Sunday, November 04, 2007

Too Late For Landis...

Too Late For Landis:
Arbitration Landscape May Change In U.S.

Bill Hue

We missed this release from Wisconsin Senator Russ Feingold’s Office in July;
“Washington, D.C. – U.S. Senator Russ Feingold (D-WI) and U.S. Representative Hank Johnson (D-GA) today both introduced comprehensive legislation in the Senate and House, respectively, to ensure Americans are not forced into mandatory arbitration agreements to resolve employment, consumer, franchise or civil rights disputes. The bicameral Arbitration Fairness Act of 2007 amends the Federal Arbitration Act to make pre-dispute agreements to arbitrate employment, consumer, franchise, or civil rights disputes unenforceable.


“Arbitration can be a fair and efficient way to handle disputes, but only when it is entered into knowingly and voluntarily by both parties,” Feingold said. “People from all walks of life – employees, investors, homeowners, those enrolled in HMOs, credit card holders, and other consumers – often find themselves strong-armed into mandatory arbitration agreements. We need to make sure that all Americans can still have their day in court.”

"For consumers, mandatory arbitration is an albatross. And despite what companies may say, it' is not more affordable than going to court, should not require consumers to travel to an appointed location for arbitration, should not contain hidden costs, should not threaten complainants with a 'loser pays' proposition to discourage them, should not shorten the notification period, or block class action status, as some clauses do," said Congressman Hank Johnson.

"Consumers Union thanks Senator Feingold and Congressman Johnson for leading the charge to protect consumers from mandatory binding arbitration. In doing so, we will be restoring justice and fairness to the system and putting consumers on a more even playing field in disputes with far more powerful corporate interests," said Sally Greenberg, Senior Product Safety Counsel for Consumers Union.

"With mandatory pre-dispute arbitration privatizing our civil justice system - a system we fought a revolution for - fairness in the marketplace is undermined and consumers are denied any remedy for fraud and deception," said Public Citizen President Joan Claybrook.

Arbitration is billed as an inexpensive alternative to civil lawsuits. The opposite, however, is often the case. Filing fees and other expenses in arbitration can result in much higher costs for the parties than civil actions. Attorneys’ fees, whether hourly or based on a contingency, are similar regardless of forum.

The Feingold-Johnson bill is supported by a host of consumer advocate organizations including Consumers Union, Public Citizen, American Association for Justice, Center for Responsible Lending, Consumer Federation of America, Homeowners Against Deficient Dwellings, Home Owners for Better Building, National Association of Consumer Advocates, National Consumer Law Center (on behalf of its low income clients), National Consumer Coalition for Nursing Home Reform, the National Employment Lawyers Association and Public Justice.”

Feingold: "Consumers and employees have little bargaining power and are effectively forced to accept arbitration. This report (the result of an investigation into nearly 34,000 California cases conducted by the group's Congress Watch division, revealing that buried in the fine print of a billing insert, employee handbook, health insurance plan or dealership or franchise agreement are clauses that waive one's right to access the courts, diverting cases to a costly private legal system) sheds new light on problems, and it should come as no surprise that arbitration firms who get paid by companies rule in their favor. One CA arbitration company ruled in favor of credit card companies in 94% of cases, which shows what consumers are up against.”

Feingold said that because public courts can reverse decisions in only the most egregious cases, arbitrators feel free to ignore the law undermining the statutory protections that Congress has so carefully provided for American workers, investors and consumers. Congress can stop companies from using their unequal bargaining power to force consumers into pre-dispute arbitration clauses in contracts.

Feingold said his bill, which has Sen. Richard Durbin, a Democrat from Illinois as a co-sponsor and is sponsored in the House by Hank Johnson, a Democrat from Georgia, will allow an arbitration selection to made only after a dispute arises, not as a pre-condition to the original agreement, which a consumer cannot refuse if they want the credit card.

"The bill would make arbitration more fair and represents a chance to restore fairness into system," Feingold said.

Joan Claybrook, president of PC, and Laura MacCleery, PC's Congress Watch division director, provided narrative to the hard evidence they collected from California, the only state that mandates that data on mandatory binding arbitration be made available to the public showing that about 96 percent of such cases are won by companies who funnel millions of dollars to private arbitration firms who, not surprisingly, rule in their favor.

According to PC's Website, the report focuses particularly on predatory practices in California, the only state that requires arbitrators to publicly disclose information about their practices. The findings, nonetheless, provide a snapshot of how arbitration traps consumers throughout the country in unfair, secret proceedings where for-profit arbitrators make the rules.

MacCleery said Feingolds bill would not just apply to credit card companies but to all binding mandatory arbitration contracts. She closed her comments by saying that she considers the law as having gone astray, based on a ruling by the U.S. Supreme Court on the Federal Arbitration Act which said a consumer can waive the right to court when they sign a contract that provides for binding mandatory arbitration. "We think this is a miscarriage of justice and will be corrected by the bill," she said

USA Cycling and USADA will definitely have to look at the mandatory arbitration clause each cyclist agrees to in taking out a license to ride professionally. That unilateral arbitration requirement is same kind of clause the proposed Act would make unenforceable.

For those of you comfortable in the notion that the right to jury trial and access to justice was so simply “abandoned” by Floyd Landis in the pursuit of his chosen employment, perhaps the knowledge that lawmakers might soon find such a notion abhorrent in the United States of America might give you some pause as to whether that requirement was actually in any way, fair.


Here is a link to an online letter you can send to your Senator or Congressman if you support the Act:

Online letter here.


wschart said...

Could USA Cycling and USADA find themselves between a rock and a hard place? If they change their requirements for forced arbitration due to this law, could UCI and/or WADA take some sort of action against them, or against any rider unfortunate enough to be placed in a situation where he might wish to take his case to court?

Left Coast Drury said...

This kind of reform is long overdue, not just from a cycling perspective.

Big companies and professionals who force arbitration on people lacking bargaining power (i.e. if you want to ride a bike and get paid--take it or leave it) know the advantage they get.

I once sued a big real estate broker for fraud. My client had initialed the binding arbitration clause. We suggested non-binding mediation as a first step--but were told to pound sand. We filed our case in CA state court, arguing for the inapplicability of the arbitration clause. The broker screamed bloody murder and demanded the case be dismissed. We said no and got the judge to agree with us. Within two months we had mediated the case and settled for full value of the fraud plus attorneys fees. Once the broker knew he would be in state court with us--he rolled over.

GMR said...

Bill Hue,

My letter has been sent in support of the arbitration legislation. The People over Profits site has other interesting articles that are in tune with my values.

I recently had to sign a Physician-Patient Arbitration Agreement in order to have a yearly exam by the physician's assistant. I signed it, in order to receive health care with my "eyes wide open".

Thank for the info.


bill hue said...

Thanks guys! I have always been puzzled by folks in other forums who articulate that WADA "fights the power". The power is held by the big guy and it is abused when the power is used to hold down the little guy. How WADA is EVER seen as the little guy is beyond me. This law seeks to rectify unfair balances of power. Anyone who has ever been screwed by an unfair system, Floyd Landis included, deserves at least a level playing field.