Consumer Law & Policy Blog

What Happened to the Arbitration Clauses in the Subprime Litigation?

Last week, Alan blogged here about the Navigant Consulting Report on suits by consumers, among others, against subprime lenders.  The Times covered the report today in an article here.  I'm wondering how borrowers have been able to file these suits.  Did the loan agreements not include arbitration clauses?  If they did, how have the borrowers managed to get around them?  Or is it just that the lenders haven't yet moved to dismiss on the ground that the matter should be heard by an arbitrator?  Anyone know?

Gang Rape Case Against Haliburton/KBR Sent to Arbitration

According to this ABC News story, a Texas trial judge has sent to arbitration the case of a woman who alleges that she was gang raped by Haliburton/KBR employees while working in Iraq. The judge appears to have reluctantly sent the case to arbitration because he felt bound to honor a mandatory pre-dispute arbitration clause.  As discussed earlier here, this case was the subject of testimony at a December 20, 2007 House Judiciary Committee hearing considering legislation to curb mandatory arbitration. We also discussed the case here.

Lexis Willing to Abandon Unfair Arbitration Clause

by Paul Bland

It’s no secret that Westlaw an Lexis are in a fierce competitive battle for customers and marketshare. In light of this situation, I’ve always been curious that Lexis’s standard contract with law firms contains a long set of provisions that require the arbitration of any disputes between Lexis and its customers.

It’s not enough that Lexis’s contract provides (in a weird irony) that its customers must abandon a number of basic legal rights in order to get access to its legal research service, but it’s also a particularly unfair arbitration clause:

Lexis’s arbitration clause includes a gag order on its customers requiring tem to keep all arbitrations confidential. A number of courts have struck down similar secrecy provisions in consumer arbitration clauses as unconscionable.

Lexis’s arbitration clause requires any customer with a claim against it to arbitrate the claim in the headquarters city of Lexis, which is apparently Dayton, Ohio. What a deal if the customer lives in Seattle or Maine! A number of courts have struck down similar provisions requiring consumers to travel long distances to arbitrate claims.

Would you like fries with your mandatory binding arbitration clause?

Stephanie Mencimer at Mother Jones reports on an amazing new low in mandatory binding arbitration:

Mandatory arbitration agreements forcing people to give up their rights to sue are now standard fare in everything from cell phone contracts to Hooters’ employment agreements. But the owner of an East Texas Whataburger has apparently taken arbitration mania to a new level. Every public entrance to the burger franchise displays a sign informing people that simply setting foot on the premises means that they are giving up their right to sue the company for any reason, even if, for instance, they get a little e coli along with their fries. Instead, customers will be forced to arbitrate their claims before the American Mediation Association, an organization that seems to consist of three lawyers in Dallas hired by the Whataburger (part of a 58-year-old fast food chain deemed a “Texas treasure” by the state legislature).

Here's what the signs say:

ARBITRATION NOTICE 

By entering these premises you hereby agree to refer any and all disputes or claims of any kind whatsoever, which arise from the products, services or permises, by way of binding arbitration, not litigation.  No suit or action may be filed in any state or federal court.  Any arbitration shall be governed by the FEDERAL ARBITRATION ACT, and administered by the American Mediation Association.

Why stop at burger joints?  Why not post arbitration notices like these at the entrance to every business, from used car dealerships, to hospitals, to banks?  And why stop at buildings?  How about food, cars, and people?

Arbitrator Certifies Class Action

by Alan M. White

If the purpose of mandatory pre-dispute arbitration clauses in consumer contracts is to prevent class actions, it does not seem to be working. An AAA arbitrator has apparently certified a class of 70 million Verizon wireless subscribers, with damage claims approaching $1 billion.

Mother Jones on Cheney-Style Justice

by Deepak Gupta

We've posted recently about the horrifying story of Jamie Leigh Jones, a 20-year old Haliburton/KBR employee who was gang-raped by her co-workers in Iraq and is now being denied her constitutional right to seek justice in court because of a mandatory binding arbitration clause in her employment contract.  Ms. Jones recently told her story to the House Judiciary Committee.  At Mother Jones, reporter Stephanie Mencimer has dug a little deeper into the origins of Haliburton's mandatory arbitration policy.  Can everything bad be traced back to Dick Cheney?  Not quite, but sometimes it seems that way.

Halliburton Victim Twice Over

by Angela Canterbury (advocacy director for Public Citizen's Congress Watch)
posted yesterday on The Hill's Congress Blog

Today, Jamie Leigh Jones will appear before the House Judiciary Committee and tell how she was gang raped by her co-workers in Iraq while working for a Halliburton subsidiary called KBR. Afterwards, her assaulters confined her to a shipping container and warned that if she left Iraq for medical treatment, she’d be fired. That’s where she was found by agents sent by the U.S. embassy to rescue her — after her father called their congressman, Representative Ted Poe (R-Texas).

Now, Jamie Leigh Jones has been victimized twice over. Because KBR/Halliburton requires employees to sign contracts containing a binding mandatory arbitration (BMA) in the fine print, Jones is being denied her constitutional right to bring her perpetrators before a jury and be heard.

But Jamie Leigh Jones will be heard by Congress today — and then, lawmakers should waste no time in re-opening the doors of justice for Jones and the rest of us. It’s time to ban binding mandatory arbitration in employment and consumer contracts once and for all. There may be no other device being used today by Halliburton and other corporate giants that does more to systematically deny rights to workers and consumers.

Congress has begun to focus. Last Wednesday, the Senate Judiciary Subcommittee on the Constitution held a hearing on the Arbitration Fairness Act — a bill that would ban most forms of binding mandatory arbitration introduced in the House by Rep. Hank Johnson (D-Ga.) and in the Senate by Sen. Russ Feingold (D-Wis.).

Senator Brownback called it a “where the rubber meets the road hearing.” He could not have been more right. While witnesses for the bill showed real-world harms from the system of biased, privatized justice that many companies force on their customers and employees, opponents offered scarecrow arguments crafted with cherry-picked data from out-dated studies. Still, it was impossible to ignore at least one hard fact: binding mandatory arbitration ruins lives.

BMA Proponents: Consumers Don't Know What's Good For Them; the Businesses That Write the Contracts Do

by Richard Alderman

  Last Wednesday, I testified before the Senate Judiciary Committee regarding the Arbitration Fairness Act of 2007. In simple terms, the bill prohibits pre-dispute arbitration in employment and consumer contracts.  Paul Bland also testified and did a great job. Here is his testimony.

In my testimony,  I discussed the "big-picture" effect of eliminating the courts from consumer disputes. My argument was similar to the one in my recent article, The Future of Consumer Law in the United States - Hello Arbitration, Bye-Bye Courts, So-Long Consumer Protection.  I thought it went well.  Even Senator Brownback, who stated his opposition to the bill, noted that I raised an interesting point that he would have to think about.

What surprised me, however, was the approach of those opposing the bill.  All of those testifying in opposition, mostly employees of arbitration associations and big law firms that defend arbitration of disputes, echoed the same sentiment: "We can't eliminate pre-dispute arbitration because forcing consumers to arbitrate is in their best interest." I heard statistic after statistic about how much more money consumers receive and how much quicker they receive it, in arbitration. Listening to this testimony, you would have thought I was hired by big business to testify, and the others were doing the Lord's work helping consumers.  I began to question whether I should have even been testifying in support of the bill. Was I anti-consumer?

Senate Judiciary Committee Hearing on the Arbitration Fairness Act

Right now, the Senate Judiciary Committee is holding an important hearing on the Arbitration Fairness Act -- legislation that would ban mandatory, binding arbitration clauses in consumer and employment agreements. (Click here to watch a live webcast of the hearing).  The witnesses include CL&P bloggers and arbitration experts Paul Bland and Richard M. Alderman and as well as Mark A. de Bernardo (a management-side employment lawyer at union-buster Jackson Lewis); Richard Naimark of the American Arbitration Association; pro-mandatory-binding-arbitration professor Peter Rutledge of Catholic University and Tanya Solov of the Illinois Secretary of State's Securities Department.  Our previous coverage of the Arbitration Fairness Act, and the battle over mandatory binding arbitration more generally, is available here.

Haliburton Maintains That Gang-Rape Case Should Go To Arbitration

U.S. PIRG's Consumer Blog has this report on Haliburton's efforts to force into arbitration a suit brought by a former employee who claims that she was gang-raped by her co-workers in Baghdad.  Read it and decide for yourself whether this is the kind of case that should be handled in private, where the allegations of corporate and governmental misconduct will never see the light of day.