Forced Arbitration Clauses Should Be Outlawed

There Is An Epidemic Of Big Businesses Depriving Americans Of Their Constitutional Right To A Jury Trial, And Legislators Should Stop It

Every American citizen has the right to a jury trial.   it says so right in the seventh amendment to the United States Constitution, as well as additionally saying so in most state constitutions.  But almost every large corporation doing business in the United States has secretly buried, deep in the fine print of their contracts “gotcha” provisions which deprive American citizens of their constitutional right to a jury trial. Big businesses do this because they want to avoid being held accountable in front of an impartial jury of average citizens, and instead want to hide their misdeeds and keep secret consumers’ claims against them. Big businesses fear juries, because they know that under the American jury system 12 average people have the power to hold them accountable on a level playing field.

So, instead of a jury trial, they rig the system.  They write their contracts  to say that instead of going to court, any future disputes with customers must go to “binding arbitration,” where a private person (instead of a public court) rule on the outcome, usually without any publicity at all.

While depriving the citizen of his or her day in court is itself outrageous, it might not be quite as bad if it weren’t for the fact that these contracts then almost always go on to game the system even further by then also imposing completely unfair rules for the binding arbitration. Those unfair rules almost always include (i) picking a decision-maker who is on the payroll of the big company and (ii) prohibiting certain types and amounts of remedies that the arbitrator can impose.

Almost every American citizen is affected by this type of contract. You (yes, You!) almost certainly have given up your constitutional right to a jury trial, if you have done even one of these things in the last few years:

• bought a mobile phone;
• worked for a large company;
• charged anything to a credit card;
• bought a new car;
• bought any computer software;
• installed an an app on your phone; or
• rented a car.

I’m willing to bet that almost every person reading this had no idea that by some seemingly insignificant and innocent act they had actually given up one of their major constitutional rights. Did you really read all the fine print on the back of the carbon copy of the car rental contract that says you give up your rights to a trial? Did you really read the 15 pages of microscopic print when your credit card company mailed you an amended and updated contract?  Of course not. Nobody does.

Did you click “Agree” when installing software without actually reading the terms of the agreement? Of course you did. Nobody reads those things.  In general, people click on “Agree” because:

1. they know the terms are not negotiable, under any circumstances. It’s a “take it or leave it” deal; and
2. they think people are fundamentally fair and don’t expect that they will be stuck with ridiculous and unfair provisions they weren’t specifically told about.

One of the most basic concepts in the American legal system is that both sides are entitled to have an impartial person decide the case.  If the decision-maker has a vested financial interest in keeping one side of the dispute happy, they obviously can’t be fair.  In a typical situation, a large company will write its  contract to require that every dispute must to be submitted to a particular, specifically-named arbitrator or  arbitration organization.  (One example is the American Arbitration Association (“AAA”)).   When a dispute arises, the arbitrator gets   involved in the dispute and gets paid  for its services, charging, at a minimum, many thousands of dollars, and sometimes even hundreds of thousands of dollars.  (Sometimes  the arbitrator’s payment comes from the company, sometimes from the customer, and sometimes from the loser of the dispute – it really doesn’t matter to the arbitrator where the money comes from, as long as it keeps coming.)

The arbitrator knows perfectly well  that if the company doesn’t like the arbitrator’s decisions,  the company will simply rewrite its contract to name a different arbitrator, and the arbitrator will lose their business.   The arbitrator  has a vested interest in keeping the big company happy with its decisions.     This conflict of interest means that  by definition  any named arbitrator is not fair, objective, or impartial.  They all pretend otherwise, but the fact is that they all know that they have to keep the company happy in the long run or they’ll lose the business.  If the arbitrator rules in favor of the customer too many times, or if any particular verdict is too high,  the company will fire them and simply hire a different arbitrator who is willing to play ball.

The United States Congress, the Missouri legislature, and each other state’s legislatures should pass laws prohibiting companies from imposing binding arbitration provisions  before a dispute has arisen, and declaring those provisions avoid.    If a dispute  comes up and both sides at that point voluntarily choose to submit the case to binding arbitration, that should be allowed  and permitted.  But the underhanded practice of burying these  kinds of provisions in the fine print in “standard” contracts,  which no one reads,  are impossible to negotiate and contain   unknowing waivers of important constitutional rights, should be outlawed and prevented from being enforced.

These laws would benefit the average consumer  and society as a whole.    Fear of being held publicly accountable for their actions is a powerful motivator for big businesses to act in a safe and responsible way.  Everyone in the community  benefits from public trials,  which is why the founders of this great nation required trials to be public.