Arbitration Horror Stories

CONTACT YOUR MEMBER OF CONGRESS AND URGE SUPPORT FOR THE ARBITRATION FAIRNESS ACT OF 2009

Wednesday, February 11, 2009

Congressman Henry “Hank” Johnson is set to introduce the Arbitration Fairness Act of 2009 this week. Please contact your Representative TODAY and ask them to be an original cosponsor of the bill. The Arbitration Fairness Act would prohibit the enforcement of binding mandatory arbitration clauses in consumer, employment, and franchisee contracts. Below is a Dear Colleague letter from Congressman Johnson.

Thank you so much for your time and efforts.

Jill Burke
People Over Profits

Last Chance to Become an Original Cosponsor of the Arbitration Fairness Act of 2009
From: The Honorable Henry C. “Hank” Johnson Jr.
Date: 2/6/2009
Preserve Consumer Rights

Dear Colleague,

One of our indelible rights is the right of a jury trial. Guaranteed by the Constitution, this right has been gradually ceded by citizens everyday as they purchase a new cell phone, buy a home, place a loved one in a nursing home, or accept a new job. Once used as a tool for businesses to solve their disputes, arbitration agreements have found their way into employment, consumer, franchise, and medical contracts.

The Federal Arbitration Act (FAA) was enacted as an alternative to resolve disputes between businesses on equal footing. Today, these agreements have entered the consumer level. In order to receive service, businesses have imposed mandatory pre-dispute arbitration agreements on consumers. Citing it as a cheaper, informal, expedited process, these contracts of adhesion leave consumers, employees, and small businesses at a disadvantage.

Ordinary Americans overwhelmingly do not support mandatory arbitration clauses when they are explained to them. However, millions of Americans have unknowingly received mandatory arbitration clauses in contracts for a wide range of consumer goods and services. Oftentimes, they are enforced without a signature, and are announced in hundreds of lines deep in fine print, written in dense legalese, often on the backside of a document or buried in a mailer along with other pieces of advertisements or solicitations. If and when a dispute does arise, high administrative fees, a lack of a discovery proceeding, and no meaningful judicial review of an arbitrator’s decision amount to a stacked deck against the consumer, making it harder for individuals to prevail.

Although states have tried to address this problem through their consumer protection laws, the courts have interpreted the Act to trump state laws leaving consumers very little recourse. This legislation would return the FAA to its original intention and omit consumer, medical, franchise, and employment agreements from these pre-dispute agreements. Americans are entitled to a trial by jury; pre-dispute mandatory arbitration agreements give only one side the upper hand.

Please become an original cosponsor of this important legislation.

Sincerely,

Henry “Hank” Johnson
Member of Congress

THE ARBITRATION FAIRNESS ACT: MYTHS AND FACTS

The Arbitration Fairness Act (AFA) would continue to allow voluntary arbitration while preserving the right to trial by jury. The bill would prohibit a corporation from forcing a consumer into a rigged mandatory arbitration system where the corporation hand-picked the arbitrator and all of the rules of the process before a dispute even occurred.

Myth: The AFA prohibits arbitration.
Fact: The AFA encourages voluntary arbitration; it only prohibits corporations from forcing mandatory clauses on consumers without them having a chance to negotiate the terms and often without them knowing about it.

Example: When admitting his father into a nursing home, Charles Miller Jr. signed a lengthy contract that, unbeknownst to him at the time, contained a binding mandatory arbitration clause. His father was not seen by a physician until three weeks after his admission, during which time he lost 19 pounds and suffered from dehydration and pneumonia, all of which led to his death. Charles Miller Jr. filed a claim against the nursing home corporation, but a court held that because he had signed this contract, he would be forced into arbitration for his claims against the nursing home, under the terms the nursing home corporation chose to put into the contract. Because Charles Miller Jr. had unknowingly signed a contract that contained a mandatory arbitration clause before any dispute had arisen, he was bound by its terms, no matter how unjust.

Myth: Most consumers favor binding mandatory arbitration.
Fact: Consumers favor voluntary arbitration and being given the choice to arbitrate. Would an employee with a claim against Halliburton want Halliburton deciding how her claim should be handled? Would a homeowner with a claim against his home contractor want the contractor deciding how his claim should be handled?

The Chamber of Commerce’s recent study, 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 binding mandatory 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.

Myth: Arbitrators are neutral, unbiased decision-makers.
Fact: Binding arbitration favors corporations because only corporations are repeat users of arbitration companies.

If an arbitration company wants to be used in a company’s mass consumer or employment contracts, the arbitration company has a huge financial incentive to appear favorable to those businesses in arbitration proceedings. Why would a company choose an arbitrator that rules against them?

Myth: Arbitration is cheap and more accessible to consumers.
Fact: Arbitration is so expensive that most consumers will not be able to pursue their claim against a corporation because they can’t afford the costs of the arbitrator.

Under mandatory arbitration clauses, consumers must pay steep filing fees just to initiate a case—seldom less than $750 – and pay their share of the arbitrator’s hourly charges, which are routinely $400 or more per hour. All these fees must be deposited in advance and almost always amount to thousands of dollars. In addition, arbitration clauses often allow the corporation to choose the location, regardless of how inconvenient or costly travel will be for the consumer.

Myth: Arbitrators are like judges; they have to follow the law and publicly state the reasons they made their decision.
Fact: Arbitrators are not bound by any laws. They do not have to follow the law and they don’t have make public or even provide to the consumer any explanation for ruling the way that they did.

Most arbitration clauses require that proceedings be kept confidential, even if the case raises important public policy issues. As a result, only the corporation can track past decisions and know which arbitrators have ruled for them. In addition, arbitrators do not set or follow judicial precedent, something our judicial system requires to ensure consistency and fairness in legal proceedings.