Jessica Silver-Greenberg and Robert Gebeloff, Beware the Fine Print: Arbitration Everywhere, Stacking the Deck of Justice. The New York Times, 31 October 2015. Part I of a three-part series on arbitration clauses in contracts. Jessica Silver-Greenberg and Michael Corkery, Beware the Fine Print: In Arbitration, a ‘Privatization of the Justice System.’ The New York Times, 1 November 2015. Part II of this three-part series on arbitration clauses in contracts. Michael Corkery and Jessica Silver-Greenberg, Beware the Fine Print: In Religious Arbitration, Scripture Is the Rule of Law. The New York Times, 2 November 2015. Part III of this three-part series on arbitration clauses in contracts. This three-part series examines “how clauses buried in tens of millions of contracts have deprived Americans of one of their most fundamental constitutional rights: their day in court.”
Winner of the 2015 George Polk Award for Legal Reporting.
Part I, Arbitration Everywhere, Stacking the Deck of Justice.
On Page 5 of a credit card contract used by American Express, beneath an explainer on interest rates and late fees, past the details about annual membership, is a clause that most customers probably miss. If cardholders have a problem with their account, American Express explains, the company “may elect to resolve any claim by individual arbitration.”
Those nine words are at the center of a far-reaching power play orchestrated by American corporations, an investigation by The New York Times has found.
By inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies like American Express devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices….
By banning class actions, companies have essentially disabled consumer challenges to practices like predatory lending, wage theft and discrimination, court records show….
More than a decade in the making, the move to block class actions was engineered by a Wall Street-led coalition of credit card companies and retailers, according to interviews with coalition members and court records. Strategizing from law offices on Park Avenue and in Washington, members of the group came up with a plan to insulate themselves from the costly lawsuits. Their work culminated in two Supreme Court rulings, in 2011 and 2013, that enshrined the use of class-action bans in contracts. The decisions drew little attention outside legal circles, even though they upended decades of jurisprudence put in place to protect consumers and employees….
Corporations said that class actions were not needed because arbitration enabled individuals to resolve their grievances easily. But court and arbitration records show the opposite has happened: Once blocked from going to court as a group, most people dropped their claims entirely.
The Times investigation was based on thousands of court records and interviews with hundreds of lawyers, corporate executives, judges, arbitrators and plaintiffs in 35 states.
Since no government agency tracks class actions, The Times examined federal cases filed between 2010 and 2014. Of 1,179 class actions that companies sought to push into arbitration, judges ruled in their favor in four out of every five cases.
In 2014 alone, judges upheld class-action bans in 134 out of 162 cases….
Thousands of cases brought by single plaintiffs over fraud, wrongful death and rape are now being decided behind closed doors. And the rules of arbitration largely favor companies, which can even steer cases to friendly arbitrators, interviews and records show.
The sharp shift away from the civil justice system has barely registered with Americans. F. Paul Bland Jr., the executive director of Public Justice, a national consumer advocacy group, attributed this to the tangle of bans placed inside clauses added to contracts that no one reads in the first place.
“Corporations are allowed to strip people of their constitutional right to go to court,” Mr. Bland said. “Imagine the reaction if you took away people’s Second Amendment right to own a gun.”…
The data on consumer arbitration obtained by The Times shows that Sprint, a company with more than 57 million subscribers, faced only six arbitrations between 2010 and 2014….
Civil rights experts worry that discriminatory labor practices will go unchecked as class actions disappear.
Part II, In Arbitration, a ‘Privatization of the Justice System’.
Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, The Times found.
The change has been swift and virtually unnoticed, even though it has meant that tens of millions of Americans have lost a fundamental right: their day in court.
“This amounts to the whole-scale privatization of the justice system,” said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. “Americans are actively being deprived of their rights.”
All it took was adding simple arbitration clauses to contracts that most employees and consumers do not even read. Yet at stake are claims of medical malpractice, sexual harassment, hate crimes, discrimination, theft, fraud, elder abuse and wrongful death, records and interviews show….
For companies, the allure of arbitration grew after a 2011 Supreme Court ruling cleared the way for them to use the clauses to quash class-action lawsuits. Prevented from joining together as a group in arbitration, most plaintiffs gave up entirely, records show.
Still, there are thousands of Americans who — either out of necessity or on principle — want their grievances heard and have taken their chances in arbitration.
Little is known about arbitration because the proceedings are confidential and the federal government does not require cases to be reported. The secretive nature of the process makes it difficult to ascertain how fairly the proceedings are conducted.
Some plaintiffs said in interviews that arbitration had helped to resolve their disputes quickly without the bureaucratic headaches of going to court. Some said the arbitrators had acted professionally and without bias.
But The Times, examining records from more than 25,000 arbitrations between 2010 and 2014 and interviewing hundreds of lawyers, arbitrators, plaintiffs and judges in 35 states, uncovered many troubling cases….
Unfettered by strict judicial rules against conflicts of interest, companies can steer cases to friendly arbitrators. In turn, interviews and records show, some arbitrators cultivate close ties with companies to get business….
With so much latitude, some organizations are requiring their employees and customers to take their disputes to Christian arbitration. There, the proceedings can incorporate prayer, and arbitrators from firms like the Colorado-based Peacemaker Ministries can consider biblical scripture in determining their rulings….
[I]n interviews with The Times, more than three dozen arbitrators described how they felt beholden to companies. Beneath every decision, the arbitrators said, was the threat of losing business….
From birth to death, the use of arbitration has crept into nearly every corner of Americans’ lives, encompassing moments like having a baby, going to school, getting a job, buying a car, building a house and placing a parent in a nursing home….
Many companies give people a window — typically 30 to 45 days — to opt out of arbitration. Few people actually do, either because they do not realize they have signed a clause, or do not understand its consequences, according to plaintiffs and lawyers….
Even when plaintiffs prevail in arbitration, patterns of wrongdoing at nursing homes are kept hidden from prospective residents and their families.
Part III, In Religious Arbitration, Scripture Is the Rule of Law.
For generations, religious tribunals have been used in the United States to settle family disputes and spiritual debates. But through arbitration, religion is being used to sort out secular problems like claims of financial fraud and wrongful death….
Scientology forbids its followers from associating with former members who have been declared “suppressive persons,” according to people who have left the church. But this year, a federal judge in Florida upheld a religious arbitration clause requiring Luis Garcia, a declared suppressive, to take his claim that the church had defrauded him of tens of thousands of dollars before a panel of Scientologists, instead of going to court….
An investigation by The New York Times found that companies have used the clauses to create an alternate system of justice. Americans are being forced out of court and into arbitration for everything from botched home renovations to medical malpractice.
By adding a religious component, companies are taking the privatization of justice a step further. Proponents of religious arbitration said the process allowed people of faith to work out problems using shared values, achieving not just a settlement but often reconciliation.
Yet some lawyers and plaintiffs said that for some groups, religious arbitration may have less to do with honoring a set of beliefs than with controlling legal outcomes. Some religious organizations stand by the process until they lose, at which point they turn to the secular courts to overturn faith-based judgments, according to interviews and court records….
Christians should not take their problems before “unbelievers,” [the Apostle] Paul wrote in his letter to the Corinthians. Disputes should be resolved inside the church.
Centuries later, Paul’s writings inspired a group of lawyers in Los Angeles to develop the practice of Christian conciliation. The group’s work ultimately gave rise to Peacemaker Ministries, a nonprofit that devised a legal process that draws on the Bible.
The peacemaker method is used by private schools, Christian lawyers and others. Clauses requiring Americans to use Christian arbitration instead of civil court now appear in thousands of agreements….