Mandatory arbitration clauses are one-sided, pre-emptive and non-consensual; they legally bind people to arbitration at the time of purchase or signing, in order to receive a good or service, but are rarely known to those whose rights are taken away by them. Since these forced arbitration clauses are presented on a take-it-or-leave-it basis, people have no choice but to waive their rights.
FORCED ARBITRATION FAVORS CORPORATIONS
Arbitration providers are biased decision makers, organized to serve corporations. Since only businesses are repeat users of an arbitrator, there is a disincentive for an arbitrator to rule in favor of a consumer if he expects further retentions. A September 2007 Public Citizen report on credit card arbitration analyzed more than 19,000 credit card arbitration cases in California, and found that the arbitrators ruled in favor of the corporation almost 95% of the time.
Consumers are also forced to pay steep filing fees just to initiate a case—seldom less than $750 – and pay their share of the arbitrator’s hourly charges, which are routinely $400 or more per hour. In addition, arbitration clauses often allow the corporation to choose the location, regardless of how inconvenient or costly travel will be for the consumer. Although corporations have the cash to pay these costs, many consumer do not and are forced to drop their cases.
In November of 2006, Erika Ricer thought she had purchased a safe car that would last her family for a number of years; however, the night Erika drove the car home, the wind shield wipers quit working while she was driving her six-year old daughter in a rain storm and the next morning on her way back to the dealership, the “Check Engine” light went on. Despite being assured by the dealer that the car had undergone quality assurance inspections and had never been in an accident, Erika was actually sold a rebuilt wreck that had been in a crash where the car was seriously damaged and the air bags deployed. Erika’s contract with the dealership contained a mandatory arbitration clause and a box that if checked, the buyer acknowledges the agreement contains an arbitration clause. Despite never checking the box, Erika is being forced into arbitration by the car dealership’s lawyers, a costly process she can not afford.
Before the Subcommittee on Commercial and Administrative Law, Erika testified, “I can’t even afford the cost of going through with the arbitration process the dealer is demanding. In order to just start the process of arbitration, I would have to pay half or more of all the costs of arbitration. I have learned that arbitrators’ fees usually range from at least $700 - $1800 per day, with an average of $1300. In addition to the arbitration fees, I would also have to pay half of the administrative fees. I know that the cards are totally stacked against me in the arbitration process that the dealers want me to go through.”
FORCED ARBITRATION WEAKENS CIVIL JUSTICE SAFEGUARDS AND THREATENS PUBLIC HEALTH AND SAFETY
Forced arbitration clauses often severely restrict the individual’s ability to argue their side of the case and obtain necessary evidence – which they would be allowed to obtain in court. Courts can also provide a range of remedies not available in arbitration and while proceedings and records of the courts are open to the public, most arbitration clauses require that proceedings be kept confidential, even if the case raises vital health and safety issues.
Charles McAlister, a 65-year-old veteran was taken to a nursing home owned by Beverley Enterprises. Charles had no legs, he was illiterate, he could not hear or see well and he suffered from the early stages of dementia. While being admitted, he was given a binding mandatory arbitration contract. Instead of reading the clause to Charles, one of the employees paraphrased it in a misleading way. Since Charles is illiterate, the only way he could sign the contract was to make his mark. The mark found on the contract was later determined not to be Charles’. Charles developed serious, debilitating bed sores on his right and left hips. One of the sores had a foul odor and became severely infected. The negligent care of the nursing home led to his death on May 8, 2003. His family attempted to sue the nursing home for the negligent care he received, but they were forced into arbitration and initially lost. They later went back to arbitration and won, but the arbitrator did not have the authority to make the nursing home change their policies, so these unsafe, unfair and deceptive practices are likely to continue.