Trial News

With more than 800 million arbitration provisions affecting Americans—from workplaces to nursing homes—an AAJ research report released Sept. 10 delves into how forced arbitration strips people of their fundamental right to trial by jury and allows wrongdoers to skirt accountability. The report analyzes closed claims databases from the two largest arbitration providers and finds that forced arbitration suppresses claims against corporations. For example, while there are more than 2 million claims each year in small claims court, there were only 30,000 consumer arbitrations over a five-year period of data that the report examined. Although 60 million U.S. workers are subject to a forced arbitration clause for workplace disputes—employment is the largest category of forced arbitration provisions—only 0.02% of workers pursued a claim in that five-year period.

The report also examines why consumers don’t pursue arbitration. For example, a Consumer Financial Protection Bureau (CFPB) study revealed that many consumers do not understand the terms of forced arbitration provisions—61% of those surveyed believed they still had a right to go to court. The same CFPB study found that in six consumer financial markets, consumers prevailed in arbitration only 20% of the time. Sometimes, even when a party is listed as “prevailing” by AAA and JAMS—the two largest providers of arbitration services in the United States—it was not the party that received a monetary award in the arbitration. In other cases, the arbitration was withdrawn or dismissed, but a consumer still was recorded as “prevailing.” And most consumer arbitrations are “settled,” but the secretive nature of the process prevents a full understanding of how those negotiations are conducted and what the outcomes for consumers truly are.

The incomplete and inaccurate data from arbitration providers is problematic, with the AAA deleting data from its records every quarter, distorting information on how and when disputes are resolved. Arbitration proponents claim that one of its benefits is faster resolution of claims, but the AAA database deletes cases from its closed claims database by filed date rather than closed date, thereby misrepresenting estimates of how long it took to resolve disputes. The longer a claim takes to resolve, the faster it is purged from the database. And claims that take more than five years will never even show up. For example, archived records show that more than 2,000 claims that were closed in 2014 are missing from the 2014 database because they were filed before that year and have been deleted—meaning that the closed claims that remain in the 2014 year records likely are only those that were filed and closed within that year.

This information and more contained in the report undermines the argument that forced arbitration is a faster, better dispute resolution system. In contrast, as the report notes, it lacks transparency, favors repeat corporate players, and stacks the deck against individual consumers.

“This groundbreaking research proves the American public has been sold a pack of lies about forced arbitration—it isn’t just as fair as a jury trial, and isn’t faster or cheaper. In fact, the brand-new data—provided by the arbitration providers themselves—revealed today show you are more likely to be hit by lightning than win in forced arbitration,” said AAJ President Bruce Stern. “The truth is that if you download an app, purchase a cell phone, start a new job, use a ride-share, or admit a parent into a nursing home, you are forced to sign away your right to hold law breaking corporations accountable.” Legislation, known as the Forced Arbitration Injustice Repeal (FAIR) Act, to end mandatory pre-dispute arbitration in employment, consumer, antitrust, or civil rights cases, recently was voted out of the House Judiciary Committee and will go to the House floor for a vote. Stern added, “Forced arbitration silences sexual harassment survivors, takes advantage of workers and consumers, and undermines public health and safety. Fortunately, there is a solution to this pernicious problem. Congress has the opportunity to end forced arbitration and vote for the FAIR Act, so that all Americans can exercise their fundamental rights.”

Read the full report here.

[Note: On Sept. 20, the FAIR Act (H.R. 1423) passed the U.S. House of Representatives by a vote of 225-186.]