Legal, Laws, and Regs

Breaking the mandatory arbitration back

People over Profits has a campaign under way to encourage Congress to support this bill. It’s important to let your Congressional representative know you support the Arbitration Act of 2007.

Ars Technica and Tortdeform both write on the recent, and important, decision of Douglas v. Talk Ameria in the Ninth Circuit Court of Appeals. In the decision, the court ruled that companies may not change terms of service arbitrarily, forcing people into having to check for such changes in online agreements; then denied the motion to compel arbitration–one of the changes actually added to the terms of service that initiated the class action lawsuit.

This is important because it challenges the concept that a person has to be forced into visiting terms of service on some periodic basis in order to ascertain changes–a onerous task, indeed.

This is also an interesting case as regards mandatory arbitration clauses. I’ve written on this issue before, and the fact that online services are now slipping in mandatory arbitration clauses–joining the banks, plumbers, credit card companies, house builders, computer manufacturers (Dell being one of the most prominant), realtors, your employer, car dealers, hospitals and others who slip such clauses in, usually in small print, and buried among dozens of other changes, worded in confusing legalese–should help drive out that this isn’t ‘just’ a problem with deadbeats looking to skip out on debt or fakes wanting to sue the poor drug companies, as the pro-mandatory arbitration supporters insist.

I bet I can safely say right now, you’re covered under a mandatory arbitration clause right now that abrogates your class action and other civil and legal rights, and you don’t even know it.

What perfect timing, then, to segue into drawing your attention to the Feingold-Johnson billThe Fair Arbitration Act of 2007, just introduced into Congress last week that would block mandatory arbitration clauses.

The issue has never been about whether arbitration is or is not a good thing. Arbitration entered into willingly by two equal parties, both of whom can argue the case without paying thousands in exorbitant fees in front of competent and truly unbiased arbitrator, is a good thing. Arbitration purely for profit, as a way of skirting the laws of the land and a form of bastardized tort reform, is not.

What the Feingold-Johnson bill is about is that people should be given a choice. This wholesale movement of companies forcing mandatory arbitration clauses, using for profit arbitration companies where cases are processed in assembly like fashion–six to an hour being typical–for fees far in excess of what courts charge, and typically favoring corporations over the individual (and disregarding many laws of the land, including the civil rights) is not a good choice.

I’d suggest contacting your congressional representatives and tell them you support this bill. After all, if arbitration is the good thing these companies say it is, then why do they need to add these mandatory arbitration clauses in the first place?

From American Homeowners Resource Center

In 1995, Justice Sandra Day O’Connor wrote: “over the past decade, the [Supreme] Court has abandoned all pretense of ascertaining congressional intent with respect to the Federal Arbitration Act, building instead, case by case, an edifice of its own creation.” Justice O’Connor was absolutely right.

Starting in the mid-1980s, the Supreme Court dusted off the Federal Arbitration Act (“FAA”) – an obscure procedural statute that had been the subject of only half a dozen or so Supreme Court decisions in 60 years – and transformed it into something bearing little relation to the law considered and enacted by Congress in 1925. Concerned with the workload of the federal courts, the Supreme Court discovered that the FAA could be used as an extensive docket-clearing device to move large numbers of cases out of the court system and into a system of private dispute resolution. The cases cleared out of the court system under the judicially re-tooled FAA have been disproportionately the claims of consumers, employees and small-business owners.

The real winners under the modern system of FAA arbitration are large companies who decide to write arbitration clauses into their “take-it-or-leave-it” contracts. Also benefitting from the modern FAA are the arbitration-providers and individual arbitrators who find a huge increase in demand for their services. What is, for the courts, a system of “do-it-yourself court reform” has increasingly become a system of “do-it-yourself tort reform” for regulated business entities seeking to avoid liability for wrongs done to consumers, employees and small-business franchise owners.

Excerpt from the testimony of David S. Schwartz, Associate Professor of Law at the University of Wisconsin Law School, before a congressional hearing on mandatory arbitration clauses held in June. The article also includes a link to the PDF for the complete testimony. The link in this paragraph is to the recordings from the event, including others testimony.

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