Consumers may finally escape from the clutches of mandatory binding arbitration if the House Judiciary Committee smiles favorably today upon the Arbitration Fairness Act. Arbitrators rule against consumers in more than 98% of all disputes; the Subcommittee on Commercial and Administrative Law is currently meeting to consider H.R. 3010, which would restore consumers’ rights to resolve disputes fairly and openly.
Today’s hearing will feature two panels. Four separate law firms will testify, along with the American Arbitration Association and Public Citizen. Join us as we struggle to interpret the Committee’s legalese – which may prove just as futile as binding arbitration.
2:00: Video Link
2:05: Today’s commentary is brought to you by both Carey and Meghann in the hope that two pairs of ears will be able to decipher the Committee’s legalese.
2:41: FINALLY! The hearing has been called to order.
2:43: The resolution on this feed is terrible. Someone, a Congresswoman – maybe Rep Sanchez (D-CA), is reviewing the history of arbitration.
2:44: Rep Cannon (R-UT) believes that arbitration provides protection for consumers because it’s fairer (what?) cheaper, and faster. That’s not right. Individual consumers don’t have deep pockets, which is why class action waivers are unconscionable.
2:45: Arbitration is so complex and ingrained that this Committee can’t possibly handle the topic today. Ok, Congressman, set up a webcam at the Hawk and Dove and we’ll meet you there.
2:47: Nobody has proposed banning arbitration – just mandatory arbitration. Consumers would still have the option to forego a trial, but that’s a choice they would be empowered to make, a choice they don’t currently have.
2:49: Rep. Johnson (D-GA), sponsor of the measure is here, pointing out that people wouldn’t voluntarily sign away other constitutional rights.
2:51: Arbitration carries its own anti-consumer charges. The fees to expedite a hearing can cost $500.
2:53: See Cannon, nobody wants to ban arbitration, they merely want to restore consumers’ right to a trial.
2:57: One of the panelists is former Georgia Governor Roy Barnes, who is receiving quite the introduction from Rep Johnson – Governor Barnes helped save Georgia from the subprime meltdown and scared the Confederate flag from the Statehouse.
2:59: That was practically a eulogy.
3:01: Onto Laura McCleary of Public Citizen.
3:02: Arbitration allows “rulings that are silly, wacky, or contrary to law…” “They are flawed by design.”
3:04: An eight month analysis of 34,000 cases of credit arbitration, data they could access only because California requires disclosure, showed that the 28 arbitrators who handled most cases ruled against consumers 94% of the time.
3:04: Arbitration involving businesses went against the consumer 99% of the time.
3:05: Credit card companies, specifically MBNA, are using mandatory arbitration to circumvent the Fair and Accurate Credit Transaction Act.
3:07: Onto Richard Naimark of the American Arbitration Association (AAA), who wants to find a balanced response to Congress’ concerns.
3:08: AAA developed a basic code of conduct that makes arbitration slightly fairer than, say, a Gitmo tribunal. Consumers can have access to counsel, arbitrators must disclose financial interest.
3:10: He’s arguing that only 2% of cases go to court, so consumers don’t “get their day in court” anyway. The cases don’t go to trial because they’re settled, not arbitrated, usually because the parties think a jury will rule against them.
3:11: Gov Barnes is branding mandatory binding arbitration as a “contract for a crime.” Payday lenders use binding arbitration to circumvent the courts.
3:12: He’s challenging Cannon – nobody thinks it’s fair to go to arbitration to prove that they are the victim of a crime.
3:13: Arbitration provides a small remedy but does not condemn the criminal action as illegal.
3:14: There are more payday lenders than McDonald’s. Frightening.
3:15: Barnes doesn’t want people to use arbitration to hide from criminal acts – one of the defenses raised is that if Congress didn’t want arbitration used that way, Congress would act.
3:18: Onto nursing homes.
3:19: News to us: Shaving cream softens feces.
3:20: Nursing homes = Abu Ghraib.
3:21: We’re struggling to see how this relates to binding arbitration.
3:21: Here we go – families are presented with 50-60 page disclaimers before their loved ones can be admitted.
3:22: Most people don’t realize they are waiving their litigation rights to gain admission.
3:23: Because they were offered “the opportunity to sign,” courts accept the agreements as valid.
3:23: The costs for arbitrating nursing home issues are significantly higher, as are the rewards.
3:23: Final thought: Mandatory binding arbitration kills grandparents.
3:24: Arbitration dissuades people from pursuing very valid claims. If a credit card company withholds a couple bucks, you won’t sue, but if you can’t form a class for a class action, the company walks away with oodles.
3:25: Appellate courts have been bench-slapping down such agreements as unconscionable.
3:26: Gov. Barnes: “I got mayhem and murder in the streets.” Apparently, no one cares about stopping illegal payday lending in the criminal courts, and arbitration is keeping it out of the civil ones.
3:27: Illegal practices flourish when individual consumers can’t pursue their claims as a class.
3:29: Conservatives should be all over this bill. They’re all about returning power to the local level, empowering local decision makers. That’s what juries are all about.
3:32: Cannon will have another chance to make his point. So far, none of the panelist agree with him. Apparently, soldiers need payday lenders.
3:34: Cannon is picking a fight with McCleary, wondering how much weight to give to her damning study. ‘We can’t trust any consumer who says “my widget broke”‘
3:35: If you arbitrate, you are wrong. “Credit cases are going to against the person who didn’t pay their bill.”
3:37: McCleary can’t convince Cannon because arbitration data isn’t readily available – nobody discloses, so Cannon is technically right in saying that her data is narrow, the category is narrow, and the study as a whole is narrow. “The implications are not narrow.”
3:38: Maybe if AAA wanted to part with their data, they could produce a story as wide as Cannon.
3:40: Point proven: according to the AAA, 60% of arbitrations are settled before they can reach arbitration – so not every arbitration results in a hearing before an arbitrator. Might as well kick things back to the courts.
3:40: Johnson wants to know how AAA gets their business. (Hint: consumers have no choice!)
3:41: “Unions and businesses primarily” refer to AAA.
3:41: Most arbitrators are lawyers, but not judges. AAA claims that there’s no bias in selecting arbitrators, that they look for “senior, respected members of the community.”
3:43: There is no court reporter in arbitrations, which means there’s no practical way to file an appeal.
3:44: There is a limited right to discovery, as controlled by the arbitrator – the arbitrators who rule against consumers 90% of the time.
3:45: The word right here is fairly creatively used.
3:45: The first panel is excused. Onto the second panel.
3:49: Deborah Williams is 64 and bankrupt thanks to binding mandatory arbitration agreement.
3:49: Her dreams of owning a Coffee Beanery franchise turned to nightmares. The binding agreement required her to purchase all sorts of unnecessary equipment, and a Pepsi contract.
3:51: The average Coffee Beanery lasts three years, and costs $375,000.
3:51: Maryland’s AG found that the Coffee Beanery committed fraud – but she was forced to arbitrate.
3:52: The arbitrator had significant financial ties to the Coffee Beanery, and had ruled in their favor repeatedly. The Coffee Beanery’s own lawyer doubled as an arbitrator.
3:53: The Coffee Beanery dragged discovery out for over 7 months, because the company knew she couldn’t pay the costs, and forced her and her layer to fly to Michigan – 500 miles away – four times for 11 days of hearings.
3:53: The cost of arbitration was over $100,000 – and the arbitrator found that the Maryland AG was wrong, there was no fraud, and that she had to pay penalties to the Coffee Beanery, including their attorney’s fees.
3:54: She has lost over $1.5 million to the franchise.
3:55: She is borrowing money from her family just to file for bankruptcy – and even then, she’ll need to pay the Coffee Beanery franchise fees over the next 15 years until her contract expires.
3:57: Onto Cathy Ventrell-Monsees of the National Employment Lawyers Association (NELA)
3:57: “Companies from Circuit City to Hooters To Halliburton” use arbitration to limit employee suits.
3:58: Employees are required to sign these agreements despite any laws that prohibit mandatory binding arbitration agreements as a condition of employment.
3:59: Wow, Cathy almost looks like she’s going to cry.
3:59: Arbitration is a “modern version of separate and unequal justice for employees.”
3:59: “Arbitrators do not need to follow the law. THEY DO NOT EVEN NEED TO KNOW THE LAW.”
4:00: Companies continually use the same arbitrators that rule in their favor. As a result, the arbitrators have a direct financial interest in ruling in the companies’ favor.
4:00: Pfizer has a 97% success rate.
4:01: Halliburton has an 82% success rate. They need to bum Pfizer’s arbitrators. We wonder how Verizon’s dinosaur-eating lawyers would fare.
4:02: Onto Peter Rutledge of the The Catholic University of America.
4:04: Arbitration lowers costs for companies, which is passed on in the higher wages, better share prices and lower prices. Thank god.
4:05: “Imagine what the increase in costs would be if arbitration was eliminated altogether.” No, no, don’t make us imagine the costs! Oh, wait, nobody is saying arbitration should be eliminated! Just that the constitutional right to a trial should be restored.
4:05: “Where are these people going to end up if arbitration is not available?” Court, good professor. They will end up in court, where they belong.
4:06: Rickshaw justice for the many is the alternative? That sounds awesome. That guy was nuts.
4:07: Onto Theodore G. Eppenstein of Eppenstein and Eppenstein – did he really go out to find another Eppenstein? Suspicious.
4:08: He wants to talk about arbitration in securities disputes – something we know absolutely nothing about.
4:09: This guy loves his resume. Enough already.
4:09: “Securities arbitration does not work for the investor.”
4:10: The poor guy has been arguing about this for 20 years.
4:11: “The public pool [of investors] isn’t pure.” Arbitrators are pandering to keep their jobs.
4:12: This guy tells you he’s going to say things a lot.
“Let me tell you something.”
“I’m going to give you examples.”
Well, um. Ok.
4:13: He has data. 58% of the time, the customer goes home with nothing except a bill for arbitration.
4:13: Pfizer laughs at the industry’s 58% success rate.
4:14: There is a place for arbitration, but it needs to be run independently. Great idea.
4:16: Geekybiker is absolutely right. If you haven’t already, tell Congress to support the Arbitration Fairness Act!
4:18: The Chairwoman is sorry for Coffee Beanery woman’s experience: Do you feel like you were ripped off? Um, duh.
4:19: Deborah is amazed to hear the professor and the AAA talk about the flaws in arbitration and wants to know: “What are you going to do for me? I lost everything. What are you going to do for me?”
4:21: Chair to the professor: if your data shows that businesses don’t prevail, why would they chose to arbitrate?
4:22: According to the prof, a ten-year-old study has useful anecdotes. One corporation spent $1 m winning a case, and legal fees are the root of all evil. Lawyers are such great villains.
4:24: Chairwoman politely says, “You’re on crack.”
4:24: Consumers’ win rate is falling, as is there rate of recovery. Maybe that has something to do with it? Maybe? Bueller?
4:26: The professor is rightly pointing out that some businesses have a higher win rate at trial – but, when they end up in court, the trial is overseen by a judge bound by the law, and both parties have a right to appeal.
4:27: This should be settled with KY wrestling. No one’s data is good enough for the other.
4:28: Eppenstein angry. Testimony misrepresented. Rarr, Eppenstein.
4:29: The very threat of arbitration depresses settlement offers.
4:30: Onto Cannon’s last stand.
4:30: Cannon wants to know if stockbrokers cheat their investors, won’t the investors take their money elsewhere?
Eppenstein: ‘If they have any money left!’
4:31: NELA has no issue with a waiver for unions because unions handle arbitration responsibly.
4:32: Not that it’s relevant, but we have discovered that Chris Cannon has 8 (eight) kids. EIGHT!
He’s never spoken to them at length.
Along with the rest of the planet.
He’s like a metronome of bullshit.
4:34: He’s now attacking Coffee Beanery woman. It’s her fault she got screwed. According to him, “we live in a world of information.” If Deborah had only done her homework, she could have kept the $1.5 million now lost forever.
4:35: Buzzers sound in the distance. Floor votes. The end is near.
4:39: Johnson is defending Coffee Beanery woman, implicitly calling Cannon a nut.
4:40: According to Ventrell-Monsees, her story is typical.
4:41: Epperstein says the public never hears about the egregious violations, the systemic raping of justice caused by mandatory binding arbitration.
4:42: Overheard on the video feed from a mystery person: “Unbelievable. I think I’m the only like regular joe blow kinda guy here and I am outraged.” @Godai heard a slightly different version.
4:42: We didn’t think it possible, but mandatory binding arbitration is even more frighteningly horrific than we knew. God help us all. The hearing is adjourned.