In a November post, we discussed a quiet but troubling threat to nursing home residents who have been neglected or abused, as well as millions of other Americans: forced arbitration.
As the New York Times has reported, with the increasing presence of fine print arbitration clauses in common contracts, more and more of us are denied our day in court when we are ripped off by a credit card company, discriminated against at work, or otherwise wronged by another party. Instead, we are forced to address disputes in private arbitration hearings, with the outcome decided by a lawyer who was probably selected by the powerful company or institution that we are suing, rather than a judge or jury.
Inevitably, these kinds of proceedings lead to blatantly unjust rulings for plaintiffs. The Times found examples of many arbitration hearings that, thanks to biased arbitrators and a closed legal process, actually left plaintiffs in debt, having received paltry compensation for claims of wrongful death or illness and saddled with steep legal fees.
Such outcomes are bad news not only for victims of personal injury, fraud, neglect and other wrongful actions, but for all of us.
Though it would be nice to believe that business leaders operate solely out of concern for the greater good, the threat of expensive legal battles is of course part of what keeps companies, medical facilities and universities from adopting dangerous or illegal practices.
So during a time when even the most dramatic cases of medical malpractice or product liability can be decided in a closed-door arbitration hearing, at a relatively low cost to the defendant, it’s almost guaranteed that companies will cut corners in order to increase profits – whether or not doing so puts patients and customers at risk.
With good reason, a coalition of consumers, patients, lawyers and other advocates have united to combat forced arbitration in a range of U.S. industries. So far, their efforts have produced mixed results – often, with so many powerful groups benefiting from arbitration clauses, their use has proven difficult to disrupt.
In December, the U.S. Supreme Court ruled in DIRECTTV v. Imburgia that the Federal Arbitration Act (FAA), which protects arbitration, preempts California laws that limit the legal power of binding arbitration clauses. According to Lexology, the decision continues the Supreme Court’s tradition of upholding the terms of arbitration agreements, which the nation’s highest court also ruled to safeguard in AT&T Mobility LLC v. Concepcion in 2011 and Am. Express Co. v. Italian Colors Rest. in 2013.
In her dissent, a frustrated Justice Ginsberg wrote that pro-arbitration rulings have “predictably resulted in the deprivation of consumers’ rights to seek redress for losses” while insulating “powerful economic interests from liability for violations of consumer protection laws.”
Some other branches of the federal government seem more inclined to fight arbitration, but only to a point. Last week, the U.S. Department of Education considered a proposal that would ban arbitration clauses in the enrollment agreements that college students sign. The Department initially issued a statement saying that they agreed with anti-arbitration advocates and wished to strongly attack the problem in university contracts, but, according to the Huffington Post, the panel pulled back on Saturday, endorsing the weaker of two options meant to address forced arbitration.
The proposal that the Department ultimately favored protects only those students who are seeking class certification from being forced to resolve disputes in arbitration. Students who wish to bring their claims against universities individually or in groups that are not class certified can still be forced to go to arbitration if the proposal is adopted. The proposal also does not clearly cover claims related to a university’s advertising, marketing, recruitment, and enrollment activities, which excludes many common claims of fraud from students.
A recent speech given by the head of the Consumer Financial Protection Bureau (CFPB) may offer hope, however, for critics of forced arbitration. Around the same time as the Department of Education’s panel discussions, CFPB Director Richard Cordray outlined the Bureau’s plans to target financial industry infringements on consumers’ right to sue.
While the CFPB’s potential new rules will probably only protect consumers involved with class action suits from being forced to go to arbitration, similar to the Department of Education’s reforms, the move would still represent a significant step forward for a sector of the economy that is one of the worst offenders of forced arbitration, as well as one that lends itself to class actions rather than individual suits. (As bank customers’ claims tend to be relatively small, grouping together into classes is a common way for such plaintiffs to seek legal redress).
Cordray’s efforts, which are tied to requirements laid out in the 2010 Dodd-Frank financial reform act, will ideally help to level the playing field for the tens of millions of bank customers Cordray says are covered by the arbitration clauses.
We can only hope that the CFPB’s actions inspire reform in other industries. Like our firm’s personal injury plaintiffs, bank users – along with university students, hospital patients and millions of other American customers – need the civil justice system to protect them against the interests of the Goliaths of the world. Forced arbitration circumvents that system, leaving the American people vulnerable to illegal and dangerous treatment and unable to truly seek recourse when they are wronged.
At Kimmel Carter, we believe deeply in the role of the civil justice system in protecting the rights of individual citizens, and we applaud those who are working to eliminate this unjust and troubling practice. Our award-winning team of personal injury attorneys fights every day to ensure that insurance companies and employers fulfill their duty to those hurt in car accidents or on the job, and to hold care facilities accountable to their residents. Lawyers at Kimmel Carter have also served in leadership roles in the Delaware Trial Lawyers Association and have been recognized for their contributions to Delaware laws that protect the rights of personal injury plaintiffs and workers’ compensation claimants.
If you need a personal injury lawyer in Delaware, please give us a call today for your free consultation, at 302-565-6100. You will never pay until we win your case.