Categories
Legal, Laws, and Regs

Binding the iPhone

On Steve Jobs and his design obsessions, Nick Carr writes:

Steve Jobs, I think it’s fair to say, looks at Apple products as works of art, as little functional sculptures aimed at giving aesthetic pleasure as well as utilitarian benefit. That’s why it pains him so deeply to have people hack into his machines and fiddle with their guts. When a customer “opens” an iPhone, the act doesn’t just complicate Apple’s business relationship with AT&T and the phone’s other exclusive carriers; it stands as a personal affront to Jobs. It’s an assault on the integrity of his artifact.

Nick has nailed it, not just for the iPhone but any Apple device. Utility is sacrificed to form. Whether it’s a good decision for Apple depends on when you ask the question. Ask it the day of a product release, good. Ask it two weeks after a product release, bad.

Nick’s responding to the disgruntled grumbles of iPhone buyers who are now the proud owners of iBricks after the iPhone upgrade. So disgruntled that many customers are contemplating a class action lawsuit against Apple.

Serendipity knocks. A little digging around discovers for us the iPhone/AT&T service agreement out at Apple. Included within the agreement we find the following:

ARBITRATION AGREEMENT
(1) AT&T and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted. It includes, but is not limited to:

* claims arising out of or relating to any aspect of the relationship between us, whether based in contract, tort, statute, fraud, misrepresentation or any other legal theory;
* claims that arose before this or any prior Agreement (including, but not limited to, claims relating to advertising);
* claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; and
* claims that may arise after the termination of this Agreement.

References to “AT&T,” “you,” and “us” include our respective subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns, as well as all authorized or unauthorized users or beneficiaries of services or equipment under this or prior Agreements between us. Notwithstanding the foregoing, either party may bring an individual action in small claims court. You agree that, by entering into this Agreement, you and AT&T are each waiving the right to a trial by jury or to participate in a class action. This Agreement evidences a transaction in interstate commerce, and thus the Federal Arbitration Act governs the interpretation and enforcement of this provision. This arbitration provision shall survive termination of this Agreement.

(6) The arbitrator may award injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party’s individual claim. YOU AND AT&T AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN YOUR OR ITS INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. Further, unless both you and AT&T agree otherwise, the arbitrator may not consolidate more than one person’s claims, and may not otherwise preside over any form of a representative or class proceeding. If this specific provison is found to be unenforceable, then the entirety of this arbitration provison shall be null and void.

(emph. mine)

Another opportunity to highlight the Arbitration Fairness Act of 2007, calling for the elimination of binding mandatory arbitration agreements from contracts.

Recently, The Ninth Circuit Court ruled that the class action provision of the arbitration agreement for AT&T/Cingular in California was unconscionable under California Law.

However, whether this clause or the ruling would hold with the iPhone/AT&T agreement depends: if the class action claim is brought in California; whether the wording on the agreement is the same, and still would be ruled unconscionable in court; whether the agreement applies only to the service, or to the phone/service combo.

Regardless, if the customers were to move on a class action lawsuit, it’s very likely AT&T would move to compel arbitration. Maybe it would be simpler just to be a good little Apple customer, stop being naughty, and let Steve preserve his artistic vision.

Categories
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:

Categories
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.

Categories
Copyright Legal, Laws, and Regs

Creative inevitability

It was a sense of inevitability that I read about the lawsuit against Creative Commons and Virgin Mobile, Australia. The suit came about because of the recent Virgin Mobile use of photos licensed for commercial use via a CC license.

Not surprising to read Lawrence Lessig’s optimistic look at the issue, though his segue going from a thoughtful look at where things went wrong to “everything worked as planned” is a rather interesting read:

this case does again highlight the free culture function of the Noncommercial term in the CC license. Many from the free software community would prefer culture be licensed as freely as free software — enabling both commercial and noncommercial use, subject (at least sometimes) to a copyleft requirement. My view is that if authors so choose, then more power to them.

But this case shows something about why that objective is not as simple as it seems. I doubt that any court would find the photographer in this case had violated any right of privacy merely by posting a photograph like this on Flickr. Nor would any court, in my view, find a noncommercial use of a photograph like this violative of any right of privacy. And finally, as the world is just now, while many might resist the idea of Virgin using a photograph of theirs for free (and thus not select a license that explicitly authorizes “commercial use”), most in the net community would be perfectly fine with noncommercial use of a photograph by others within the net community.

The Noncommercial license tries to match these expectations. It tries to authorize sharing and reuse — not within a commercial economy, but within a sharing economy. It tries to do so in a way that wouldn’t trigger at least most non-copyright rights (though again, most is not all — a CC BY-NC licensed photograph by a voyeur still violates rights of privacy, for example). And it tries to do so in a way that protects the copyright owner against presumptions about the waiver of his rights suggested by posting a work freely.

I began to write on my concerns about Creative Commons, as soon as they were released. Years ago, in response to a comment by Sam Ruby, I wrote about the potential problems for confusion associated with the CC licenses:

Sam, in the legal world there is no ‘seed’ planting. There is clarification or confusion.

Not all forward motion is positive. I’d rather see people hesitate on using the CCL, and the CC open a dialog with the community (through a weblog with comments or a discussion group or like), then to continue using the CCL, perhaps incorrectly, all based on wonderful sounding words and a cute movie.

I appreciate the nobility of the Creative Commons intent and effort. But I’d appreciate it more if they combined that with an interactive element that allows us all to understand better what it all means.

I guess we have a better idea of what it all means now. But I wrote that over five years ago.

In response to this issue, Suw Charman wrote:

I like to think that the world is based on goodwill. People are, generally speaking, nice and, by default, they will respect and help others. Certainly humans are fundamentally and inescapably social creatures that need each other on a minute-by-minute and day-to-day basis, and I think that being nice is one of the attributes that which fuels the reciprocation that makes helping someone else ultimately worth it for us ourselves.

I also think that the social web is an expression of the niceness that lubricates society. All the mores that have built up around blogging and wikis and sharing and Creative Commons are based on being nice: if you quote someone’s blog, it’s being nice to credit them; Wikipedia encourages everyone to be nice to newbies; sharing anything with strangers is an act of niceness in itself; and Creative Commons licences are predicated on the idea that people will be nice and respect them.

Whilst niceness isn’t universal – there are people who aren’t nice – it is a desirable attribute, so much so that niceness is taught and enforced from birth. I doubt there’s anyone reading this who wasn’t told as a child to “be nice” or to “play nicely”. Nice is good. We need nice.

This might explain why I get so cross when I come across examples of people, or especially businesses, not playing nice. But thanks to the internet, we now get to call out companies who, whilst sticking to the letter of the law (or Creative Commons licence), are flagrantly abusing its spirit.

The online world–Suw’s ‘social web’–is no different than the offline world: there are people who give all, and people who take all, and the rest of us in the middle just trying to get by. The online world–with its Creative Commons, Wikipedia, Citizen Journalism, Social Network/Web/Graph goodness–is no more ‘nice’ than the towns, cities, or hamlets we live in; it’s just newer is all and we don’t have to worry about landfill. Continuing to set any of this up on a pedestal only serves to generate a false sense of trust and security that inevitably leads to disillusionment.

In the post associated with the comment I quoted earlier, I wrote (with some modifications to grammar):

Pessimists see the world from its dark side—always the glass half empty. They never see that the world can be made better, or that problems can be solved. They’re not constructive, but they aren’t destructive, either.

Idealists, on the other hand, only see the light. In their world, the sun always shines (except for that bit of rain needed for the trees), the birds always sing, and humanity exists in harmony. They are pleasant, but they can also be destructive.

The idealist is destructive where the pessimist isn’t by introducing change without concern for the consequences. They say, “Look at this wonderful thing I have given you!”, but don’t provide the user manual. After you’ve managed to blow up a city block, when you look for the idealist they’ve moved on to another part of the world, to drop yet another idealism bomb on some unsuspecting poor sod.

Idealists. You gotta love em, because if you didn’t you’d want to strangle them.

Where this is all leading is the release this week of the Creative Commons licenses: those digital goodies that one can attach to our creative efforts to let others know if they can use these efforts in defined ways. Collaboration and community, 101. Like our idealist, the Creative Commons have dropped this little bomb in our lap and then left it up to us to determine how to use these things, and what they really mean.

Jonathon Delacour, who has been called, usually with respect and affection, many things but I don’t think ‘nice’ was one of them, shared some of my misgivings about the CC licenses. He wrote:

Picasso and Braque stood on each other’s shoulders as they invented Cubism but they were careful (and sufficiently smart) to maintain the copyright on their works. The Creative Commons Licenses, on the other hand, typify Thomas Sowell’s unconstrained vision of human nature by relying on people (“I’ve never met”) to behave honorably and to respect the integrity of my work. Spend five minutes on “this Internet” and tell me I’m not bound for disappointment.

I wouldn’t be so skeptical if the Creative Commons Licenses relied less on a rose-tinted vision of benign collaboration and instead provided greater safeguards for the real interests of those licensing their original works; or if, to borrow Thomas Sowell’s words, they replaced—to at least some degree—their “moral vision of human intentions” with a more pragmatic acceptance of the “inherent moral and intellectual limitations of human beings.”

In other words—and pardon my bluntness—what’s in it for me? Really? Other than distress and disillusionment?

It is this determination to manufacture an online Utopia, to hold fast to the rose-tinted vision that Jonathon described, of the Creative Commons–promoted by shrewd, sharp people who should have known better–that spurred me to write my criticisms years ago, and to continue to write on topic in the times since.

The Creative Commons web site has never, to my knowledge, responded to challenges, or discussion regarding the issues surrouding the licenses. When I derived a test of CC licenses, or when Creative Commons figured in a Dutch law suit, or Virgin Mobile grabbed several CC licensed photos from Flickr for its campaign, the Creative Commons community seemed to focus more on eliminating anything other than the type of license that caused the initial problems, rather than respond to the issues, or reflect on perhaps providing stronger warnings.

Ultimately, who really does benefit from the Creative Commons? Andrew Orlowski, who has never been referred to as ‘nice’ either, as far as I know of, wrote one of the most eye opening summations of the Creative Commons I’ve read:

Few participants who slap a CC license on their work understand that the mechanism was designed to benefit the network, not the humans, by removing “frictions” such as compensation or consent.

Some would say it is not the CC organization’s responsibility to answer the critics, to meet the challenges–that the organization doesn’t have an obligation to warn as much as it promotes. I say to stubbornly persist in wearing those rose-tinted glasses, to mark only the sunny hours, as the sun dial would say, is the ultimate irresponsibility. The Virgin Mobile lawsuit was inevitable, and it didn’t have to be.

It would seem that the online site Babble has been taking photos from Flickr, assuming they’re CC licensed, even when the photos they take are copyrighted by their owners.

No, I don’t blame CC. However, there is a growing assumption that photos at Flickr are CC licensed, and this is causing additional confusion. In addition, a CC licensed photo, even one designated as non-commercial, can be used in a magazine or newspaper, because that’s not necessarily considered ‘commercial’ use of the photo.

Just one of the many uncertainties and confusions around CC licenses, copyright, and fair use. That’s the main reason we shouldn’t be making it easier for people to license their work with CC.

Categories
Legal, Laws, and Regs

More on the Arbitration Fairness Act of 2007

The Consumerist has more on the Arbitration Fairness Act of 2007.

People Over Profits has an email campaign but it also helps to contact your Congressional rep directly. A letter of phone call also works wonders.

How important is this bill? There is no bill pending in Congress that scares Corporate America more than this one. There is no bill pending in Congress that could more help the American people than this one.

Due to rulings in the Supreme Court, mandatory arbitration agreements now trump the Equal Employment Opportunity Commission when it comes to employment discrimination lawsuits. This means that an arbitrator can make decisions based on civil rights, can do so without following the law, can do so without following the arbitration rules themselves, and can do so without any transparency into the decision process.

…after Sherri Warner lost her discrimination and wrongful firing suit in mandatory arbitration, a San Francisco arbitrator not only charged her nearly $16,000 for his time, he ordered her to pay her opponent’s legal fees of more than $207,000.

The fee award would probably not have been allowed in court, and it forced Warner into bankruptcy. But after her lawyer, Stephen Gorski, asked the arbitrator to explain his decision, the arbitrator refused when reminded no rules required him to do so.

Arbitrators rarely issue written opinions, making requests for review virtually impossible.

What’s scarier is that this case was ten years ago, and since then, the Supreme Court has given even more power to arbitration, including giving it power over ruling on employment discrimination that now supersedes that of the EEOC. The Supremes have even given it power over the law, itself. In recent case, one of my favorites, Buckeye Check Cashing vs. Cardenga, a man sued a check cashing company claiming that the conditions of the loan were illegal. The company, which had a mandatory arbitration clause, demanded that the claim be taken to arbitration. The state of Florida disagreed, saying that an arbitration clause that was in a contract deemed to be illegal is not enforceable.

However, our Scalia controlled Supreme Court doesn’t allow a little thing like an illegal contract deter it. It decided that it wasn’t up to the courts to determine the validity of an arbitration clause just because it happened to be in an illegal contract — the only item the courts could determine is whether the arbitration clause is, in and of itself, legal. The rest of the contract was then up to the arbitrator.

Question

Under the Federal Arbitration Act, may a party avoid arbitration by arguing that the contract in which the arbitration clause is contained is illegal?

Conclusion

No. The 7-1 majority (Justice Samuel Alito not participating) ruled that challenges to the legality of a contract as a whole must be argued before the arbitrator rather than a court. The opinion by Justice Antonin Scalia explained that “unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance.” The Court held that the Florida Supreme Court had been wrong to rely on a distinction between void and merely voidable contracts, because the word “contract” in the Federal Arbitration Act includes contracts later found to be void. Justice Clarence Thomas dissented due to his long-held view that the FAA does not apply in state courts.

This is a frustrating topic for me, because I’ve watched over the years now as arbitration has eroded all of our judicial rights, as granted by the Seventh Amendment to the Constitution. It’s frustrating because I can’t seem to convey, in this weblog, how serious this can get.

A legal expert in Texas once said that he felt in ten years, there would no longer be a civil court system because of how much it is being eroded by an act that was basically put into law in 1925, as a way for businesses to come to ‘gentlemanly agreements’ in regards to a dispute. It was never intended to be used by corporations against the common citizen.

This is also a case of the breakdown of the system of checks and balances built into our government. The Supreme Court has empowered arbitration and supported mandatory arbitration to the point that it now is undermining the very nature of civil rights in our country, and was allowed to do so, unchecked, in the Republican controlled Congress.

Now we have a Democratic controlled congress. More than that, we have a congress where even many Republicans are beginning to look askance at the miscarriage of justice that occurs under the auspices of ‘arbitration’.

American Corporations do not want this Bill. American Corporations, who have delivered shoddy equipment, surly service, and bad faith consumerism.

Who supports this bill?

The Feingold-Johnson bill is supported by a host of consumer advocate organizations including Consumers Union, Public Citizen, American Association for Justice, Center for Responsible Lending, Consumer Federation of America, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center (on behalf of its low income clients), National Consumer Coalition for Nursing Home Reform, the National Employment Lawyers Association and Public Justice.

The list is only growing, as word of this Bill slowly trickles out.

Support the Arbitration Fairness Act of 2007. Please.