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)

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

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)

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)

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)

(Photo: Getty)

So, why was this particular arbitration clause unconscionable, anyway? Groklaw says that it includes provisions that have nothing to do with the purpose of arbitration — such as the requirement for secrecy.

The court explains:

It forbids class actions and requires that all arbitrations be kept confidential. The agreement also states in relevant part that "[n]o dispute may be joined with another lawsuit, or in an arbitration with a dispute of any other person, or resolved on a class-wide basis," and "[a]ny arbitration shall remain confidential. Neither you nor AT&T may disclose the existence, content, or results of any arbitration or award, except as may be required by law or to confirm and enforce an award." CP at 718-19. The dispute resolution section also provides that any claim must be brought within two years and limits a consumer's right to collect punitive damages and attorney fees.

They also added that AT&T just wasn't fooling anyone by trying to hide a bunch of baloney in the arbitration agreement:

Limiting consumers' rights to open hearings, shortening statutes of limitations, limiting damages, and awarding attorney fees have absolutely nothing to do with resolving a dispute by arbitration. Courts will not be so easily deceived by the unilateral stripping away of protections and remedies, merely because provisions are disguised as arbitration clauses.

AT&T EULA's Terms Are Found "Unconscionable" - What Does That Mean? [Groklaw] (Thanks, tz!)

(Photo: Todd Kravos )

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)

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)

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.

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.

From the Seattle Post-Intelligencer:

T-Mobile customers Kathleen Lowden and John Mahowald sued T-Mobile in King County Superior Court in 2005, alleging that the wireless carrier wrongly charged them for roaming, long distance, night-time and other fees that should have been free. They said T-Mobile also levied other charges, such as "a universal service fund fee," that weren't advertised.

T-Mobile removed the case to federal district court and tried to compel mandatory arbitration, noting that the consumers had signed a contract agreeing to resolve their disputes in this manner.

T-Mobile customers can sue, court rules [Seattle P-I]
Opinion by Judge Gould (PDF)
(Photo:swruler9284)

Mandatory arbitration means that all disputes are handled by an extra-judicial arbitration firm whose fees are paid for by the corporations and there's zero appeals. One study found that arbitration firms rule against consumers 95% of the time. Now, this is just a civil case, and with the media attention surrounding her story, there will probably be action by the Justice Department to press criminal charges. Let's hope so because we know arbitration is not going to give her justice.

CNN legal analyst: Alleged Halliburton rapists may go free [Raw Story](Thanks to Tino!)

RELATED
"Halliburton", gang rape, and fear of arbitration: the Jamie Leigh Jones case [Overlawyered]
KBR Statements and memo regarding rape allegations [ABC]

An October hearing on companion legislation in the House Judiciary Committee quickly devolved into a sob story, with three consumers sharing in horrifying detail how arbitration left them financially ruined. Today's hearing will be comparatively sedate, featuring one panel of academics and lawyers.

Join us at 9:30 as the professionals slice and dice the wonderful and evil qualities of the most anti-consumer practice allowed by law—for now.
(Photo: xsparrowx)
9:32: Video Link - Constitution Subcommittee hearing to examine S. 1782, to amend Chapter 1 of Title 9 of the United States Code with respect to arbitration. Coverage begins momentarily. Oh Congress, you could de-sass anything.
9:34: Here we go. Senator Feingold (D-WI) is chairing the hearing, already decrying our lost right to jury trials.

9:35: Arbitration is especially evil because contracts are often non-negotiable.

9:36: Arbitration's extra-judicial nature precludes discovery and restricts judicial review. It's the 'gitmo of contracts.

9:37: Voluntary alternate dispute resolution is great, but consumers must be given the right to choose arbitration or a jury trial.

9:37: The bill is meant to apply to disputes between investors and securities brokers, which is important to some people.

9:38: And now to Senator Brownback (R-KS).

9:40: Brownback thinks the proposed law is "over-broad" because it applies to any dispute where the two parties have unequal power.

9:40: He is worried that removing arbitration would lead to a flood of lawsuits that would clog the judiciary. Then us poor consumers would have no meaningful chance of recovering anything.

9:41: More reasonable, he wants a distinction between fine print arbitration, where arbitration is snuck into an agreement, and agreed arbitration, where two equal parties agree to send disputes to an arbitrator.

9:42: Employees are 20% more likely to recover from arbitration than litigation.

9:42: California studies show that consumers won 65% of cases against businesses.

9:43: These statistics conflict directly with what we heard during the last hearing. Consumers have a 1.6% chance of winning most arbitrated cases.

9:44: Eh, weak point. The trial bar suggests that a series of small cases should be bundled together into a class action. Brownback offers "My toaster doesn't work" as an example. If most toasters of a certain brand don't work, a class action would be justified. The problem is that class actions also fail most consumers. Who wants a $5 coupon towards a new toaster when the lawyers handling the case get $5 million for their work? But that is a whole separate bill. We do not want to drag our broken toaster into arbitration.

9:46: Feingold is clarifying that the bill applies only, exclusively to mandatory arbitration. Other arbitration is more palatable.

9:47: The witnesses have been sworn in.

9:47: Oh good, we do have an aggrieved consumer: Fonza Luke of Birmingham, Alabama. She works two jobs in health care, and serves on the board of her church. She has four children and six grandkids.

9:48: She is going to talk about how mandatory binding arbitration applies to employees.

9:49: She spent 30 years as a licensed nurse and always earned the highest honors and accolades. Always took the hospital up on new training opportunities.

9:49: In November 1996, she was told she would lose her job if she didn't sign a mandatory binding arbitration agreement.

9:50: She didn't think it was right, and after speaking to her husband and pastor, she refused to sign.

9:50: The hospital tried twice more to get Fonza to sign, and when she still refused, she was fired for insubordination.

9:51: "The only things I did that were insubordinate were things that younger, white employees did all the time." "I believe [the hospital] fired me because of my race and my age."

9:52: The EEOC (Equal Employment Opportunity Commission) agreed and fined the hospital.

9:52: She sued in federal court, but was told that she had to go to arbitration, even though she had refused to sign the agreement.

9:52: She was told that she implicitly agreed to the proposed agreement because she continued to work for the hospital.

9:53: Her appeal was rejected, and she was sent to arbitration.

9:53: The arbitrator was paid by the hospital and rejected Fonza's claims of discrimination. "I don't even think he looked at my claims."

9:54: Now Peter B. Rutledge of the Catholic School of Law.

9:55: He's talking about "the data."

9:55: "'The data' are conflicting with calls to abolish arbitration." Dude, just say that the numbers tell us to shut up.

9:56: Costs would rise, consumers would lose access to justice. Irony would run through the streets without abandon.

9:56: "Eliminating arbitration would not make individuals as a whole better off." We are bothered by the phrase 'individuals as a whole.'

9:57: Most arbitration studies refer to employment arbitration, not the standard consumer arbitration that we hate.

9:58: His argument boils down to this: litigation is expensive and time consuming, so why not arbitrate?

9:58: Litigation is expensive, but that is a factor that each consumer must weigh. Sure, arbitration could work in certain circumstances, but arbitration can only be fair when consumers choose it over litigation. That choice is what this bill seeks to restore.

10:00: Onto Richard M. Alderman of the University of Houston Law Center.

10:01: Yuck! Congress eliminated mandatory arbitration for used car dealers, but hasn't given us the same freedom.

10:01: The car dealers complained that stronger dealers would impose arbitration on weaker franchises, so Congress stepped in and provided relief. Thanks for forgetting the rest of us, Congress.

10:02: Bingo: Business has opted out of the civil justice system in favor an alternate form of justice that they control.

10:03: Our courts do more than hand down decisions. They interpret statutes and form common law. By escaping the courts, we kill democracy. Do you want to kill democracy? Didn't think so.

10:04: Arbitrators are not bound by precedent. No common law, no uniformity. Different consumers in identical situations can receive different outcomes.

10:05: Arbitrators can not contribute to, or modify, common law. We have frozen the law and prevented any adaptation to new or novel situations.

10:05: Should a powerful party should deny weaker parties access to the courts and our common law?

10:06: Onto Richard Naimark of the American Arbitration Association. Wonder what he might possibly say.

10:07: "The AAA does not represent an industry." Arbitrators are independent lawyers, not employees of the AAA.

10:07: He agrees that the issue is access to justice.

10:08: Back to this old point: arbitration is cheaper than litigation.

10:08: Arbitration is cheaper "IF due process protections are built into the process."

10:09: 'Due process protections' and access to courts and consumer choice are not the same thing.

10:10: Due process means that costs must be reasonable, everybody should have access to legal counsel, the arbitration must be in a mutually agreeable location (we heard at the last hearing that this is not followed.)

10:10: Those provisions are necessary for people to take arbitration seriously, but they do not justify denying consumers access to the court system. Nothing does.

10:11: Onto Tanya Solov, the Director of the Securities Department with the Illinois Secretary of State. We're going to hear about investors.

10:12: This is all the Supreme Court's fault. They're the ones who ruled that investors could be roped into mandatory binding arbitration.

10:13: Don't think investment disputes affect you? Half of all Americans invest, and most investment agreements include clauses requiring mandatory binding arbitration.

10:13: A win in arbitration results in meager recovery, sometimes less than the cost of arbitration.

10:14: "Arbitration may be desirable if both parties knowingly and willing agree to arbitrate at the time of the dispute." 'However, even if arbitration is cheaper and faster, especially when investors lose their life savings, a fair hearing with a public review is more important than a cost-effective solution.'

10:15: She supports the act.

10:17: Onto Mark A. de Bernardo or Public Justice. He has testified more than 40 times before Congress. Impressive.

10:18: He supports arbitration over litigation. Again, litigation is not always the solution, but consumers must be given the choice.

10:20: He is rattling off statistics that prove how arbitration is better than sliced bread, all without addressing the issue of consumer choice.

10:22: "I do believe this bill would be a death blow to arbitration in America." We agree.

10:23: "Arbitration is a job saver, litigation is a job destroyer."

10:24: Onto F. Paul Bland, Jr. We will make no joke about his last name. None.

10:25: He wants to respond to some of the comments thrown around today. "Outlandish comments" have been made.

10:25: He's pissed and wants people to look at the big picture, not little studies and "the data."

10:26: The studies are rigged. One study selected one case out of every one thousand to show that consumers won.

10:27: Here is how the studies define a consumer win: Consumer loses their house, goes into arbitration. If the consumer recovers $1, that's a win.

10:27: What is the one place in the country where the data isn't handpicked? California. All data must be posted.

10:28: Bland is so angry. He's practically yelling at the other witnesses.

10:28: Employee win rates and damage awards are much worse in California.

10:28: Blackballed: Every arbitrator that gave a large award to a consumer suing an HMO never heard another case involving HMOs again.

10:30: AAA talks about due process, but prior to 2001, they had never enforced due process claims. Only when they were sued in federal court did they begin to selectively enforce due process.

10:30: AAA doesn't provide neutral arbitrators. They hand over a list of seven arbitrators who all specialize in defending the industry.

10:31: That's what happened to Fonza.

10:33: Question time.

10:33: Feingold is praising Fonza for refusing to sign the arbitration agreement, but wants to know why she refused.

10:33: Fonza was told that she would be waiving her rights because she felt that she could be fired too easily as she was approaching retirement.

10:34: The hospital offered nothing in exchange for signing the agreement.

10:34: The arbitrator that heard her case refused to allow any evidence that the EEOC spent months collecting. Courts would have allowed Fonza to present her evidence.

10:35: Holy shit! The woman who was raped in Iraq and accused Halliburton of covering up her case is trying to sue the company in federal court. She is now being told that she must submit to mandatory binding arbitration.

10:36: Going back to the revolution, colonists complained that King George selected judges and who were dependent on him for their salary. Their decisions were decried as horrifically unfair. Sound familiar?

10:39: "To try to make arbitration more like a court won't work. The question is should consumers be forced into arbitration."

10:42: Brownback was the Kansas expert on "fence law." What is fence law, and why is Brownback talking about Kansas fence law?

10:42: Oh, this is when a cow breaks through a fence and does unspeakable things to the neighbor's property.

10:43: He is still talking about fence law, the civil alternative to pulling guns.

10:45: He is asking the AAA how more due process could be added, possibly by legislation.

10:46: The AAA would require legislation to protect the little guy by enshrining their due process requirements into law. Still doesn't get us to consumer choice, though there might be new opportunities to sue for violations of those protections. If the AAA hands over a list of biased arbitrators, consumers could potentially sue for failing to follow the due process requirement of a neutral arbitrator.

10:47: Rutledge is concerned that all arbitration—consumer, employment, securities—is lumped together. "The data" don't support that. "The data" are angry.

10:48: Brownback also wants more data.

10:48: Rutledge is defending himself from Bland's claims of "outlandish comments." Don't mess with "the data."

10:49: He believes the best, most accurate data have been cited in his testimony. Powerful words. Maybe he wants "the data" to speak for themselves.

10:50: A batch of schoolchildren have walked into the hearing room.

10:50: They do not look amused. These kids today, with their rock music and sneakers... they have no respect for "the data."

10:52: The Illinois Secretary of State rep also wants to know how these studies classify a win.

10:53: Even without that data, she thinks there is more than enough support to pass the bill.

10:53: Feingold wants to hear more about how we lose something as a nation when we chose arbitration over common law.

10:54: Our system depends on private parties litigating in public to keep market players in check. When you make proceedings secret, the marketplace loses vital information.

10:55: We have a right to know if someone is suing Mattel for making deadly toys. "This is your life. This is your house, this is your health, this is your automobile. If this is secret, you do not have a way to protect yourself."

10:56: Feingold is picking up on our choice argument: Do you think that it means that no reasonable person would choose arbitration?

10:56: Right, if nobody chooses arbitration, that strongly damns the institution.

10:57: Consumers rarely choose arbitration. Of 20,000 cases, 4 were brought by consumers. This is not a valuable alternative that helps consumers. "There are not consumers out there crying because they might lose the chance to arbitrate."

10:58: Brownback wielding self-deprecation: "The fence law expert is back."

11:01: He wants to know if there's a way to bring arbitration into the tradition of common law.

11:02: No.

11:02: Alderman does not believe there is any way to create public law outside of the courts.

11:03: We don't want arbitrators interpreting statutes. Federal judges are nominated by the President and confirmed by the Senate. Businesses pick arbitrators who save them money. They should not be allowed to interpret Congress' work.

11:04: The Texas Better Business Bureau required its members to use BBB arbitrators regardless of what their contracts stated. BBB arbitration was considered fair, but when one of the arbitrators ruled against the biggest homebuilders in the state, the businesses chose to withdraw from the BBB rather than face another unsuccessful arbitration. It is a money-saving business decision, not an open and fair system of justice.

11:08: Feingold contrasting mandatory binding arbitration and a Congressional hearing: "This is exactly what a hearing should be, a fair hearing of the issue."

11:10: The hearing is adjourned.

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.
(Photo: xsparrowx)

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."
Ok.
"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.

When she received notice of pending arbitration against her, it had no claim attached to it. She didn't even know who was suing her. She sent a letter asking for the case to be dismissed or to be served with an actual claim. She didn't hear from them again until NAF told her they had ruled against her for $46,000. They didn't even respond to her motion.

Takeaway: Scan your monthly credit card statements for any charges you don't remember making and report them as soon as possible. Also, arbitration by companies against consumers is evil. Support the Arbitration Fairness Act.

Stacking the Deck Against Consumers [Yahoo! Finance]

"[T]he bank asks for substantial costs related to the arbitration itself, and those costs are significantly higher than court filing fees. . . . In one case that I handled, the fees alone amounted to $450. Furthermore, the arbitration company sends the arbitrator a judgment form already filled out so that all the arbitrator need do is check the appropriate box... In my case I did not award the bank the litigation-related fees. . . . I never got another case!"

Full article inside...

National Arbitration Forum... weren't those the guys Public Citizen found ruled in favor of companies 95% of the time? Yep, they are.

Mandatory binding arbitration against consumers is a scam. Let's abolish it and keep it where it was designed for, businesses to deal with other businesses.

Sept 2006 [West Virginia Lawyer via Credit Slips
(Photo: Jackass)

The 8-month analysis of 34,000 cases decided by the National Arbitration Forum over a four year period found:

• 188 of the cases were brought before NAF by consumers, 99.6% by corporations
• On one arbitrator's busiest day, assuming an eight-hour workday, he decided a case once every seven minutes. 100% of those were in favor of the business, awarding 100% of the request money.
• 28 NAF arbitrators handled about 9 out of 10 of the cases, ruling for business 95% of the time.
• 120 other arbitrators handled 10% of the cases, ruling for businesses 86% of the time.

"Binding mandatory arbitration is a systematic, privately funded denial of justice for consumers," said Laura MacCleery, director of Public Citizen's Congress Watch division. "It is a get-out-of-jail-free card for corporate hucksters."

The Arbitration Trap: How Credit Card Companies Ensnare Consumers (PDF) [Public Citizen]
Raw data (XLS)
(Photo: Getty)

High cost: You have to pay a bunch of money, usually at lest $750, just to start a claim.
Biased Arbitrators: Companies are the only repeat customers of arbitration firms so guess who the arbitrators usually find in favor of?
Limited discovery: Good luck getting the necessary evidence in the room.
Prohibition of class actions: Arbitration clauses routinely don't allow you to participate in a class action lawsuit, "only effective remedy for wide-scale scams that rip off individual consumers or farmers in small amounts."
Inconvenient locations: Gas dollars rack up as you trek to their out-of-the way offices.
One-way requirements: The company still gets to sue in a real court if it wants, you however have to go through arbitration monkey court.
No public record: Only businesses requiring arbitration agreements have access to the body of previous arbitration findings — and which firms ruled in their favor.
Limited judicial review: Decisions can only be overturned in cases of fraud or "manifest disregard of the law," very difficult legal positions to establish.
Limited remedies: "Injunctive relief - a court order compelling the offending party to do something, or prohibiting that party from taking some action - cannot be obtained through arbitration. Arbitrators often split the difference between the two sides in awarding damages instead of determining the true costs of injuries. As a result, arbitration awards to consumers and employees are substantially lower than court awards."

And that's nine reasons why you should support the Arbitration Fairness Act.

Ban Mandatory Binding Arbitration [National Association Of Consumer Advocates]
(Photo: Getty)

If you do not wish to be bound by this arbitration clause, you must notify the Bank in writing within 60 days after receiving a copy of this Agreement. You must send your request to: Arbitration Manager, E*TRADE Bank, Legal Department, 671 North Glebe Road, Arlington, Virginia 22203. Your request must include your account number(s) and a clear statement of your intent, such as "I reject the arbitration clause stated in the Bank's account agreement.

From Credit Slips:

[The arbitrator] admitted that they never show up and he has never had an attorney show up before. Just before I left, he suggested that we might reschedule. I told him I would not agree to rescheduling and that I believed he had no choice but to find an award in favor of my client. This made him extremely uncomfortable and he indicated he would need to talk to someone at NAF [National Arbitration Forum] first. I reminded him that he was supposed to be impartial and he told me he would give me his decision in a few days.

I just want to clarify that the arbitration notice states that FIA will appear by telephone. Mr. Curry [the arbitrator] told me that they never appear in person and often don't call.

Arbitration First-Hand [Credit Slips]
(Photo: It'sGreg)

No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of...a consumer dispute.

(Photo: Bombardier)

American arbitration came into being in the Federal Arbitration Act of 1925. It was created to provide a speedy alternative to courts for for businesses "of generally similar sophistication and bargaining power" to resolve their disputes. A series of supreme court decision s extended the meaning to parties lacking lots of money and lawyers, like consumers and employees, in what is termed mandatory binding arbitration. Getting a credit card, bank account, car, medical care, or in some cases, a job, is conditional upon your agreement to forgo your constitutional right to take disputes to court.

What started as a way for peers to come to a sort of expedited gentleman's agreement has evolved into a extra-judicial system for corporations to enforce their will and protect themselves from censor. The Christian Science Monitor found that the top 10 arbitration firms decide in favor of companies 98.4% of the time. This seems hardly representative of a system between parties "of generally similar sophistication and bargaining power."

In a previous post, we urged you to email your elected representatives. But in talking with a former congressional aide, we learned that at the end of the week, the total number of form letters is tallied and the number given to the chief of staff. Definitely do one or the other, but if you want to have more impact, and have it read by the staffer covering the issue, mail in a personal letter.

Lookup the mailing address for your
Senator
Representative

$200 termination fees are just the beginning. Protected from the reach of law, of public review, of appeal, who knows what else these companies will get up to?