After my article on arbitration in the Oct. 29 issue of the San Francisco Examiner, I was beseeched with a flurry of questions concerning pre-dispute binding arbitration. Unbeknownst to me, the topic was about to receive the best and most widespread coverage it has ever received, thus revealing both the timeliness and importance of the topic.
On Oct. 31, The New York Times began a three-part series on the peril to our system of justice that arbitration clauses present: I guess great minds think alike. Authors Jessica Silver-Greenberg and Michael Corkery undertook the most thorough and insightful analysis I have ever seen in revealing the national threat that compulsory pre-dispute arbitration presents. I have but 600 words a week to discuss a topic such as this. They were provided more than eight pages, over the course of three days, to publish: “Arbitration Everywhere Stacking the Deck of Justice” (Oct. 31); “In arbitration a ‘privatization of the Justice System’” (Nov. 1); and “In Religious Arbitration Scripture is the Law” (Nov. 2). If you care about your rights, read these articles.
To recap my previous article; mandatory pre-dispute arbitration is a system by which individuals and businesses, upon entering into a contract or employment relationship, agree at the outset, before any dispute has arisen, to submit any claims they may have arising out of the relationship to a confidential, private system of dispute resolution where there is no judge, jury, record or right of appeal.
Indeed, in many arbitration agreements there are severe limitations on what discovery (requests for depositions, document production, etc.) can be conducted and the rules of civil procedure and evidence, which guarantee a fair trial, often don’t apply. In most cases, there is no right of appeal. Many of these agreements are contracts of adhesion, i.e., take-it-or-leave-it types of agreements in which there is inherently unequal bargaining power, such as those found in job applications, hospitals, emergency rooms and nursing homes.
Statistically, compulsory pre-dispute arbitration favors the powerful companies and employers who seek to invoke these clauses, as they can shield their wrongdoings from the scrutiny that our public judicial process guarantees. The plague of this justice killer is spreading every day, emboldened by the United States Supreme Court’s interpretation of the Federal Arbitration Act (FAA).
Each of you reading this, if you own a cellphone, have rented a car, bought a house, have any credit cards or work for a large employer, have probably already surrendered your 7th Amendment right to a jury trial.
The FAA, Title 9 United States Code Sections 1-16, was passed in 1925, after what was termed a widespread judicial hostility to privatization of the justice system through binding arbitration. Judges were reluctant to tender their role as guardians of justice to forced private, confidential proceedings, which were entered into prior to any dispute occurring.
Section 2 of the FAA sets forth its overarching principal: “A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
In 2011, The U.S. Supreme Court in ATT Mobility v Concepcion, 563 US 333, (a case which was originally filed in California) ruled companies could preclude pursuit of class actions in State or Federal Court when a consumer signed an arbitration agreement. This was but a further empowerment of what I call the “Justice Pirates,” as now they could preclude hundreds of thousands of individuals, each defrauded of a small amount, from banding together through a class action to seek justice.
The court in Concepcion held that, “In light of these provisions, we have held that parties may agree to limit the issues subject to arbitration, to arbitrate according to specific rules, and to limit with whom a party will arbitrate its disputes.”
Unless it is you who has written the arbitration agreement, you can bet that these are not terms favorable to you.
I will continue to write two more parts of my own “miniseries” to discuss the effect of arbitration on Californians and how one can seek
to exempt or protect themselves against this right-stealing scourge.
Christopher B. Dolan is owner of the Dolan Law Firm. Email questions to email@example.comChris DolanJessica Silver-GreenberglawlegalMichael CorkeryNew York TimesSan FranciscoSan Francisco Examiner