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Posts Tagged ‘Forced arbitration’

Ahead of CFPB Rule, Congress Prepares for a Showdown over the Future of Forced Arbitration and Consumer Class Actions

Tuesday, March 21st, 2017

Last week, lawmakers laid the groundwork for a battle over consumer rights and forced arbitration that likely will play out through the spring.

First, congressional Democrats introduced several bills to restore consumers’ right to hold corporations accountable in court for wrongdoing. Led by U.S. Sen. Al Franken (D-Minn.), lawmakers on March 7 introduced a slate of bills aimed at ending the use of forced arbitration in various sectors. Forced arbitration provisions, also known as “ripoff clauses,” block consumers from challenging illegal corporate behavior.

Lawmakers were joined at a packed press conference by people who had been harmed by forced arbitration: a veteran illegally fired from his job while serving in the military and blocked from suing his employer; a victim of Wells Fargo fraud whose class action was kicked out of court; and former news anchor Gretchen Carlson, barred from speaking out about sexual harassment she had suffered at Fox News.

Among the bills introduced were Franken’s Arbitration Fairness Act, which would prohibit forced arbitration in consumer, employment, civil rights, and antitrust cases and Sen. Sherrod Brown’s (D-Ohio) Justice for Victims of Fraud Act, which would close the “Wells Fargo loophole” by restoring consumers’ right to sue when banks open fraudulent accounts without their knowledge.

However, in stark contrast to this push to strengthen rights and restore corporate accountability, GOP lawmakers began pressing to make it harder for consumers to band together when harmed and take corporations to court.

Two days after the Franken press conference, the House passed H.R. 985, the so-called “Fairness in Class Action Litigation Act” would effectively kill class actions by imposing insurmountable requirements to file group lawsuits. This would make it nearly impossible for consumers to hold corporations accountable for illegal and abusive behavior.

Among other onerous provisions, H.R. 985 would require that each harmed person suffer the “same type and scope of injury.” Under this absurd standard, a Wells Fargo customer with two fake accounts opened in his or her name could be barred from joining together with customers who had three fraudulent accounts. The bill also would build in costly and unnecessary delays and appeals, limit plaintiffs’ choice of counsel, and drastically restrict attorneys’ fees.

Joining together in a class action often is the only chance real people have to fight back against widespread harm, including corporate fraud and scams – particularly when claims involve small amounts of money, where it would be too costly for an individual to pursue a separate claim. Class actions have also been critical vehicles for overcoming race- and gender-based discrimination and have been instrumental in achieving victories as momentous as desegregation of our schools, as was the case in Brown v. Board of Education.

Beyond protecting the rights of the disadvantaged, class actions act as a crucial check on corporate misbehavior by returning money to harmed consumers and workers. Removing the threat of class liability would encourage systemic fraud, as banks and lenders that pad their bottom lines by committing fraud would have a competitive advantage in the marketplace.

In the financial sector, the proposed CFPB arbitration rule is a major target of financial industry lobbyists precisely because it would restore the right of consumers to join class action lawsuits. According to the CFPB’s arbitration study, class actions returned $2.2 billion in cash relief to 34 million consumers from 2008-2012, not including attorneys’ fees and litigation costs. While the CFPB rule is expected to be finalized this spring, it would be rendered largely ineffective should H.R. 985 become law.

You can watch our video against H.R. 985 here and follow developments on Twitter using the hashtag, #RipoffClause.

This article originally appeared at FairArbitrationNow.org on March 17, 2017. Reprinted with permission.

Amanda Werner is Arbitration Campaign Manager with Public Citizen and Americans for Financial Reform, where her work focuses on the Consumer Financial Protection Bureau (CFPB)’s arbitration rulemaking. She represents a broad coalition of consumer, civil rights, labor, and community groups as part of a robust public campaign in support of a strong final rule against the #RipoffClause.

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.

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 CFPB Just Took a Huge Bite Out of Predatory Lending

Thursday, May 5th, 2016

paulblandBanks and payday lenders have had a good deal going for a while: They could break the law, trick their customers in illegal ways, and not have to face any consumer lawsuits. Armed by some pretty bad 5-4 Supreme Court decisions, they could hide behind Forced Arbitration clauses (fine print contracts that say consumers can’t go to court even when a bank acts illegally), even when it was clear that the arbitration clauses made it impossible for a consumer to protect their rights.

But the free ride is coming to an end. After an extensive study, that proved beyond any doubt how unfair these fine print clauses have been for consumers, the CFPB is taking a strong step to reign in these abusive practices. In a new rule, the CFPB says banks can no longer use forced arbitration clauses to ban consumers from joining together in class action lawsuits. That means banks can no longer just wipe away the most effective means consumers often have for fighting illegal behavior.

This is a common sense rule that will go a long way in combating some of the financial industry’s worst practices.

In recent years, for example, if a bank systematically cheated 10,000 consumers in the same way, the bank could use its arbitration clause to stop those customers from going to court together. Each individual had to figure out the scam, figure out what their rights were and then spend time and money fighting the bank and its expensive lawyers. Everyone was essentially on their own. Under most arbitration clauses, one or two customers (at most) would have the means and ability to fight all the way through the arbitration system to get their money back.

In contrast, a class action could offer all 10,000 people a fair shot at justice.

Exempting the financial industry from the normal legal system has had far-reaching – and terrible – consequences. Predatory lending and dishonest practices have pushed millions of people right into desperation. Far too many Americans have been tricked into taking out loans that were far more expensive than they realized.

But help is finally on the way. The free ride is ending.

When it passed the Dodd-Frank Act, Congress required the CFPB to study the use of forced arbitration clauses and take action if those clauses undermined the public interest. So the CFPB undertook a huge, data driven empirical study, which itreleased in March of 2015. The study found that, when consumers could go to court as part of a class action, they recovered billions of dollars in relief. Banks had to refund over charges, erase illegal or inflated debts, and correct inaccurate credit reports.

When consumers were subject to forced arbitration, though, nearly all of those wins disappeared. Almost no consumers actually fought their way through the complex and biased corporate arbitration system. They just gave up. Predatory lenders generally kept whatever money they’d taken, and could operate in a Wild West manner, unless a government agency intervened on behalf of the helpless consumer.

How did arbitration get to be so unfair? In the past, many state laws were clear that if an arbitration clause that banned class actions would undermine a consumer protection law, then a court should strike it down. But in a pair of 5-4 decisions, Justice Scalia wrote opinions that swept all that law away. As a result, corporations could write fine print contracts that would override actual laws. These decisions – one in 2011 and one in 2013 – were unmitigated disasters for consumers and they transformed the Federal Arbitration Act – in place since 1925 – into a Federal Predatory Lender Immunity Act.

But today, things are changing. The CFPB is living up to its name — the Bureau really is protecting consumers. CFPB Director Rich Cordray is probably the most effective agency head in the federal government. He is not afraid to stand up to huge and politically powerful corporations on behalf of the American people. He’s worked hard to ensure the agency lives up to the vision that Elizabeth Warren had when she was advocating for its creation. It’s no wonder why politicians who get huge campaign contributions from large banks hate the agency so much. Many House Republicans attack the CFPB almost as often as they try to repeal the Affordable Care Act.

Today’s action is probably the biggest step forward for consumers since Dodd-Frank itself. It’s a huge step forward in the fight for common-sense protections. It’s a new rule that says the financial sector doesn’t get to re-write – or break – the rules anymore.

This blog originally appeared in Huffington Post on May 5, 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: .

Save the Seventh

Friday, March 13th, 2015

Susan HarleyThe Seventh Amendment to the United States Constitution states, “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved …”

Even though we are all granted the right to a trial by jury in the U.S. Constitution, Big Banks and corporations regularly use fine print in contracts to trick consumers out of their right to a day in court. Forced arbitration means that if consumers are ripped off or otherwise harmed, they must use private arbitration proceedings to air their grievances.

If you’re already angry about forced arbitration and you want to do something to get these predatory terms out of financial products, skip to the end of this post for ways to get involved.

There’s plenty to be mad about. These expensive arbitration “tribunals” have no judge or jury. They are overseen by paid arbitration providers who are selected by the companies. Arbitration firms have a very good reason to guarantee repeat business for themselves by finding in favor of the corporations over the consumers. The findings of arbitration decisions are not public and the appeals process is very limited. Most likely, you will also be required to go to arbitration in another state!

If consumers were interested in choosing arbitration, they would enter into the decision after some harm has come to them. It would need to be an informed decision where they did so with a full understanding of the consequences of their choice to not go to court.

But that’s not how we’re all roped into signing (or even clicking) away our rights. It has been proven that consumers rarely understand that their contracts contain arbitration clauses and have little idea of the repercussions of having their complaints heard in a non-court venue.

And, even if you understood they were there and knew it meant you were losing your right to go to court, it’s not like your average adult can simply opt out of getting a checking account, taking out that student loan, or financing that car.

What about if those very same companies with arbitration clauses were systematically ripping off you and your fellow consumers – but only in small dollar amounts? The only way it makes sense for consumers to bring those cases is through class actions where those who have been harmed can band together to make a complaint about a company’s action. Makes sense, right? Except most arbitration clauses contain class action bans, which were unfortunately upheld by the U.S. Supreme Court in 2011. Now Big Banks basically have free rein to steal a few dollars here and there from all of their customers without worry of being held accountable.

Congress saw the unfairness of forced arbitration clauses and prohibited them in certain industries and in housing-lending contracts via the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank tasked the Consumer Financial Protection Bureau (CFPB) — the brainchild of Elizabeth Warren — that was created by the same legislation with studying arbitration in all consumer financial contracts and determining whether consumers would be better served by prohibiting the practice.

The CFPB’s study is finally complete. It shows that consumers have little idea about arbitration clauses and how the fine print strips them of their constitutional right to their day in court. In fact, three out of four consumers surveyed as part of the study did not know whether they had an arbitration clause in their credit card agreements. And, of those who did have arbitration clauses, only seven percent understood that meant they had given up their right to their day in court.

Now it’s time for the public to get involved. Every person who’s even been steaming mad at Wall Street’s sticking it to the little guy and thinking they can weasel out of being held accountable needs to get involved.

Urge the CFPB to stand up to Big Banks and do the right thing. It’s certain that the U.S. Chamber of Commerce and its corporate cronies will do everything it can to keep unfair forced arbitration in consumer financial products, so we need as many people as possible to join this fight. There’s a whole toolbox of tactics we’d love to get you involved with, and it only depends on how much time you have to invest in protecting consumers.

Only have a second or two to take an online action? Easy!

What about a minute to share this social media meme? Great! While you’re at it, Tweet with the hashtags #CFPB and #ForcedArbitration.

If you have a lot to say on the subject and want to get your community fired up too, write a letter to the editor. We have ideas on what to say! There are even more ways to get involved. If you want to learn more, email: action@citizen.org.

You could be part of scoring a major win for our country by reclaiming the Seventh Amendment. Americans, take back your day in court!

About the Author: Susan Harley is the deputy director of Public Citizen’s Congress Watch division.

Restaurant (?!) Thinks It's Important to Take Away Customer's Legal Rights on Its Website

Monday, November 4th, 2013

 

PaulBlandWeb-172So how weird is this?  The Daily Grill, a very fancy and pricey steak house, encourages people to buy gift cards and make reservations on line.  (O.k., nothing weird yet, I admit.)  BUT, on their website is a bunch of super dull prose under the heading “Legal Notices.”  (For steak?)  And, as with so many other corporations, the Legal Notices include a provision for “Resolution of Disputes.”  The usual – the consumer has to arbitrate with a company picked by the corporation, the arbitration clause shortens the statute of limitations to a year (was THAT really necessary?), imposes a secrecy (“confidentiality”) provision, and it bans consumers from bringing class actions.
A restaurant with a Forced Arbitration clause.  What’s next?   If fancy steak houses want to strip their customers of their constitutional rights, will street vendors selling hot dogs and egg rolls be next?  Will a bus driver hand me a card saying “by occupying a seat, you consent that any dispute we may have will be subject to forced arbitration”?  Is there any ending point to corporations feeling empowered and entitled to insist upon taking away peoples’ rights?
It’s a particular creepy notion, in that I doubt that many of us think “well, it’s a steak house, so I better lawyer up.”  What in Pluto’s realm are these guys worried about?  Class actions?  Is there some history at the Daily Grill of them wiping out giant office parties with mass food poisoning?  Have they gotten in trouble in the past for misrepresenting something on the menu?  (Maybe the 16 oz. New York Strip is really 14 ounces?)  As my kid would say, “what NOW?”
One particularly ugly part of this provision – The Daily Grill is saying that just by LOOKING at its website, you’ve supposedly “agreed” to give up basic constitutional rights such as the right to trial by jury.  You don’t sign anything, you don’t say “I agree to the terms and conditions.”  You just look at this, and they think that means they can infer consent.  If Corporate America can define “consent” and “agreement” to be inferred from silence from looking at something, then consent has become a truly mongrelized, meaningless notion.
On the one hand, this may just seem like a ridiculous provision that no one should worry about.  But another way of looking at it is how Corporate America, emboldened by a string of arbitration-loving decisions from the five member conservative majority of the U.S. Supreme Court, has been racing to make a basic rule of operation that they don’t want to be part of the American legal system.
They don’t want to be accountable if they do anything to hurt you.
After reading this, I have a new suggested motto for The Daily Grill:  “If we accidentally kill you with food poisoning after you reserved your table on-line, we’re going to try to rig the system against your family and keep it all quiet.”  Who wants to eat at a restaurant with THAT motto?

This article was originally printed on Public Justice on November 4, 2013.  Reprinted with permission.

About the Author: F. Paul Bland, Jr. is a Senior Attorney at Public Justice since 1997, is responsible for developing, handling, and helping Public Justice’s cooperating attorneys litigate a diverse docket of public interest cases.

Meet the Senators Who Voted Against the Franken Amendment

Thursday, October 8th, 2009

I think that all homo sapiens can understand how the mere thought of an organization that receives government money through contract mechanisms being tangentially involved in setting up a fake tax shelter for a fake pimp and his fake prostitution ring of fake prostitutes can justifiably lead to lawmakers going absolutely cross-eyed with white-hot, impotent rage. But what happens when a similarly taxpayer-endowed contractor attempts to cover up employee-on-employee gang rape by locking up the victim in a shipping container without food and water and threatening her with reprisals if she report the incident? Somehow, it doesn’t engender the same level of anger!

Credit new Senator Al Franken however, for introducing an amendment to the Defense Appropriations bill that would punish contractors if they “restrict their employees from taking workplace sexual assault, battery and discrimination cases to court.” You’d think that this would be a no-brainer, actually, but that didn’t stop Jeff Sessions from labeling Franken’s effort a “political attack directed at Halliburton.” Franken, of course, pointed out that his amendment would apply broadly, to all contractors, because otherwise, ‘twould be a bill of attainder, right? Right?

Franken’s amendment ended up passing, 68-30. Here’s a list of the Senators who showed broad support for Roman Polanski by voting against it:

Alexander (R-TN)
Barrasso (R-WY)
Bond (R-MO)
Brownback (R-KS)
Bunning (R-KY)
Burr (R-NC)
Chambliss (R-GA)
Coburn (R-OK)
Cochran (R-MS)
Corker (R-TN)
Cornyn (R-TX)
Crapo (R-ID)
DeMint (R-SC)
Ensign (R-NV)
Enzi (R-WY)
Graham (R-SC)
Gregg (R-NH)
Inhofe (R-OK)
Isakson (R-GA)
Johanns (R-NE)
Kyl (R-AZ)
McCain (R-AZ)
McConnell (R-KY)
Risch (R-ID)
Roberts (R-KS)
Sessions (R-AL)
Shelby (R-AL)
Thune (R-SD)
Vitter (R-LA)
Wicker (R-MS)

ADDENDUM: It’s been pointed out to me that the U.S. Chamber of Commerce lobbied against the Franken amendment as well:

Republicans point out that the amendment was opposed by a host of business interests, including the U.S. Chamber of Commerce, and applies to a wide range of companies, including IBM and Boeing.

I guess we must cover up crimes like rape in order to save capitalism.

About the Author: Jason Linkins is a Political Reporter at the Huffington Post, covering media and politics. He’s based in Washington, DC. Previously, he wrote for HuffPo’s Eat The Press, and has also contributed to DCist and Wonkette.

This article originally appeared in The Huffington Post on September 7, 2009. Reprinted with permission from the author.

Why Does Chamber of Commerce Favor Arbitration for Workplace Rape Victims, But Oppose It for Union Workers?

Thursday, June 18th, 2009

Yesterday, the union movement ramped up its attacks on the Chamber of Commerce over its “two-faced” approach to the Employee Free Choice Act’s provision requiring arbitration if a business won’t bargain in good faith after a union’s been chosen by workers. As the AFL-CIO Now blog observed:

The latest Big Business tactic is to attack the provision of the Employee Free Choice Act that guarantees workers who form a union a fair first contract — a vital provision, because more than 50 percent of workers who form a union don’t have a contract after one year and more than a third still don’t have a contract after two years.

Corporations are crying about the possibility they might have to take part in arbitration with employees if they don’t reach a first contract after three months of talks — even though they’re enthusiastic about arbitration in a wide variety of circumstances where they have the advantage.

In a new ad running in key newspapers, American Rights at Work again challenges corporate hypocrisy on arbitration. When it’s a big corporate entity against an individual, as in credit card disputes or personal injury claims, corporate spokesgroups like the Chamber of Commerce say arbitration is a way to settle any sort of dispute “fairly, quickly and inexpensively.” But when it’s time to bargain over better wages and benefits for their workers, these same groups are viciously opposed to even the possibility of requesting arbitration.

To union activists, what’s especially galling is how fervently businesses embrace arbitration when it allows them to avoid being held accountable for negligence towards employees or the defrauding of consumers. As Stewart Acuff, the special assistant to the President of the AFL-CIO, observes, “It’s pretty simple: arbitration is fine for them when it keeps them out court and limits damages to business. They use it to settle credit card disputes, mortgage payment disputes, and whenever it limits businesses liability and negligence. But when they look at arbitration for workers, then all of it sudden they hate it when it’s simply used as an incentive to force good-faith bargaining, a last resort to allow workers to get a collective bargaining agreement.”

In contrast, business interests have so championed and abused little-known arbitration provisions to keep themselves from being sued that they’ve spurred new legislation pushed by the Fair Arbitration Now coalition designed to rein in their excesses. A few days ago, NPR featured the story of Jamie Lee Jones who was repeatedly raped by co-workers of Halliburton in Iraq but has been barred from suing the company because of an employer’s contract she signed preventing a lawsuit. As the NPR story noted:

Jones was escorted by security to the company clinic for a rape examination. When the rape kit examination was done, the evidence was turned over to Halliburton security. The young woman’s breasts were so badly mauled that she is permanently disfigured. It has been four years since the attack, and despite the physical and circumstantial evidence, the Department of Justice has declined to investigate.

Seeking Justice Through a Suit

Justice Department officials refused to explain or comment in any way to NPR about the case. Jones has decided that if she can’t have her day in criminal court, she’ll sue Halliburton and its former subsidiary, KBR, in civil court.

“I want corporate accountability,” she says. “I was so brutalized that I’m going to have to remember this the rest of my life. And Halliburton was so uncompassionate that they even let the men work there, still, after I went home.”

Heather Browne, director of communications at KBR, says that while the company can’t speak to the facts since the case is ongoing, it denies any liability in the attack. And she argues that any dispute with Jones, even one involving charges of rape, must go to arbitration.

So Jones is now going to court seeking the right to sue. She has become one of the nation’s leading arbitration reform advocates.

An Arbitration Culture

If Jones’ case is remarkable, the fact that arbitration is involved is not. In the past 20 years it has become a dominant feature in the legal relationship between American corporations, their employees and their customers.

If you use credit cards, have a cell phone contract, bought a house from a builder or put your mother or father in a nursing home, you have very likely signed away your right to be heard in court if there’s a problem. It’s called pre-dispute mandatory binding arbitration.

Public Citizen’s David Arkush, one of the country’s leading researchers on arbitration, says many consumers have no clue as to the rights they’re signing away.

“In the fine print of those contracts is a provision that says that they can never sue the company if they have a dispute,” Arkush says.” Instead they have to go a private, secret tribunal chosen by the company.”

To top it all off, businesses rig the arbitration process against consumers and employees by barring them from going to court if there’s any fraud or negligence before a dispute occurs, and only the company can choose the arbitrator.

The arbitration provision in the Employee Free Choice Act, on the other hand, only uses arbitration if negotiations between business and labor have broken down for 120 days after negotiations begin, and both businesses and the union must agree on their arbitrator from a vetted list of private arbitrators approved by a federal agency, the Federal Mediation and Conciliation Service.

All that makes the two different types of arbitration strikingly different: one is a business ruse used by businesses to deprive customers and workers of their rights, and the other is a bulwark designed to protect workers’ rights against bad-faith bargaining.

The new pro-labor ad attacking such hypocrisy, running in Capitol Hill political newspapers as negotiations in the Senate are heating up, puts the issue starkly:

Big Business is happy to support arbitration when it’s in their best interest. But when it comes to negotiating contracts with their workers, Big Business would rather use delay tactics to avoid paying better wages and benefits. It’s only fair that corporations agree to arbitration for workers who are trying to negotiate a first contract after forming a union. Arbitration is a key part of the Employee Free Choice Act that will let both sides reach a fair agreement.

One reason the Chamber and other Big Business interests are turning to attacking arbitration is that their previous bogus claims that the legislation takes away the right to a secret ballot have been exposed as a fraud on Capitol Hill. (The bill actually gives workers the choice — now determined by employers — of whether to form a union by majority sign-up or secret-ballot election.)

Of course, you don’t hear Newt Gingrich or the Chamber of Commerce championing the rights of on-the-job rape victims like Jamie Lee Jones to sue and avoid arbitration, indeed when it comes to abused employees or defrauded consumers they hail arbitration as the best way to handle any disputes. In fact, in May 2008, more than a dozen business trade groups wrote a letter to Congress stating, “Arbitration is an efficient, effective, and less expensive means of resolving disputes for consumers, employers, investors, employees and franchisees, in addition to the many businesses that use the same system to resolve business disputes.”

As the SEIU Blog sums up their attitude, “Corporate Lobbyists: We Were for Arbitration Before We Were Against It.” Among the paeans to the glories of arbitration offered by business leaders before they attacked its use in the Employee Free Choice Act:

“For more than 80 years, arbitration has helped Americans settle disputes fairly, quickly and inexpensively, without having to file a lawsuit or navigate the court system.” – Lisa Rickard, president of the US Chamber’s Institute for Legal Reform (4/2/08)
“Arbitration is mutually beneficial, which is what we have always thought.” – Arne Wagner, assistant general counsel for Bank of America [ABA Journal, December 1994]

“[F]ederal policy… favors the use of arbitration as an efficient, effective, and less expensive means of resolving disputes…Arbitration, has served as an essential valve for the nation’s overburdened civil justice system.” – Letter to Senate Judiciary Committee signed by US Chamber of Commerce, Retail Industry Leaders Association, National Retail Federation, National Association of Manufacturers, Jackson Lewis, et al (2/7/08)

Just a little bit of a double standard, no? Arbitration is the best thing ever when it comes to protecting their wallets, but when it comes to adding the safety net of first contract arbitration during collective bargaining, it’s the devil incarnate that must be stopped at all costs.

Despite such hosannas to arbitration, they’re not-so-surprisingly eager to denounce arbitration as a “mortal threat to American freedom” when workers want it after months of stalled labor negotiations.
And the research is now irrefutable that a majority of workers who select a union don’t get a contract in their first year as a result of business stalling tactics; if businesses can’t bust a union through illegal intimidation before an election, then they’ve got a second shot at union-busting by foot-dragging tactics and lowball proposals to slash wages and benefits by the company. As American Rights at Work reports:

One year after a successful union election, 52 percent of employers deny their workers a contract. According to Cornell University researcher Kate Bronfenbrenner, 52 percent of workplaces had no collective bargaining agreement one year after a successful union election. Two years after an election, 37 percent of workers’ unions still had no labor agreement.

It’s easy to determine when businesses will back or oppose arbitration: if it seems likely to screw workers and consumers out of their day in court, then they see it as good, and it if might possibly help workers achieve decent wages and benefits through labor negotiations, then it’s bad. As Paula Brantner, the attorney who heads the pro-worker Workplace Fairness advocacy organization, observed recently:

So if employers truly think that arbitration is a better system than resolving disputes in court, then why are they fighting the Employee Free Choice Act [EFCA] provision? You don’t have to be a cynic to realize that they’re inclined to fight any effort to level the playing field for workers, which the Employee Free Choice Act would do. Just as they’re spreading the myth that EFCA would eliminate the secret ballot, it just comes naturally for them to confuse the public about the other EFCA provisions that would empower workers.

But if corporate America doesn’t want “a bureaucrat from Washington” to tell people how to run their businesses, then we have to wonder why they want arbitrators who are not even required to know the law or follow it passing judgment on their employment practices. Essentially, companies are talking out of both sides of their mouth: they want to impose an unfair arbitration process on their employees, but cannot bear to have even a fair arbitration process applied to them.

But workers don’t have to accept this hypocrisy: we can work to support both the Arbitration Fairness Act and the Employee Free Choice Act. If both were to pass, workers would be able to go to court for their employment and civil rights claims (under the Arbitration Fairness Act), and leave arbitration to the unions and employers who know how to use it best (under EFCA). But that might simply be too much fairness for employers to handle.

And while the Chamber of Commerce and its GOP allies like Newt Gingrich have been painting a nightmarish scenario of jackbooted bureaucrats imposing job-killing arbitration concessions, the real truth of how arbitration works in labor negotiations has been ignored. As a new Roll Call column by two Harvard and MIT labor scholars, including Arnold Zack, the former past president of the National Academy of Arbitrators, points out:

Something is drastically wrong with a labor law when an employer can ignore and thwart the will of the majority of its employees.

The Employee Free Choice Act currently before Congress addresses this problem by assuring time for negotiations and mediation as the first step in the process and arbitration when agreement is blocked.

The bill has led to a misguided debate and mistaken information about the role played by arbitration in a well-designed and professionally administered dispute resolution system. This has made the current bill an easy target for opponents to argue that everyone will end up having a contract imposed by “government arbitrators” who know nothing about business or labor issues…

If passed, the Employee Free Choice Act would assign a mediator by the Federal Mediation and Conciliation Service as soon as a new unit is certified to support the negotiations by offering the full range of mediation, education, and facilitation services helping the parties reach a voluntary agreement. The vast majority of cases are likely to be resolved through negotiations and mediation.

In fact, settlements are reached more than 90 percent of the time in public sector jurisdictions that provide mediation prior to arbitration. So, contrary to those who argue every case will go to arbitration, the presence of arbitration encourages and enhances the ability of the parties to reach voluntary agreements in negotiation and mediation — and incidentally does so without imposing on employees or employers the risks and costs of a strike to get a contract.

After being smeared by hyperbolic distortions about the bill’s arbitration provision and research by the Chamber’s extremist libertarian scholar-for hire, Richard Epstein, the union movement is finally hitting back on this issue. The latest inside-the-Beltway barrage follows up on last week’s first round of attack ads against the Chamber’s “hypocrisy.” As a spokesman for American Rights at Work (ARAW) told The Hill newspaper this week:

“Labor law reform must ensure that workers who want to join a union are able to do so without facing endless delays from corporations seeking to deny them a voice in the workplace,” ARAW spokesman Josh Goldstein said. “Big Business’ position is hypocritical and motivated by their desire to maintain a status quo in which corporations make millions while middle class families struggle to get ahead.”

About the Author: Art Levine is a contributing editor of The Washington Monthly who has also written for The American Prospect, Alternet, In These Times, Salon, The New Republic, The Atlantic and numerous other publications. He’s written investigative articles on unionbusting and other corporate abuses, and recently completed Cornell University’s Strategic Corporate Research summer program. He blogs regularly for Huffington Post, and co-hosts a weekly Blog Talk Radio show, “The D’Antoni and Levine Show,” every Thursday at 5:30 p.m. ET.

This article originally appeared in The Huffington Post on June 17, 2009. Reprinted with permission by the Author.

10 Steps to Ending Forced Arbitration

Wednesday, May 6th, 2009
If you look close enough at an employment or credit card contract you’ll typically see some fine print sized like this that says something to the effect of, “By signing this contract both parties agree to submit to binding arbitration. Both parties acknowledge that if there is one or more disputed items that remain unresolved at the end of arbitration, the arbitrator will render a final and binding decision on those unresolved items and his/her decision will be written on a separate settlement agreement and shall be signed by both parties.” It might be confusing. But you might sign it anyway because you need the job, or you need the credit card.

Did you notice the part about “binding arbitration”? That’s the part of the contract where you loose your rights to a trial by judge and jury if a dispute arises between you and that company.

What about the 7th Amendment, you ask? Aren’t we all entitled to a trial by jury? Well, unfortunately binding arbitration, also known as mandatory arbitration or forced arbitration, is legal. No courts or typical rule of law are involved in making decisions through mandatory arbitration. And if we don’t tell Congress to pass the Arbitration Fairness Act, it’s only going to get worse.

The Arbitration Fairness Act stands on the side of workers and consumers. It will make it illegal for companies to force binding arbitration. Instead, the Arbitration Fairness Act will make arbitration a voluntary option where both parties must agree to arbitration, rather than making it mandatory, binding, or forced.

  • Forced arbitration is the reason Jamie Jones of Houston, Texas cannot bring the men she accused of raping her on the job to trial.
  • Forced arbitration is the reason James Myers, also of Houston, Texas cannot bring the Halliburton-subsidiary he accused of demoting him due to age and race discrimination to trial.
  • Forced arbitration is the reason Irene Lieber of Brooklyn, New York cannot bring MBNA, the credit card company that forced her to pay $45,000 in stolen credit card fees, to trial.

For those who want to help make sure the Arbitration Fairness Act is passed, and stories like these never happen again, the Fair Arbitration Now Coalition has set up an easy-to-use website. The site not only calculates who your member of Congress is, but places the phone call, so you don’t even have to dial the number or worry if you’re calling the wrong office.

Here’s how it works:

1. You go to this website: http://bit.ly/arbitrationfairnessact which has been set up by the Fair Arbitration Now Coalition and sponsored by Workplace Fairness.
2. You enter your name, address, phone number, and zip code, then click “submit.”
3. Your two Senators and local Representative will be listed. Choose one of them and select “call now.”

(If it seems easy so far, you’re right. It is!)

4. Review the short script which starts, “Good day. I am a constituent and…”. This is a suggested script you can use when calling the representative’s office.
5. When you are ready to place your call, click “place call”, found at the top of the page.
6. A few moments later you’ll be pleasantly surprised to receive a phone call at the phone number you entered in step two. It will be a short recorded message from Paula Brantner, from Workplace Fairness and the Fair Arbitration Now Coalition, thanking you for your help and reminding you to mention that you are a constituent when you talk to your representative’s office.

(If you’re like me and you’ve never placed a call to a Congressional office you might be a little nervous at this point. But that’s ok. Just take a deep breath and remind yourself that this is democracy in action and making these calls is exactly how we do our part to get this bill passed.)

7. After Paula’s short message DON’T HANG UP. The Click-to-Call system will place a call for you directly to your selected Congressional office.
8. An office assistant will answer. Tell them you are a constituent and simply follow the script from step four.
9. Make note of the Congressional representative’s current position on the Arbitration Fairness Act, as well as the name of the person you spoke to and any additional comments, then click “submit your response.” The info will be submitted to the Fair Arbitration Now Coalition.
10. Be sure to go back and call your other two members of Congress.

You might be afraid of these 10 steps. But not to worry. You don’t need to know how to contact your Senator or Representative before making the call. You just need to visit http://bit.ly/arbitrationfairnessact and be willing to help put an end to forced arbitration with the Arbitration Fairness Act.

Fine print: by reading this blog entry you retain all your rights.

About the author: Brett Brownell is a New Media Fellow with the New Organizing Institute and Workplace Fairness, and was a blogger and videographer for the Obama campaign’s new media team.

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