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“They Should Stop And Take A Second Look”: Ending Forced Arbitration Is A No-Brainer For Conservatives

The Obama administration is preparing to issue consumer protection regulations that will force Republicans to choose between their Wall Street allies and the Seventh Amendment right to a jury trial in civil cases. Republicans will be tempted to denounce the new rules as yet another example of this president’s customary imperial overreach, but on this issue, they should stop and take a second look.

The problem is called forced arbitration, and if you’ve ever taken the time to read a consumer service contract or end-user license agreement before signing it (which makes you an admirable human being, and very rare), you’ll almost certainly have seen a clause that revokes your right to go to court in case of a breach of the agreement by the corporation.

Such clauses are found everywhere, from credit cards and checking accounts to cable TV and car rentals. When you sign, you agree to accept the decision of a private, for-hire arbitrator. Unfortunately, the arbitrator is usually hired by the same company that breached the agreement and is not legally required to follow statutory or common law precedents. Its decisions are almost impossible to appeal. Most consumers have no idea that’s what they’re agreeing to.

Enter the Consumer Financial Protection Bureau, which has been authorized by Congress to step in to study this problem and, based on its findings, restore Americans’ ability to hold financial institutions accountable. Under the Dodd-Frank Act of 2010, the bureau is authorized to issue regulations that limit or ban the use of forced arbitration in consumer financial services and products. Regulations to do just that are expected to be promulgated sometime this year.

The regulations may turn out to be poorly framed or excessive – we’re talking about the same administration that gave us Lois Lerner and executive amnesty, after all – but the problem Congress wanted the agency to address is real.

Recently, while traveling to Topeka on business, I needed to rent a car. I stopped at the Thrifty counter at the Kansas City airport. While filling out the usual paperwork, I asked the gentleman behind the counter, “What happens if I don’t check this box that says I waive my right to sue?” He blinked at me uncomprehendingly for a moment and then replied, “Um, it means you don’t get the car.” I checked the box, disgusted. My destination was 80 miles away, I was in a hurry, and I didn’t have time to haggle or shop around with Thrifty’s competitors, all of whom undoubtedly have the same policy.

Today, a big company like Thrifty can effectively insist that we waive our Seventh Amendment rights on a “take it or leave it” basis; and market forces are not sufficient to police the problem. We’re stuck. And it isn’t just car rentals. When you buy a hair dryer or click “I agree” to a software download, you’re probably forfeiting your right to go to court.

Statistics show that, more often than not, the arbitrator hired by the company you’re disputing with will rule in the company’s favor, likely because he’s eager to be hired again by that company in the future.

Even consumers who think they understand what they’re signing usually have no clear idea of how arbitration really works. They mistakenly equate it with mediation or some other court-like procedure. In reality, forced arbitration is conducted in secret and lacks the procedural safeguards that allow consumers to prove their case. Arbitrators typically keep their reasoning private, making it hard for the losing party to know why he lost, and results are rarely published, making it difficult for similarly situated parties to know they’re entitled to relief.

To be sure, arbitration can be a great option when it’s voluntarily agreed to by both parties after a dispute has arisen, but to be truly voluntary, all parties need to be free to say no. In the case of consumer financial services and products (the kinds of agreements the Consumer Financial Protection Bureau is authorized to regulate), most individual consumers have no bargaining power, as anyone who’s tried to negotiate with his credit card company can attest.

Voluntary arbitration agreements have always been lawful, but up until the 1920s pre-dispute arbitration clauses like the one I had to sign at Thrifty were rarely enforced by American courts. Americans have long cherished the common-law right to a jury trial in civil cases. Indeed, preserving that right was one of the top demands of the Antifederalist skeptics of the proposed Constitution, and the Seventh Amendment was ratified precisely to preserve that ancient right in the courts of the newly constituted federal government.

In 1925, Congress enacted the Federal Arbitration Act to make arbitration a viable alternative for resolving contractual disputes between corporations. That strikes me as constitutionally tolerable, so long as agreements are voluntary and the parties are of roughly equal bargaining power, and if recourse to the courts is still possible if the arbitration process itself is disputed. But recent interpretations of that act by the U.S. Supreme Court have expanded its reach to cover all kinds of contracts, including consumer and employment contracts, and have even overridden state-level laws permitting class actions. (One of the reasons most corporations favor arbitration is that it forces each claimant to pursue his claim individually.)

So in disputes between individual Americans and big companies, the Seventh Amendment has become Swiss cheese, and with more holes than cheese. Many genuinely aggrieved consumers are being denied access to the civil justice system.

How can we fix this? The Supreme Court should reverse its errors, and Congress should amend the Federal Arbitration Act to ensure agreements are truly voluntary. (A bill to do that, dubbed the Arbitration Fairness Act, has been introduced in recent Congresses, but has gone nowhere, thanks to fierce opposition by the U.S. Chamber of Commerce.) Realistically, in the near term, the Consumer Financial Protection Bureau’s forthcoming Dodd-Frank regulations are the best hope consumers have for relief. But that only applies to consumer financial services and products. So there’s no avoiding a legislative remedy.

This issue should be a no-brainer for conservatives. Ending the un-American practice of forced arbitration should be on the agenda, not just of traditional consumer advocates, but of everyone who loves liberty and the Bill of Rights. As a freedom issue, it’s right up there with things like repealing health care mandates, allowing cell-phone unlocking, ending corporate subsidies and eliminating cronyist tax breaks.


By: Dean Clancy, Thomas Jefferson Street Blog, U. S. News and World Report, April 17, 2015

April 20, 2015 Posted by | Conservatives, Consumer Financial Protection Bureau, Consumers | , , , , , , , | Leave a comment

“Re-Purposing The Grand Jury”: The St. Louis County Prosecutor Implicitly Conceded The Need For A Trial

Here is the irony of St. Louis County Prosecutor Robert McCulloch’s announcement Monday night that a grand jury had declined to indict officer Darren Wilson for the shooting of Michael Brown: The entire presentation implicitly conceded the need for a trial.

McCulloch was at pains to persuade the public that the grand jury had extensively weighed all the available evidence, and that it pointed to the conclusion that Wilson had not committed a crime. He talked about witnesses who changed their stories once they were presented with knowable facts that contradicted their original claims. He discussed the forensic evidence suggesting that Wilson’s initial shots against Brown occurred during a struggle in or near Wilson’s police cruiser, and that Wilson only began firing again after Brown, who’d initially fled, began moving toward him again. He talked about the lack of agreement over the position of Brown’s hands when Wilson fired the second, fatal barrage of shots.

So far as I know, McCulloch was under no obligation to discuss this evidence publicly. Nor was he under any obligation to release the evidence into the public domain following his remarks, as he repeatedly pledged to do. He presumably did these things to assure us that the decision not to prosecute Wilson was arrived at fairly and justly.

The problem with this is that we already have a forum for establishing the underlying facts of a caseand, no less important, for convincing the public that justice is being served in a particular case. It’s called a trial. It, rather than the post-grand jury press conference, is where lawyers typically introduce mounds of evidence to the public, litigate arguments extensively, and generally establish whether or not someone is guilty of a crime. By contrast, as others have pointed out, the point of a grand jury isn’t to determine beyond a shadow of a doubt what actually happened. It’s to determine whether there’s probable cause for an indictment, which requires a significantly lower standard of proof. That McCulloch appeared to turn the grand jury into an exercise in sorting out the former rather than the latter suggested he wanted no part of a trial.*

And, in fairness, it would have been extremely difficult to convict Wilson in a trial. But that’s a separate question from whether or not the verdict would be seen as legitimate after the fact. If McCullough was truly as concerned as he suggested tonight that the public accept the process that’s allowed Darren Wilson to walk away a free man, he had an obvious way to help ensure that this would happen. That he chose to avoid it demonstrates a rather appalling level of cynicism.

UPDATE: Some readers have argued that it would have been unethical for McCulloch to go to trial with a case he didn’t believe in. Two points in response: 1. Well, he went to the grand jury with a case he didn’t believe in, and it’s pretty unusual for that to happen, too. Clearly, the reason he did that was to make the process of letting Wilson off the hook look fair–again, not the typical purpose of grand juries, which are about establishing probable cause for an indictment. My point is that there’s a much better venue for establishing the fairness of the process (and for nailing down what actually happened)–a trial. Conversely, if this were simply about assessing probable cause, then the platonically correct move would have been to avoid a grand jury altogether, since McCulloch clearly didn’t think it exists. 2. Yes, it would have been hard to convict Wilson. But that doesn’t mean there wasn’t a case to be built. That McCulloch didn’t believe in the case says as much about him and his biases as it does the underlying facts. A different prosecutor could have easily come down differently.


By: Norm Scheiber, The New Republic, November 25, 2014

November 26, 2014 Posted by | Darren Wilson, Ferguson Missouri, Robert McCulloch | , , , , , , | Leave a comment


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