November 2015 Newsletter: Arbitration Clauses Limit Class-Action Rights for Consumers

The New York Times has written a three-part series of articles over arbitration clauses in an attempt to bring this issue to the forefront of the national consciousness. In recent years, it has become nearly impossible to apply for a credit card, apply for a job, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration.

The New York Times found that the attempt to block class actions was initiated with a bunch of Wall Street corporations and their corporate lackey attorneys who were desperately attempting to avoid expensive class-action lawsuits over ten years ago, according to court records. One of those corporate lackey attorneys was John G. Roberts Jr., “who as a private lawyer representing Discover Bank, unsuccessfully petitioned the Supreme Court to hear a case involving class-action bans.” 

Two Supreme Court rulings, in 2011 and 2013, enabled corporations to effectively ban class-action lawsuits in contracts. In 2010, the Supreme Court heard AT&T v. Concepcion, where customers argued that the company had promised them a free phone if they signed up for service, and then charged them $30.22 anyway. Once again, the ruling involved the California courts and their rejection of a class-action ban as “unconscionable.” The court ruled 5-4 in favor of AT&T. By the time the Supreme Court handed down its favorable decisions, John G. Roberts Jr. was the chief justice of the United States Supreme Court.

What an Arbitration Clause Looks like

Here is an example of what an arbitration clause looks like: “You or we may elect to resolve any claim by individual arbitration. Claims are decided by a neutral arbitrator.”

The Argument in Favor of Arbitration

Those in favor of arbitration argue that it provides consumers with a fairer, simpler, cheaper and faster way of resolving disputes.

According to The New York Times, “The seven-million-member Kaiser Health plan in California uses arbitration to resolve its disputes with patients and employees; 90 percent of the claimants and their attorneys who participated in arbitration last year reported that it was better than or the same as going to court.” 

Corporate Victory

The sharp shift away from the civil justice system has barely registered with Americans, according to F. Paul Bland Jr., the executive director of Public Justice, a national consumer advocacy group. Mr. Bland attributed this to the tangle of bans placed inside clauses added to contracts that no one reads in the first place.

“This is among the most profound shifts in our legal history,” William G. Young, a federal judge in Boston who was appointed by President Ronald Reagan, said in an interview. “Ominously, the business has a good chance of opting out of the legal system altogether and misbehaving without reproach.”

By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft, and discrimination, court records show.

“Corporations are allowed to strip people of their constitutional right to go to court,” Mr. Bland said. “Imagine the reaction if you took away people’s Second Amendment right to own a gun.”

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