Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘Paul Bland’

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: .

Defense Attorneys Make Excuses, But the Outcome is the Same

Wednesday, October 1st, 2008

When attending the American Constitution Society’s panel following the release of Schwab and Clermont’s seminal report, Employment Discrimination Plaintiffs in Federal Court: From Bad to Worse?, I was expecting the defense representative on the panel to attempt to explain away the results (even in the midst of what has to be silent glee that their side is winning so handily). But no explanation the other side can come up with puts a dent in the basic premise of the report: employment discrimination plaintiffs have it worse than other kinds of plaintiffs in our federal courts.

Cyrus Mehri’s excellent testimony before the Senate Judiciary Committee (Part I, Part II) lays out the new report’s three basic premises:

  • When employers win at trial, they are reversed by the U.S. Courts of Appeals 8.72% of the time. When employees win at trial, they are reversed 41.10% of the time.
  • There has been an absolute drop in employment discrimination cases of 37% from fiscal 1999-2007.
  • Juries rule in favor of plaintiffs in job cases 37.63% of the time versus 44.41% in non-job cases. District court judges, however, rule in favor of jobs plaintiffs only 19.62%, while ruling in favor of non-jobs plaintiffs 45.53% of the time.

Rather than dealing with why federal district court and appeals court judges might be biased, I guess it’s easier to try to explain away the absolute drop in cases.  And if you’re a defense lawyer, you might try to explain in a way that doesn’t implicate the other two findings, as if the fact that plaintiffs have difficulty winning before trial court judges, and hanging onto even the successes upon appeal, doesn’t have anything to do with it.

Instead, we’re expected to believe some of the following excuses, according to Eric Dreiband, former general counsel of the EEOC, who is now back to representing defendants at Jones Day.  (Listen to Dreiband’s presentation; Windows Media Player required). And another defense-oriented article responding to the study repeats some of the same excuses.

1.  Plaintiff’s attorneys are taking more wage and hour cases under the FLSA.

There has admittedly been a rise in the number of wage and hour cases, especially class actions, brought under the Fair Labor Standards Act in recent years.  Depending on who you ask, there are varying reasons for that, whether it’s because employers are trying to cut corners by misclassifying employees, there’s an increased awareness of the FLSA among workers, making it more likely they’ll ask questions about their classification, or if, as plaintiffs’ attorneys will acknowledge, it’s an act of self-preservation because of the three points detailed above.  Bringing a case under a statute that doesn’t require evidence of intent can be a lot easier than bringing a discrimination case:  either an employer violated the FLSA or it didn’t, and it doesn’t matter what it intended to do as it does in discrimination cases.

But this point is almost irrelevant if you’re one of the hapless plaintiffs with a discrimination case, not a wage and hour case.  Defense attorneys aren’t arguing that it’s impossible for plaintiffs with strong discrimination cases to get a lawyer, because all of the skilled plaintiffs employment lawyers no longer have time to take them, because that’s simply not true.  Bottom line:  the fact that there are now more FLSA cases doesn’t detract at all from the premise that employment discrimination plaintiffs have it bad.  They’re two completely different things that both happen to affect workers.

2. More cases are ending up in arbitration, instead of the courts.

Certainly, there are employers who believe that requiring all of their employees to submit their employment claims to arbitration benefits them, and they’re probably right. As Paul Bland’s excellent blog post reminds us,

“If you want to work here,” millions of employees are told, “you have to agree that any disputes you have with us–even if we cheat you, even if we break our contract or break the Fair Labor Standards Act or a basic civil rights act–will be submitted to binding arbitration with an arbitrator who is chosen by an arbitration company whom we pick. If you don’t like it, you can’t work here.”

Plenty of evidence suggests that just like what’s happening in federal court, employees forced into the arbitration process don’t fare very well. (See Alexander Colvin, Empirical Research on Employment Arbitration: Clarity Amidst the Sound and Fury?, Employee Rights and Employment Policy Journal, Vol. 11, No. 2 (2007). In fact, employees forced into arbitration may fare worse there than they do in court, according to Colvin’s piece, the leading academic study of thousands of publicly reported employment cases in arbitration. So again, the fact that more employees have cases in arbitration instead of federal court hardly contradicts the conclusions of the Schwab and Clermont study, when the evidence shows that plaintiffs forced into arbitration are even worse off there than in court.

3. More plaintiffs are going to state court instead of federal court.

In many states, plaintiffs in discrimination cases have the option of choosing between state and federal court, and attorneys must make the strategic decision about where the case is most likely to be successful. Admittedly, strategy sometimes dictates that a worker will fare better in state court, in states where there are no damage caps limiting the type and/or amount of damages that can be awarded, and where judges and juries may be more receptive to employment cases than those in federal court, making it more likely that a jury will hear a case rather than have it thrown out on summary judgment.

However, for every state where a plaintiff is likely to fare better in state court, we can name one where they will be worse off in state court, or not have the ability to make that choice at all. Some states don’t even have their own antidiscrimination statutes, or have what’s known as a “private right of action” which allows workers to enforce their rights in court. Others have more restrictive damage caps than those under federal law, which haven’t changed since 1991. (That’s longer than it’s taken to raise the minimum wage, and we know how long that took!) Some state judges are relatively unfamiliar with employment statutes compared to federal judges, and others, forced to rely on campaign contributions, tend to favor those who can contribute the most to their re-election campaigns, while federal judges are appointed for life. Unfortunately, we have a relatively small amount of evidence about outcomes in state courts, but what we do have makes this one a tossup at best.

4. More cases are being resolved by the EEOC pre-litigation.

Of all the excuses proffered, this one had the most potential to persuade us that plaintiffs were actually benefiting. The EEOC has invested heavily in its mediation program which works to resolve claims before they are investigated, or, in some cases, as part of the conciliation process between employer and employee. And Mr. Dreiband, as the EEOC’s former general counsel, was very knowledgeable about the EEOC’s program.

But, as the saying goes, where’s the beef? I asked Mr. Dreiband following his presentation whether the EEOC had studied whether mediation was actually beneficial for plaintiffs in terms of damages awarded. He was unaware of any such studies, and indeed, the studies on the EEOC’s website are limited to the parties’ satisfaction with the process, as well as participating mediators’ evaluation of the program.

Initially, it sounds good when you hear that cases are resolved quickly, and before there is any litigation. Most people just want to move on with their lives, rather than spend years fighting their employer in court. But several aspects of the push to resolve cases so early should give worker advocates pause. A case resolved before any discovery takes place may mean that key evidence that makes the case a valuable one never sees the light of day. A case resolved where the employee doesn’t have an attorney may mean that the employee is outmatched and overcome by the power imbalance on the other side, as rare is the case where an employer wades in to any case without representation. And a process where 13.5% of cases settle for non-monetary compensation makes you wonder just how many people out there are settling for an apology or a good reference, no matter how much they were damaged.

Admittedly, a certain percentage of these cases would have been lost anyway, but settling a case for a token amount of money and an apology may not be much better. Before the EEOC so heavily touts the benefits of mediation, they should study exactly who benefits. Is it the employer who benefits most when litigation goes away quickly and cheaply? We simply don’t know.

So let’s review:  reducing the number of cases in federal court, no matter what the reason, doesn’t:

  • explain why plaintiffs fare so much worse in front of federal district court judges than juries;
  • explain why employment discrimination plaintiffs fare much worse than other plaintiffs on appeal;

And it doesn’t even explain that the reduction in federal court cases means plaintiffs are faring better in other forums. In fact, it may mean that, like the movie “Dumb and Dumber,” Schwab and Clermont’s next report should be called “Worse and Worser.”

Take Back Labor Day: Week 3 Roundup

Friday, September 19th, 2008

The fun continued unabated at TodaysWorkplace.org, as we continued our Take Back Labor Day project for Week 3: September 15-19, 2008. Although we featured fewer posts this week than the previous two weeks, we still tackled many provocative issues that are frequently in the headlines.

On Monday, September 15, we kicked off the week with a post by Paul Bland of Public Justice. Bland, at the center of virtually all litigation to eliminate the scourge of mandatory arbitration in employment cases, tells us all about the pernicious practice that “require[s] current and prospective employees to sign away core constitutional rights as a condition of getting a job,” in the post “Labor in Exchange for One’s Rights.”

The next day, Tuesday, September 16, features Phil Duran of Outfront Minnesota. Duran, who represents transgender employees in discrimination cases, reminds us that not everyone is fully sharing in Labor Day’s promise when transgender employees lack full antidiscrimination protections under federal law, in the post “Sharing Labor Day with Transgender Workers.”

Wednesday, September 17 continued Week 3 with Jeff Blum of US Action. Blum tells us about US Action’s exciting new initiative to bring back some New Deal-era ideas, in the post, The Next New Deal. I think we’d all agree with him that:

We need to invest in our nation’s future and rebuild our middle class; creating good paying jobs instead of shipping them all overseas. No more race to the bottom, we need to begin our race to the top!

In our last post of the week, on Thursday, September 18, Tula Connell of the AFL-CIO, addresses issues straight out of the headlines:

Worsening unemployment. Millions of home foreclosures. Two-income households unable to support families. America’s workers are facing economic disasters so severe, even the national media is paying attention.

Connell’s post, Working Harder for Less Mocks the American Dream, reminds us that the Employee Free Choice Act is a way that we can correct the existing imbalance between workers and their employers which is one of the causes of the financial inequities dominating the headlines.

Although we’re inching closer to the end of the month, we will still be going strong next week, with posts from notables such as: Ilona Turner, Cyrus Mehri, Jen Nedeau, Richard Freeman, and Charlotte Fishman. (See About Our Bloggers to learn more about our rock-star lineup for next week.) Stay tuned every weekday in September to hear about what our experts will be talking about next — you can be certain it’s being ripped from the headlines!

Labor In Exchange for One’s Rights

Monday, September 15th, 2008

A large and growing number of employers across the United States require current and prospective employees to sign away core constitutional rights as a condition of getting a job. “If you want to work here,” millions of employees are told, “you have to agree that any disputes you have with us–even if we cheat you, even if we break our contract or break the Fair Labor Standards Act or a basic civil rights act–will be submitted to binding arbitration with an arbitrator who is chosen by an arbitration company whom we pick. If you don’t like it, you can’t work here.

These provisions are common. Big Box retailers have them, restaurants have them, companies like Halliburton have them, and many more. Exact numbers are hard to come by, but it’s clear that today there are far more workers in America who have been required to sign mandatory arbitration clauses than there are workers who are members of unions. If one were trying to figure out whether the balance of power had shifted one way or the other between employers and employees, it would be hard to find a more obvious measure. A smaller and smaller percentage of American workers have been able to organize into groups to balance out the power of employers, and a larger and larger percentage of American workers have been forced to give up their legal rights and submit to corporate-chosen, largely non-transparent tribunals whose decisions are not meaningfully reviewed by any court. What a deal!

Arbitration tends to work pretty well in the collective bargaining process, where both sides–the union and the employer–are pretty sophisticated “repeat players,” and where neither party dominates who selects the arbitrators. Arbitration between employers and individual employees tends to be a very different situation, though. While individual employees rarely know how a given arbitrator has ruled in past cases (the arbitrations are generally confidential, and thus secret), the employers know who’s who. Arbitrators who rule for an employee risk being blackballed, and never working as an arbitrator again.

As a lawyer who represents employees and consumers in an adversary process, I’ve learned to be suspicious when the party who is adverse to–against–my client says it’s doing something for my client’s good. Thus, I’ve always taken it with a grain of salt when big corporations say things to the effect of “the reason we’re choosing to force our employers to submit to arbitration is because arbitration is fairer and better for the employees.” It reminds me of the line in Caddyshack where the Judge self-righteously tells the caddy “I’ve sent boys younger than you to the electric chair. I didn’t want to do it; I felt I owed it to them.”

Thus it should be no surprise that the leading academic study of thousands of publicly reported employment cases has found conclusively that non-unionized employees who have to take their disputes to pre-dispute binding arbitration win less frequently than if they could have taken their cases to court. The same study found that in those cases where employees do win in arbitration, they tend to win smaller awards than they would have been likely to win in court. (See Alexander Colvin, Empirical Research on Employment Arbitration: Clarity Amidst the Sound and Fury?, Employee Rights and Employment Policy Journal, Vol. 11, No. 2 (2007). (Purchase the article.) There are some studies paid for by the Chamber of Commerce that purport to show how employees benefit from mandatory arbitration (some by carefully selecting the cases they study, some by blurring together data from arbitration in the collective bargaining setting and the non-unionized setting, and some by simply lying), but the Colvin piece is the real deal.

The U.S. Supreme Court has repeatedly said that a cornerstone of arbitration is that it’s voluntary, and consensual. The Court sees nothing involuntary about telling a long-time employee that they have to sign a binding arbitration clause or lose their job. “After all,” the argument runs, “they could always choose to work for someone else.” This argument is pretty empty for most employees. It’s only a short step from that to saying that someone who signs an arbitration clause at gunpoint has made a voluntary choice – “hey, they could have chosen to be shot.”

The legislative history of the Federal Arbitration Act makes very clear that this state of affairs is not what Congress intended in 1924. From talking to my clients, there are a large and growing number of people who feel that mandatory arbitration for employees is unfair, and that Congress needs to do something to correct the problem.

About the Author: F. Paul Bland, Jr. is a Staff Attorney for Public Justice (formerly Trial Lawyers for Public Justice), where he handles precedent-setting complex civil litigation. He has argued or co-argued and won more than twenty reported decisions from federal and state courts across the nation, including cases in four federal Circuit Courts of Appeal and six state high courts. He was named the “Vern Countryman” Award winner in 2006 by the National Consumer Law Center, which “honors the accomplishments of an exceptional consumer attorney who, through the practice of consumer law, has contributed significantly to the well being of vulnerable consumers.” He is a co-author of a book entitled Consumer Arbitration Agreements: Enforceability and Other Issues, and numerous articles. For three years, he was a co-chair of the National Association of Consumer Advocates. He also has won the San Francisco Trial Lawyer of the Year in 2002 and Maryland Trial Lawyer of the Year in 2001. Prior to coming to Public Justice, he was a plaintiffs’ class action and libel defense attorney in Baltimore. In the late 1980s, he was Chief Nominations Counsel to the U.S. Senate Judiciary Committee. He graduated from Harvard Law School in 1986, and Georgetown University in 1983.

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