The pro-consumer change comes the same day that a partial settlement was reached in a case accusing Chase and other credit card companies companies of unlawfully conspiring to insert industry-wide arbitration clauses into their contracts. Chase said they won't be replacing the clause with any other similar language, like a class-action waiver.

Mandatory binding arbitration is a clause inserted into many consumer contracts that forces consumers to revoke their right to lawsuit in the event of a dispute. Instead the case gets sent to an arbitration firm, which the company itself pays. The Christian Science Monitor found that the top 10 most used arbitration firms only found in favor of consumer 1.6% of the time. It's about time these kangaroo courts got shut down.

JPMorgan Pulls Arbitration Clause From Card Contracts [Bloomberg]
Case Accusing Chase, Others of Conspiring on Arbitration Clauses is Partially Settled [PR Newswire]
(Photo: Pascal Vuylsteker)

The amendment was in response to the case of Jamie Leigh Jones, the former Halliburton/KBR employee who allegedly was raped by coworkers in Iraq's green zone and imprisoned by her superiors. When she returned to the U.S. and sued her former employer for claims relating to the rape, the company tried to force her into arbitration instead of court.

Last month, a court held that Jones's case couldn't be compelled into arbitration. With this amendment, victims will no longer have to sue to be able to sue for sexual assault and discrimination claims.

The passage of this amendment is a good step toward ending forced arbitration, a secretive, unfair, and lawless system that companies force on consumers, employees, and franchise owners. A larger bill, the Arbitration Fairness Act, would ban these forced arbitration clauses from these types of contracts.

Senate OKs Measure Related to KBR Assault Claim [Houston Chronicle]

The details of Jamie Leigh Jones's case are sad and disturbing. She claims that, while working in Iraq, she was drugged, beaten, and gang-raped by her fellow employees, then locked in a guarded storage container by her superiors. Upon returning to the U.S., she sued her former employer for claims relating to the rape, as well as sexual harassment and several fraud and employment claims.

Halliburton/KBR had tried to compel arbitration for all of Jones's claims, including the torts related to the alleged rape (assault and battery; intentional infliction of emotional distress; negligent hiring, retention, and supervision of the employees involved; and false imprisonment), by citing that the arbitration clause in Jones's employment contract and arguing that the alleged rape was a personal injury claim arising in the workplace (in this case, Halliburton wants "workplace" to include Jones's sleeping quarters because they were employer-provided).

The Fifth Circuit opinion affirmed the lower court holding, which allowed arbitration for some of Jones's claims but rightly found that the civil claims related to the alleged rape were not related to Jones's employment and fell outside the scope of the arbitration clause in Jones's employment contract. We hope that Jones and her aggressors see justice done.

The case is Jones v. Halliburton, No. 08-20380 (pardon our lack of Bluebooking).

Appeals Court Sends Contractor's Case to Court [Houston Chronicle]
(Photo: jonathon)

Elijah complained, but says Dell won't make things right, and has pushed things to arbitration. He writes:

In summary:

I bought a Dell laptop.

I got it replaced under warranty.

The original model was discontinued.

The replacement model is 1600x900 where the original was 1920x1200.

Dell says they are required to give me product that has the same "functionality and performance" and they insist they have done that.

I cannot get anyone other than (redacted) to contact me. In fact even when I send emails to various members of the corporate elite that you listed on your site insisting that if anyone but the person who's name this email belongs to contacts me I will consider it a harassing contact, all messages get funneled back to this man who slowly and laboriously tells me that he will not do anything for me.

The last two months have been spent coping not only with the lack of a third of the pixels I'd gotten used to using, but also a keyboard that is missing 10key, has no Fkeys accessible without pressing the Fn key, and for some reason it seems to like pretending I've pressed CTRL a lot, which can make for some very interesting fast paced shortcut/window opening/lost all your data haha! While dealing with this I have been trying to get someone other than this (redacted) fellow to talk to me. This has proved impossible.

I have also over the last two months been trying to get as complete a set of information possible to fill out the arbitration paperwork so that I can get this resolved under dell's legal framework. If dell will not negotiate with me (it is my contention that giving me what I want is immediately cheaper than going to arbitration and could actually make them money), I need their contact information for purposes of listing them as a respondent to arbitration. [redacted] insists he has given me that info, but he has not. What he has given me is the information for contacting the arbitration people and his listening skills seem deficient any time I try to convey this to him. Lately I have taken to hanging up the phone and telling him not to call me unless it is to give me the info I need. He still calls and the calls still consist of him slowly and laboriously telling me I cant have a new laptop and then not giving me the information I need.

The legal department has been of little help too. Once I finally got the name and number of the person in charge of consumer issues in the legal department (it is not well advertised) I spent two weeks calling and emailing the man before I got a reply. The reply was by email, and the reply was the same screwup as [redacted] gave me. Rather than giving me dell's information as a respondent, the man gave me the contact information of two arbitration organizations NOT NAMED ON DELL'S TERMS OF SALE. By that standard I think his reply may have been even less useful than [redacted] since it includes no information even remotely related to dell's legal framework for dispute resolution.

What I want is a laptop replacement that has a 1920x1200 screen. (Redacted) told me that they can only give me a laptop sold through home and home office. When I told him there was one with such a screen in that department, he switched his tune immediately to "I've done the research and we can't give you anything." The sticker price of what they gave me was $1,100, the sticker price of what I want is $1,200. The arbitration will cost $2,500 and Dell must pay the bill. Even going with retail numbers most favorable to dell, they save $200 by just making me happy, and since the laptop I'm asking for his highly upgradeable, they stand to pick up another $500-$1,000 in revenue from upgrades. If they lose in arbitration I still get what I want AND they had to pay $2,500.

Please, I was told that you guys could help me out and you make such problems known to the public which prods these big corporations into acting intelligently. All I want is a laptop with a 1920x1200 screen like what I originally purchased, is it so much to ask that dell be held accountable to their own contracts?

Elijah says he's filled out his arbitration paperwork but hasn't received confirmation from Dell that it's received it. He'd like Dell to back off on the arbitration, cut its own losses and hand over a comparable laptop, but at this point there doesn't seem to be a great chance of that happening since he's already committed to the arbitration.

He could shrug his shoulders at the arbitration procedure and try to take Dell to small claims court of breach of warranty. That might, at least, get their attention. What would you do if you were Elijah?

UPDATE: Elijah says he's reached a resolution with Dell, but declined to elaborate.

(Photo: Sterlic)

Here's how it was explained in the 85-page PDF USAA recently sent out to its members:

Changes and clarifications to the Depository Agreement And Disclosures
Arbitration — page 51
We added an option for binding arbitration to resolve disputes about your account. Either you or USAA Federal Savings Bank may elect to resolve a dispite through binding arbitration. By keeping your account and continuing to transact on the account, you are agreeing to the use of binding arbitration for any disputes in accordance with this provision. PLEASE REVIEW THIS PROVISION CAREFULLY.

Action you may choose to take
If you do not want to be subject to binding arbitration, you must close your account.

Interesting that USAA is making arbitration mandatory as other banks are backing away from the practice.

RELATED:
What Is Mandatory Binding Arbitration?
Arbitration Firm Rules Against Consumers 95% Of The Time
Forced Arbitration: As Fair As A Sucker Punch

Yes, that Bank of America is actually allowing credit card, loan, and banking customers to file lawsuits. They aren't doing it due to a sudden change of heart, of course. National Arbitration Forum, which handled their disputes, is leaving the credit card business entirely after being punched in the face sued by the Minnesota Attorney General. Consumers are not terribly fond of arbitration.

Consumer advocates have faulted the arbitration process, saying it is biased in favor of companies and that consumers often do not realize they are waiving their right to sue when they accept services. Supporters of arbitration say the process can be faster and less costly than going to court.

"While the bank thinks arbitration is a very fair way to go, customers do not," Bank of America spokeswoman Shirley Norton said. "It is in everyone's best interest to change it. We're hoping we'll be able to resolve more disputes directly with our customers."

Norton said the bank will review consumer cases already in arbitration on a case-by-case basis.

That's one more big company down...maybe now even more will follow their lead.

Bank of America ends arbitration of card disputes [Reuters] (Thanks, Phil!)

PREVIOUSLY:
Arbitration May Be Dead, But Courts Offer Imperfect Alternative
Credit Card Arbitration Cabal Implodes
Another Arbitration Firm Pulls Out Of Credit Card Arbitration
Minnesota Attorney General Punches National Arbitration Forum In The Face

(Photos: PJLewis and mrkathika)

This is a shame. Although many creditors' claims are bogus, the courts may never test them.

No judge sees most creditors' claims

One of the main reasons creditors were so successful in their NAF claims was that few consumers defended themselves. NAF may have been in bed with the creditors, but in cases where the consumer did not answer, arbitrators did not have to stretch themselves to make consumers lose.

Most courts have even less oversight when it comes to defaults, because judges never see the cases. The creditor simply submits an affidavit saying the consumer was served and did not answer. The clerk then enters a default judgment. No judge ever even glances at the file, and the evidence the creditor has to support its claims is largely irrelevant.

This may not be true in all states, but it is still the typical procedure in most.

Consumers may not know their rights or the true cost of litigation

Consumers rarely answer for several reasons. Some are expecting to have their "day in court." Unfortunately, most civil litigation (other than small claims court) happens on paper, and a court date—if any—comes only after the consumer has filed an answer and one of the parties makes a motion.

Further, consumers may think they cannot afford court—and they may be right. Other than small claims court, litigation can be expensive. But consumers who do not defend themselves may end up owing the debt as well as the creditors' litigation costs. If they defend themselves and win, they may be able to recover their costs from the creditor, instead.

Other consumers have simply given up. They may not realize they could win their case if they defended it.

All of this means that creditors' claims will rarely be tested, even though many creditors have no competent, admissible evidence to prove they actually own the debt, much less that the consumer owes it.

Courts should take measures to safeguard due process

Courts should take a lesson from the NAF case, and institute safeguards to ensure consumers do get their day in court, and that creditors are forced to come up with competent, admissible evidence to support their claims. Otherwise, I do not think consumers are getting meaningful notice of their opportunity to be heard, regardless of what the procedural rules may say.

Until state courts step up, consumers will be no better off than they would have been in NAF. But at least in court, the creditors are not paying the judges.

Sam Glover is a consumer rights lawyer, enemy of shady debt collectors, previous Consumerist contributor, and writes the Caveat Emptor blog. His column appears monthly on Consumerist.

(photo: &y)

The sudden and massive retreat was in advance of forthcoming Congressional action and lawsuits, in particular, an acid-toned suit filed by MN's AG last week, the main catalyst for the cascade of pullbacks.

Will the courts now be clogged with consumer lawsuits? Not so, says PIRG's Ed Mierzwinski, "It won't lead to more lawsuits... It will lead to a fairer marketplace."

Credit card binding arbitration system crumbling [CreditCards.com] (Thanks to Keith!)
PREVIOUSLY: Another Arbitration Firm Pulls Out Of Credit Card Arbitration
National Arbitration Forum Exits Credit Card Dispute Business
Minnesota Attorney General Punches National Arbitration Forum In The Face
The Arbitration Fairness Act Is In The House

(Photo: pink fish13, Subhash Chandra)

Although we're glad to see these companies exit a portion of the privatized justice racket, this only applies to credit card disputes. There are still plenty of opportunities for consumers to be forced into arbitration, including agreements for nursing homes, retirement plans, insurance, cell phones and utility service, employment contracts, and franchise agreements. Arbitration won't be fair until consumers have the right to choose whether to use it after a dispute arises. That's why it's important for Congress to pass the Arbitration Fairness Act.

For more information on forced arbitration, check out our archives, the Fair Arbitration Now coalition (of which we are a member), or if you're really intrigued, tune in at 2 this afternoon for a House subcommittee hearing on the issue, where the Minnesota Attorney General who sued the National Arbitration Forum last week is scheduled to testify.

(Photo: samwilkinson)

The lawsuit alleges that NAF is a biased forum for resolving disputes, and claims that NAF has business ties to collection agencies that prejudice its arbitrators. A Business Week article last year uncovered materials showing that NAF marketed its arbitration services to companies as more likely to collect on debts than litigation.

From the AG's website:

The company tells consumers, the public, courts, and the government that it is independent and operates like an impartial court system. In fact, it has extensive ties to the collection industry-ties that it hides from the public," said Attorney General Swanson.


The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, works behind the scenes-alongside creditors and against the interests of ordinary consumers-to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing the Forum to decide the disputes. The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum-and hence, revenue-for itself.

San Francisco sued NAF last year, alleging similar biases and complaints.

Consumerist readers know how much we dislike forced arbitration, and we're glad to see action being taken in courts, and in Congress, to curb its abuses.

Minnesota Sues a Credit Arbitration, Citing Bias [Business Week]
(Photo: nfarley)

From the San Francisco Chronicle:

In its February 2006 decision, the arbitration panel said Kinkade and other company officials used terms like "partner," "trust," "Christian" and "God" to create "a certain religious environment designed to instill a special relationship of trust" with the couple.

What the company didn't tell them, said their attorney, was that they would have to sell Kinkade's works at minimum retail prices while the artist undercut them with discount sales, some of which he made himself on cable television.

It was part of a plan, they claimed, to lower the value of the publicly traded company before Kinkade bought it in 2004, at steep losses to many investors. Hazlewood and Spinello put their $122,000 savings into galleries in Charlottesville and Fredericksburg, Va., that opened in 1999 and 2000 and closed in 2003.

Kinkade's company denies everything. "We are confident that before this is over, we'll be vindicated," said a lawyer for the firm.

Artist's firm on hook for $2.1 million [SFGate]

Meanwhile, the Arbitration Fairness Act continues to chug along in Congress, gathering cosponsors and hopefully getting some attention later this summer. If you want to find out more about mandatory binding arbitration, stay updated, or find out how you can help get the Arbitration Fairness Act passed, check out fairarbitrationnow.org.

Rape Case Highlights Arbitration Debate [NPR]
(Photo: nailmaker)

When I was seven, I saved the lives of my two younger cousins who were playing on the railroad tracks. They did not notice the train coming, but I did and frantically ran to them. I was able to toss them both to safety, but I fell and my pants got caught on the rail. I have been living with one leg ever since.

Thirty surgeries and two decades later, I was doing fine as a medically trained professional, drawing blood for lab tests at the University of Southern California Hospital. I did my job just as easily on crutches as with a properly fitting prosthetic leg, and had supervisors who understood that I needed to switch between the two because artificial legs don't always fit the way they should. Padding wears down and that extra pressure causes painful blistering that can take weeks to heal, months if the blisters get infected. It also takes weeks to get my leg back when it needs to be refitted.

When staffing needs at USC changed and I had to transfer to the Tenet facility at Garfield Medical Center, my working environment turned ugly. In this day and age, when the law says employers have to accommodate the disabled, the last thing I expected to hear from my new supervisor was, "Go home and put on your leg," but it was something she told me over and over. I did what she asked for as long as I could because I did not want to lose my job, but wearing the leg on top of the blisters gave me a bad infection. Artificial limbs wear out and, at this time, I also had to get a new leg, which meant a lengthy medical review process and insurance delays to replace my basic prosthetic device which costs $34,000. Because my supervisor refused to let me do my job on crutches, I was unable to work for six months. When I returned to Garfield, my job was gone.

The only work they had for me was as a daily hire on the graveyard shift, where a new supervisor let other workers make disparaging remarks to me. When I complained to her, she said I should not take it seriously, that they were just "playing around." I could not let my situation continue, so I told the human resources department I was filing a grievance. My job performance reviews were the only thing that changed after that. They went from always good to always bad.

I thought I had an "open-and-shut case" of discrimination, so I found a lawyer and he filed a lawsuit against Tenet and Garfield. Four days later, I was fired for something I never did, mislabel specimens.

Evidence and facts matter in a court of law, but I didn't have access to one. Tenet employment contracts include a binding mandatory arbitration clause which prevented me from having my case heard before a real judge in a legitimate court. Instead, my case was reviewed by an arbitrator Tenet hired, guaranteeing I would lose and they would be protected.

I was never going to get a fair hearing, but just to make doubly sure of that, Tenet offered the arbitrator two more case to handle while she was in the process of evaluating my case. I lost, of course, but because of this treachery and the strong evidence we had, my lawyer tried to get a regular court to throw out the arbitration decision. That was a failure too.

You can ask your members of Congress to support the Arbitration Fairness Act here, you can also check out the Fair Arbitration Now website and sign a petition to ban forced arbitration.

Previously: The Arbitration Fairness Act Is In The House
Mandatory Binding Arbitration: The Worst Choose Your Own Adventure Ever
What Is Mandatory Binding Arbitration?
(Photo: mindonfire)

My husband and I are struggling with a housing crisis – and it's very different from the mortgage crisis you've been hearing so much about. Ours was caused by sneaky language in the contract we signed with the home builders. Thanks to a clause requiring "binding arbitration agreement," we are stuck with a poorly constructed house that we might not be able to get rid of.

John is an Apache helicopter pilot serving in Iraq and, between his year-long tours of duty, his unit transferred to Georgia. When we bought our new home in Savannah in 2006, we thought of it as a place representing security, stability and safety for our family – everything a home should be. The associate assured us the defects we noticed when touring the house were "normal" and would be repaired by the builder in a timely manner.

Among the blizzard of documents we had to sign during our closing was a warranty that contained the arbitration clause. We had no idea it meant we agreed to a contract that shielded the builders from legal action no matter how negligent or shoddy their workmanship was. And believe me, it was.

Apparently, all kinds of businesses routinely stick these arbitration clauses into contracts for credit cards, cell phones, nursing homes and employment, to name a few. Like millions of other Americans, we effectively waived our legal right to take the company to court. Instead, our arguments would be handled by an arbitrator – a private company hired by the home builder.

Of the 182 defects we found and reported to the arbitrator, only 39 were approved for repair. Contractor estimates said it will take about $20,000 just to repair those defects, not including the other defects and code violations, doors that don't fit their doorways and mold problems caused by improperly installed showers and doors. Instead of fixing the defects, the home builder has offered us a measly $2,600.

Given the huge difference between the estimated repair cost and the home builder's offer, we appealed the arbitrator's decision. Just submitting the appeal set us back another $1,000.

If we disagree with the arbitrator's final decision, we won't be able to appeal or take the builder or the arbitrator to court – even if the decision seems illegal. Once you've agreed to binding arbitration, the only way to address problems is through that process regardless of facts and evidence. And since arbitrators are hired by the company responsible for the circumstances in dispute, they have a financial incentive to make rulings that satisfy the company that retains them.

Meanwhile, the paperwork and fees keep adding up. Instead of taking care of our home repairs, we have to keep feeding the arbitration beast while we hope and pray that the next decision will be a fair one. We doubt it will. And as the clock ticks, defects like the faulty installed showers and back door are causing more and more damage from water and mold.

John comes home from Iraq in October, and his unit will transfer to Fort Drum, New York, in January 2010. We will have to sell the house, defects and all. We would need to disclose the lingering $20,000 repair estimates, code violations and mold issues. With a mess like this, who in their right mind would knowingly buy this house?

Like so many of our country's economic problems, ours shows the amazing gap between what is legal and what is right. It's just not right for us to be saddled with the expense of fixing this defective home. Nor is it right that we had to sign away our right to sue and become trapped in this frustrating process of binding arbitration.

Unfortunately, the only way out of binding arbitration now is for Congress to change the law to let buyers choose whether they want to settle disputes with an arbitrator or in a court of law.

Michelle also told us that while she was complaining to the construction company, one of their employees told her, "We build in middle class neighborhoods because middle class people can't afford to fight us." People are fighting, though: victims of mandatory binding arbitration and consumer advocates are hitting the Hill today to tell Congress to support the Arbitration Fairness Act. You can ask your members of Congress to support the Arbitration Fairness Act here, you can also check out the Fair Arbitration Now website and sign a petition to ban forced arbitration.

On Wednesday, consumer groups and arbitration victims will head to Congress to demand passage of the Arbitration Fairness Act, which would ban mandatory binding arbitration clauses in consumer, employment, and franchise contracts. We'll be sharing the stories of some arbitration victims here throughout the week. Today's story is by Deborah Williams, a small business owner who was forced into arbitration and ended up paying over $4,000 just to feed, house, and transport the other side's witnesses and lawyers.

Being trapped by the fine print of a contract transformed my dream of opening a coffee bar with my husband into a nightmare.

We had wanted to open a small neighborhood coffee shop, where everyone recognized each other and we would get to know the people and spirit of our community. We wanted a "Cheers" on caffeine.

In 2004, the vice president of Michigan-based Coffee Beanery told us that, in the right location, our café with their franchise could yield $125,000 a year, so we talked it over and decided to sign a 15-year agreement. What the vice president conveniently neglected to tell us, however, is that nearly 40 shops in the Coffee Beanery franchise had failed within three years of opening, leaving their owners bankrupt.

My husband and I soon found ourselves following a similar path. We were receiving bills amounting to far more than we signed up for – and the quality of some of the franchise products we had to use was abysmal. The real costs were so much greater than expected that we had to take out an additional $50,000 loan just to open the store. It didn't take long to realize we were in deep trouble. We struggled to keep up with our expenses but quickly began to fall short.

Then we heard from two other Coffee Beanery franchise owners whose shops were not just failing to thrive, but losing money fast. We had to face the fact that we'd been duped. We tried to get out of our contract but were dragged through the company's mandatory arbitration process. When signing the contract to open our store, we also had to sign away our right to take the franchise to court. You might think arbitration resembles mediation, but you would be wrong. It is biased from the start because the company typically selects the arbitrator it wants.

In our case, the company's lawyer had already worked with this arbitrator and won, making it extremely unlikely that we would do any better than the previous franchise owners. The arbitrator also used the same accounting firm as Coffee Beanery, a conflict of interest that further reduced our chances of having an impartial hearing. As if that wasn't bad enough, an investigation conducted by Maryland's State Attorney General's Office concluded that Coffee Beanery committed fraud in selling us our franchise, a key finding the arbitrator elected to ignore. We should have known that justice would never be served.

Coffee Beanery made us travel from our Maryland home to Michigan for the arbitration. We were forced to fly there four times in the 11 days of hearings, driving up our already hefty arbitration costs. In the proceedings, the company attributed our store's downfall to our own mismanagement, not its faulty sales concept.

The arbitrator unsurprisingly sided with Coffee Beanery, ordering us to pay $187,452 in legal fees and arbitration costs – including almost $17,000 for the arbitrator's services and $500 to cover the cost of Coffee Beanery lawyers' lunches.

We lost everything; we have nothing left. Our home is being foreclosed. We are living out of boxes until the bank sells our house. This past winter, our pipes froze because we could not afford to pay for heat, leaving us without water for three days. Our simple coffee shop dream wrecked our whole life

What's worse, though, is that ours is not an isolated case. Many others have been subjected to the unfairness of binding mandatory arbitration.

Had we been allowed to go to civil court, we would have had a fighting chance for justice. Mandatory arbitration is deceitful and skewed to favor the big companies, not the small entrepreneurs trying to make a living. This isn't just a problem for business owners like us; people unknowingly sign binding arbitration contracts all the time – when they buy a cell phone or house, apply for a credit card, go into a nursing home or take a job.

Besides writing your members of Congress, you can also check out the Fair Arbitration Now website and sign a petition to ban forced arbitration.

(Photo: freaksanon)

On Wednesday, consumer groups and arbitration victims will head to Congress to demand passage of the Arbitration Fairness Act, which would ban mandatory binding arbitration clauses in consumer, employment, and franchise contracts. We'll be sharing the stories of some arbitration victims here throughout the week. Today's story is by Marlene Owens, whose late father was killed by a nursing home's negligence, but was prevented from suing because the nursing home had gotten her elderly and incapacitated father to sign a new contract that included an arbitration clause.

My dad, John Donahue, spent his last thirteen years living in a nursing home. By the age of 93, his caretakers needed a mechanical lift to transfer him in and out of his bed, his bath, his chair. One evening in 2005, an aide tried to put Dad to bed using the lift by herself when the machine required two people to operate it. Not only did the lift severely rupture my father's eye and crush his eye socket, but the aide put him to bed for the night leaving his injuries untreated. The emergency surgery to remove his eye two days later was followed by a horrible infection that killed Dad after six weeks of unnecessary pain and suffering.

The next blow came when I tried to file a lawsuit against the nursing home and learned that, even though my dad's death was caused by its staff, I had no right to sue the home because of three words that I had never seen together before: binding mandatory arbitration. Here's what happened: I originally signed a contract to admit Dad to the Embassy Care Nursing Home which, four years later, was purchased by Kindred Healthcare Inc. The new owner decided to limit its financial liability for patient care by adding a new and unfair agreement to the facility's admission contracts, including those of patients already in residence.

Kindred staff took the outrageous liberty of rounding up a group of residents, including Dad who by then was 91 and had suffered a stroke, and read the arbitration agreement to them. There was literally no way he could have understood what that paperwork was about. The staffer then extracted "voluntary signatures" from these fragile, medicated and confused residents so the nursing home could cheat them and their families out of having their day in court if serious problems with care came up.

While I never knew Dad was put in this abusive situation, I know this for certain: He never trusted the woman who presented him with this paperwork, and he would never have voluntarily cooperated with her. She had the nerve to claim he "eagerly" signed the form that I knew nothing about until after his death, something I will always have serious doubts about.

Nursing homes by definition are supposed to care for the frail and elderly. If they are doing their job right, why shouldn't they accept responsibility for those patients? By trying to eliminate people's right to sue, doesn't that just make it easier for facilities to be careless and abusive, like they were in Dad's case?

Kindred Healthcare has been trying to force me into arbitration over my father's wrongful death for four years now, but my anger has given me the strength to fight back. Just this month, thanks to their own questionable tactics, a real judge has decided that my case against Kindred deserves a jury trial in a real court of law, not some arbitrator bought and paid for by the nursing home. I've asked for a speedy trial because I'm 74 and I want to be around to see Kindred lose this case. For me, it's not about the money. I want to see our story in the newspapers. I want people to know the ugly truth of what this business did to my father and how they've tried to get away with it all this time.

Here's how to contact your Representative and Senators to ask them to support the Arbitration Fairness Act.

Previously: The Arbitration Fairness Act Is In The House
Mandatory Binding Arbitration: The Worst Choose Your Own Adventure Ever
What Is Mandatory Binding Arbitration?
(Photo: gregthemayor)

Wyeth's Phenergan is used to treat nausea and, according to its label, can be administered several different ways, including by IV push, in which the drug is injected directly into the vein. This carries the risk that the drug will instead be injected into an artery and cause gangrene, which is what happened here.

Levine argued that Phenergan's label should have warned of this risk and prohibited IV push, instead suggesting less risky methods, such as an IV drip. Acting under Vermont law, the lower courts agreed.

Wyeth argued that because the FDA had approved Phenergan's label, it had complied with all labeling requirements, and state law claims were pre-empted, despite subsequent information that IV push administration of Phenergan had caused gangrene in several cases. Even if it had wanted to include an IV push warning, Wyeth argued, it wouldn't be able to because it would differ from the label the FDA had approved.

The Supreme Court disagreed. "The very idea that the FDA would bring an enforcement action against a manufacturer for strengthening a warning . . . is difficult to accept—neither Wyeth nor the United States has identified a case in which the FDA has done so."

The decision is an important step in the fight against pre-emption, which, like binding mandatory arbitration, is designed to prevent injured consumers from getting their day in court. Although this decision bodes well for drug cases, the Supreme Court went the opposite way last year in Riegel v. Medtronic, which dealt with faulty medical devices. Congress introduced legislation last year that would forbid federal pre-emption of medical device cases, and the bill will likely be reintroduced soon.

Wyeth v. Levine [Supreme Court (PDF)]
(Photo: afagen)

Since arbitration is a private system of justice, all the trappings of litigation, like court reporters and judges, are paid by the parties. In the Coffee Beanery case, that came to $35,000 for the reporter, $25,000 for the arbitrator and arbitration association, and several thousand for the opposing lawyers' and witnesses' lunches, commutes, and hotels.

Although the Sixth Circuit Court of Appeals eventually overturned the arbitration award, this is an unlikely outcome, and Coffee Beanery is planning to appeal. In the meantime, we can hope that Congress passes the Arbitration Fairness Act, which bans mandatory binding arbitration in consumer, employment, and franchise contracts.

Franchise Fraud: Wake Up and Smell the Fine Print [Mother Jones]
(Photo: Lisa Brewster)

Rep. Hank Johnson, the original sponsor of the bill, was joined by 36 other House members and will likely get more support in the coming months.

Arbitration is a form of alternative dispute resolution where, instead of going to court, parties agree to make their case to an arbitrator, using fewer rules and a simpler procedure than typically found in litigation. The arbitrator's decision is usually binding on the parties.

Binding mandatory arbitration is the same as the above, except consumers are required to use arbitration (and forbidden from going to court) as part of doing business with the company. Most consumer contracts for credit cards, cars, homes, utilities, insurance, and even employment have clauses requiring binding arbitration, and preventing a consumer from suing if the company hurts him or her. The arbitrators are usually biased towards the company, which picks which arbitrator to use-and often pays the arbitrator's fees (unlike courts, which are funded by taxpayers).

Why do we support the Arbitration Fairness Act? In short, because mandatory binding arbitration is patently unfair to consumers. It is a joke of justice; a fake tribunal where injured consumers will almost always lose to corporations at the hands of a biased arbitrator.

For more information, check out our posts on arbitration, or our recent choose your own adventure through the arbitration process.

(Photos: spi516, navets, and superbomba)

Kenneth Hammel, now, 80 responded to a newspaper ad that promised to pay him $8000 for his trade-in, but he ending up getting charged over $42,000 for a used Sedona with a retail price of $23,250. He ended up winning his lawsuit against the dealership, winning $13,893, plus treble damages of $41,679, plus attorneys fees, and he gets to keep his car.

The sole source of the good news is a press release issued by the law firm, posted below. Of note, despite the case going before an arbitration board, which often tends to side with business over consumer interests, the good guys still won.

80 YEAR OLD, HANDICAPPED MAN FROM BUCKS COUNTY WINS TENS OF THOUSANDS IN DEALER FRAUD LAWSUIT AGAINST CHERRY HILL TRIPLEX
Senior Sues For Fraud And Deceptive & Unfair Trade Practices

FOR IMMEDIATE RELEASE

(January 15, 2009) An 80-year-old man who filed suit against the Cherry Hill Triplex automotive group of Southern New Jersey, claiming deception and theft, has won $13,893, in addition to treble damages of $41,679, plus attorneys fees, and will get to keep his vehicle, a 2005 Kia Sedona. Craig Thor Kimmel and Melissa K. Fiala of the lemon law and consumer advocacy firm of Kimmel & Silverman, P.C. brought the case on behalf of the consumer.

Relying upon the fine print of the contract, the New Jersey dealer fought vigorously to transfer the case from Court to private arbitration, resulting in the case being heard by the American Arbitration Association.

The complaint alleged that when Kenneth Hammel of Fairless Hills, PA responded to an advertisement offer guaranteeing $8,000 for his trade, he was eventually charged over $42,000 for a used 2005 Kia Sedona that carried a retail price of $23,250. Hammel, who is physically disabled and requires the use of a motorized wheelchair, alleged that Cherry Hill Triplex accepted his 2000 Chrysler Town & Country in trade for a vehicle that could accommodate a motorized lift. After many hours of what was alleged as “high-pressure selling,” Hammel agreed to purchase a 2005 silver Kia Sedona. Approximately 12 hours after his arrival at Cherry Hill Triplex, Hammel finally was released to drive home in the Sedona.

The next day, Hammel noticed the motorized lift installed by the dealership was not functioning correctly. He contacted Cherry Hill Triplex and was advised to drop off the vehicle for repair. When he returned, Hammel alleges the dealership presented him with a different car—a beige 2005 Kia Sedona.

Hammel claimed that, unbeknownst to him, when the dealership presented him with the second vehicle, they traded in the first vehicle he had just purchased three weeks earlier and subtracted nearly $8,000 for “depreciation.” The financing was also altered, form an annual percentage rate of 7.49% to 10.4% .The monthly payment skyrocketed from $250 a month to $385.88.

According to attorney Melissa K. Fiala, the testimony revealed that Cherry Hill Triplex engaged in practices that were unlawful and deceptive. Craig Thor Kimmel says "It is a terrible thing that in these difficult economic times, some businesses feel entitled to take advantage of their customers. Senior citizens are especially vulnerable and should be cautioned never to go it alone when swimming in these shark tanks.’ Both Kimmel and Fiala further say that consumers can’t believe everything they read in mail or print advertisements. “As the old adage says, if it’s too good to be true, it most likely is. Mr. Hammel learned the hard way.” says Kimmel.

[Press Release]

PREVIOUSLY: Car Dealership Bilks Old Man and Steals $2000 With His ATM Card

The victim, who suffered from Alzheimer's, exited through an emergency exit into the February night. Using the emergency exit apparently doesn't set off an alarm, and no one knew the victim was missing until someone discovered her the next day, with her face frozen to the ground.

The victim's son filed a wrongful death suit, alleging that the nursing home, Capital Senior Living, hadn't provided reasonable care. Capital Senior Living tried to force the case to arbitration, citing the arbitration clause in the contract for care. The victim's son pointed out that the victim had never signed the contract, and more importantly, the court held, the victim clearly didn't have the mental capacity to enter a contract, so the arbitration clause was invalid.

Although we are opposed to binding mandatory arbitration in all its forms, arbitration clauses in nursing home contracts are particularly insidious, as they have the potential to prey on the elderly and on distraught families making the difficult decision to entrust a loved one to a nursing home. Like most arbitration agreements, there is no room for bargain; one can't take out the arbitration clause and agree to the rest of the contract. In response, Congress introduced the Fairness in Nursing Home Arbitration Act last session.

The case is High v. Capital Senior Living Properties, a PDF is available here.
(Photo: evansent)

(Photo: Getty)

The court ruled the class-action waiver clause, included in every single cellphone contract and many other types of contracts, was "unconscionable," as it denied consumers basic protections. Here's the kill quote from the Opinion: "Courts will not be easily deceived by attempts to unilaterally strip away consumer protections and remedies by efforts to cloak the waiver of important rights under an arbitration clause."

Read full Supreme Court Ruling here.

Court says AT&T can't force arbitration [Seattle Post-Intelligencer] (Thanks to Mark!) (Photo: Todd Kravos)

At issue was whether one of Coffee Beanery's vice presidents, Kevin Shaw, should have been required to disclose his prior conviction for grand larceny to the franchisees, which he didn't do. Under the Maryland Franchise Registration and Disclosure Law, he was required to make this disclosure, presumably to allow potential franchisees the chance to evaluate his franchise sales claims. The Franchise Act was prescient, it turns out, because Shaw did mislead the franchisees involved in the suit, along with several others, and was sanctioned by Maryland's Securities Commissioner.

The franchisees sued Coffee Beanery over these misrepresentations, but were sent to arbitration in accordance with the arbitration clause in their franchise agreement. After the arbitrator found in favor of Coffee Beanery, the franchisees appealed the decision, were denied in district court, and ultimately won in the Sixth Circuit. The court held that the arbitrator's ruling that Shaw was not required to disclose his prior felony, even though Maryland has enacted legislation explicitly stating otherwise, "flies in the face of clearly established legal precedent." The court also reiterated other courts' holdings that an arbitration agreement in a fraudulently induced contract is void.

The Sixth Circuit's opinion was emailed to us, and we couldn't find an easily accessible online version. The case name and number, for those of you with Lexis/Westlaw, is Coffee Beanery v. WW, LLC, No. 07-1830, (6th Cir. 2008).

(Photo: Getty)

For example (emphasis ours):

Congress is taking up legislation this week that will wipe out arbitration provisions in hundreds of millions of consumer contracts — for everything from credit-card agreements to cell phones to health-insurance policies, even a contract for the purchase of a kitchen sink.

Holy sh*t! Not the f*cking kitchen sink! I'm moving to Canada this time, I swear to God!

Anyway, in our august and respected opinion (ha ha ha ha) this WSJ piece was misrepresenting the real issue at hand — whether or not arbitration should be mandatory. The piece of legislation she refers to does not remove your ability to enter into arbitration, a fact that she manages to ignore. She also refutes generalized "anti-arbitration" arguments with studies paid for by the American Arbitration Association — the people who most directly benefit from forcing consumers to use their services.

We could have written a response to the piece, but some kind consumer lawyers sent us one that had been written already and we like it. So, we're just going to link to that and save ourselves some time. In short, however, our point is this: We think the market should be able to decide whether or not arbitration is a better deal for consumers, and in order for it to decide it has to be able to choose.

There's nothing wrong with arbitration, if that's what you want to do, but you should not be forced into it by your employer, your nursing home, or in order to purchase something. Especially a kitchen sink.

Big Business Wants You Out Of The Courtroom [Cranky Greg]
Arbitration Works Better Than Lawsuits [WSJ]

Although there aren't any revelations in the article, it's still nice to see a story critical of arbitration run in a business publication. The volume of the article—BusinessWeek interviews numerous former arbitrators who became disillusioned with the process—makes a pretty compelling case that arbitration is broken, although it doesn't mention any solutions, like passing the Arbitration Fairness Act.

Banks Vs. Consumers (Guess Who Wins) [BusinessWeek]
(Photo: Getty)

Our favorite polling question takes aim at people who support mandatory binding arbitration, but don't quite know what they're supporting:

A majority of those who were initially supportive or unsure of binding arbitration disapprove of arbitration when important information is given about common provisions in consumer contracts. With added information, Americans overwhelmingly disapprove of binding arbitration.

Big shift among binding arbitration supporters. Those who said they approve of, or were not sure about binding arbitration were presented the three following facts:

1. The arbitrator who decides the outcome of the dispute will be selected by the company
2. The consumer may never take legal action against the company over the dispute
3. Binding arbitration applies even in cases where the consumer has been seriously injured by the product or service

When presented with this information, two in three (66%) disapprove of binding arbitration and only one in five (21%) approve. Among those who initially said they were unsure, disapproval is very high (64% disapprove, 6% approve). Disapproval is high even among those who initially approved of arbitration (67% disapprove, 28% approve).

After learning the specifics of contract provisions, Americans overwhelmingly are against binding arbitration. When initial and final disapproval ratings are combined, binding arbitration loses by more than eight to one (81% initial/final disapproval, 10% final approval).

Congress may be unable to do anything about our unpopular President, but 64% of us want them to get off their asses and pass the Arbitration Fairness Act. When they return tomorrow, rested from their holiday break, give 'em a call and tell them to channel our collective hatred of mandatory binding arbitration into action.

New Poll: Americans Say "No Thanks" To Binding Arbitration [Consumer Law & Policy Blog]
Write Your Senator
Write Your Representative
PREVIOUSLY: How To Write To Congress

(Photo: Getty)

[b]eginning before late 1998 or early 1999, Defendants began communicating with each other and their co conspirators concerning the imposition and use of mandatory arbitration clauses.” After preliminary meetings and communications, the banks formed an “Arbitration Coalition” to recruit other credit card issuers into using mandatory arbitration clauses. Over the next four years, the Arbitration Coalition held more meetings, shared plans for the adoption of arbitration clauses, and spun off additional working groups. Ultimately, “Defendants jointly forced unwilling and unaware cardholders to accept arbitration clauses and class action prohibitions on a ‘take-it-or-leave-it basis’ through the joint exercise of immense market power.”

The cardholders argue that the banks’ collusion violated the antitrust laws. According to Plaintiffs-Appellants, the banks conspired in order “to immunize themselves from economic responsibility for antitrust and consumer protection violations, and to reap supra-competitive profits from their cardholders.” The cardholders also contend that the alleged collusion produced several market effects, including the creation of a “non-price trade advantage over cardholders” and the removal of any economic incentive for the banks to comply with antitrust and other laws, thereby shifting the risk and cost of their non-compliance to cardholders. The collusion is also alleged to have resulted in an increase in dispute related costs to individual cardholders (including monitoring the banks’ conduct and seeking relief through costly individual arbitrations), the removal of all non-arbitration credit cards from the market, thereby depriving the cardholders of meaningful choice in the area of credit card services, and a diminution in the overall quality of credit services offered to consumers.

The Complaint sets forth two antitrust claims against the banks. The first claim alleges a conspiracy to impose mandatory arbitration clauses in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The second claim alleges that the banks participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration, also in violation of Section 1

In 2004, the suit alleges, California resident Elizabeth Marcotte was hit with a $25,0000 award, plus $10,000 in attorneys' fees, in a credit-card collection case. But Ms. Marcotte allegedly wasn't notified about the arbitration, because she was served at an old address, even though she had notified the credit-card company of her new address. The NAF awarded the attorneys' fees without requiring proof that the debt collector actually incurred the fees, according to the suit. Ms. Marcotte wasn't reached for comment.

In another credit-card collection case, the NAF allegedly entered an award against California resident John Sheakley, without responding to his request to appear at a hearing and explain why he didn't owe the purported debt to a bank that was a predecessor of FIA Card Services.

The award issued by an arbitration judge was the first of its kind and prompted Health Net to announce it was scrapping its cancellation practices that are under fire from state regulators, patients and the Los Angeles city attorney.

Arbitrator Sam Cianchetti, a retired Los Angeles County Superior Court judge, found that Health Net violated numerous state laws in canceling Patsy Bates' policy and declared the company's actions "despicable."

Cianchetti also blasted the company for tying employee bonuses to the number of policies canceled and the amount of money saved.

"It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive," he said in a 21-page opinion.

"Bates was contacted by Mr. Robert Torrez, who called regarding health insurance. When advised she already had health insurance, Torrez suggested he might be able to get her a better rate. An appointment was made," reads the arbitration award.

The arbitrator found that HealthNet's agent did not properly explain and review the forms Ms. Bates was required to sign and also changed her weight on the application without her written consent.

"When asked about her weight, she told him her weight on her driver's license was 185lbs. She never told Torrez to change the weight, nor was she aware that the weight had been changed."

After Ms. Bates was diagnosed with breast cancer, HealthNet rescinded her coverage because of the weight change and left her with over $100,000 in unpaid medical bills.

Health Net ordered to pay $9 million after canceling cancer patient's policy [LATimes]
Arbitration Award (PDF) [LA Times]

The 8-1 decision came in a lawsuit by Alex E. Ferrer, a former Florida Circuit Court judge who decides minor civil disputes as a form of TV entertainment.

Ferrer refused to pay a management fee to Arnold Preston after the two men had signed a contract that called for arbitration of any disputes.

Ferrer says Preston is not a licensed talent agent as California law requires.

Preston sought the money by starting a proceeding with the American Arbitration Association in Los Angeles. Ferrer filed a complaint with the California Labor Commissioner, seeking to invalidate the contract for the fees. Ferrer went to court when the labor commissioner said she lacked the power to block the arbitration.

At issue was the reach of the Federal Arbitration Act.

"When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws," wrote Justice Ruth Bader Ginsburg.

I looked at him incredulously. "Absolutely!" I responded. "For corporations. The consumer is stripped of their rights and forced into a process that rules against them over 90% of the time."

He counters with decreased legal fees and other selling points, and then hits me with the killer, "If you get an unbiased arbiter, it's the ideal solution."

Do you agree now he's just asking for it?

"There's the issue," I replied. "The consumer doesn't get an unbiased arbiter. The arbiter is chosen by the corporation, and those who don't give the corporation the ruling they want are not chosen again."

He went back to the unbiased point again. He apparently wasn't going to be able to see it from the consumer's side, so I gave up.

But at that point I knew...had it just been me in that dealership, I'd have walked. But my wife has to put up with a lot of my arguments of principle, and this one would have cost her a shiny new vehicle.

(bonus: The first time he made the 'unbiased' argument, he couldn't remember the word 'unbiased'. I had to prompt him.)

- Sean

RELATED:
Said No To The Doctor's Arbitration Agreement
Arbitration Clause Destroys American Dream
Arbitration Firms Are Godless Bloodsuckers
Arbitration Firm Rules Against Consumers 95% Of The Time
9 Reasons To Ban Mandatory Binding Arbitration

Justin says: " I filled out everything the next night (tonight) and got an email right away confirming (Written notice coming in the mail as well.) "

Boo arbitration clauses. Yay, opting out.

Opt Out [H&R Block]

Sex Assault Suit Vs. Halliburton Killed [ABC] (Thanks to Philip!)
RELATED: Mandatory Binding Arbitration Means Alleged Halliburton Rapists Could Go Free

Sorey says when he went in, he told a befuddled cashier that he didn't think that the arbitration notice was enforceable, that anyway he wasn't agreeing to it, and, "I need a taquito and a coffee." He says he sat down, watched some traffic, and ate his taquito. "I didn't choke, I didn't burn myself, and I didn't sue 'em," he reports.

Eat Burger, Waive Right to Sue [Mother Jones]
(Photo: Dan Sorey)

Arbitration Opt Out [Comcast] (Thanks to Stephen!)

Verizon Wireless faces class action over ETFs [RCRWirelessNews] (Thanks to Steve!)

My eyes skimmed over the words... forgo constitutional rights... American Arbitration Association... binding... I thought about all the other arbitration agreements I had signed: cellphones, rental cars, and credit cards—why was it a problem now? I also thought about how I had written post after post about how arbitration strips consumers of their rights... how arbitrators that rule in favor of corporations get most of the work... how I had urged people to support the Arbitration Fairness Act. I signed everything except the arbitration form and slipped it between the papers and handed it back...

I hoped that maybe it would go unnoticed, but the receptionist looked through all the papers and said, "Oh, we need you to sign this one." The acupuncturist arrived and got in the conversation, which went something like this:

ME: I'm sorry, it's nothing against you guys, I have no plans to sue you, I just don't feel comfortable giving up my constitutional rights.
THEM: Well, it's just something we have to have you sign for our malpractice insurance.
ME: Are you going to deny me treatment if I don't sign it?
THEM: We have attorneys come in here all the time and they even say that it wouldn't hold up in a court of law...
ME: Oh, it'll hold up, believe me. Are you going to deny me treatment if I don't sign?

Then they gave in and let me get stabbed with needles without signing an arbitration agreement. I wasn't trying to be a hardass, I just genuinely felt physically distressed when I saw that word staring back at me. ARBITRATION. Consumer Rosa Parks I'm not, but being able to negotiate the contract process, object to what I felt objectionable, and still get the services rendered, felt good.