Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘arbitration’

Congress Just Killed Your Right to a Day in Court

Monday, October 30th, 2017

Last week, 50 Senators joined Vice President Mike Pence to kill one of the most important advances in consumer rights in years.

By casting the tie-breaking vote to kill the Consumer Financial Protection Bureau’s arbitration rule – which allowed consumers to band together to sue banks, financial institutions and credit card companies – Pence showed just how much power Wall Street has amassed on Capitol Hill and on Pennsylvania Avenue. It also unmasked the alarmingly cozy relationship between GOP leaders and the bank executives who defrauded millions of consumers and exposed their most important information to Equifax hackers.

As I told one reporter , “This was the Wells Fargo Immunity Act.”

Public Justice was proud to be a leading voice in the effort to defend the CFPB rule and help consumers fight back against the big banks that defraud their own customers. But make no mistake:  This vote was a big setback for consumer protection, but it did not kill the resolve of those of us who will continue to fight alongside the CFPB in order to give Americans their day in court.

Now that consumers have learned what’s at stake, there’s going to be more pressure from constituents for lawmakers to stop the kinds of behavior we’ve seen from Wells Fargo and Equifax, among others. This vote, though heartbreaking for those of us who believe in protecting the little guy, may well turn out to be a huge catalyst for future change.

With your help, we will keep fighting to keep the courthouse doors open.

This blog was originally published at Public Justice on October 30, 2017. Reprinted with permission. 

About the Author: Paul Bland has been a senior attorney at Public Justice since 1997. As Executive Director, Paul manages and leads Public Justice’s legal and foundation staff, guiding the organization’s litigation docket and other advocacy.

Divide and Conquer: Employers' Attempts to Prohibit Joint Legal Action Will be Tested in Court

Thursday, September 28th, 2017
On Monday, October 2, the U.S. Supreme Court will hear arguments in the most consequential labor law cases to come to the Court in a generation, which could fundamentally alter the balance of power between millions of American workers and the people who employ them.

So why are so few people paying attention?

At first glance, the cases may seem dry and complex, as they involve 80-year-old laws that most people have never heard of. But the issue at stake is actually quite simple: should your employer be able to force you to give up your right to join your coworkers in a lawsuit challenging working conditions as a condition of getting or keeping a job?

The federal courts of appeals for the Seventh and Ninth Circuits say the answer should be no. They point to the National Labor Relations Act (NLRA), a law passed by Congress in 1935 to end “industrial strife and unrest” and restore “equality of bargaining power between employers and employees.” The NLRA gives workers the right to join unions and to “engage in other concerted activities” for “mutual aid or protection,” and it makes it illegal for employers to “interfere with, restrain or coerce employees in the exercise” of those rights.

But in recent years, more and more employers are requiring their employees to agree, as a condition of working for that employer, that they must resolve any disputes that might come up in the future in a private arbitration proceeding, and not in court. Many of these so-called arbitration agreements also prohibit the arbitrator from hearing more than one employee’s claim at a time—in other words, they ban employees from taking legal action together, either in court or in arbitration. A recent study from the Economic Policy Institute found that 23.1% of private sector, non-union workers, or 24.7 million Americans, work for employers that impose such a concerted legal action ban.

Sheila Hobson was one such employee. She worked at a gas station in Calera, Alabama that was run by Murphy Oil. When she applied to work there, she had to sign an agreement stating that she would not participate in a class or collective action in court, “in arbitration or in any other forum” and that her claim could not be combined “with any other person or entity’s claim.” Two years later, she joined with three coworkers to file a lawsuit under the Fair Labor Standards Act. She and her coworkers claimed that they were routinely asked to clean the station, stock shelves, check prices at competitors’ stations and perform other tasks while “off the clock” and without pay. Murphy Oil moved to dismiss the lawsuit, pointing to their arbitration agreement and arguing that each employee had to pursue their claims individually.

The National Labor Relations Board, a federal agency created by Congress to enforce the NLRA, stepped in to defend Ms. Hobson and her coworkers. The NLRB ruled that Murphy Oil’s arbitration agreement interfered with its employees’ right to engage in concerted activity for their mutual aid or protection in violation of the NLRA. But the Court of Appeals for the Fifth Circuit agreed with Murphy Oil, leading to this showdown before the Supreme Court.

The crux of Murphy Oil’s position, which is shared by the employers in the cases out of the Seventh and Ninth Circuits that are also being argued on Monday, is that the employers’ bans have to be enforced because of the Federal Arbitration Act. This law, passed back in 1925 at the request of businesses who wanted to be able to resolve commercial disputes privately under specialized rules, says that agreements to arbitrate should be treated the same as any other contracts. And because their concerted action bans are found in arbitration agreements, the employers argue, the FAA requires their enforcement.

But the FAA includes a “saving clause” that allows arbitration agreements to be invalidated on any “grounds as exist at law or in equity for the revocation of any contract.” One such ground for revoking a contract is that it is illegal, and the Seventh and Ninth Circuit opinions pointed out that a contract that interferes with employees’ rights under the NLRA is illegal and thus unenforceable under the FAA’s saving clause. Moreover, as the NLRB explained, the Supreme Court has repeatedly held that the FAA cannot take away anyone’s substantive rights; it merely allows those rights to be pursued in arbitration rather than in court. But the concerted action bans in these cases, and those like them that other employers force employees to sign, do take away the very substantive right to join with coworkers that the NLRA guarantees. By preventing workers from banding together in court or in arbitration, these agreements deprive employees of the ability to pursue their concerted action rights in any forum whatsoever.

Given the high stakes these cases present, both employer and employee positions have garnered a large number of friend-of-the-court briefs before the Supreme Court. The Chamber of Commerce has weighed in on the employers’ side, as have other groups representing industry and the defense bar. The Justice Department, which had originally represented the NLRB, switched sides with the change in presidential administration and is also supporting the employers.

Meanwhile a group of ten labor unions pointed out that given the economic power employers wield over employees who need jobs to support their families, “few workers are willing to put a target on their back by bringing legal claims against their employer on an individual basis.” The NAACP Legal Defense Fund and more than 30 other civil rights groups, including Public Justice, explained how joint legal action has unearthed patterns of discrimination and brought about systemic changes in workplace policies that individual cases could never have achieved, listing 118 concerted legal actions challenging discrimination based on race, gender, age, disability and sexual orientation that would not have been possible under concerted action bans like Murphy Oil’s. The National Academy of Arbitrators disputed the employers’ premise that joint or collective claims can’t proceed in the more streamlined forum of arbitration, noting that labor arbitrators have been resolving group claims in unionized workplaces for decades and that requiring each case against the same employer – with the same evidence – to proceed separately would actually be far less efficient and more costly. Finally, the Main Street Alliance argued that concerted action bans reduce enforcement of minimum wage and employment discrimination laws, which disadvantages responsible businesses relative to corporations that mistreat employees and break the law.

With nearly a quarter of U.S. non-union employees already subject to concerted action bans, a green light from the Supreme Court telling employers to continue this practice will no doubt cause that figure to soar. But Public Justice is hopeful that the Court will follow the plain meaning of the NLRA and find these bans to be the illegal acts that they are—attempts to coerce employees into giving up their right to join forces to increase their bargaining power. That right applies equally whether employees want to join a union, join a lawsuit or join a boycott or picket line. The Supreme Court should stop this employer power grab and reaffirm the right to concerted activity, which is just as important for workers now as it was when Congress established it over 80 years ago.

This article was originally published at Public Justice on September 28, 2017. Reprinted with permission.

About the Author: Karla Gilbride joined Public Justice in October 2014 as a Cartwright-Baron staff attorney. Her work focuses on fighting mandatory arbitration provisions imposed on consumers and workers to prevent them from holding corporations accountable for their wrongdoing in court.

Supreme Court opens its new term with a direct attack on workers’ rights

Monday, September 25th, 2017

The Supreme Court returns next Monday from its summer vacation for the first full term where Neil Gorsuch will occupy a seat at the far end of the Court’s bench. And the Court will open this term with a trio of cases that are very likely to immunize many employers from consequences for their illegal actions.

The three cases — National Labor Relations Board v. Murphy Oil USAErnst & Young LLP v. Morris, and Epic Systems v. Lewis — all involve employment contracts cutting off employee’s rights to sue their employer for legal violations.

In at least one case, employees were required to sign the contract as a condition of beginning work. In another, employees were forced to give up their rights as a condition of keeping their job. These contracts contained two restrictions on the employees: 1) a “forced arbitration” provision, which requires any legal disputes between the employer and the employee to be resolved in a privatized arbitration system; and 2) a provision prohibiting employees from bringing class actions or other collective suits against their employers.

Requiring private arbitration favors employers over employees. As an Economic Policy Institute study determined, employees are less likely to prevail before an arbitrator than before a court, and they typically receive less money from an arbitrator when they do prevail.

Banning class action suits, meanwhile, effectively permits employers to violate the law with impunity, so long as they do not do too much harm to any individual employee.

If an employer cheats one employee out of $300,000 worth of wages, for example, that employee is likely to be able to find a lawyer who will take his case on a contingency basis — meaning that the lawyer gets a percentage of what the employee collects from the employer if they win. If the same employer cheats 10,000 employees out of $30 each, however, no lawyer is going to represent any one of these workers on a contingency basis. Plus, few employees are likely to bother with a $30 suit. It’s too much hassle, and too expensive to hire a lawyer who won’t work on contingency. The solution to this problem is a class action suit, which allows the 10,000 employees to join together in a single case litigated by a single legal team.

Banning such class actions effectively leaves these employees without remedy. As one federal judge explained, “the realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”

The employer’s claim that they can combine a forced arbitration clause with a class action ban arises out of two previous Supreme Court cases that took an extraordinarily creative view of a nearly 100-year-old law.

In 1925, Congress enacted the Federal Arbitration Act to allow, as Justice Ruth Bader Ginsburg once explained, “merchants with relatively equal bargaining power” to agree to resolve their disputes through arbitration. Beginning in the 1980s, however, the Court started to read this law expansively to permit forced arbitration between businesses and relatively powerless consumers and employees.

Then, the Court got even more aggressive. By its own terms, the Federal Arbitration Act exempts “workers engaged in foreign or interstate commerce.” Nevertheless, in its 5-4 decision in Circuit City v. Adams, the Supreme Court held that the Act applies to most workers engaged in foreign or interstate commerce. Thus, forced arbitration clauses in employment contracts were given special protected status, even though the federal law governing these clauses says otherwise.

Similarly, Justice Antonin Scalia wrote for a 5-4 Court in AT&T Mobility v. Concepcion that the Federal Arbitration Act has penumbras, formed by emanations from its guarantees that give it life and substance. The right of businesses to insert class action bans, Scalia claimed, is one of these penumbras contained in the 1925 law. And so businesses gained the power to add no class action clauses to their forced arbitration agreements, even if a ban on class actions violates state law — and despite the fact that the Federal Arbitration Act says nothing about class actions.

Nevertheless, the employees in Murphy Oil and its companion cases hope that another provision of law will protect them from signing away their right to join a class action.

A provision of the National Labor Relations Act (NLRA) provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Several lower courts have held that an employee’s right to engage in “concerted activities” protects their right to join class actions, and they cite multiple previous Supreme Court decisions which lend credibility to this claim.

In a world governed by the text of the law, employees would have a strong case that they cannot be forced to give up their right to bring class action litigation. But we live in a world governed by Circuit City and Concepcion — both of which demonstrate the Supreme Court’s willingness to take liberties with the law in forced arbitration cases.

This article was originally published at ThinkProgress on September 25, 2017. Reprinted with permission.
About the Author: Ian Millhiser is the Justice Editor for ThinkProgress, and the author of Injustices: The Supreme Court’s History of Comforting the Comfortable and Afflicting the Afflicted.

Get Back Your Right To Take Your Bank To Court

Thursday, July 13th, 2017

Wall Street, the U.S. Chamber of Commerce and right-wing Republicans are ganging up again this week against consumers who want to hold financial institutions that rip them off accountable.

The target this time is a rule issued this week by the Consumer Financial Protection Bureau that is designed to restore the ability bank and credit card customers, as individuals or as a group, to take a financial dispute to court.

“Our new rule will restore the ability of groups of people to file or join group lawsuits. In some cases, not only will companies have to provide relief, they will also have to change their behavior moving forward,” said a statement issued by the agency. “People who would otherwise have to go it alone or give up, will be able to join with others to pursue justice and some remedy for their harm.”

However, unsurprisingly, it took less than a day for the guardians of Wall Street profiteering to attack the rule. They are the same people – like Sen. Tom Cotton, R-Ark., in the Senate and Rep. Jeb Hensarling, R-Texas, in the House – who are working to either get rid of the CFPB entirely or render it toothless.

That’s why People’s Action is launching a petition asking Congress to keep the CFPB arbitration rule and protect the ability of ordinary people to go to court against corporate wrongdoers.

Cotton announced Tuesday that he would be introducing legislation to undo the rule under the execrable Congressional Review Act, the same tool Republicans have been using since President Trump took office to undo a host of Obama-era regulations.

Quoted in The Washington Examiner, “Cotton accused the bureau of “going rogue again” and said that the rule “ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests.”

Reuters reported that “the U.S. Chamber of Commerce is contemplating a legal challenge and Trump administration officials are also looking at ways to kill the rule.”

Many customers don’t realize that right now, if they believe their bank or credit card customer has ripped them off or otherwise harmed them, they can’t take the matter to court.

That’s because buried in the fine print of more than 50 percent of the nation’s credit card account agreements and more than 40 percent of the bank account agreements, accoording to a 2015 Consumer Financial Protection Bureau report, there’s language that says if you want to challenge wrong or unfair charges to your account, you are required to go into a binding arbitration process, rather than take the dispute to a court.

The arbitration process is rigged to favor the financial institution. When The New York Times looked at this process in 2015, it found that few customers used the arbitration process, and when they did, consumers lost roughly two-thirds of the time. The process is also explicitly designed to keep consumers with similar complaints from banding together to confront patterns of bad behavior.

Among other things, arbitration clauses shielded Wells Fargo from a class action lawsuit when its employees were creating thousands of bogus consumer accounts in order to meet sales quotas.

It’s only fair: If you steal from a bank, you’ll be brought before a judge. The same should happen if a bank steals from you – and thousands of others. That’s what the CFPB rule says.

The use of the Congressional Review Act is particularly pernicious because ff these Republicans succeed this won’t be a temporary setback. This fundamentally unfair and undemocratic practice that keeps Wall Street from being held legally accountable for its actions would be permanently locked in, because the act not only invalidates the rule but prohibits an agency from writing a similar rule in the future.

Sign this petition so Congress hears you loud and clear: Keep the CFPB arbitration rule and protect our right to challenge corporate wrongdoers in court.

Republican leaders in Congress are hell-bent on neutering the CFPB or eliminating it altogether, precisely because it takes actions like this to even the playing field for consumers going up against the financial giants.

This blog was originally published at OurFuture.org on July 13, 2017. Reprinted with permission.

About the Author: Isaiah Poole is communications director of People’s Action, and has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.

The Trump Administration is About to Put Nursing Home Profits Ahead of Nursing Home Patients

Wednesday, May 10th, 2017

Some of the most heart-wrenching stories of abuse, mistreatment and neglect you’re likely to hear involve nursing homes. As America’s baby boomers age, and nursing home populations continue to grow, big corporations have, not surprisingly, started to take note. In fact, the vast majority of nursing homes in the United States – 70%, according to the Centers for Disease Control and Prevention – are run by for-profit corporations, and an increasing number of homes are being snapped up by Wall Street investment firms.

And that, in turn, can often mean that high quality care takes a backseat to high profits.

Increasingly, these giant corporations are using forced arbitration clauses — contract terms that say that people cannot sue them, no matter what laws they break, and instead people harmed by illegal acts can only bring cases before private arbitrators who are generally beholden to the corporations. These clauses make it far harder for the victims of mistreatment to hold a facility accountable where there’s abuse or serious negligence, and they minimize the incentive to provide the highest quality of care.  The secretive arbitration system also effectively lets homes sweep the facts about problems under the rug, so that the public and regulators never learn about widespread or egregious abuses.

That’s why, in 2016, the Centers for Medicare and Medicaid Services said nursing homes should no longer receive federal funding if they use arbitration clauses in their contracts. It was a commonsense proposal that would ensure families can hold nursing homes accountable for abuse and neglect. The government essentially said – and rightly so – that protecting desperately vulnerable people is more important than squeezing out an extra percentage of profit for hedge fund owners.

But that was 2016. Now, the Trump Administration appears to be gearing up to kill the proposal.

Senator Al Franken (D-MN), a fierce opponent of arbitration who has fought corporate lobbyists to protect Americans’ right to their day in court, said on Tuesday that “the Trump Administration is planning to lift the ban on nursing home arbitration clauses.”

So the White House, it appears, is ready to deliver another gift to hedge funds and banks – the corporate entities that increasingly control the nursing home industry – at the expense of the sick and elderly and their families.

It’s no wonder why corporate lobbyists working for the nursing home industry have made killing the CMS proposal a top priority: unlike the public court system (where trials are open to the public, press and regulators), nursing homes benefit enormously from the secretive system of arbitration, where the facts about abuses can be (and often are) buried. “Confidentiality” provisions – which really translate into gag orders – and non-transparent, non-public handling make it easier for systemic problems to stay hidden, and to continue.

If nursing homes are permitted to continue opting out of the civil justice system, we can expect to see lower levels of care, and higher numbers of preventable injuries and deaths. If they succeed in keeping families out of court, the potential savings to their bottom line are enormous when you consider that abuse is very widespread (according to the government’s own study).  Public Justice, our national public interest law firm and advocacy organization, set forth an extensive factual and legal case in support of the CMS proposal, where a great deal more background is available.

Consider just a handful of the plaintiffs who were able to successfully challenge nursing homes in court:

  • A 90-year-old woman allowed to languish with a festering pressure sore, acute appendicitis, and a urinary tract infection so severe it has entered her blood.
  • A diabetic patient injected with the incorrect dose of insulin, sending them into hypoglycemic shock and causing brain damage.
  • An 81-year-old man who was viciously beaten by a roommate who’d been involved in 30 assaults prior to moving in with the victim.
  • An 87-year-old woman whose calls for help were ignored after she fell and broke her hip.

Had any of those patients been subject to an arbitration clause – as no doubt many future cases would be if the Administration folds to pressure from for-profit homes – they likely would have never had a chance to have their case heard by a jury.

Nursing homes have complete control over some of the most vulnerable and fragile people in the entire country: people who are gravely ill, who are often cognitively impaired in ways that make it hard for them to protect themselves, are completely at the mercy of these institutions.

Now, rather than working to give those patients some small measure of protection and security, the Trump Administration is poised to give them the shaft. It’s unconscionable back-pedaling that would leave millions with little recourse when they, or their loved ones, are mistreated or abused.

This blog originally appeared at DailyKos.com on May 3, 2017. Reprinted with permission.

About the Author: Paul Bland, Jr., Executive Director, has been a senior attorney at Public Justice since 1997. As Executive Director, Paul manages and leads a staff of nearly 30 attorneys and other staff, guiding the organization’s litigation docket and other advocacy. Follow him on Twitter: .

 

If Uber Wants to Take Away Its Customers’ Rights, It Should Tell Them

Tuesday, December 13th, 2016

It’s bad enough that a ton of corporations require their customers and employees to submit all their legal claims to private arbitration, a secretive system that is rigged against the individual. But to compound the unfairness, a growing number of corporations are hiding their forced arbitration clauses to make them more and more obscure. As corporations become more secretive, and try harder to slip these by consumers so they won’t notice, it makes it less and less likely that people will actually read and agree to them (or choose not to). Here at Public Justice, we are fighting back against this trend: we have repeatedly argued to courts around the country that arbitration clauses should be held to the same standards as other types of contract terms – people should never be bound by these clauses unless they agree to them.

Recently, in the case of Meyer v. Uber, federal judge Jed Rakoff, who is both nationally prominent and widely respected, held that Uber had failed to form an enforceable agreement to arbitrate with customers through its mobile app. Judge Rakoff looked at the two things that a corporation must do to form a contract – it must conspicuously disclose the contract term, and it must ensure that individuals unambiguously agree – and found that Uber had failed to do either of these things. This was a puzzling error by Uber, which has been able to meet this basic standard in its arbitration clauses with both customers and workers in a number of other parts of its business.

Now the case is on appeal to the U.S. Court of Appeals for the Second Circuit. Uber is essentially arguing (with support from the U.S. Chamber of Commerce) that the normal rules of contract do not apply to apps. Uber’s position is that arbitration clauses don’t need to be conspicuously disclosed in this setting, and that we can just assume that any customer who uses Uber has “agreed” to arbitrate even if they haven’t taken any step to indicate that this is so. Public Justice filed an amicus brief in this case, explaining both (a) why Uber’s position violates core principles of contract law, and (b) how arbitration clauses are not exempt from these basic rules of law. Even if courts have favored enforcement of arbitration agreements, they still insist that there BE an actual agreement.

Both of the basic legal rules – conspicuous disclosure and unambiguous agreement – are essential. If Uber wins that it need not conspicuously disclose information, that would open the door to arguments that even if an arbitration clause is hidden in ways that no (or almost no) consumers would ever find it, they’re still enforceable. In other settings, we’ve already seen corporations try increasingly bizarre ways to slip arbitration clauses past people (e.g., one car manufacturer put an arbitration clause deep in the manual for a car, wrapped up in fake leather in the glove compartment, and argued that all consumers should be “deemed” to have read it), and it’s crucial that courts draw the line against such adventurous mistreatment of consumers.

Similarly, courts should insist on an unambiguous signal from a consumer that they’ve agreed (like a signature on a contract, or clicking “yes, I agree” to terms and conditions). Uber’s position is that if the consumer does the same thing they would have done if they’d never known about the terms and conditions (essentially inferring consent from silence by the consumer), that’s enough. But assuming that people agree to something when they’ve never said so is dangerous and wrong. The silliness of reading consent into a consumer’s silence was made clear in a famous episode of The Simpsons:

Homer Simpson talking to God: “Here’s the deal: you freeze everything as it is, and I won’t ask for anything more. If that is OK, please give me absolutely no sign.”

[No response]

“O.k., deal. In gratitude, I present you this offering of cookies and milk. If you want me to eat them for you, please give me no sign.”

[No response]

“This will be done.”

(This scene was actually cited in Jude Boyce Martin’s dissent in Seawright v. American General Financial Services, Inc. [6th Cir. 2007]).

The upshot, as we set out in our amicus brief, is that courts need to insist that corporations trying to impose arbitration on consumers at least follow basic rules of contract law.  Hiding arbitration clauses where no one will read them, and then assuming that consumers agreed if they just do nothing, is a recipe for enforcing a lot of fine print without any consent.

We are very grateful to the fantastic team of lawyers who wrote this amicus brief, spearheaded by Andrew Kaufman of Lieff Cabraser Heimann & Bernstein, along with Jonathan Selbin and Jason Lichtman also of Lieff Cabraser; and Jahan Sagafi, Nantiya Ruan, Paul Mollica, and Peter Romer-Friedman of Outten & Golden LLP.

This blog originally appeared on publicjustice.net on December 7, 2016. Reprinted with permission.

Paul Bland, Jr., Executive Director, has been a senior attorney at Public Justice since 1997. As Executive Director, Paul manages and leads a staff of nearly 30 attorneys and other staff, guiding the organization’s litigation docket and other advocacy. Follow him on Twitter: .

Why the Wells Fargo Scandal Shows the Need to End Forced Arbitration

Thursday, September 22nd, 2016

aaron_jordanAnother day, another scandal at the big banks.

Since the financial crisis, banks like Barclays and UBS have been caught manipulating interest rates; J.P. Morgan has reluctantly handed over billions for its association with Bernie Madoff, illegal hiring practices, and lax oversight of its own traders among its other misdeeds; while Goldman Sachs has been fined billions for selling toxic subprime mortgages to investors. This past week the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for creating fake accounts and assigning them to unwitting customers. While this outrage shows the need for tighter regulation, it also exposes the urgent need to end the anti-consumer practice of forced arbitration in financial service agreements. If consumers cannot access the courts, scandals will be harder to uncover and victims will find it nearly impossible to achieve justice.

OAKLAND, CA - OCTOBER 11: A sign is posted in front of a Wells Fargo bank on October 11, 2013 in Oakland, California. Wells Fargo reported a 13 percent increase in third-quarter profits with a net income of $5.6 billion, or 99 cents a share compared to $4.9 billion, or 88 cents a share one year ago. (Photo by Justin Sullivan/Getty Images)

(Photo by Justin Sullivan/Getty Images)

Over the last decade, Wells Fargo has pioneered a business strategy called “cross-selling.” The idea is to get customers to use other products sold by the bank. If you have a checking account, try out a credit card. If you like our investment services, why not get a mortgage? High level managers bullied subordinates into hitting impossible account-creation targets. The result was massive fraud: according to the CFPB, Wells Fargo opened 1,534,280 deposit accounts and 565,443 credit-card accounts “that may not have been authorized, by using consumers’ information without their knowledge or consent.” More than 100,000 of these accounts were charged fees: in other words, Wells Fargo customers paid late fees for accounts they never opened and never wanted.

The scope of the scandal is breathtaking. Wells Fargo has already fired more than 5,300 employees and the victims of its illegal scheme likely number in the hundreds of thousands. On its face, this would seem the perfect instance for a class action lawsuit (in which similarly situated plaintiffs come together to bring a lawsuit). Wells Fargo, however, has a notoriously stringent arbitration agreement. Instead of allowing those who have a “disagreement” with the company to bring a lawsuit, they force them into an out-of-court arbitration.

Arbitrators aren’t required to follow precedent, nor do they abide by encoded rules of procedure. They can make their decisions on a whim and without a hearing, and these rulings cannot be appealed. Their income depends on being rehired by the companies themselves.  Studies consistently show that arbitrators favor their corporate benefactors. This is unsurprising: corporations wouldn’t be rushing to write new forced arbitration agreements if this alternative system was more likely to favor the consumer.

Wells Fargo’s forced arbitration clause is particularly harsh and exceptionally broad. Paul Bland, an attorney at Public Justice, has called it “one of the most anti-consumer, egregious”clauses in the industry while attorney John Keating found it “startlingly unconscionable.” According to Wells Fargo’s 2016 business account agreement, all clients “irrevocably…waive the right to a trial by jury.”

Noting the stark language of the agreement, federal Judge Vincent Chhabria found that the agreement was broad enough to cover any dispute between the bank and its clients, thus denying defrauded clients access to the courts. Never mind that consumers can hardly agree to anything with regard to accounts they never opened or desired in the first place.

Federal agencies are taking steps to curb the use of forced arbitration. The CFPB has released a proposed rule that would prohibit class action bans in arbitration clauses, while the Department of Education is considering similar provisions in education contracts (for-profit colleges are infamous for their iron clad mandatory arbitration clauses). President Obama has signed an Executive Order granting the Labor Department authority to prohibit companies with federal contracts of more than $1 million from enforcing such clauses. The Department of Defense, having seen the unfairness of forced arbitration on our men and women in uniform, has prohibited forced arbitration in credit cards and auto loans to service members.

These steps, if finalized, will not only help ensure justice for those already wronged, but prevent future scandals. If wrongdoing is exposed before a public court of law instead of behind closed doors, corporations will be less likely to cheat their customers. And if companies must confront an impartial judge and jury, wronged consumers are much more likely to win relief.

Ending forced arbitration would not only help the victims of this Wells Fargo scandal, it may prevent the next one.

This blog originally appeared in afj.org on September 20, 2016. Reprinted with permission.

Aaron Jordan serves as a Dorot legal fellow at Alliance for Justice. As a member of the Justice program, he works on and writes about judicial nominations, the Supreme Court, and the civil justice system. Aaron received his B.A. in History from Davidson College and his J.D. from the University of Pennsylvania Law School. At Penn, Aaron was the Articles Editor for the Journal of International Law, a Project Coordinator for the International Human Rights Advocates, and a Teaching Assistant in Constitutional Law for Professor Rogers Smith. During law school, Aaron had internships for the organizations Voices on the Border and Human Rights First, and worked as a law clerk for Congressman Gregory Meeks (D-NY) and Senator Patrick Leahy (D-VT). After graduating from college, Aaron spent a year teaching in Honduras, where he started an ongoing scholarship to fund the education of deserving, underprivileged children.

Uber Drivers Learn that Sometimes the Perfect is the Enemy of the Good

Tuesday, September 20th, 2016

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Courts have an important responsibility to approve class action settlements and ensure that the plaintiffs and their attorneys are not selling out the class by colluding with the defendants. Sometimes, though, in their zealous protection of the absent class members, courts wind up forgetting the old aphorism attributed to Confucius: “Better a diamond with a flaw than a pebble without.” Uber drivers may wind up with pebbles rather than somewhat flawed diamonds. Crushed pebbles may make concrete, but even flawed diamonds could help pay a lot more bills.rough-diamonds

When veteran wage-and-hour litigator Shannon Liss-Riordan sought court approval for a $100 million settlement on behalf of a class of 385,000 Uber drivers in California and Massachusetts, she was denounced by some objectors for the compromise she reached, even after she volunteered to cut her fee in half. Then Judge Edward Chen of the U.S. District Court for the Northern District of California last month denied approval of the proposed settlement of the drivers’ independent-contractor-misclassification claims, finding that the settlement was not “fair, adequate, and reasonable,” as required to grant preliminary approval.

Judge Chen is one of the most careful protectors of absent class members and one of the most thoughtful jurists when it comes to adjudicating wage protections. In denying preliminary approval for the proposed independent-contractor-misclassification settlement, Judge Chen expressly endorsed the view that district court review of class action settlements should not be too lax – and particularly that the court’s review at the preliminary (as opposed to the final) approval stage should be more searching.  But, in this case, his decision disapproving the settlement may have unintended consequences.

In disapproving the settlement, Judge Chen acknowledged the risk posed by Uber’s previously-rejected arbitration provisions, stating: “The most obvious risk to Plaintiffs is, of course, that the Ninth Circuit [which sits as the Northern District of California’s reviewing court] will uphold the validity of the arbitration provision contained in the 2013 and/or 2014 agreements, which this Court found was invalid as a matter of public policy.” This is exactly what happened.

Last week’s decision from the Ninth Circuit upholding Uber’s arbitration agreements (which contained class waivers) in another case may mean that the vast majority of those 385,000 drivers will get nothing. The Ninth Circuit ruled that Judge Chen had erred in previously declaring Uber’s arbitration agreements unenforceable, and that in doing so, he had “ignore[d]” circuit precedent.

Now, to get anything at all, each driver may need to bring an individual arbitration against Uber and win, showing that he or she was more like an Uber employee than an independent contractor. This will be a tough showing and, as Uber well knows, the vast majority of drivers will never step forward to assert the risky claims at all.

Denying approval for the $100 million settlement, Judge Chen found that the settlement reflected a 90% discount on the full value of the drivers claims, with the exception of the claim under the Private Attorneys General Act (PAGA), for which the Court indicated that the settlement was a mere 0.1% of their full value. In particular, Judge Chen expressed concern that the PAGA claim had recently been added to the lawsuit to induce Uber to settle. Furthermore, Judge Chen questioned the value of the nonmonetary relief in the settlement, such as the provision that would allow drivers to accept cash tips (as opposed to in-app tipping as with Lyft), suggesting that riders accustomed to a cashless experience are unlikely to reach for their wallets.

It is possible that each of these terms was a compromise that was less than ideal for the Uber driver class members. Of course, any settlement of a wage-and-hour class action (or more broadly, any settlement of any lawsuit) is going to consist of a mix of terms, both good and bad for both sides of the dispute. But surely getting some money in a settlement – even an imperfect settlement – would be much better for hundreds of thousands of Uber drivers than getting nothing at all.

These Uber disputes raise central questions about the level of scrutiny a district court should apply to a class settlement – particularly given Judge Chen’s criticism of “lax review” – and whether the Court or class counsel is in a better position to evaluate the risks of non-recovery. While the court is charged with preventing collusive settlements to protect absent class members, ultimately, seasoned and responsible class counsel and class members both tend to care most about the bottom line, in light of the risks. With the benefit of hindsight, Liss-Riordan appears to have been right about the risks of proceeding with the litigation, and the settlement’s objectors were misguided.

The case is not over. Liss-Riordan has been signing up Uber drivers to pursue individual arbitrations in California. The PAGA claims on behalf of California drivers may not be compelled to arbitration. Nonetheless, the likelihood of a recovery nearing $100 million, or getting money for all 385,000 Uber drivers, looks bleak.

When reviewing class action settlements that were negotiated at arm’s length by experienced class counsel, where class counsel is able to articulate the rationale for their position, courts should be hesitant to second-guess counsel’s risk assessment. The perfect is often the enemy of the good in these cases, where a court – with a single decision – can erase years of work to obtain a successful result, absent some kind of an agreement between the parties. Particularly in the employment context, where workers should be recovering more than nominal amounts in any class resolution, those who do not wish to participate can always opt-out of a deal and pursue their own claims if they are so inclined. For the rest, though, receiving flawed diamonds might be a whole lot better than the alternative – getting dirt.

This blog appeared on Bryan Schwartz Law on September 16, 2016. Reprinted with permission.

Logan Starr is an associate at Bryan Schwartz Law, focusing on employment discrimination, whistleblower, and wage-and-hour claims. Previously, Mr. Starr served two years as a law clerk to the Honorable L. Patrick Auld, United States Magistrate Judge for the Middle District of North Carolina.

 Bryan Schwartz Law is an Oakland, California-based law firm dedicated to helping employees protect their rights in the workplace. Mr. Schwartz and his firm have fought to prohibit discrimination, retaliation, and harassment obtained reasonable accommodation for disabled employees, vindicated whistleblowers’ rights and ensured that corporations pay workers all wages they are owed. Bryan Schwartz Law has successfully litigated individual and class action complaints nationwide, helping to recover millions of dollars for thousands of employees, forcing corporations and Government agencies to change their practices and punish wrongdoers. Bryan Schwartz Law is also one of the few Bay Area-based law firms with extensive experience representing Federal employees in their unique Merit Systems Protection Board and Equal Employment Opportunity Commission complaints.

Why Supreme Court Nominations Are One of the Most Important Issues for Working People

Friday, September 2nd, 2016

Kenneth QuinnellThere’s a lot at stake in the 2016 presidential election. While U.S. Supreme Court nominations may not be the most headline-grabbing stories that come out of a presidency, they probably should be. With Supreme Court justices serving for life and having significant power in interpreting laws that affect our daily lives, the importance of court appointments cannot be overstated.

This election, in particular, could shape up to be one of the most important elections in terms of shaping the court in American history. After Antonin Scalia’s death earlier this year, Republicans in Congress have sworn to prevent a replacement from being chosen until after the election and have stalled President Barack Obama’s nomination of Merrick Garland for more than 150 days. In all likelihood, it will be up to the winner of the 2016 presidential election to choose Scalia’s replacement, be it Garland or someone else.

But that’s not the end of the story. According to a 2006 study by the Harvard Journal of Law and Public Policy, the average retirement age for Supreme Court justices is 78.7. As of the beginning of the next president’s term, three of the nine justices will be older than 80. Another will be 78. While those justices seem healthy and committed to staying on the court for the near future, Scalia seemed the same way before passing away at 79. It’s not outside the realm of possibility that the next president could literally appoint a majority to the court, especially if elected for a second term.

It isn’t necessarily the case that the appointment of one or two new justices will make a significant shift right away, but over time, replacing Scalia with a justice that is less of a right-wing ideologue has the potential to reshape many areas of American law—and, in particular, much of the law surrounding the rights and lives of working people. Here are six reasons that Supreme Court nominations are one of the most important issues in the 2016 elections:

1. Gerrymandering: With a case already moving its way through the courts, this one could come up soon. And it’s a big one. Ever wonder why the country keeps voting for Democrats for president, but Republicans control Congress? A key reason is gerrymandering, the process of drawing the district lines for congressional seats for partisan advantage. Currently, 55% of congressional districts were created to favor Republicans, compared to 10% drawn in favor of Democrats. That’s why, in 2012, when Barack Obama won re-election and a majority of votes for congressional seats went to Democrats (50.59%), Republicans managed to somehow get a significant majority of House seats (53.79%). In that cycle, 1.37 million more Americans voted for Democrats, only to see Democrats end up with 33 fewer seats in the House. If one spends any time reading constitutional law, they’ll find that the precedent is pretty strongly against this type of gerrymandering. A court appointed by Hillary Clinton would likely frown heavily on this type of manipulation of the electorate.

2. Voting Rights: In 2013, the court issued a ruling that shocked President Obama, legal scholars, civil rights groups and historians. The conservative majority on the court gutted the enforcement mechanism for the Voting Rights Act. This was almost immediately followed by states that were previously required, based on a history of discrimination, to get Department of Justice approval for changes to voting laws, passing a series of laws that made it harder for many, particularly African Americans, to vote. Republicans passed laws shortening voting hours, eliminating early voting and making it harder to register and harder to vote, among other new obstacles to people exercising their right to vote. Many of these laws have been rejected by courts, and it’s likely that the Supreme Court would look very negatively on them.

3. Citizens United: The court ruled that corporations can spend as much as they want to influence elections, as long as they spend it independently of campaigns. This led to tons of money flowing into elections and the creation of super PACs. Clinton wants this ruling overturned and said she’d appoint justices that would do so. Trump’s on the other side. Clinton-appointed justices are likely to take a stricter look at other attempts by corporations and the wealthy to have more influence on elections than the rest of the electorate.

4. Corporate Influence in Supreme Court Cases: A recent study found that between 2009–2012, the one entity most likely to get a hearing at the Supreme Court, out of all petitioners, was the Chamber of Commerce. The court was not only more likely to hear cases championed by the chamber, it was more likely to decide in favor of the corporate interests the chamber supported. The court also made it harder for citizens to engage in class-action lawsuits, making it harder for citizens to sue corporations like Comcast or Walmart for hurting working people or consumers and making it less likely those working people and consumers would win cases before the court. Additionally, in the notorious Hobby Lobby case, the court allowed some corporations a religious exemption, allowing them not to provide insurance coverage for contraception. Other anti-working people decisions in recent years involved making it easier for judges to dismiss cases earlier, without going to trial, and requiring some consumers to submit to arbitration, rather than going to court.

5. Workplace Fairness: A series of 5–4 decisions during the John Roberts Court era have come down against working people and their rights on the job. These rulings will be ripe for challenges once Scalia’s seat on the court is filled. Among the key rulings that are under scrutiny are those that make it harder to sue in cases of pay discrimination, make it easier to retaliate against and fire employees who report job bias claims, make it harder to prove age discrimination on the job, weakened the Family and Medical Leave Act, made it easier to promote “right to work” at a national level, weakened overtime protections, made it easier to dismiss wage theft claims and made it easier to fire public employees for public statements made in the course of their duties.

6. Deportations: Earlier this year, the court effectively killed an executive order from Obama that would have shielded as many as 4 million undocumented immigrants from deportation. It will likely be considered again under a new court.

Any number of other issues that affect working people could also come before the Supreme Court, including, but not limited to: education funding, Medicaid expansion, public funding of elections, solitary confinement of inmates, prison overcrowding and many other issues.

This blog originally appeared in aflcio.org on August 30, 2016.  Reprinted with permission.

Kenneth Quinnell: I am a long-time blogger, campaign staffer and political activist.  Before joining the AFL-CIO in 2012, I worked as labor reporter for the blog Crooks and Liars.  Previous experience includes Communications Director for the Darcy Burner for Congress Campaign and New Media Director for the Kendrick Meek for Senate Campaign, founding and serving as the primary author for the influential state blog Florida Progressive Coalition and more than 10 years as a college instructor teaching political science and American History.  My writings have also appeared on Daily Kos, Alternet, the Guardian Online, Media Matters for America, Think Progress, Campaign for America’s Future and elsewhere.  I am the proud father of three future progressive activists, an accomplished rapper and karaoke enthusiast.

The Right to an Unfair Trial

Tuesday, November 10th, 2015

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This cartoon was originally posted on JenSorensen.com on November 09, 2015 and the TheDailyKos on November 10, 2015. Reprinted with permission.

About the Author: Jen Sorensen is a political cartoonist, writer, and graphic journalist. Her work has appeared in the Village Voice, LA Times, Ms. Magazine, The Progressive, NPR.org, and alt-weeklies around the country. You can find more of her work here.

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