Remington Gregg

President Biden today signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act into law, a bipartisan bill that bans the use of forced arbitration clauses in sexual assault and sexual harassment disputes. Passage came after years of advocacy and it is an important milestone in the work to end force arbitration in America.

President Biden and Vice President Harris also voiced their support for banning forced arbitration clauses in all types of disputes. So the work to ban forced arbitration across the board by passing the Forced Arbitration Injustice Repeal (FAIR) Act continues!

Last month, a coalition of organizations applauded and supported the reintroduction of the Forced Arbitration Injustice Repeal (FAIR) Act, a bill that would ban companies from imposing take-it-or-leave-it clauses on consumers, workers, servicemembers, and patients that would force them into secretive, binding arbitration proceedings.

The FAIR Act passed the U.S. House of Representatives in 2019. We are confident that lead sponsor, Rep. Hank Johnson, will continue to work with his colleagues in the House to pass the FAIR Act again. The FAIR Act was also introduced in the U.S. Senate by Sen. Richard Blumenthal.

The FAN coalition will continue to work to garner public support for the FAIR Act, and work with members of Congress to prohibit forced arbitration clauses once and for all.

The financial software firm Intuit announced that shareholders voted down a proposal that would have forced shareholders into binding arbitration instead of allowing them their day in court if they sue the company, its officers or directors. Earlier this month, a coalition of organizations urged shareholders to vote against the proposal. In the only, only 2.4% of shareholders supported the proposal.

Consumers, workers and small businesses understand that forced arbitration clauses block everyday people from holding corporations accountable for wrongdoing. This vote proves that large institutional investors – including Intuit’s largest shareholders, Vanguard and State Street – are no fans of forced arbitration either. Intuit’s shareholders sent a strong and resounding message against forced arbitration with this vote. It should be seen as a cautionary tale for other companies thinking about trying to force everyday investors into secretive, arbitration proceedings.

Over the past decade, forced arbitration clauses have become almost impossible to avoid in consumer and employment contracts.

Beginning in 2019, the rail operator Amtrak amended the terms and conditions for its passenger rail transportation services to include an arbitration provision that forces individuals into a private justice system that has no judge or jury, has limited right to appeal and is not bound by precedent. Amtrak’s arbitration provision states that it is “intended to be as broad as legally possible” – applying not only to individuals who buy tickets, but to “family members, minor passengers, colleagues and companies” for whom tickets are bought.

In November, 32 groups and more than 4,700 citizens urged Amtrak to reverse court and remove the forced arbitration clauses from its ticket. The advocacy organizations sent a letter both to Amtrak’s CEO and leading congressional appropriators and transportation committee chairs in both chambers of Congress. The groups argued that a railroad that receives $2 billion a year in taxpayer funding should not be allowed to shut the courthouse doors on customers who are discriminated against or injured, and called for the removal of forced arbitration clauses from Amtrak’s ticketing. Amtrak did not respond.

This month, Public Citizen sued Amtrak. The lawsuit alleges that Amtrak’s forced arbitration clause violates the Constitution in three ways. First, it forces passengers to either agree to give up their First Amendment right to go to court or find a different mode of transportation. Second, it forces passengers to take claims against a government entity into a private arbitration system that lacks the constitutional protections of a federal court. And third, it threatens the institutional integrity of the judicial branch by creating a wholly separate, private litigation process that lacks meaningful judicial oversight.

Amtrak, which began operating in 1971, is an institution of the federal government that must comply with the U.S. Constitution and acts only pursuant to authority delegated by Congress. Congress directed Amtrak to provide passenger rail services to America’s travelers; it did not authorize Amtrak to force travelers to waive their right to go to court if they are injured by Amtrak, the lawsuit says.

In 2016, Amtrak agreed to pay up to $265 million dollars to settle claims in the aftermath of a 2015 crash that killed eight and injured more than 200. If forced arbitration clauses had been in place at the time, none of the victims or their families would have been able to use the courts to hold Amtrak accountable.
Over the past decade, forced arbitration clauses have gone from being the exception to the rule in consumer and employment contracts, and now they’re almost impossible to avoid. Even by the most conservative estimates, the number of forced arbitration agreements in effect in the U.S. is at least 2.5 times the population, and the overwhelming majority of these agreements waive a person’s right to join others in a class action. Public Citizen recently compiled a wall of shame showing that more than 100 major companies use these clauses to deny justice to customers and workers.

Polling shows that 84% of voters want to stop corporations from forcing consumers and workers into arbitration. In June, the U.S. House of Representatives passed the Forced Arbitration Injustice Repeal (FAIR) Act (H.R. 1423) on a bipartisan basis by a vote of 225-186. The FAIR Act would prohibit companies like Amtrak from forcing their customers into arbitration. The FAN coalition strongly supports passage of the FAIR Act.

Last week, the U.S. House of Representatives passed the FAIR Act, getting one step closer to banning forced arbitration clauses that prevent everyday consumers and workers from accessing the justice system when harmed. The bill passed on a bipartisan basis.

Preserving their forced arbitration get-out-of-jail-free card is a crucial priority of the U.S. Chamber of Commerce and big business. They are going to ratchet up their spending and lobbying, too. But people have caught on to big business’ schemes and aren’t willing to put up with them anymore. In the not-distant future, we will make the FAIR Act law.

Today, 73 consumer, civil rights, environmental, and worker organizations urged the U.S. House of Representatives to pass the Forced Arbitration Injustice Repeal (FAIR) Act. Last week, the bill passed successfully out of the Judiciary Committee and a vote in the full House floor is expected this week.

The FAN Coalition strongly supports the FAIR Act and looks forward to working with this coalition of organizations to ensure that the FAIR Act becomes law! Read the letter here.

Yesterday, the federal government drastically rolled back protections for some of the country’s most vulnerable people by overturning an Obama-era rule that protected seniors and other nursing home residents from being forced into secretive arbitration proceedings when they are harmed by a long-term care (LTC) facility. Forced arbitration clauses have become ubiquitous in society and are slipped into the fine print of many contracts. These clauses force consumers to waive their right to settle disputes in open court in front of a neutral judge and jury, a legal move that often favors defendant businesses’ interests.

In 2016, the Obama administration released a rule that would have prevented LTC facilities that receive federal funding from forcing their residents into arbitration. The rule would also have prohibited LTC facilities, such as nursing homes, from conditioning admission or the continuation of care on signing an arbitration agreement. The corporate-run nursing home industry sued the Obama administration shortly after the rule was released and received a temporary order blocking the administration from implementing the rule.

The Trump administration, which has made no secret of its cozy relationships with big business, proposed a new, drastic rule in 2017. Public Citizen mobilized dozens of organizations to fight the proposal. While ultimately a huge setback for LTC residents, today’s final rule is at least a partial win when compared to the 2017 version. The agency’s retreat from implementing some of the worst features of the proposed rule is a testament to Public Citizen and our allies’ advocacy against the Trump administration’s rollback of the Obama-era protections.

Unfortunately, however, the final rule will still allow nursing homes to impose arbitration agreements on unsuspecting parties. This predatory practice compromises the wellbeing of LTC facility residents and ensures that systemic incidents of abuse and neglect are hidden from public view.

The rule promulgated today by the Centers for Medicare and Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services, does not protect seniors. Although it requires that nursing homes explain arbitration agreements to residents or their representatives and confirm that they acknowledge that they understand the agreement, there is little reason to believe that corporate-run nursing homes will actually do that—especially since enforcement of these vague disclosure standards is almost certain to be lacking. And given that most people are unfamiliar with the problems associated with forced arbitration, prospective residents or their loved ones are unlikely to ask questions about the arbitration provisions buried in admissions contracts, especially during the typically stressful experience of transitioning yourself or a loved one into a nursing home.

By permitting the nursing home industry to enforce binding arbitration agreements against elderly and vulnerable residents, CMS is actively siding with corporate-backed nursing facilities over seniors. In 2016, the Obama administration concluded that “there is significant evidence that pre-dispute arbitration agreements have a deleterious impact on the quality of care for … patients,” particularly by creating “negative incentives on staffing and care as a result of not having the threat of a substantial jury verdict for sub-standard care.” In finalizing the new rule, the Trump administration provided no contradictory evidence to these important findings.

Because arbitration proceedings are almost always kept secret, the new rule will allow nursing homes to shield their systemic abuse and neglect from public scrutiny. This will make it impossible for people looking at nursing homes to be aware of past incidents, and prevent them from making informed decisions about their and their loves ones’ long-term care. Sadly, the all too many instances of harm and neglect that have filled the papers are just the tip of the iceberg when it comes to injuries that were hidden because disputes were heard in secret arbitration hearings.

CMS’s new rule gives another free pass to an industry that has been found time and again to be guilty of wantonly abusing some of the most vulnerable members of society. Congress, however, has the power to correct this egregious wrong. Rep. Loretta Sanchez (D-CA) is planning to reintroduce legislation that would protect LTC residents from being forced into arbitration. And in February, Sen. Richard Blumenthal (D-CT) and Rep. Hank Johnson (D-GA) introduced the Forced Arbitration Injustice Repeal (FAIR) Act. This legislation would prohibit companies from forcing consumers (including nursing home residents), workers, and small businesses into arbitration before a dispute has even occurred.

Not only is passing the FAIR Act the right thing to do, but a recent survey showed that more than 80 percent of both Republicans and Democrats support ending the practice of forcing individuals to arbitrate their claims against businesses and employers outside of court. The bill is expected to receive a House markup in September, so now is the time to tell your Representative to make companies put people before profits by voting for the FAIR Act!

Today, a U.S. House of Representatives Judiciary subcommittee is holding a hearing to explore how forced arbitration clauses erode legal rights. This is the third hearing this year in Congress exploring how forced arbitration harms consumers, workers, and small businesses.

It is clear that the public, everyday shareholders, and now, Congress, are very concerned about the impact of these clauses on every person’s access to justice. The FAN coalition strongly supports this hearing, led by Chair David Cicilline (D-RI). Our letter in support of the hearing is below.

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May 16, 2018

RE: FAN Letter Supporting Hearing on How Forced Arbitration Erodes Legal Rights

Dear Chairman Cicilline and Ranking Member Sensenbrenner:

The undersigned members of the Fair Arbitration Now coalition strongly support today’s hearing exploring how forced arbitration erodes our legal system and curtails everyday people’s access to justice.

Forced Arbitration Disadvantages Workers, Consumers, and Small Businesses

Forced arbitration clauses are usually hidden in the fine print of “take-it-or-leave-it” agreements. These clauses deprive people of their right to seek justice in court before an impartial judge or jury. They are ubiquitous in contracts governing bank accounts, student loans, cell phones, employment, small business merchant accounts, and even nursing home admissions.

Corporations that place forced arbitration clauses in their standard contracts with consumers, non-union employees, and small businesses shield themselves from accountability for illegal practices and other wrongdoing. The contracts typically designate:

• The arbitration provider, who often rely on the company for repeat business and therefore may be biased in the company’s favor;
• The arbitration rules, which provide none of the legal safeguards that protect individuals who use the courts, including their ability to obtain key evidence necessary to prove one’s case;
• The state in which the arbitration is to occur, which is always at the company’s convenience, not the harmed individual who may have to travel far to get there, and
• The payment terms, which might include exorbitant filing fees, as well as continuous fees for procedures such as motions and written findings, and “loser pays” rules that are prohibitive for many individuals.

The proceedings are secret and final with few rights to appeal. Studies have shown that those forced into arbitration are less likely to win, receive smaller awards, and are otherwise severely disadvantaged. According to the Economic Policy Institute, “Consumers obtain relief regarding their claims in only 9 percent of disputes. On the other hand, when companies make claims or counterclaims, arbitrators grant them relief 93 percent of the time—meaning they order the consumer to pay.”[1]

Forced Arbitration Clauses Are Everywhere and are Not Voluntary

Since arbitration clauses are usually contained in non-negotiable contracts, the consumer, worker, or small business is presented with a legal fiction that they actually have a “choice” when signing away their rights when in fact refusing to sign means forgoing the goods, services, or employment. As a result, according to the Economic Policy Institute, 60.1 million workers, more than half of non-union, private-sector employees, have signed away their right to go to court if harmed by their employer.[2] In consumer contracts, a majority of credit cards, prepaid cards, storefront payday loans, cell phone companies, and private student loan contracts, along with a large segment of banks, include arbitration clauses in non-negotiable contracts. Many small businesses are also forced to agree to arbitrate disputes with larger companies, even when those companies steal money, price-fix, and otherwise violate antitrust laws that harm the small business.

Forced Arbitration Clauses Allow Corporations to Evade Accountability for Illegal Misconduct

Forced arbitration clauses allow banks and lenders to cheat customers with no accountability. They allow companies to hide systemic harassment and discrimination, including sexual harassment. They also prevent small businesses from enforcing their rights against companies engaged in illegal antitrust conspiracies, allowing criminals to keep ill-gotten gains and leaving small businesses with little or nothing.

In sum, forcing consumers, workers, and small businesses into arbitration has played a significant role in hiding systemic wrongdoing and allowing corporate wrongdoers to evade accountability for bad acts.

Congress Must Act

Congress must rein in the overly expansive interpretation that courts have given to the Federal Arbitration Act. Forced arbitration weakens federal and state laws that are intended to protect consumers and employees by removing individuals’ ability to enforce those laws in court. In 2011, the U.S. Supreme Court dealt a devastating blow to consumers and employees, ruling that companies could ban individuals from joining together to enforce their rights.[3] In 2018, the Court held that workers may be forced, as a condition of employment, to waive their right to act collectively to enforce their legal rights.[4] And just last month in Lamps Plus Inc. v. Varela, the Court dealt another blow to protecting access to the courts for those who have been harmed.[5]

Until Congress acts to correct the legal fiction—that workers, consumers, and small businesses have consented to the deprivation of their rights—these clauses will continue to endanger individuals and small businesses.

In February, Rep. Hank Thompson and Sen. Richard Blumenthal introduced the Forced Arbitration Injustice Repeal (FAIR) Act (H.R. 1423/S.R. 610). This important legislation would prevent corporations from forcing workers, consumers, and small businesses to resolve disputes in private, company-controlled arbitration systems, even when that company has engaged in illegal misconduct. The bill would specifically cover cases involving consumer, civil rights, employment, or antitrust violations, and it would ensure that federal and state laws enacted to protect legal rights in those cases are properly enforced.

The FAIR Act does not seek to eliminate arbitration and other forms of alternative dispute resolution agreed to voluntarily post-dispute. It would allow workers, consumers, and small businesses to choose arbitration in the aftermath of being harmed if they truly perceived arbitration to have benefits over proceeding in court. Nor would it affect collective bargaining agreements that require arbitration between unions and employers. Rather, the FAIR Act’s sole aim is to end the practice of forcing consumers, workers, and small businesses into secretive, one-sided arbitration proceedings that bind people long before they are harmed.

We strongly support the FAIR Act, which would restore access to our civil justice system and preserve important civil rights, employment, and consumer protections, and according to a national survey, 84 percent of the public supports federal legislation that ends the practice of forcing consumers and workers into arbitration. Republicans support the legislation more than Democrats (87% to 83%).[6] We urge you to quickly pass the FAIR Act through the subcommittee so that all of your colleagues in the House of Representatives have an opportunity to be on record supporting everyday people’s access to justice. With questions, please contact Remington A. Gregg at rgregg@citizen.org and Christine Hines at Christine@consumeradvocates.org.

Sincerely,

Fair Arbitration Now (Organizations that support ending the predatory practice of forced arbitration in consumer and non-bargaining employment contracts: http://www.fairarbitrationnow.org/coalition/).

[1] Heidi Shierholz, Correcting the Record, Economic Policy Institute (Aug. 1, 2017), https://www.epi.org/files/pdf/132669.pdf.

[2] Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration, Economic Policy Institute (Sept. 27, 2017), https://www.epi.org/files/pdf/135056.pdf.

[3] AT&T Mobility v. Concepcion, 563 U.S. 333 (2011).

[4] Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018).

[5] 587 U.S. __ (2019)(holding that “an ambiguous agreement” does not provide the “necessary ‘contractual basis’” for concluding that the parties agreed to submit to class arbitration). Lamps Plus at 6.

[6] Guy Molyneux & Geoff Garin, Nat’l Survey on Required Arbitration, hart research assoc. (Feb. 28, 2019),  https://www.justice.org/sites/default/files/2.28.19%20Hart%20poll%20memo.pdf.