Legal, Laws, and Regs

Arbitration facts

Note: I can go on and on about arbitration. I’m not only passionate about this topic because I realize how important it is, I’m also interested because it really is a fascinating topic. It’s like a microcosmic view of the American government, including how our courts work, and the balance of power between the legislative, executive, and judicial branches.

However, I realize this is a topic that’s probably of little interest to most of you. Some of you aren’t from the US, in which case this country’s arbitration policies aren’t of interest. For the US folks, I’m not sure if you think mandatory arbitration agreements will not impact you, you’re already sold on the need to eliminate them and have contacted your congressional representatives, or because it doesn’t involve free candy.

However, if the reason you’re not interested is because you don’t know much about arbitration, leave comments and I’ll do my best to answer (with consideration that I’m not a lawyer and any answers provided are based on interest not legal training), or perhaps address the question to people who can answer the question.

I’m really pleased to see the discussions raised about binding mandatory arbitration agreements because of the Public Citizen report, but a little concerned about the misinformation being disseminated, and, frankly, lack of understanding of arbitration.


The original Federal Arbitration Act was actually a maritime act, and was intended for use in federal court, not state courts. In 1984, as noted in the Public Citizen report, the Supreme Court made a flawed decision to extend the Federal Arbitration Act to state courts, as well as federal courts. The majority opinion stated, “In creating a substantive rule applicable in state as well as federal courts, Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements.”

Sandra Day O’Connor wrote in dissent that the decision, “utterly fails to recognize the clear congressional intent underlying the FAA. Congress intended to require federal, not state, courts to respect arbitration agreements…Today’s decision is unfaithful to congressional intent, unnecessary, and, in light of the FAA’s antecedents and the intervening contraction of federal power, unexplained.”

To the Supreme Court, from that point on, the mandate was clear: push as many civil cases as possible into arbitration. In 1987, the Supreme Court ruled that states are required to “rigorously enforce arbitration agreements”; in 1995, that states could not outlaw pre-dispute arbitration agreements in order to “overcome judicial hostility to arbitration”; then in 2006 came the decision that, to me, showed that the Supreme Court is grossly out of touch with the people in its obsession with arbitration.

In this instance, the State of Florida ruled that an arbitration agreement cannot be forced when the contract the arbitration agreement was in, was illegal. Really, makes a lot of sense to me. The Supreme Court overruled Florida, however, and gave the power to determine whether a contract is legal to arbitrators saying that the state could only rule on the legality of the arbitration agreement itself, not the contract.

This, to me, is when the Court really crossed the line–putting issues of determining legality into the hands of anyone who sets themselves up to be an arbitrator. I still, to this day, cannot understand how the Supreme Court could so abuse its power in this way. Since arbitrators do not have to be accountable to the courts or the people, can be private for-profit corporations, don’t have to be lawyers or legal professionals–to give them the power to determine whether a contract is illegal or not is grossly dangerous.

The Supremes have also not accounted for the differences in how arbitrations are held between the time the FAA was created in now. The original 1925 Federal Arbitration Act did not account for the concept of for-profit arbitration firms, where such firms would cater to large clients at the cost of the individuals who ended up facing this combined corporate might; nor did they consider the concept of corporations embedding hidden arbitration clauses in contracts for services such as a credit card, bank account, new car purchase, new computer purchase, cable service, phone service, health insurance, car insurance, car maintenance agreements, hospital procedures, and, especially, employment. The FAA was intended solely to facilitate dispute resolution related to commerce between companies of equal financial strength.

The Public Citizen report focused in California, because that’s the only state to mandate public reporting of arbitration cases–elsewhere, the arbitration companies keep such information secret. Most of the cases had to do with credit cards, many having to do with debt collectors. These do form the majority of arbitration cases now, especially those handled by National Arbitration Forum, which rather specializes in this. In fact, it was NAF that encouraged the introduction of arbitration clauses into credit cards in the first place.

However, what the report can’t show, though, is that many of these filings are in error, based on mistaken identity, non-existent debts, debts years past the applicable statute of limitations, or even based on invalid or possibly illegal contracts. Many of the filings are focused at low income people who can’t afford lawyers, and who don’t understand the arbitration process well enough to know that they need to respond. All too frequently, notices sent to the individuals are sent to incorrect addresses, and the person doesn’t even know the arbitration occurred, until they get served with a court notice that the company has filed to validate the arbitration.

Now, you might think that there’s enough checks and balances in the arbitration process to ensure people’s legal rights are upheld, but that’s not true.

When an arbitration claim is first filed, the FAA allows the respondent to reject the arbitration process because there is no valid arbitration agreement in place. At that point, the organization or individual initiating the arbitration process is supposed to take the issue to court, and get a ruling as to whether an arbitration agreement actually exists. The initiating organization then has the burden to prove that an agreement exists.

What happens, though, is that people don’t get notices of pending arbitration in order to respond by rejecting the arbitration process because of no valid arbitration agreement. Worse, though, is that NAF and the other arbitration corporations ignore such responses anyway and continue the arbitration proceedings. Yes, in effect: NAF violates the very law that undermines its existence.

Why this is serious is that when the companies then move to enforce the arbitration agreement in court, the burden of proof shifts to the individual. The individual must now prove that the arbitration award needs to be set aside based on very limited, strictly controlled circumstances. To summarize:

  • Where the award was obtained through corruption or fraud
  • Where the arbitrators were guilty of misconduct, or grossly exceeded their powers
  • Where the arbitrator is not properly impartial
  • When no valid arbitration agreement exists–this latter was added by the states, because the FAA stipulated that no arbitration process should even occur if no valid agreement exists.

They sound good, except for one thing: because of the push by the Supreme Court, most judges are extremely reluctant to vacate an arbitration award, and you’ll have to go to rather extraordinary means in order to get the award overturned.

Case in point is the law most states support that will vacate an award by the individual showing no arbitration agreement exists. In one case in this state (Missouri), when a car buyer moved to sue the company that sold him the car, the car dealer went to court demanding that the case be moved to arbitration because there was a pre-dispute binding mandatory arbitration agreement contained within the car contract. The car buyer denied such an agreement existed, and demanded to see the signed agreement or contract that contained the agreement. The company said they couldn’t find it. Instead, the car company testified that since this is something they require for all car sales, one must exist even if it couldn’t be shown.

This was enough for the Missouri court system, which ruled in favor of the car company. In fact, this is a trend in all states, based on the Supreme Court rulings to ensure that arbitration be given precedence: companies, especially larger ones, don’t have to show signed contracts or arbitration agreements if a company employee is willing to testify that these contracts and agreements ‘typically’ exist.

In addition, it becomes extremely difficult to prove misconduct or corruption of an arbitrator, or that the arbitrator followed substantive law, when the arbitration process is kept secret. Remember that in a court of law, court minutes and decisions have to be public; arbitration is secret. You have no way of knowing whether the arbitrator is impartial or not, because you don’t have access to the arbitration cases they reviewed, or their past employment or other relevant information to determine if they are impartial. You don’t even know if looked at any papers you submit.

It’s been a tragedy to see binding mandatory arbitration agreements added to credit cards, but it now gets worse: they’re being added to every kind of consumer agreement. Broadband Reports wrote on the Public Citizen report, with the discussion focused more on arbitration agreements now being added to phone and cable contracts. This post demonstrates that we’re seeing a major shift in the use of arbitration agreements. Previously, these were introduced into credit card and other purely financial agreements. Now they’re in phone, cable, and satellite agreements, new computer or car or home purchases, employment agreements, health insurance policies, doctor and hospital pre-releases and so on.

These agreements are added in order to protect the organization from lawsuit. Dell has been using arbitration agreements in its online sales for a few years now; I know of one Dell class action lawsuit forced into arbitration, and I’ve heard from two lawyers about two others they decided to drop because of the difficulties. In the one case that went to court, the suit alleged that Dell advertised certain functionality in the machines it sold, and then didn’t provide what was promised. This is not an uncommon class action lawsuit against manufacturers.

The problem with class suits and arbitration, though, is that most arbitration companies don’t support class action suits. In these cases, then, each individual has to file an arbitration claim individually. Each person must do his or her own arguments, filings, investigation, as well as paying hefty fees upfront. The benefit back is typically too small for the individual to make such effort worthwhile, especially because most lawyers won’t touch arbitration cases, as they’re too difficult to win — the arbitration company’s rules tend to be rather, um, flexible when it comes to a big client.

There’s been criticism of class action lawsuits because many are seen as frivolous. However, most safety features in the car you drive, the medicine you use, the hospitals you visit, the toys you give your kids, even the paint you use and the air you breath, came about because of class action lawsuits. The frivolous suits are not as common as the corporations would like you to think. It’s actually quite difficult to get class action status for a lawsuit.

It’s only been recently that the state courts have been fighting back at arbitration, specifically because class actions weren’t being respected. To the courts, if the arbitration agreement is unconscionable–beyond being reasonable, or grossly one-sided–then the agreement can be rejected, and the case referred to the courts system. In this case, not supporting a basic constitutionally given right to a class action met the determination for ‘unconscionability’.

The only problem is, though, what constitutes ‘unconscionable’ differs wildly between courts, and again, forces the burden of proof on the individual fighting the arbitration agreement. In other words, the burden of proof always ends up falling on the party least able to have the resources to provide such proof.

Returning the Broadband post, some of the commenters mentioned about opting out of the arbitration agreements in whatever contract you enter. Unfortunately, this is no longer viable. All credit cards now have arbitration agreements but one, and that one is provided through the AARP, because the AARP strongly disapproves of binding mandatory arbitration agreements.

Most health insurance policies now include binding mandatory arbitration agreements, and we all know that many times we don’t have the option of switching companies. Same with phone companies, computer manufacturers, and,well, you’ve heard the list from me before.

One thing I hope doesn’t get lost in the discussion about the Public Citizen report is the fact that the Arbitration Fairness Act of 2007 is focused only on eliminating binding mandatory arbitration agreements. This doesn’t impact on post-dispute arbitration agreements or proceedings. People can still choose to go to arbitration or mediation for dispute resolution rather than go to the civil courts. In addition, when feasible, civil courts will even help facilitate this process.

Other discussions:



I must admit to being impressed with Amazon’s new download service. I’ve already made my first list of wishlist songs and albums, at prices that seem much more affordable than iTunes.

Speaking of Apple losing its gloss, I was scanning the jabber today about iPhones being ‘bricked’, yet another instance where a noun becomes a verb. It’s a good word, though–deliberately turning a useful electronic gadget into a useless ‘brick’. It’s not something I worry over much about because a) I won’t buy an iPhone and b) it’s unlikely I’ll be buying another iPod.

My iPod’s battery is dying, and it irks me that the only way I can replace the battery is getting out my old soldering iron, or sending it in to Apple and paying $65.00 dollars and getting a re-furbished replacement back. This isn’t what I expect when I spend that kind of money, especially when other MP3 players are a fifth the price.

Don’t need another cellphone, either, because when the cellphone contract comes up in February, it’s being terminated and the cellphone I have donated to whatever organization wants to reclaim it. Don’t need a cellphone, don’t want one. Think of the money I save that can be used to buy music.

Photography Weather

Welcome Fall

Happy first day of Fall. Oh, how wonderful to think this miserable summer is drawing to a close.

August went down as the third warmest August since weather history has been kept in this region. A couple of cooler days towards the end kept it from being the hottest. We’re still quite warm and humid, with temperatures today in the 90s and only getting down to about 70 at night. Hopefully, we’re heading into normal temperatures later this week.

I thought I would check the Fall color report and the predictions look dismal for the state. Whatever region didn’t get blasted by our odd thaw-freeze-thaw cycle this spring, got hit with an ice storm in January, and/or the summer drought. This is the first time I remember that all parts of the state are being conservative about their predictions for fall color.

We’ve started feeding neighborhood animals and birds, once I saw the pathetic acorns and other nuts coming from our own neighborhood trees. I’m concerned because we don’t seem to have many birds this year; even the number of squirrels are down. The only critter that has done well in the weather this year are the mosquitoes.


During one of the nicer nights in the last few weeks, I was finally able to open the windows to get some fresh air, only to have the St. Louis pest control come through with the mosquito spraying. Ah, there’s nothing better than the smell of bug spray by moonlight.

Still, Fall is my favorite time of the year. I don’t know if it’s the deeper, richer colors of autumn, the cooler weather, the pleasant walks, but I always feel changes for the good are right around the corner.

color palette

Plus there’s Halloween candy.

Legal, Laws, and Regs

Binding Mandatory Arbitration: A report by Public Citizen

I phoned into the news conference today publicizing the release of Public Citizen’s report on Binding Mandatory Arbitration, but had such bad reception I finally had to hang up. However, I don’t need the press conference–all I needed was the report and what a report it is.

I’ve read a lot of the horror stories on mandatory arbitration clauses hidden into contracts, but wasn’t that aware of how widespread these have become. If you have a cellphone, you’ve agreed to binding mandatory arbitration; ditto for having cable, satellite, buying a new home, car, or computer. Getting a new job, going to the doctor, even just having a name, because you could end up in arbitration on nothing more than a case of mistaken identity. Arbitration doesn’t have the same requirements as a court, so the companies don’t have to verify you’ve been informed of the proceedings, or even given a chance to participate. You could lose an arbitration case, and only find out afterwards that someone stole your name and credit card to run up charges.

The report also has statistics, as well as a good history of what happened in the Supreme Court over the last few decades to get us into this mess.

As reported in this ABC News Report the arbitration companies, who make millions of dollars on arbitration, say it’s all fair and beneficial to the consumer. If this is so, then why hide these arbitration agreements? Why sneak agreements in, in small print? Why not give people a choice of arbitration or court trial? You’ll find that no arbitration company will ever answer these questions. That should be a red flag to all of us.

The Arbitration Fairness Act of 2007, which only seeks to eliminate binding mandatory arbitration agreements, has the support of every consumer group in this country, not to mention associations of home owners and other organized groups of consumers.

On the other side, though, are very rich banks, builders, manufacturers, HMOs, and pharmaceutical companies and others who are pouring thousands, hundreds of thousands, of dollars into Congressional pockets. The only reason a Congressional representative will vote against this bill is if they’ve been bought. There’s no good moral, legal, or logical reason not to support the passage of the Arbitration Fairness Act of 2007.

Take a few minutes, download the report, read some of the cases, and make sure to check out Appendix A with a description of the history of mandatory arbitration. Then, let your congressperson know you expect them to vote for this bill, or be prepared to explain why they did not.


Back to business

It’s amazing how things seem to happen at once. I’ve been waiting to find more information for one story in order to write a follow-up, and waiting on an event for another. Both happened today. Isn’t that just the thing?

The follow up is to the Jena story. Details of Mychal Bell’s juvenile records are being quoted, and I’ve tried to track down the source, but have had little luck. Every time I’ve asked someone where they got their information, they either disappear, or ignore the question. Today, Pursuing Holiness and Evangelical Outpost have posted links to eyewitness testimony, police reports, and the DA’s bail hearing argument. The documents are at Evangelical Outpost, as separate links. One is a broken link, but I imagine that will be fixed, soon (here’s the link — it doesn’t say anything new, and carefully cut out the defense attorney’s response). The person who provided this information wrote a post at Pursuing Holiness, and wishes to be anonymous.

I talked with a reporter from one newspaper who mentioned about Bell’s past record and who stated that this information was released with Mychael Bell’s bail hearing. I’m assuming the information I’ve been looking for is in the document with the broken link. One other document I wanted was included, and is another of the missing pieces I needed for my follow up.

I was contacted by a production editor at CNN yesterday about the Jena story, but she was mainly interested in where I lived. I must update this in my About Me page. I believe she contacted me because she was looking for someone in Jena for an afternoon ‘bit’ on Jena. I watched the bit, which ended up being a debate between Rev. Jesse Lee Peterson from, who managed to work into the discussion that the NAACP is the equivalent of the KKK; and Roland Martin, a CNN contributor. Peterson is an embarrassment to the black people of this country, but Martin spent all of his time looking supercilious and quoting Jesse Jackson.

More disturbing, the CNN talking head managed to introduce some of Mychal Bell’s juvenile record into the discussion, in a very offhand manner, without references to sources, or even if the source was credible–showing that CNN is reading our comments, folks. It was one of the most despicable acts of sensationalist journalism it’s been my misfortune to see.

I never thought I would agree with Doc Searls and others who believe in citizen journalism and that the mainstream media is dead. After yesterday, though, I agree with the latter, but I’m not sure of the former. Seems to me that the mainstream media is only giving the people what they want: sound bites; innuendo; dozens of shallow, sensationalist ‘bits’ rather than one longer, thoughtful story; opinion rather than fact–the in-depth coverage of a story is sacrificed to immediacy and ratings. The thing is, that’s what too many weblogs and ‘alternative news sources’ give, too.

Still, there were webloggers associated with the Jena 6 event who wrote thoughtfully, tried to dig up information, and find, and publish, the facts. I’ll link to these when I write my follow-up.

The second story is on a press conference being held today about a report that Public Citizen is releasing today on the abuses of Binding Mandatory Arbitration (BMA), and in support of the Arbitration Fairness act of 2007. I’ve read the report, and it’s excellent–very detailed, very factual. Most of the work is based in California, where records have to be kept by arbitration companies. If anything, California is actually much more ‘pro consumer’ than most other states, and whatever the report shows for that state is probably doubled in others.

I have a couple of other items I want to cover, one on photography, one on tech. The one on photography is based on some of things I’ve discovered about myself while working on the book. The tech one is based on some of the things I’ve discovered about myself while reading weblogs while working on the book. I need to get back to the book, however, especially since I’m determined to see if finished on time.

I’ve had a hard time with this book, and it’s not because of the subject or the reviewers. The subject of web graphics, covering topics ranging from photography to SVG to the new Silverlight, and everything in-between, is one I absolutely love and always have. The reviewers are three people I know, like, and respect, and they’ve been very encouraging.

I have this book, and another for O’Reilly I’ve talked with my editor about and then that will, most likely, be it for me. I’m considering trying alternative publication routes, including my own ad-based web sites on technology and graphics, and perhaps even publishing my own PDF-based works. I’ve always want to return to the topic of making technology more accessible for the non-tech, a subject I really like. I’ve enjoyed the graphics writing so much that focusing on that, also, has great appeal.

Josh Anon at O’Reilly Media reviewed just such a bookGet Your Head Around Aperture 1.5 from an Aperture help site, Bagelturf. The author, Steve Weller, self-published the book, and promises to provide updates of the book, as they arise. It’s based on work he did at his site, and though the layout looks a little rough, the ability to be able to update the book to fix typos or errors, or to update the material based on new information appeals to me enormously.

At the same time, people really don’t want to pay for things they’d rather get free. Eventually, the only writers who can afford to publish online may end up being Cory Doctorow or those who are independently wealthy, and I’m neither.

Something I have to think on, while I finish the book.