Paul Bland on mandatory binding arbitration

Consumer rights attorney Paul Bland testified before the House Subcommittee on Commercial and Administrative Law yesterday, and his testimony was so spot-on, it is worth highlighting here. You can find a full transcript at the House Judiciary Committee’s website. Bland’s introduction, which neatly summarizes the big problems with mandatory binding arbitration, follows the jump.

This testimony will make the following points:

• A large and rapidly growing number of corporations are requiring millions of consumers and employees to give up their rights to a trial by jury and to bring cases in the U.S. public civil justice system, and instead submit all of their legal claims to binding mandatory arbitration.
• Most consumers have little or no meaningful choice about submitting to arbitration. Few people notice or realize the importance of the fine print that strips them of rights; and because all the corporations in entire industries are adopting these clauses, people have no choice. They must give up their rights as a condition of buying a car, opening a bank account, or getting credit card, etc.
• Private arbitration companies are under great pressure to devise systems that favor the corporate repeat players who draft the arbitration clauses (and thus decide which arbitration companies will receive their lucrative business). For example, arbitrators who rule against corporations and in favor of individuals are often blackballed from serving as arbitrators in future cases. Also, some arbitration companies have undertaken advertising campaigns aimed at prospective corporate clients which make a number of inappropriate promises of favorable treatment.
• There is no meaningful judicial review of arbitrators’ decisions. Under current law, arbitrators enjoy near complete freedom to ignore their own rules, the facts and even the law in any given case, without fear that their rulings will be seriously examined by any later court – and without fear of personal or professional consequences.
• Many corporations tack on lots of unfair provisions to their arbitration clauses that are not inherent to the idea of arbitration, but that further rig the systems against individuals. For example, some corporations impose “loser pays rules” to discourage individuals from bringing claims; some corporations insert provisions into arbitration clauses that strip individuals of substantive statutory rights; some corporations require people to arbitrate their claims across the country (knowing that they’ll be forced to drop the cases); and some corporations use arbitration clauses to ban class actions even where it is clear for class actions are the only way for individuals to have any remedy. While some courts have been protective of individuals, striking down some of these unfair contract terms, too many other courts have either left the issue of whether the arbitration clauses violate the law to be decided by arbitrators rather than courts or uphold even egregiously unfair clauses. This is particularly disturbing because arbitrators have a significant financial incentive to rule that the clauses are legal, so they can continue to bill the file on the case.
• A number of corporations are using arbitration for debt collection, but abusing the process so that the arbitration process just becomes a “mill” that nearly always rules for the lender regardless of the underlying facts.

[via CL&P Blog]