Forced Arbitration – The Underhanded, Secretive Way Corporations Try to Avoid the Civil Justice System

If you read the fine print of your credit card agreement or pretty much any agreement with a large corporation, you may be surprised to learn that you signed away a critical legal right – the right to file a claim against the corporation in a court of law. The American Association of Justice recently published a shocking report on how corporations are using underhanded tactics in an effort to avoid going to court being subjected to our constitutionally-based trial-by-jury system.

How are corporations making you sign away your rights? Well, many corporate contracts contain forced arbitration provisions.

Forced arbitration provisions declare that a consumer, employee, or small business cannot resolve a complaint against the corporation in court. Instead, you must submit to a private forced arbitration forum. You may be thinking, “That’s not so bad. It just means I get to avoid going to court.”

Not so fast.

Here’s what forced arbitration really means – the corporation is in charge. The corporation is empowered to choose the location of the arbitration, which routinely presents a major hurdle to a middle class consumer. For example, PayPal requires consumers to arbitrate in California. Doesn’t matter if you’re a Virginia resident, North Carolina resident, etc. You are burdened with traveling to the forum that the corporation chooses.

It gets worse.

In many agreements, the corporation is empowered to select the arbitrator. Yes, you read that correctly. The corporation gets to pick the person who will ultimately decide the outcome. It would be like a defendant getting to pick the judge.

There are some corporations that allow a consumer to select from a panel of arbitrators. However, the consumer only gets to select from a list that the corporation provides.

It continues to get worse. 

Many forced arbitration clauses provide privileges to the corporation that are not equally provided to the consumer. For example, in some forced arbitration agreements, corporations have the right to dismiss the case early on, to change its position during the proceedings, to record the arbitration for their own uses, and to take the matter to court if it chooses to do so. All the while, the consumer has none of these rights and are relegated to hoping for a favorable outcome from the arbitrator. This would be like the defendant not only getting to choose the judge, but also getting to select all of the jurors, where the trial would be held, and which rules would apply.

Let’s be clear – forced arbitration clauses are patently unfair to middle class consumers, employees and small businesses. Unfortunately, they continue to become more common in various contracts. We need to stand up and fight for more transparency in these agreements. Consumers should know exactly what rights they are signing away and it should be required that a consumer has the exact same rights that the corporation has during an arbitration proceeding.

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