Corporations Are Stealing Your Constitutional Rights: Forced Arbitration Clauses
When I read recently that General Mills had tried to impose binding arbitration on people who used Facebook to like its cereals, I thought the company was stupid, and didn’t much care because I don’t buy their products anyway. But when I learned that an ever-increasing number of corporations are sneaking forced arbitration clauses into the fine print of their purchase agreements, I became more concerned. How can I be forced to give up the right to sue if a product hurts me or my family, just because I bought the product?
Today, I’m totally alarmed and outraged, after watching the Alliance of Justice’s film “Lost in the Fine Print.” The film tells the story of consumers who were harmed by for-profit schools, credit card companies, and employers, but were then prevented from suing in court by the arbitration clauses hidden in the fine print of their contracts. Denied any access to the courts, their only choice was arbitration before an arbitrator hand-picked by the company. The consumers all lost, but one of them lost more than just her case: she was forced to pay the company’s $362,000 in legal fees and costs! It’s no surprise the outcomes are so lopsidedly in favor of the corporations, given that they choose and pay the arbitrators, who depend on the corporations for business.
AFJ’s Nan Aron, who hosted a showing of the film at the Women’s National Democratic Club, told us that 93% of consumers who try to use company-mandated arbitration lose. Worse, when a small business in California challenged the imposition of a forced arbitration clause by American Express, the US Supreme Court upheld the clause last year, despite a stinging dissent by Justice Elena Kagan. Now, as far as the companies are concerned, there’s nothing to stop them: Comcast, Wells Fargo, AT&T, Amazon, and Verizon are just a few of the companies that impose binding arbitration on their customers. The Court vindicated the arbitration clause even though by requiring individual arbitration actions it made it so expensive for Amex’s small business customers to challenge unfair fees that they effectively had no remedy. According to Justice Scalia, under the Federal Arbitration Act, the fact that there is no remedy is irrelevant. Now, as far as the companies are concerned, there’s nothing to stop them: Comcast, Wells Fargo, AT&T, Amazon, and Verizon are just a few of the corporations that prohibit class actions and impose binding arbitration on their customers, without their knowledge.
Forced arbitration like this ought to be illegal, and any contract between a corporation and a consumer that seeks to impose such a one-sided elimination of civil rights ought to be unenforceable. As Nan Aron pointed out, it isn’t just consumers who are affected. Corporations are slipping binding arbitration clauses into the fine print of employment contracts, too. The film tells the story of an Air Force reservist fired by NBC Universal because she was absent from work while serving her country in an elite military unit. Federal law protects members of the military reserve from just such discrimination by their employers, yet the law was trumped by NBC Universal’s hidden arbitration clause. Without even holding a hearing, the company’s hand-picked arbitrator ruled against the reservist, leaving her with no recourse.
It’s inequitable that shareholders can band together as a legally constructed corporate “person” (with constitutional rights) and be shielded from individual liability for damage done by the corporation, while flesh-and-blood humans who are individual consumers are prevented from joining together to file a class action lawsuit after the corporation has injured them. These forced arbitration clauses deny us our rights as citizens to have access to the courts and a jury trial, and deny us important protections granted by Congress and state legislatures.
Learn more and join the Alliance for Justice’s campaign to reform the Federal Arbitration Act. You can see the film at www.LostInTheFinePrint.org.
Enjoyed this post?
Sign up for EPI's newsletter so you never miss our research and insights on ways to make the economy work better for everyone.