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Forced Arbitration Clauses

Forced Arbitration Clauses

It is very likely that you have unknowingly agreed to a written or oral contract that contains a forced arbitration clause. Forced arbitration clauses are commonly hidden in credit card, cell phone, cable service, car rental or shopping online agreements. Today even nursing homes use forced arbitration clauses. Most Americans have “consented” to a wide range of forced arbitration clauses without ever knowing it.

What is forced arbitration?

Forced arbitration clauses declare that you cannot take any complaint that you might have against the business or corporation into a court. Instead, all complaints must be submitted to a private forced arbitration forum. From that point on, the corporation is in charge. The corporation usually chooses the location and picks the arbitrator.

What is wrong with forced arbitration?

Forced arbitration is a corporate backed privatized system which by design eliminates all of the checks and balances of the civil justice system, including your right to trial by jury. Here are some of the major criticisms of forced arbitration:

  • Our court system is public and exposes corporate fraud when it occurs. Arbitration is a private and confidential process. Arbitration allows big business to hide fraud and unethical conduct.
  • In our civil justice system, you have a right to demand information from the corporation and you have a right to obtain written records. Your rights to obtain this information may be waived by the forced arbitration clause.
  • Judges and courts must follow the law, including statutes and case law. If you are unhappy with the decision of a judge, you usually have a right to appeal that decision to a higher court. Arbitrators may not be bound by the law and their decisions are not subject to any meaningful judicial review.
  • Forced arbitration clauses eliminate the possibility of class action lawsuits for consumers. If, for example, your cell phone provider overcharges you $3 a month, and refuses to credit your account when challenged, it is unlikely that you, as a single consumer, would challenge the company over the bill. But if the cell phone provider was overcharging millions of customers, and profiting by the illegal and unethical conduct, the company would reap a windfall because no single consumer could afford to challenge the company over such a small amount. It was for this purpose that class actions were created. Class actions are an effective remedy for wide scale scams that rip off individual consumers in small amounts. Prohibiting class actions allows a business to engage in fraudulent business practices without recourse.
  • The right to trial by jury is one of the most important rights guaranteed by our Constitution. Thomas Jefferson said “I consider trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principals of its constitution.” More recently, Chief Justice William Rehnquist said: “The founders of our nation consider the right of trial by jury in civil cases an important bulwark against tyranny and corruption, a safeguard too precious to be left to the whim of the sovereign.” The purpose of forced arbitration is to eliminate all of the checks and balances of the civil justice system, including your right to a trial by a jury of your peers.

To learn more, check out this New York Times article on forced arbitration entitled “Arbitration Everywhere, Stacking the Deck of Justice:

What can you do about forced arbitration clauses?

First, you should be aware that forced arbitration clauses exist and the negative impact that forced arbitration clauses may have upon you as a consumer. Second, you should make sure that you read the fine print in all of your consumer contracts to confirm whether a forced arbitration clause is included. Third, if the contract has a forced arbitration provision in it, you should try to negotiate and eliminate the forced arbitration clause. Unfortunately, most of the corporations using forced arbitration clauses are not willing to negotiate. Ultimately, the only effective remedy is a legislative one which would limit or prohibit forced arbitration. Please support legislation at the state and federal level that would ban forced arbitration.


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