have been spreading like a deadly virus in employment contracts, consumer purchasing products and services, which includes credit cards, payday loans, health insurance policies, student loans, car loans and civil rights disputes. Citizens with legitimate claims are deprived of equal justice under the law, even if they unknowingly signed an arbitration agreement.
Did you know companies like DirectTV, AT&T, T-Mobile Netflix, Time Warner Cable, and a host of other well-known service providers have customers sign mandatory arbitration contracts before service or products are sold to the customer> This is a common practice that protects companies from lawsuits regardless of if a consumer is deprived of proper service, is overcharged or even harmed by defective products.
Consumer advocates have argued for years that mandatory arbitration practices are “a license to defraud, discriminate, avoid responsibility, cheat and steal.” And worse, if an individual loses in arbitration, that person has no right to appeal, unlike, when a lawsuit was tried in court.
What is interesting is that the U.S. Supreme Court ruled in separate cases in 2011 and 2012 that corporations, businesses and employers are allowed to induce a person into forced arbitration, which critics say the rulings were a “rubber stamp,” in violation of a citizen’s “right to sue.”
Imagine an underdog boxer about to fight an esteemed champion for the champion’s world’s heavyweight title. But there’s a problem: the rules automatically are tilted against the underdog challenger. First, the rules require the challenger to agree to fight the champ in his hometown, and the champ is allowed to hire his own hand-picked judges to score the fight. Facing unfair rules like this, the underdog fighter wouldn’t stand much of a chance to win.
Don’t you agree?
Well, thanks to recent U.S. Supreme Court decisions and slick maneuvering by a litany of corporations and employers’ questionable practices, American citizens are facing similar unfair rules when defrauded or wrongfully terminated under arbitration, a practice imposed involuntarily upon the person.
“The devil is in the details,” according to Justice.org website.
Arbitration is an alternate method of resolving disputes whereby two parties present their sides of a complaint to an arbitrator or panel of arbitrators. The job of an arbitrator is to decide the rules, weigh the facts and arguments of both parties to settle the dispute. Corporations, service businesses and employers frequently induce individuals to sign arbitration agreements to forbid a consumer or employee to file a lawsuit against them.
The big problem is like the underdog boxer who must fight a champion with the power to hire his own people to judge all his fights in a ring. So if the underdog cannot score a knockout; again, who do you think will win?
“From cell phone purchases, to nursing home agreements, to gaining employment; consumers and employees are being forced to sign arbitration clauses, and to potentially cede their civil and labor rights-in every aspect of their lives,” says Alliance for Justice President Nan Aron.
“For example,” Aron further explains, “anyone who saw the pictures of conditions aboard the Carnival Cruise Ship Triumph after it was disabled by a fire knows why it was dubbed ‘the cruise from hell,'” Aron said.
“But those passengers may have a hard time suing. When they bought their tickets, there was a forced arbitration clause (the passengers may not have seen) written in the fine print.”
The U.S. Supreme Court ruled in January 2012 for the second time, that arbitration is allowed under federal law, although the practice is denied in most states under state law. Wanda Greenwood and other plaintiffs filed a class-action lawsuit against Compucredit Corporation, claiming the company engaged in deceitful marketing in violation of the Credit Repair Organization Act(CROA) (15 U.S.C. 1679).
This story came to light when Greenwood and many others applied for an Aspire Visa credit card marketed by Compucredit.
A bank issued the Aspire Visa after each individual signed an agreement containing a binding arbitration clause. Attorneys representing Greenwood argued, however, that when Congress passed the CROA law, the law preserved a person’s right to sue in court to protect abuse and deceptive business practices. The Aspire Visa card targeted people with poor credit scores as a way to help them rebuild their credit history. Promotional material distributed by Aspire said the Visa card came with a $300 credit line with no deposit, unlike many credit card companies that usually charge an upfront fee.
The devil was in the details according to Greenwood’s attorneys, when the hidden costs eliminated most of the credit line by including a $29 initial fee, a $6.50 monthly fee with an annual fee of $150 dollars! Total fees for a year amounted to $257 dollars. Apparently the consumers failed to thoroughly read the fine print, because buried within the wording of the contract was a stipulation that either the customer or the company had the right to force a dispute into binding arbitration.
Ruling against Greenwood in the credit card case, the Supreme Court held “that a ‘right-to-sue’ isn’t really a right to file a lawsuit and have your case heard in a court of law, but merely a statement saying the consumer will have some forum in which to resolve the dispute.”
Reaction to the ruling unleashed harsh responses from advocates and attorneys.
“Supreme Court is just steamrolling over the American civil justice system and throwing consumers to the wolves,” said Consumer Watchdog advocate Doug Heller, in an LA Times article published shortly after the high court handed down the controversial ruling.
The only dissenter, Justice Ruth Bader Ginsburg, said, “the specific right-to-sue wording in the law could not be satisfied by arbitration.”
Forced Arbitration Killing the Right to Sue
Arbitration is killing citizens’ “right to sue,” according to advocates working to have Congress outlaw the law, despite hurdles by the U.S. Supreme Court decisions, which upheld the practice. Class-action lawsuits, for decades, allowed Americans to unite and share resources to take on corporate giants ranging from Toyota, Exxon Mobil and AT&T. What many citizens may not realize is the fact that major companies in most disputes with consumers and employees are able to dodge lawsuits by having consumers and employees in advance sign away their “right” to file a suit.
A dispute, as mentioned earlier, will be settled “one-on-one” in a private arbitration forum. Arbitration clauses are often included into terms of service agreements in which a person must agree to if they want to use the product or service or be hired for a job.
Interviewed by phone, Stanford Law Professor and attorney Michael McConnell said, “Arbitration in many cases is an advantage for consumers and employees when you have a very small claim. It saves time and lots of money.” McConnell represented the credit card company and bank that won the Supreme Court ruling upholding arbitration in a lawsuit filed against the credit card company.
McConnell further said much of the opposition against Mandatory Binding Arbitration boils down to money. “It doesn’t benefit trial lawyers and different advocacy groups because it cuts them out of the profits that could be made if a lawsuit was won.”
Many years ago, the arbitration process was prohibited by law in several states. But in 2011 the Supreme Court ruled in AT&T Mobility v. Concepcion that all state laws opposing forced arbitration are preempted by the 1925 Federal Arbitration Act.
On April 27th 2011, the high court ruled in a 5-4 margin that the Federal Arbitration Act of 1925 preempted state laws prohibiting contracts from disallowing class-wide arbitration. The AT&T arbitration lawsuit derives from a suit over AT&T mobile phone contracts filed in 2006 by Vincent and Liza Concepcion, in which the couple claimed the wireless provider engaged in deceptive advertising by falsely claiming their wireless plan included free cell phones.
The suit soon grew into class-action status. AT&T attorneys successfully argued the Concepcions signed a contract agreeing to use the arbitration process. AT&T won the suit due to the plaintiffs signing the contract with the arbitration clause hidden in the terms of agreement.
Following the AT&T victory, Sony’s playstation network updated their terms of service with forced arbitration clauses, as did Xbox Live – Microsoft’s online gaming system, and in March 2012, Netflix issued a terms of service update prohibiting subscribers from joining class-action suits against the company. Favorable judgements for consumers are very slim, according to Christine Hines, an advocate for Public Citizen.
Hines highlights the fact that arbitration specialists often favor corporations, employers and service providers, primarily because arbitrators expect to get repeat business from corporations. Therefore arbitrators have a financial incentive to rule in the business’ favor.
For example, a study conducted by Hines’ Public Citizen group showed 95% of arbitration cases were settled in favor of a company either through employment or service providers.
Law Professor McConnell did explain during the interview to Newsblaze that statutory claims like workplace discrimination, antitrust and sexual harrassment that, “there are more reasons to be concerned about these kinds of cases where there is a strong public policy.”
Consumers Unable to Use Federal Rights Law By Signing Arbitration Contracts
Forced arbitration is so blantantly used to deprive consumers of their legal rights, according to Chris Moran, writing in Consumerist.com, that there are nine federal laws a company or employer can easily bypass under the Supreme Court rulings upholding mandatory arbitration – if a claim is made against a company under the arbitration enforcement.
- Telephone Consumer Protection Act
- Electronic Funds Transfer Act
- Fair Credit Reporting Act
- Equal Opportunity Act
- Fair Debt Collection Practice Act
- Right to Financial Privacy Act
- Servicemembers Civil Relief Act
- Truth-in-Lending Act
- Credit Repair Organization Act
To keep the public informed of companies requiring consumers to sign arbitration agreements. the CFPB published a partial list of well-known companies that Americans often do business with, in their Forced Arbitration Rogues Gallery.
Congress Should Act Now
Congress must act to pass additional federal laws to ensure arbitration contracts do not violate citizens’ civil rights and equal protection under the Constitution. Currently there is a laundry list of bills pending in Congress to eradicate abusive arbitration practices. Alliance for Justice President, Nan Aron, writing in a LA Times op-ed, said:
“The Civil Rights Act, the Equal Pay Act and the Age Discrimination in Employment Act are just three of the landmark laws placed at risk when powerful corporations and employers can opt out of them by forcing consumers and employees into arbitration.”
“But there is a solution,” Aron said. “The Arbitration Fairness Act now pending before Congress would bar forced arbitration in employment, antitrust and civil rights cases as well as consumer disputes. It would reopen the courthouse doors to millions of Americans to put real umpires back on the level playing field.”
For more information on this subject, google the following story published by Mother Jones: Have you Signed Away Right to Sue?