Arbitration Horror Stories

This is a great story reprinted from the Consumer Law and Policy Blog and available at: http://pubcit.typepad.com/clpblog/2009/04/outrage-in-ohio-an-unfair-decision-on-arbitration.html

by Paul Bland and Tami Alpert (Power-Cotchett Felow, Public Justice)

Something really crazy has happened in Ohio. Last summer an Ohio State Court of Appeals held that, under Ohio law, if a company claims there is an agreement to arbitrate, then the plaintiffs can be automatically kicked out of the courtroom without being given a chance to respond. The decision is Garber v. Buckeye Chrysler-Jeep-Dodge of Shelby, 2008 WL 2789074, No. 2007-CA-0121 (Ohio. App. 5 Dist. 2008). We urged the Ohio Supreme Court to review and overturn this decision, but several months ago it refused to hear the case. For now, at least, this decision is the law in one part, and possibly all, of Ohio. Under the Garber rule, a plaintiff can be forced go before a private arbitrator picked by the company they are suing, without ever being given an opportunity to respond.

This new decision in Ohio is a complete aberration – court cases are normally like a game of chess in the sense that parties are given a chance to respond whenever the other side makes a move. But now, in Ohio, if a corporation simply claims that there’s an agreement to arbitrate, the corporation gets to have the legal equivalent of a checkmate on the first move. Under the Garber ruling, the consumer immediately loses and is kicked out of court. Under this decision, no matter how unfair a given arbitration clause may be, the consumer has no meaningful chance to appeal.

The Big Problem
To understand why the Garber ruling is so bad, it is important to know a bit about binding mandatory arbitration. Arbitration is not court trial, nor is it mediation. Instead of going before a publically chosen and accountable judge, using standard court rules and fees, under arbitration, a case is resolved by a private decision maker selected by a private arbitration company (there are three big arbitration companies in the US right now that do about 90% of the business). The private arbitration company makes up its own rules and fees, and the arbitrators usually do not issue written decisions explaining their awards. Even if they do write decisions, those are usually not publicly available or searchable – it’s very hard if not impossible for a consumer to find out why an arbitrator decided an earlier decision one way or the other. Unlike a court judgment or mediation, the decision of the arbitrator is final. It is binding and is not subject to any meaningful appeal. (See this prior post for more on the lack of judicial review in arbitration.)
Arbitration clauses are generally enforceable under the law. But like any contract, sometimes arbitration clauses have problems that make them so unfair that they are unenforceable. For example, there are some cases where the arbitration clause was never actually agreed to by the consumer. We have seen this in a lot of car sales; indeed we’ve even seen forgeries by some car dealers of consumer’s signatures. Like any contract, an arbitration clause that wasn’t assented to by both parties is not enforceable. Another example of why arbitration clauses should not be made automatically enforceable without giving consumers a chance to respond is that corporations often add ridiculously unfair terms to the fine print of an arbitration clause. One arbitration company used to require that all consumers, regardless of their residence or the amount of money they claimed in a dispute, had to physically go to Minnesota to have their cases heard in arbitration. Similarly, some corporations and/or arbitration companies have set such high fees for arbitration that they prevent people from proceeding. We’ve represented consumers who were faced with arbitration fees that were greater than the value of the underlying dispute. Other arbitration clauses have terms that are terribly biased and one-sided. In the infamous Hooter’s sexual harrassment case, 173 F.3d 933 (4th Cir. 1999), the arbitration clause allowed the company to pick practically anyone to be the arbitrator. Under the language of the clause, the company could even have selected themanager accused of harassing a waitress to serve as arbitrator in the case.

When parties challenge unfair arbitration clauses, it serves as a critical policing system. Many courts – including Ohio courts–have struck down abusive arbitration clauses in particular cases. In Ohio, as in most other states, there are cases holding when the terms of an agreement to arbitrate are so unfair they are unconscionable, the agreement is deemed unenforceable, and rather than arbitrate, the dispute can proceed in court. (I wonder if these pro-consumer cases still mean anything after the Garber decision.) Some companies have responded to these kinds of decisions by revising their arbitration clauses to jettison some of the most obviously unfair provisions. For example, some companies now will bear the full cost of arbitration. If consumers can’t challenge the most abusive arbitration clauses, corporations will have no incentive not to put in the most unfair provisions they can invent.

We’ve reviewed hundreds of cases involving unconscionability challenges to arbitration clauses, and we have NEVER before seen a court issue a ruling like the Garber case in Ohio. No other court has simply taken the word of one side, and refused to allow the other side to respond to a claim that there is an agreement to arbitrate. This is simply outrageous.
What Happened
In Garber, two car buyers filed a lawsuit in court against a car dealer, alleging fraud and violation of consumer protection statutes. A few weeks later, the dealer responded with a motion to compel arbitration. The NEXT DAY, without giving the car buyers any opportunity to respond, the trial court automatically granted the motion to compel arbitration! The following day, the car buyers rushed back to court asking to re-open the case and permit them to challenge the enforceability of the arbitration clause.
The car buyers raised very serious legal challenges, arguments that would have won in many courts. For example, one of the two consumers never even signed the agreement, and the agreement required that they use of a very expensive arbitration company. But the trial court refused to even consider the car buyer’s arguments and denied their motion.
Going against all previous precedent, the Ohio Court of Appeals affirmed, holding that the car buyers waived any arguments they might have against the arbitration clause because they did not raise the arguments IN THEIR COMPLAINT. Shockingly, the Court of Appeals also held that, under Ohio
law, the trial court was not required to permit the plaintiffs any response to the car dealer’s motion to compel arbitration.

We at Public Justice petitioned the Ohio Supreme Court to review the case, but the court refused, making this decision the final rule in at least a large part of Ohio. You can find a copy of our Petition, which sets forth the legal reasons why this ruling should have been overturned, here.

Why It’s Wrong
The ruling in Garber creates an entirely new procedural barrier and substantive requirement that has never before been recognized by any court, and that contradicts a number of established rules of law.
First, by ruling against the plaintiffs without even providing them an opportunity to be heard, the court violated their fundamental due process rights. Due process means that when one party makes a claim, the other party must be notified and given an opportunity to have their side of the story heard. What’s happened in Ohio s that the Garber ruling has eliminated this vital Constitutional protection for consumers alleged to have entered arbitration clauses. Now, if a corporation says there is an arbitration clause, the court is supposed to just take the corporation’s word for it and throw the lawsuit out of court. The plaintiff is never given an opportunity to challenge the existence of a valid arbitration agreement, and thus is denied basic due process.
Second, the Garber decision ignores the hefty body of law from around the country establishing that a party should be permitted to take discovery when resisting a motion to compel arbitration. Now, in Ohio, plaintiffs are forced to put forward their responses to an affirmative defense in their complaint, before they’ve had the opportunity to take discovery. This makes no sense. A lot of these situations are fact-specific, and therefore require discovery. Our petition lists many cases supporting the right of consumers to take discovery before being forced into arbitration.

Third, in many cases, consumers do not even know about a supposed “arbitration clause” until it is evoked as a defense. Sometimes this happens because a consumer never actually sees nor signs a contract. In other cases, the consumer won’t know about the arbitration clause – they’re often embedded deep within the body of the agreement, and unsuspecting consumers or employees sign without being informed of the arbitration clause. We have also seen cases where there is a language barrier, and the arbitration clause is never adequately translated. To say that these consumers are supposed to attack an arbitration clause that they don’t know about and usually don’t have a copy of in their complaint is an unfair and ridiculous burden.
Fourth, the Garber ruling creates a strict new pleading rule that does not exist in Ohio law for any other affirmative defense. For example, when addressing this very question in a non-arbitration context, the Ohio Supreme Court in Royce v. Smith held that “a matter constituting an affirmative defense . . . need not be alleged in the complaint.” Royce v. Smith, 68 Ohio St.2d 106, 112 (Ohio, 1981). This holding is consistent with the approach under the Federal Rules of Civil Procedure (which Ohio follows). Similarly, appellate courts in other jurisdictions have refused to automatically enforce arbitration clauses. Treating arbitration clauses differently than other affirmative defenses or other contracts that require judicial enforcement, and automatically enforceable, violates the U.S. Supreme Court’s repeated statements that arbitration clauses are “as enforceable as other types of contracts, but not more so.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12 (1967).
Finally, up until now, courts across the nation, as well as in Ohio, have repeatedly rejected efforts to force cases into arbitration where no agreement had been reached, or where the arbitration clauses were unconscionable. As explained above, this can happen when the terms such as the venue or cost of arbitration are not reasonable, or when the agreement is otherwise downright unfair or one-sided. Because there are so many circumstances that can make an arbitration agreement unenforceable, blindly and automatically enforcing all arbitration agreements is simply bad law. The new rule created by Garber is unfair and unsound.

Conclusion
Because of the terrible Garber decision, many Ohio consumers are faced with this unfair barrier to justice unless the court rules are-rewritten or the legislature takes some action. Until then, consumers, employees, and other plaintiffs will be forced to jump through ridiculous hoops at the outset of a case in order to preserve any hope of a day in court.

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

Thank You for your informative blog about arbitration.

I recently have been hired at Macy’s and have been introduced to their “Solutions In Store” arbitration policy. The only way to opt-out of their mandatory arbitration, new hires need to mail an opt-out card within 30 days of being hired, which I am going to do!

From thoroughly researching online, I know that just mailing the opt-out card is not enough. I also have to receive a confirmation letter that my opt-out has been processed. That confirmation letter will be my only evidence in court that proves I officially declined the final and binding arbitration process. I have a sneaky suspicion that Macy’s is going to make this process very difficult. Good thing that I am persistent!

For orientation, Macy’s has a pamphlet and video on why their arbitration policy benefits the employee. Macy’s really tries to make new hires feel fortunate that arbitration is the policy.

I would want my day in court if I were ever to be an unfortunate victim of a crime. It is hard for me to comprehend that an employer can take basic rights away from their employees.

One concern that bothers me about opting-out of the arbitration policy, is that I will be red-flagged as a potential law-suit. The 30 day opting-out period also coincides with my 60 day New Employee probation period. Macy’s policy says that declining arbitration will NOT affect employment.
I’ll let you know the results!

Thank you again for you blog,
Diana

This is a major victory for advocates of arbitration reform!

9 March 2009

WASHINGTON (AP) — The Supreme Court has ruled that consumers can sometimes resist credit card companies’ push to move their dispute over finance charges and late fees to arbitration. The justices voted 5-4 Monday in favor of Betty Vaden in her dispute with Discover Bank.
Discover sued Vaden in Maryland state court in 2003, claiming she hadn’t paid more than $10,000 that was owing on her account. Vaden filed a class-action counterclaim, saying the company’s finance charges and late fees violated state law. The bank then asked a federal court to force Vaden into arbitration over her claim.

But Justice Ruth Bader Ginsburg, writing for the majority, said state courts sometimes are the proper place for such lawsuits. “Here, the controversy between Discover and Vaden was triggered by Discover’s garden-variety, state-law debt-collection claim against Vaden,” Ginsburg said. Many credit card customer service agreements require disagreements over charges to be resolved using binding arbitration because it is cheaper and faster than a lawsuit, industry officials say. But they also argue that some state courts, reluctant to let go of lawsuits, are hostile to arbitration.

A study by the Public Citizen consumer advocacy group found that arbitrators often rule in favor of the credit card companies.
In this case, the issue was whether a federal court could step into what had been a state court lawsuit to order the parties into arbitration.
Discover sued Vaden in Maryland state court in 2003, claiming she hadn’t paid more than $10,000 that was owing on her account. Vaden filed a class-action counterclaim, saying the company’s finance charges and late fees violated state law.
The bank then asked a federal court to force Vaden into arbitration over her claim.

The case is Vaden v. Discover Bank, 07-773.

Mother Jones’s Stephanie Mencimer did a fantastic job of reporting one couple’s epic struggle with Michigan-based franchise, Coffee Beanery. Although they’ve completed depleted their savings taking the company to task through arbitration and lost, they were able to beg, borrow and steal to get the arbitrator’s award thrown out by the 6th Circuit Court of Appeals (the second appeal, the first of which was unsuccessful). It’s now the company’s turn to appeal and we’ll see what happens. It’s such a shame that the road to justice is so long and arduous in this wonderful country. Please read the entire story here, you’ll be glad you did.

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.

The following was reprinted from www.thenation.com. I highly encourage you to go there and link your blogs, home pages and facebook pages to this article. Spread the word!!

by KIA FRANKLIN

February 10, 2009

Despite the new Ledbetter Fair Pay Act, corporations can still get away with employment discrimination and other harmful action through binding mandatory arbitration agreements in which Americans sign away their right to resolve disputes in a court of law. Nestling arbitration clauses in the fine print of credit card agreements, patient consent forms and employment contracts is a deceitful tactic used against an estimated 30 million Americans nationwide. It sends disputes between a person and a corporation to a closed-door, unregulated resolution process hidden from outside view.

Congress and President Obama should provide a much stronger check against corporate power. They can do that by passing The Arbitration Fairness Act (AFA), first introduced in 2007 by Senator Russ Feingold (D-WI) and Representative Hank Johnson (D-GA).
Arbitration does not grant the three main safeguards guaranteed by our public courts: fairness, accountability and neutrality. The corporation chooses a private individual–who is not necessarily a judge or lawyer–to hear and decide the case. Corporations are repeat customers whose appeasement generates steady business. Studies show that arbitrators have financial reason to rule in their favor. Corporate clients get preferential treatment; regular people do not get anything resembling neutral decision-making.

In typical court proceedings, there is something called the discovery process: it allows both sides to demand information and documents from each other to prove their case. This crucial procedural tool plays no role in the secretive, informal proceedings of arbitration: no obligation for the arbitrator to issue a written opinion, no requirement that the arbitrator rely on the law to decide cases; and, worse yet, no opportunity for meaningful review or appeal in a real court of law. Nothing is a matter of public record. All disputes are privatized so they can be kept out of sight, away from objective scrutiny.

In recent years, the Supreme Court has generally leaned toward enforcing arbitration clauses, even those between a corporation and consumers, workers, service purchasers and other individual parties with less bargaining power. As a result, lower courts tend to block the enforcement of state consumer protection laws limiting mandatory arbitration agreements and federal laws providing a right to access the courts for certain grievances.

Arbitration between similarly situated corporations can be an appropriate, even helpful, dispute resolution tool, but a significant body of research has found arbitration to be neither fair nor cost-effective when average citizens confront corporations. Thousands of dollars in filing costs, lawyer fees and other expenses are just the beginning. The process can quickly become a financial nightmare for families struggling to make do with less.

Arbitration does not offer balanced resolution of high-stakes issues like the type of employment discrimination that cost Lilly Ledbetter over $200,000 in wages. Instead, at its most extreme, it can lead to job loss, inadequate health services and no actual legal recourse for severe injuries suffered. This is especially true of nursing home patients forced to resolve claims of abuse, sexual assault and medical negligence in arbitration. In one such case, a New Mexico district court ruled that an elderly husband could have placed his wife in a different nursing home that did not require arbitration, even though visiting her in the new facility would have required him to drive 120 miles round trip.

The Ledbetter Fair Pay Act and the Arbitration Fairness Act pursue the same overarching goal: to replace the empty symbolism of unenforceable legal rights with real substance. The right to sue is an invaluable instrument in our democracy, especially in a time of economic crisis. It enables all Americans, regardless of income or background, to combat discrimination in the workplace, and it strips large corporations of the power to hide behind the fine print, where legal jargon all too often limits liability for illegal behavior.

About Kia Franklin
Kia Franklin is a senior fellow in civil justice at The Drum Major Institute for Public Policy in New York, and managing editor of the civil justice blog TortDeform.com. more…

Another Arbitration Agreement is Struck Down

On January 7, 2009, an order was issued by the Contra Costa Superior Court in a race discrimination and whistleblower retaliation case that found the arbitration agreement that Countrywide Home Loans company requires its employees to sign as a condition of employment unconscionable and unenforceable. Specifically, the court found two unconscionable provision in the arbitration agreement: (1) a provision giving the arbitrator exclusive authority to determine the arbitrability of employment case, and (2) a provision giving Countrywide the unilateral right to modify the agreement.

Having found the binding arbitration agreement unconscionable, the court struck that agreement as void and unenforceable, thus allowing the plaintiff to proceeds with his employment discrimination and retaliation claims to jury trial. Let’s hope this is the beginning of a trend.

The following was posted on Overruledblog.com. It couldn’t have summed up the arbitration issue any better. Please read it and tell your friends!!!

WHY I BLOG

February 6, 2009, 1:27 pm
Filed under: Uncategorized | Tags: arbitration, supreme court

Debbie Dantz worked at an Applebees, a job she desperately needed to take care of her two teenage daughters and a terminally ill father. It was not a high paying job, but because Dantz couldn’t afford a car or even a bed to sleep on, she needed work within walking distance of her home and the Applebees fit the bill.

So when Dantz’ boss made a pass at her, she didn’t quit because she needed the money. She stuck with the job as her manager’s behavior became increasingly bizarre and cruel. He ordered all the waitresses to wear skirts, and would regularly lift them up and make crude comments as he looked under them. Sometimes, he would order Dantz to sit in a chair while he quietly circled her, staring at her like a predator. When Dantz complained about this treatment, her manager and her male co-workers threw food at her.

One day, when Dantz arrived at work a paper was shoved into her hands and she was ordered to sign it. The paper contained something called a “binding mandatory arbitration agreement” which said that, if Applebees broke the law, Dantz no longer had the right to hold it accountable in court and instead would be shunted into a privatized, biased justice system. Dantz refused to sign, and was told that until she did, she would be paid nothing but tips—a violation of federal minimum wage laws. Nevertheless, Dantz needed her job, so she didn’t quit.

After nearly three years of harassment, abuse and long hours for little or no pay, Dantz finally decided that she’d had enough. She filed suit against her employer—and the court kicked her to the curb. Even though Dantz refused to sign the binding arbitration agreement, the court said that merely by continuing to work for Applebees, she was bound by its terms. Debbie Dantz’ employer illegally abused her for almost three years, and Dantz was powerless to hold it accountable.

Lest there be any doubt, when Dantz was thrown out of court and relegated to privatized arbitration, her opportunity for justice ended right there. Let’s explore a few ways that arbitration differs from real courts:

Most importantly arbitration is biased in favor of corporate interests. According to a study by Public Citizen which examined almost 20,000 arbitration decisions, the corporate party won a massive 94% of the time. In one case, an arbitrator awarded $11,000 to a debt collector against a woman who owed no money whatsoever, but who had the same name as a woman who did.
Arbitration is often pay to play. If you bring a suit in federal court, you pay a $350 filing fee, and that’s it. Arbitrators, on the other hand, frequently offer an a la carte menu. If you want to file a motion, that’s $500. If you want a live hearing, $1500. If you want a written explanation of the arbitrator’s ruling, $1500 more. In some cases, consumers have been charged $10,000 or more for the privilege of losing their case before a biased arbitrator.
Arbitration is secret. Except in California, arbitrators are not required to publicly disclose their decisions. Because they can keep their past history from the public, many arbitration companies market their services to corporations by highlighting their pro-business bias, even as they lobby Congress with claims that they are just as fair and balanced as real live judges.
So in summary, arbitration is expensive; it is secretive, and it is fundamentally unfair. Even worse, it is almost always forced on ordinary Americans. If you have a credit card. Or if you have a job. Or if you have a cell phone. Or if you have a loved one in a nursing home. You have probably been forced to sign an arbitration agreement. Virtually all banks, many employers and some nursing homes will even refuse to do business with you unless you sign away your power to hold them accountable for their actions. If you refuse to sign an arbitration agreement you can lose your credit card, lose your phone service, or even be fired.

The reason why these binding mandatory arbitration agreements are legal is a series of wrongly decided Supreme Court decisions that began in the 1980s. Needless to say, business groups like the Chamber of Commerce are very interested in blocking any legislation which might overturn these wrongful decisions, and they have hired a veritable army of lobbyists to block a bill called the Arbitration Fairness Act, which would prevent companies from coercing their customers and employees into signing away their rights. To be honest, I can’t blame them. If I had total immunity from following the law, I would want to preserve my ill-gotten gains as well.

If the business lobby succeeds in blocking the Arbitration Fairness Act, however, it will be a tragedy not just for women like Debbie Dantz, but for thousands of Americans who are victimized by abusive credit card companies, whose loved ones are neglected by nursing homes, or who are fired because their boss doesn’t like the color of their skin. People and corporations must be accountable for their actions, they cannot be allowed to hide behind the Supreme Court’s mistakes.

Which brings me to the title of this blog post. I started Overruled because Debbie Dantz’ story is far too common. It is the story of Lilly Ledbetter, who was tossed to the curb by a Supreme Court more concerned with protecting businesses than preventing pay discrimination. It is the story of James Lind, who lost his ability to work and became disabled after his insurance company suddenly refused to pay for the drug that kept his MS at bay—and who was later tossed out of court because of Supreme Court decisions saying that employer provided health insurers may treat their customers this way with impunity. And it is the story of Bridget Robb, who was electrocuted from the inside by a defective device implanted in her heart, and thrown out of court because of a Supreme Court decision giving lawsuit immunity to the makers of dangerous medical devices.

When judges ignore the law to serve their own deregulatory agenda, people suffer, they lose their jobs, and they even die. I hope my venture into the blogosphere can do something to keep this from happening.

The following was reprinted from www.kansascity.com.

Payday lender loses appeal in Missouri cases

By DAN MARGOLIES

The Kansas City Star
An Overland Park-based payday lender’s attempt to bar borrowers from pursuing class-action lawsuits is “unconscionable,” a Missouri appeals court has ruled.

In a sweeping decision handed down last week, the Missouri Court of Appeals in St. Louis found that part of a mandatory arbitration clause in QC Financial Services Inc.’s loan contracts was both “procedurally” and “substantively” unconscionable.

The company’s in-house attorney, Matt Wiltanger, said QC was “obviously disappointed with the result” and would “more than likely” appeal to the Missouri Supreme Court.

QC Financial is a subsidiary of publicly traded QC Holdings Inc. and does business in Missouri as Quik Cash. Through its 596 branches in 24 states, QC Holdings originated 3.6 million loans totaling $1.35 billion in 2007 and posted revenues of $213.6 million.

Since 2002, Quik Cash has made loans to about 400,000 Missouri residents. Due to the arbitration clause in its loan contracts, however, Quik Cash had never been sued in the state until DeQuae Woods, a single mother of two in Florrisant, Mo., filed her claim in mid-2007.

Woods, who wound up paying $1,800 in interest on an initial Quik Cash loan of $450, alleged that the company had violated Missouri’s payday lending law and sought class-action status on behalf of similarly situated borrowers.

Quik Cash moved to have the suit dismissed, pointing to the mandatory arbitration clause in the loan contract. Among other things, the clause waived Woods’ right to participate in a class-action lawsuit or class arbitration against Quik Cash.

On Dec. 31, 2007, a St. Louis County judge ruled that the class-waiver provision created a chilling effect on legal disputes over the contract.

“If a clause immunizes a defendant and paralyzes consumers, it is unconscionable,” Circuit Judge Richard C. Bresnahan wrote. “Here there is overwhelming evidence this has occurred.”

QC appealed the decision, and last Tuesday the Missouri Court of Appeals-Eastern District upheld it. Citing a 1999 decision by a Florida appeals court, the Missouri court said that QC, by denying Woods the right to class arbitration, “has precluded the possibility that a group of its customers might join together to seek relief that would be impractical for any of them to obtain alone…”

That’s because few attorneys are willing to take on small, individual claims that are likely to cost more to pursue than they are to pay in damages and legal fees. Class actions, on the other hand, allow plaintiffs to pursue claims that, taken individually, aren’t worth much but in the aggregate may be worth a lot.

“The court has given the people the right to join together in a class arbitration and let us take a close look at the practices of Quik Cash and see if they comply with Missouri’s payday lending law,” said Woods’ attorney, John Campbell of The Simon Law Firm in St. Louis. “Of course, we’ve alleged they don’t. But up until now, we couldn’t pursue such a case.”

Woods hopes to show that Quik Cash charges more than state law permits. Missouri’s payday lending law allows payday lenders to charge up to 75 percent of the amount they lend. “Our allegation is that, through a series of different maneuvers, QC attempts to keep people in loans longer than the law allows and, as a result, people pay many times the amount they borrowed,” Campbell said.

Class waivers in consumer agreements have become a major legal issue throughout the country. Some courts have upheld them; others have struck them down. Earlier this year, for example, the 8th U.S. Circuit Court of Appeals, a federal court based in St. Louis, held that a class-waiver provision in an American Express credit-card contract — one very similar to Quik Cash’s provision — was not unconscionable under Missouri law.

By contrast, the Missouri Court of Appeals found that the terms of Quik Cash’s class-waiver provision left consumers like Woods “with no meaningful avenue of redress through the courts.”

Quoting from a decision it handed down earlier this year, it said that letting Quik Cash’s class waiver provision stand would allow the company “to continue imposing ‘its improper and deceptive charges ad infinitum since none of its customers would have a practical remedy to bring about a stop to the conduct.’

“As such,” it continued, citing a 2002 California case, “this would allow (Quik Cash) to grant itself a ‘get out of jail free card while compromising important consumer rights.’”

Unless Quik Cash chooses not to appeal, the Woods case now goes to an arbitration panel, which will decide whether to certify it as a class action. In theory, the class could include all 400,000 of Quik Cash’s customers in Missouri.

Shares in QC closed Tuesday at $3.90, down 21 cents.

To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.