Last year, I wrote a blog on the increased proliferation of arbitration clauses in consumer contracts. (See Founding Fathers Wouldn’t Like Fine Print: Forced Arbitration in Consumer Purchases) This subject recently appeared again in the news as Sen. Al Franken introduced Senate bill S.1133 earlier this year. The Franken bill seeks to limit forced arbitration – a practice which severely curbs the rights of consumers and employees.
Arbitration clauses now exist in almost all contracts for credit cards, phone service, and car purchases. It also can be found in agreements with physicians, applications for employment, and nursing home leases. The arbitration clause is usually buried deep in the fine print. On the surface, these agreements may seem to be a positive step reducing overcrowded courts, frivolous lawsuits, and the expense of a trial. In reality, it stacks the deck against the plaintiff and gives a break to large corporations and entities that stand to lose a great deal in a trial by jury. It can also be extremely expensive for the plaintiff – often an individual with little money, but a big grievance.
What is arbitration? It means that instead of a court, presided over by a judge and jury, an arbitrator is assigned to the case. The arbitration occurs outside of our civil justice system. The arbitrator may have no experience as a judge, have full control of what evidence is permitted, and may even have ties to the defendant company, yet their rulings are almost impossible to appeal. Because arbitrations are private, finding out if a company has had prior complaints that ended in arbitration is difficult or unattainable, unlike a jury trial where the information is open to the public.
Eliminating binding arbitration clauses from consumer contracts should be an easy ‘sell’ to Congress, right? Don’t bet on it. It will not be an easy fight since the U.S. Supreme Court has ruled twice in favor of arbitration clauses and the U.S. Chamber of Commerce fully supports these agreements. However, what’s at stake is not just the grievances of a few wronged consumers, but every American’s 7th Amendment right to a trial by jury.
Mandatory arbitration clauses in consumer contracts are effectively opting the entire country out of the Constitution. Corrective legislation that is fair and protects our Constitutional rights is needed. Parties of roughly equal bargaining power can certainly decide to contractually bind themselves to arbitration. But consumers just trying to buy a refrigerator or rent a car shouldn’t be forced to give up their 7th Amendment right in order to complete the purchase.