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I decided to write this blog as a service to all those who have already been negatively affected by an arbitration experience or soon could be.  Despite the veneer of “fairness and impartiality” that is propagated by arbitration advocates, the current system offers little protection for consumers, small businesses and employees with far less bargaining power than those with whom they’re contracting.

I recently went through an excruciating arbitration horror story of my own.  I was forced to sue a recent former employer for breach of contract and fraud with the arbitration company, JAMS, My opponent perjured himself throughout deposition and right in front of the arbitrator. Then he even admitted to defaming me during a vigorous cross-examination. It all looked very promising – so promising in fact, that he made two huge settlement offers, which I now regret having declined. Just before the conclusion of the proceeding I was informed by someone in the industry that my former employer was spreading lies about me, presumably in an effort at blacklisting. We brought it to the arbitrator’s attention, but he decided to ignore it.

Despite what was a huge preponderance of evidence in my favor, the arbitrator, unbelievably, decided against me.  He also ruled that I should pay my former employer’s legal fees, in addition to my own. The total bill was almost a million dollars and was completely devastating.

It wasn’t until after the proceeding when I attempted to appeal the arbitrator’s decision that I learned of the built-in iniquities of the binding arbitration system here in the United States.  The system usurps ordinary consumers’ basic civil right to trial by a jury of their peers and grossly favors big business. Don’t believe me? Read some of the stories posted in this blog. Worst of all, there is almost no possibility at all for appealing a lazy or downright wrong ruling by an arbitrator.

Originally, our government enacted the Federal Arbitration Act in 1925 in order to alleviate pressure on an overworked legal system.  The intent was to allow large corporations to settle their disputes privately, outside of the public courts.  However, the Act still exists almost wholly unaltered since that time, and today is being used as a means of settling disputes between big corporations and ordinary citizens – a disparity that was never intended.

Think it doesn’t affect you?  Think again – almost everyone in this country who has a cell phone or a credit card is subject to a binding arbitration agreement.  Even hospitals and doctors have them buried in the fine print of their admissions documents!  This allows these parties to eschew the civil litigation system that you already pay for and to which you are fully entitled.  Instead of a jury of your peers, your case will be decided by a person who works for a big corporation which is being paid by the corporation you are litigating against.  To make matters worse, most arbitrators work in their off-time as defense attorneys for the same sort of companies you are suing.  Imagine suing a hospital for accidentally using elevator lubricant to clean surgical instruments used during your operation – and the “impartial” person assigned to decide your case is an attorney who makes a living defending doctors’ and hospitals’ malpractice claims.  It happened to a man named Bennie Holland.

Perhaps the worst part of arbitration is that there is NO PUBLIC RECORD OF PROCEEDINGS.  This is shockingly irresponsible as it allows corporations and the people that run them to violate your rights with impunity and without any fear that discoverable records of their transgressions exist.  In my case, this meant I had no way of knowing that my prospective employer was a people-mill that had been in almost constant legal battles with former employees when I signed my contract – a contract which included a binding arbitration agreement.

I ask that you please use this blog as a venue to broadcast your own personal arbitration horror story.  I’m making a documentary about the injustice of the Alternative Dispute Resolution (ADR) system and the current initiatives to reform it and I need to hear YOUR story.  It’s incumbent upon us all to use our voices to close this loophole that is allowing ordinary Americans’ right to a fair trial be usurped by large corporations and their lobbyists.

Please also contact your Senators and Congressmen and tell them to support the Arbitration Fairness Act of 2009 which is currently working its way through Congress.

Senate Moves to Ban Mandatory Arbitration with Defense Contractors

Congratulations to freshman Senator Al Franken (D-MN) and the Senate Judiciary Committee for taking some concrete steps toward leveling the playing field for employees and individual consumers in disputes with influential companies and corporations. The Senate approved a measure banning the use of Mandatory Binding Arbitration clauses in employment contracts by defense companies that contract with the federal government. The amendment in question even garnered the support of a few Republican senators, passing 68-30.

This is another step in the right direction for all of us and I, for one, am grateful!

Check out used car arbitration horror stories here.

Unfairness of MBA Discussed on Capital Hill

A Senate Hearing held on 7 October 2009 came down on the right side of two very important issues for American employees – Age Discrimination and Mandatory Binding Arbitration. Specifically, Sen Patrick Leahy (D-VT), Senator Al Franken (D-MN) and the rest of the Senate Judiciary Committee held a hearing on two Supreme Court decisions made in the past two years.

Regarding age discrimination, Senator Leahy, who chairs the committee, took issue with the Supreme Court’s decision this past June which switches the burden of proof in age discrimination cases from employers to employees.

“The Supreme Court’s recent decisions make it more difficult for victims of employment discrimination to seek relief in court, and more difficult for those victims who get their day in court to vindicate their rights,” Leahy said. “These decisions will encourage corporations to mistreat American workers in a still-recovering economy.”

Senators Leahy and Franken then focused their rath over the Supreme Court’s decision to uphold the Federal Arbitration Act in Circuit City, Inc. v. Adams.

“Now, after the Circuit City decision, employers are able to unilaterally strip employees of their civil rights by including arbitration clauses in every employment contract they draft,” Leahy said.

Attending the hearing was Jamie Leigh Jones who was drugged, raped and tortured by her coworkers during her time as a contract worker in Iraq. Because of an MBA clause in her employment contract, Jones was forced to take her case in front of an arbitrator instead of a jury of her peers. Senator Franken took up her cause and grilled Mark deBernardo, a partner in a law firm in Virginia who argued the merits of mandatory arbitration. Please click here for video of the hearing.

“She has not had her day in court, sir,” Franken said. “This is the result of your binding, mandatory arbitration, Mr. de Bernardo.”

Forced Arbitration: Unfair and Everywhere

The folks at Public Citizen have published a new report entitled, “Forced Arbitration: Unfair and Everywhere” which is enormously informative. Please click here to read it.

House Subcommittee Heard Testimony on Unfair Binding Arbitration Clauses

House Subcommittee Heard Testimony on Unfair Binding Arbitration Clauses

September 16th, 2009 • Filed Under: News • No Comments

Lawmakers and consumers testified on Tuesday before a House subcommittee, calling for new, tough laws restricting the ability of companies to force customers into mandatory binding arbitration when disputes arise. The law could help protect consumer access to the courts in cases against nursing homes, banks, cable companies and other corporations.

Congress is currently considering two different pieces of legislation that would restrict forced arbitration clauses contained in many agreements consumers must sign to do business with companies in many industries critical to Americans’ day-to-day life.

Representative Henry C. Johnson of Georgia has introduced the Arbitration Fairness Act, which would prevent all pre-dispute arbitration clauses that could be considered “forced” due to economic and social needs of the individual, and Rep. Linda Sanchez of California has introduced the Fairness in Nursing Home Arbitration Act of 2009, which would nullify all such clauses contained in admission agreements that prevent residents or family members from filing a nursing home negligence lawsuit or other claim in open court.

A report released on Monday by Public Citizen found that 75% of eight major industries require customers to sign pre-dispute arbitration agreements, including banks, cable/internet providers, home builders, and car dealerships. These agreements require customers to sign away their ability to go to court if they have been wronged, and most companies refuse to give customers information about their arbitration requirements until they are ready to agree to sign a contract.

Defenders of the practice object to calling the agreements mandatory, since consumers are not forced to sign the contract, and other clauses in contracts that people may not be familiar with are not considered to be mandatory. Stephen J. Ware, a professor of law at the University of Kansas, testified against passage of the bills, saying that pre-dispute arbitration prevents load on the court system, and that there are pre-existing laws which allow courts to nullify arbitration agreements which are unfairly utilized.

Critics of the practice say that when such agreements become ubiquitous in key industries, especially ones where people have little choice but to participate, then such agreements become de facto mandatory requirements.

“Checking a parent or other relative into a nursing home or other long-term care facility is a perfect example of a time when one party really has no real power or choice in the matter,” Sanchez said in her testimony before the House Subcommittee on Commercial and Administrative Law. “For desperate families who are unable to provide adequate care at home, the need for an immediate placement for their loved ones makes the ‘take-it-or-leave-it’ choice no choice at all.”

Question about the costs of the arbitration process

One of our readers sent me an email about his particular case. Our correspondence was as follows:

I just read your story about JAMS arbitration and it has confirmed a lot of what I thought. I am considering bringing a contract that I signed with another party to JAMS arbitration per the clause that they put in there but I have no idea what the costs will be. Before the ruling and legal costs that you were found responsible for, what were your costs in proceeding with the arbitration process? Thanks, and I hope all is well,

SW
Los Angeles, CA
_____________________________________________________________________________________________________________________________________
Dear SW:

To be honest, I don’t remember what the JAMS fees were, but I believe they were comparable to their competition. In fact, the arbitration fees were paid for by my opponent. What I found completely lacking was the integrity of my particular arbitrator. If you peruse around my blog, you’ll find some other ppl have had similar experiences to mine. I, for one, will never ever use JAMS again, if I can help it.

I hope that helps.

Best of luck to you,
Ehren Bragg
______________________________________________________________________________________________________________________________________

Unfortunately I don’t have a choice based on the contract which specifies JAMS. I called them and they said $400 to initiate, then $1500 retainer for the retainer fee for the arbitrator, and then $500-1000/hr for his/her time, which is pretty crazy considering the dispute is over $500.

SW
Los Angeles, CA
______________________________________________________________________________________________________________________________________
That’s why this whole thing is so screwed up. We already pay for the court system and then we have to pay again – many times it’s approaching or even exceeding the amount we’re seeking redress of – with this arbitration system.

Best of luck to you,
Ehren Bragg

Bank of America no longer requires arbitration to settle disputes

Bank of America has changed its policy that required binding arbitration between its credit card holders and banking customers and the bank. Bank of America made the decision in reaction to customer complaints that arbitration favors banks rather than the individual customer.

According to Bank of America spokeswoman Shirley Norton, the new rule change is effective for new disputes beginning Aug. 20. She also said that the company believed that arbitration is fair, but it was clear that some customers felt that it wasn’t.

The new law will allow for lawsuits against the bank but the company hopes that by listening to customer complaints and making changes, they will be able to settle more disputes with customers directly.

The practice to require binding arbitration is a common banking practice to protect against potentially more costly lawsuits.

Binding Arbitration Segment on NPR

This segment about binding arbitration recently ran on NPR. It’s a great piece and I’m very happy to see MBA getting more national attention. But my question is: when are people going to start getting angry about this?

Rape Case Highlights Arbitration Debate

by Wade Goodwyn

All Things Considered, June 9, 2009 · Jamie Leigh Jones was a 20-year-old Halliburton employee in 2005 when she was sent to work in Iraq. She’d been there just four days when she joined a small group of Halliburton firefighters outside her barracks at the end of the day. One of them gave her a drink. She took two sips, and Jones says that was the last thing she remembered.

“I woke up inside the barracks,” she says. “It was actually inside my barrack room, and that’s when I noticed I had been severely beaten and was actually naked.”

Jones had been raped, repeatedly. By how many men, she’s not sure. But she says one man was still naked and asleep in the room when she came to.

“Apparently, he knew he was beyond the reach of any jurisdiction, so he was still brazen enough to be there,” she says.

Jones was escorted by security to the company clinic for a rape examination. When the rape kit examination was done, the evidence was turned over to Halliburton security.

The young woman’s breasts were so badly mauled that she is permanently disfigured. It has been four years since the attack, and despite the physical and circumstantial evidence, the Department of Justice has declined to investigate.

Seeking Justice Through a Suit

Justice Department officials refused to explain or comment in any way to NPR about the case. Jones has decided that if she can’t have her day in criminal court, she’ll sue Halliburton and its former subsidiary, KBR, in civil court.

“I want corporate accountability,” she says. “I was so brutalized that I’m going to have to remember this the rest of my life. And Halliburton was so uncompassionate that they even let the men work there, still, after I went home.”

Heather Browne, director of communications at KBR, says that while the company can’t speak to the facts since the case is ongoing, it denies any liability in the attack. And she argues that any dispute with Jones, even one involving charges of rape, must go to arbitration.

So Jones is now going to court seeking the right to sue. She has become one of the nation’s leading arbitration reform advocates.

An Arbitration Culture

If Jones’ case is remarkable, the fact that arbitration is involved is not. In the past 20 years it has become a dominant feature in the legal relationship between American corporations, their employees and their customers.

If you use credit cards, have a cell phone contract, bought a house from a builder or put your mother or father in a nursing home, you have very likely signed away your right to be heard in court if there’s a problem. It’s called pre-dispute mandatory binding arbitration.

Public Citizen’s David Arkush, one of the country’s leading researchers on arbitration, says many consumers have no clue as to the rights they’re signing away.

“In the fine print of those contracts is a provision that says that they can never sue the company if they have a dispute,” Arkush says.” Instead they have to go a private, secret tribunal chosen by the company.”

A Losing Record For Consumers

Arbitration is a closed, private process, often with little or no written record. But one state, California, changed its law to require that arbitration results be publicly recorded. Public Citizen staff reviewed 34,000 California cases, and Arkush says the results speak volumes.

“Overall, consumers lost 94 percent of the time,” he says.

The arbitration industry disputes that number. But it does not disagree that corporations win more of the time. The disagreement is about whether this is evidence of bias or a reflection that corporations bring stronger cases.

Mike Kelly, spokesman for the National Arbitration Forum — one of the country’s largest arbitration firms — says it’s the latter.

“You’re not going to bring a case that you’re going to lose,” he says. “Frankly, you’re not going to bring a case that you think you have a chance to lose.”

Kelly says the results would still be lopsided if these same cases went to court instead of arbitration. And Kelly says his arbitrators, which the NAF calls neutrals, are men and women without bias.

“What you’re really doing is taking a shot at all those individual neutrals who are handling these cases,” he says.

Rulings And Consequences

Elizabeth Bartholet was one of the NAF’s arbitrators for a time. She’s a law professor at Harvard and for two decades has moonlighted as a part-time arbitrator. The first 19 cases she arbitrated for the National Arbitration Forum were all credit card cases. She ruled each time for the credit card company.

Then, on the 20th case, she ruled for the consumer. After reviewing the evidence, Bartholet awarded the cardholder $48,000. And with that, her career as an NAF arbitrator was effectively over. She says she was stricken from her remaining cases.

“I called the NAF and spoke to the case manager, and she agreed the reason I was being removed was because I had ruled in this one case against the credit card company,” Bartholet says.

The NAF says nothing improper was done, that companies and consumers alike are allowed to strike an arbitrator from a case. Bartholet counters that arbitrators know full well that if they rule against corporations too often, their income will dry up.

“NAF arbitrators are given a form where every line is filled out in terms of the amount it is suggested that you rule,” she says. “And so all you need to do is fill in to the right [of that line] the exact same number. And then at the bottom, you total it up and they give the attorneys’ fees number. And there’s no indication that you should even write a one-sentence opinion.”

Bartholet says nowadays, she will arbitrate only when both parties are roughly equal in power and enter into arbitration voluntarily.

Push For Reform

The Arbitration Fairness Act now before Congress would ban clauses that make arbitration mandatory for the resolution of disputes — restoring to consumers and employees the choice of taking their case to court.

Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, says that making arbitration voluntary will lead to its extinction.

She also says it will clog the courts with needless litigation. “It really is human nature,” she says. “When people have an argument, they really want to fight it out. And the best place to fight it out is in court.”

New Poll Shows a Majority of Americans Oppose Mandatory Binding Aribtration

A poll released yesterday by Lake Research Partners indicates that a majority of Americans oppose Mandatory Binding Arbitration (MBA). The study included 800 American adults who were likely to vote in the upcoming 2010 election cycle. Specific results were as follows:

- 59% of likely voters oppose the inclusion of mandatory binding arbitration clauses in consumer and employment contracts.

- 6 out of ten Americans support the Fair Arbitration Act.

- Over 2/3 of the sample didn’t realize that they were subject to mandatory arbitration clauses that were buried in the fine print of contracts they had signed with credit card companies, cell phone service providers and others.

- More than 70% of respondents were completely unaware that MBA’s could keep them from suing employers and consumer product companies in a court of law.

The results of the poll were announced yesterday by the Fair Arbitration Now coalition at a Capital Hill news conference that was held to commemorate Arbitration Fairness Day.

ARBITRATION FAIRNESS DAY – 29 APRIL 2009

Respond to the Chamber of Commerce – Support Fairness in Arbitration

On April 29th, people who were harmed by forced arbitration will travel to DC to participate in Arbitration Fairness Day and urge support for the Arbitration Fairness Act. In anticipation of next week’s event, the Chamber of Commerce has inundated Capitol Hill with misleading paper opposing the Arbitration Fairness Act.

Businesses oppose the Arbitration Fairness Act because the system of forced arbitration allows them to escape accountability for discrimination, harassment, gross negligence, fraud, and other corporate wrongdoing. Businesses aren’t looking out for the best interests of consumers and employees; they want to protect their ability to force individuals into a system that they design. Who wouldn’t want to control the method by which claims against them are resolved?

The Truth: HR 1020, the Arbitration Fairness Act does not eliminate arbitration, it just makes it voluntary. In other words, big business can’t force you to sign away your right to hold them accountable for their wrongdoings, but a consumer can still choose arbitration.

Don’t listen to the hype. The Chamber knows full well that they must use scare tactics to try and defeat this bill because they are on the wrong side of this issue.

The Chamber of Commerce thinks Americans won’t hold them accountable for spreading anti-consumer rhetoric. Send a Letter to Congress and tell them not to be fooled by the U.S. Chamber of Commerce and their well-funded, big business allies. Insist that they put People over Profits!

For more information on forced arbitration and the upcoming Arbitration Fairness Day, or to sign a petition please visit www.fairarbitrationnow.org.

Contrary to what the Chamber of Commerce claims:

Americans support the Arbitration Fairness Act. As the attached letter reflects, civil rights, labor, and consumer groups representing millions of Americans support the Act because it protects consumers and employees from discrimination, sexual harassment, negligence, and predatory lending by holding corporations accountable for their wrongdoings.

The Arbitration Fairness Act would only restore the Federal Arbitration Act to what it was originally intended to do. Contrary to what the Chamber claims, forced arbitration has not been used for 80 years in consumer and employment contracts; it is business to business arbitration that has been used for 80 years. Corporations started using forced arbitration in consumer contracts beginning in the mid to late 1990’s, after court cases held that there was nothing in the Federal Arbitration Act that limited the use of forced arbitration to only business-to-business disputes.

Consumers favor voluntary arbitration and the bill does nothing to limit the use of arbitration after a dispute has arisen and both sides agree to it. If arbitration is so fair and efficient, as the Chamber claims, why wouldn’t consumers voluntarily choose it as a means to resolve their dispute? If consumers don’t choose it, it’s because it’s not fair.

Forced arbitration is not better for consumers. The studies cited by the Chamber carefully select the cases and distorted numbers they want to report. For example, the Searle study actually shows that businesses win far more often than consumers in mandatory arbitration and in much higher amounts. Consumers win less, and when they do prevail, receive much lower awards compared to their original claim. If a consumer is to claim $5,000 and only win $10, this counts as a “win” by Searle’s calculation, therefore inflating its 53.3% “win rate” figure.

Consumers support the Arbitration Fairness Act. You only need to read the questions included in the Chamber’s poll to understand why the results that it cites are inaccurate. The Chamber’s poll, which purported to show that voters did not support the Arbitration Fairness Act, asked voters: “If you could choose the method by which any serious dispute would be settled between you and the company, which would you choose?” (Emphasis added.) But what they didn’t tell these voters is that forced arbitration takes away a consumer’s choice. Under the current system, consumers are not allowed to choose which option is best for them. They are not allowed to choose to file a claim in court nor are they allowed to choose who the arbitrator will be, or even what state they will have to arbitrate the claim in. Instead, they are forced into an arbitration system that is set up to favor the corporation and trample on the rights of the consumer. When consumers are given the choice to arbitrate after a dispute has arisen, they gain bargaining power and are better able to enter into an arbitration system that is fair.

Thank you for Taking Action!

Jill Burke
People Over Profits

Today is National Arbitration Fairness Day!

People from all over the country are descending upon Capitol Hill today to meet with lawmakers and tell them of their own personal experiences with Mandatory Binding Arbitration and support the Arbitration Fairness Act which is currently working its way through Congress. Many others have visited their lawmakers’ local offices to do the same.

Unfortunately, the fight isn’t over and there is still time to get the attention of lawmakers and the media. Please contact your members of Congress by telephone or email and let them know you are part of the majority of Americans who support arbitration reform. Click here to find their contact information.

For more information, please visit: www.fairarbitrationnow.org.

I’ll be reporting on the effect of our efforts in the days and weeks ahead. Thank you all for your continued support.

Best,
Ehren Bragg