Today Public Citizen released a report documenting unfair wireless industry practices and a number of ways that the industry escapes accountability for those practices.
Arbitration Fairness Act
Alliance for Justice released a report exposing repeated and aggressive efforts by the conservative majority on the United States Supreme Court to radically rewrite the laws governing arbitration in order to shield corporations from liability.
Arbitration Activism: How the Corporate Court Helps Business Evade Our Civil Justice System details ways in which the Supreme Court’s rulings in cases like AT&T Mobility v. Concepcion and Rent-a-Center West v. Jackson have “allowed big business to abuse forced arbitration contracts, building up a privatized legal system that robs everyday Americans of the chance to be heard by an impartial judge and jury.” The Court’s actions can ripple through the legal system in a very short time, and the report tracks the harmful impact that the AT&T case has already had on civil and employment rights and constitutional protections in the five months since it was decided.
The Corporate Court’s rulings have systematically distorted existing federal law, allowed corporations to establish arbitration procedures that free themselves from class liability, and have removed many legal disincentives for corporate misbehavior. Most importantly, the Roberts Court has willfully undermined the fundamental principle that all Americans should have access to the courts, ensuring that all parties stand equal before the law.
In announcing the release of the report, Alliance for Justice President Nan Aron said, “Our nation is facing a crisis where our most cherished notions of fairness and the rule of law are being slowly chipped away by those who seek to concentrate all power in the hands of giant corporations and financial institutions. The aggressive expansion of forced arbitration by this Supreme Court is just one more example of how even the most routine aspects of our lives, from signing up for a cell phone or applying for a job, are being rigged to favor business interests and to disempower everyday Americans. We call on Congress to restore fairness and balance to the system of resolving consumer, employment, and civil rights disputes, before it is too late.”
Danielle Franco-Malone is legislative counsel at Alliance for Justice.
Jamie Leigh Jones is a former employee of defense contractor KBR, who, following an incident in Baghdad, Iraq, sued her employer alleging negligence, assault and battery arising from a gang-rape, negligent hiring, retention and supervision and false imprisonment. However, Jones’ employment contract included a clause requiring employment-related claims into arbitration, which would deny the use of a public judge, jury or right to appeal.
KBR fought for years to force Jones into arbitration, even appealing the issue to the U.S. Supreme Court. After learning of Jones’ case, Congress passed a law that bars defense contractors from forcing employees with sexual assault claims into arbitration. KBR dropped the appeal. After more than five years of trying to get to court, Jones’ claims were heard by a jury this summer. Jones lost her trial, but her ordeal to exercise a basic right to access the civil justice system should be remembered by the millions of employees and consumers who face a similar obstacle.
Here’s another story about the impact of Jones’ case.
When Captain Matthew Wolf of the US Army Reserves was called up for active military service from his New Jersey home, he decided to exercise a benefit Congress created for military men and women under the Servicemembers Civil Relief Act (SCRA).
The SCRA creates procedures that protect soldiers from certain civilian responsibilities so that they may devote their entire energy to their military service. Congress did not want soldiers to be distracted by their civilian obligations. One of the many provisions of SCRA allows service members to terminate car leases and receive a refund for all advance payments made.
However, when Wolf returned his 2007 Nissan Infinity G35 Sedan, the dealer refused to return his payments. He then decided to seek justice for himself and for all other service members similarly situated. He brought a class action lawsuit against Nissan for violating the SCRA.
Unfortunately, Wolf’s lease agreement included an arbitration clause which contained a ban on class actions. Meaning that instead of going to court, Wolf would be forced into a secretive arbitration proceeding controlled by the dealer. In addition, he could not act on behalf of other service members whose rights were also potentially violated because the contract banned class actions.
When Wolf initiated the claim and begun proceedings for a class action, Nissan moved to dismiss the lawsuit by invoking the arbitration clause and class action ban. The district court ruled in Nissan’s favor, holding that the forced arbitration clause and class action ban was valid in light of the Supreme Court’s recent ruling in AT&T Mobility v. Concepcion (decision issued April 27, 2011).
Arbitration clauses are typically found in many everyday contracts between consumers and corporations, including cell phone, banking and employment contracts. When an individual is bound to arbitration instead of an open court with a judge and jury, the fate of his claim rests with a privately financed arbitrator. Further, arbitrators’ decisions are generally withheld from the public, without any reasoning given and are not appealable.
Individuals with identical claims often bring their claims together in one class action. Even assuming that Wolf would have recovered for his loss in arbitration, Nissan likely would not address all of the other soldiers who suffered similar losses. But if all service members were able to combine their claims against Nissan, they could simultaneously seek redress.
However, the Supreme Court held in Concepcion that the Federal Arbitration Act preempts state laws which hold that class actions bans within arbitration clauses are unconscionable. The court effectively allowed companies to insert class action bans within arbitration clauses in their consumer contracts. As a result of the decision, Wolf and his fellow service members could not get their day in court.
Soon after Concepcion was decided, Sen. Al Franken (D-Minn.) and Rep. Hank Johnson (D-Ga.) introduced the Arbitration Fairness Act (S.987, H.R.1873). The legislation would ban arbitration clauses in consumer contracts, which would ensure that arbitration is voluntary and entered into after the dispute arises. It will help to prevent similar injustices from occurring to other service members.
Wolf v. Nissan Motor Acceptance Corp., No. 10-CV-3338 (NLH) (KMW), 2011 WL 2490939 (D.N.J. June 22, 2011).
Guest author Jeremy Greenberg is civil justice intern at Public Citizen.
Forced arbitration affects almost all consumers of goods and services and millions of employees who sign contracts where the fine print eliminates their right to seek justice in court. Yet forced arbitration remains an issue largely unknown to the public. That may change soon. Filmmaker Susan Saladoff through her documentary film “Hot Coffee,” presents gripping accounts of the ongoing corporate campaign to restrict individuals’ right to a civil jury trial, including Stella Liebeck’s story, which also inspired the film’s title.
Most Americans have heard of Stella Liebeck. She was the 79-year-old woman who in 1992 sought and won compensation in court in a case against McDonald’s Corp. after suffering third-degree burns on her groin, inner thighs and buttocks when the company’s too-hot coffee which was heated at dangerously high temperatures spilled onto her lap. Due to the distortions and false rumors that soon became conventional wisdom – no, she was not racing down a highway while trying to sip her coffee – Liebeck’s case became a symbol for so-called “tort reform,” or corporate efforts to give big businesses near-immunity from liability.
Stella Liebeck’s tale portrayed in “Hot Coffee,” was frank and compelling truth-telling, but it was the lesser known story of Jamie Leigh Jones and the knowledge that forced arbitration clauses are inserted within everyday consumer and employment contracts which seemed to stir indignation in some writers who reviewed the film.
Jamie Leigh Jones’ case was the “most infuriating example of legal injustice,” wrote Peter Debruge in his review of the film for Variety, the entertainment industry magazine.
Jamie Leigh Jones was a 19-year-old employee of defense contractor and Halliburton subsidiary KBR who was gang-raped in Iraq by her co-workers and wrongfully imprisoned by her employer after she reported the crime. She attempted to sue her employer in civil court, but the provision in her employment contract barred her from court and required her to go to arbitration, a secretive system where corporations typically have enormous influence over the process and outcome of disputes. As Debruge recounted Jones’ story in the film right up to Senator Al Franken’s effort to assist Jamie Leigh and similar victims, it became crystal clear that “as consumers and employees, virtually everyone watching the film has similarly waived their rights.”
Hank Stuever of the Washington Post also found the immediate impact of this type of “tort reform” on our everyday lives significant enough to mention in his glowing review of the film. “As Saladoff shows,” Stuever wrote, “each of us at present relinquishes our right to sue in all sorts of everyday consumer transactions — while using credit cards, cellphones and a host of other products.”
Forced arbitration is mentioned and described in other reviews of the film including in The New York Times, The Daily Beast, CNN and Reuters, to name a few. Saladoff’s “Hot Coffee” and by consequence the movie reviewers have brought more attention to the injustice of forced arbitration than tireless public interest advocates could even dream of providing it. With any luck, viewers of the film will be spurred into action so we can all work together to effect change in the system.
“Hot Coffee,” will premiere tonight on HBO at 9 p.m.
Over the last year, the US Supreme Court has issued three disappointing decisions that expanded companies’ use of forced arbitration clauses in consumer and non-union employment contracts. Forced arbitration clauses are an abusive corporate tactic to stamp out consumers’ and employees’ rights.
The Court has empowered corporations to restrict our right to access the court by expanding arbitrators’ power and limiting consumers’ and employees’ ability to band together in class actions. Just last month in AT&T Mobility v. Concepcion, the Court gave the green light to corporations to ban class actions in their contracts. So now we are left virtually without recourse and corporations are free to act without any fear that they may be held accountable for their actions.
Luckily, there are members of Congress who will stand up for consumers and employees. Senators Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.), and Rep. Hank Johnson (D-Ga.) announced the introduction of the Arbitration Fairness Act of 2011, S. 987 and H.R. 1873. So far, 11 other senators and 62 representatives have cosponsored the legislation. They concur that arbitration should be agreed to by both parties after the dispute arises (not inserted in the fine print of one-sided adhesion contracts).
All members of Congress should be on board. Congress should stop the corporate attack on our rights and support the Arbitration Fairness Act.
All around the country, newspapers’ consumer journalists are taking notice and reporting on the injustice of forced arbitration. Most recently, Matthew Hathaway, columnist for the St. Louis-Post Dispatch, posted a short article on the “The Savvy Consumer” blog. While Hathaway reports on the biases and unfairness of the predatory corporate practice, he’s a tad overly optimistic that it may soon come to an end.
As Hathaway noted, the new Consumer Financial Protection Bureau created by the recently passed financial reform law will be authorized to ban or restrict forced arbitration. So will the Securities and Exchange Commission. But here’s what Hathaway leaves out: millions of other consumer contracts exist that fall outside of these agencies’ jurisdictions. The CFPB and SEC can restrict investor-broker contracts and contracts for other financial products as designated under the new law. But they have no authority to restrict or ban forced arbitration in numerous consumer contracts, such as those for employment, nursing homes, cell phones, and home building.
Hathaway guesses that the days of forced arbitration “could be numbered.” His optimism is refreshing. But even with SEC and CFPB’s new authority, we still need Congress to pass the Arbitration Fairness Act to eliminate pre-dispute forced arbitration from all consumer contracts for good.
Stephen Colbert has a hilarious segment on binding mandatory arbitration clauses in credit card agreements. The part on arbitration starts a little past two minutes in, but the whole piece is worth watching.
|The Colbert Report||Mon – Thurs 11:30pm / 10:30c|
|Consumer Protection Agency – Barney Frank|
The forced arbitration of claims arising out of statutory protections for consumers and employees has become a hot topic at the Kagan hearings. The parade of comments by Senators started even before the hearings began, with a written statement by Senator Leahy criticizing the Supreme Court’s 5-4 decision in Rent-a-Center v. Jackson, and similar remarks on the Senator floor by Senator Franken. The topic was raised again in Senator Whitehouse’s opening statement on Monday and in an extended colloquy between Franken and Kagan this morning.
In his statement, Leahy called the Rent-a-Center decision "a blow to our nation’s civil rights laws and the protections that American workers have long enjoyed under those laws." He noted that "more than one hundred million Americans work under binding mandatory arbitration agreements" and that "most Americans are not even aware that they have waived their constitutional right to a jury trial when they accept a job to provide for their families."
Congress worked for years on a bipartisan basis to pass laws to protect workers from race discrimination, gender discrimination and age discrimination. . . . Rent-a-Center is unfortunately just the latest in a line of divisive and devastating Supreme Court decisions where five justices have, in effect, gutted those statutory protections. … Congress should now take a closer look at the way in which binding mandatory arbitration is creating a legal underground where American workers are left without protection.
There is no rule of law in arbitration. There are no juries or independent judges in the arbitration industry. There is no appellate review. There is no transparency. And as a result of today’s divisive ruling, there will likely be no justice for millions of American workers and their families. The courthouse doors have simply been closed to them. Today’s opinion also gives big business a disincentive to treat their employees fairly and will no doubt lead to virtually all companies requiring their employees to sign one-sided arbitration agreements as a condition of employment.
Senator Whitehouse’s opening statement at the Kagan hearings struck a similar chord, Unfortunately, the conservative wing of the current Supreme Court has departed from [the Court’s] great institutional traditions. Precedents, whether of old or recent vintage, have been discarded at a startling rate.
Statutes passed by Congress have been tossed aside with little hesitation, and constitutional questions of enormous import have been taken up hastily and needlessly. Only last week, the Rent-A-Center decision concluded that an employee who challenges as unconscionable an arbitration demand must have that challenge decided by the arbitrator.
And the Citizens United decision — yet another 5-4 decision — created a constitutional right for corporations to spend unlimited money in American elections, opening our democratic system to a massive new threat of corruption and corporate control. There is an unmistakable pattern. For all the talk of umpires and balls and strikes at the Supreme Court, the strike zone for corporations gets better every day.
Finally, Senator Franken this morning used the hearings as an opportunity to sharply critique not only the recent Rent-a-Center decision, but also the Court’s 2001 decision in Circuit City v. Adams, which rewrote the Federal Arbitration Act to include most employee claims. The relevant portion of the transcript form this morning’s hearings:
In her Oct. 25 column, Kathleen Parker defended the 30 GOP senators who opposed Al Franken’s amendment to the defense appropriations bill. The amendment would restore access to justice for individuals who are sexually assaulted or harassed while working for defense contractors. Under current law, many defense contractors can use the fine print of employment contracts to strip employees of the right to go to court — even if the employees are assaulted by co-workers in a lawless environment permitted by the employer.
Ms. Parker first argues that contractors might not know what is in their subcontractors’ employment contracts. But that problem is easily solved — by requiring disclosure of the contracts.
Ms. Parker then argues that Congress should prohibit binding arbitration for criminal cases. We could hardly agree more, which is why we support the Arbitration Fairness Act, a bill that would end binding arbitration for all employees and consumers. At the same time, we also urge Congress to pass Mr. Franken’s amendment. That the amendment makes needed progress without ending forced arbitration for every American is no reason to oppose it.
David Arkush, Washington
The writer is director of Public Citizen’s Congress Watch.