Avoiding Arbitration Agreements

If you don't know much about arbitration agreements, now is the time to learn. You've probably agreed to arbitration hundreds of times in your life. Arbitration is a method of alternative dispute resolution where the parties submit their dispute to an arbitrator (or a group of arbitrators), who then considers the facts and arguments and decides the dispute. Sounds a lot better than hiring a lawyer and filing a lawsuit, right?

Wrong.When you agree to arbitrate, you are waiving your day in court and your constitutional right to have a jury of your peers decide the facts. Unfortunately, federal law has allowed arbitration to proliferate in an abusive manner to the detriment of consumers and employees.When arbitration is used, it's rarely optional. It is almost always a mandatory provision written by the party with all the bargaining power and presented as a "take it or leave it" term of the contract. Consumers are forced to agree to arbitrate before a dispute even arises between them and the company. Arbitration clauses are usually buried in the fine print of a contract, where businesses know most consumers are unlikely to ever see them. Unfortunately, whether or not you did the see them, the law generally presumes that if you signed the agreement ( or clicked "I accept the terms and conditions" ), you read the agreement - all of it.

Even if you do object to arbitration, what other choice do you have? Would you give up your cell phone and your credit card? If you're unemployed, would you turn down a job offer because of the arbitration clause in your employment contract? What if you had to sign an arbitration agreement as a condition of keeping the job you already have? What if you had to choose between agreeing to arbitration with a nursing home or quitting your job to take care of your ailing parents? Regrettably, the "choice" for consumers and employees to agree to arbitrate is no more than illusion. Most folks acquiesce, believing there must be some safeguards in place to ensure they are treated fairly.

In truth, there's little about arbitration that's fair to consumers. Companies use expansive contract language to force consumers and employees to arbitrate issues which no reasonable person would ever expect to be covered by the arbitration clause. Here are some examples:

• When Wells Fargo was exposed for fraudulently opening as many as 2 million bogus accounts in its customers' names, it used the forced arbitration clause in its customer's original agreements to keep them out of court.

• A Fayetteville, Arkansas nursing home so egregiously neglected one of its residents that he died of severe dehydration. The resident's son was unable to file a wrongful death lawsuit against the nursing home because of an arbitration agreement included in his father's admissions paperwork .

• Army National Guard Sergeant Charles Beard was on active duty in Iraqi when his family car was repossessed by the lender. The lender committed a clear violation of the Servicemembers Civil Relief Act, which required the lender to obtain a court order before repossessing the vehicle. Sergeant Beard never got his day in court because of the mandatory arbitration clause in the lender's agreement.

Mandatory pre-dispute arbitration puts us at a distinct disadvantage and eviscerates many of the protections offered by our courts and our juries. For example:

• Outcomes in mandatory arbitration unquestionably favor employers over and employees. According to a December 2015 report from the Economic Policy Institute citing a 2011 study, employees only won at trial in 21.4% of arbitration proceedings, whereas employees prevailed in federal court trials at a rate of 36.4% and in state court trials at rate of 57% .

• When arbitrators do rule in favor of employees, the awards are significantly lower than those awarded by courts and juries. For example, the study cited in the above-mentioned EPI report revealed that the average damages awarded to employees in arbitration equaled $109,858 ; in contrast, federal and state courts awarded $394,223 and $575,453 to employees respectively, on average.

• Consumers fare even worse in arbitration than employees. Based on data compiled in Public Citizen's August 22, 2016 comments to the Consumer Financial Protection Bureau, when consumers made affirmative claims against providers in arbitration, consumers prevailed only 9.4% of the time. However, when providers made claims in arbitration against consumers, providers prevailed at a whopping clip of 93% .

• Because arbitration is binding, the arbitrator's decisions can't be appealed and reviewed by the courts, even if the arbitrator clearly erred in applying the law.

• Arbitration proceedings are almost always confidential. This allows businesses to conceal their particularly egregious conduct from public scrutiny even if it involves issues of prevailing public concern, such as the abuse and neglect of nursing home residents. If consumers or employees "go public," companies may seek liquidated damages from them for breach of the confidentiality agreement. This arrangement prevents victims from speaking out against both a company's harmful conduct and the injustice of arbitration proceedings.

• Arbitration clauses include a near-universal class action waiver. If a business mistreated you and a group of other consumers or employees in the same manner, each person is required to arbitrate those claims individually. Many individual's claims are too small to make it economically feasible for them to hire an attorney or pursue the claim on their own. By depriving consumers and employees of the ability to band together, businesses may continue their unlawful practices without any risk of real accountability.

While this information may make it seem futile to resist the arbitration epidemic in our society, there are some things you can do to protect your right to a trial by jury.

First, where possible, don't be afraid to negotiate with a business to remove the arbitration clause. Some companies, particularly those with smaller operations and fewer customers, may allow the party with whom you are negotiating to make some concessions to close a deal. If you have any additional bargaining power based on the size of your agreement or the company's need for your business, don't be afraid to demand changes to protect yourself in the event of a dispute.

Second, when executing standardized agreements dictated by the provider, take care to closely review the arbitration clause. As explained further below, some arbitration agreements are so one-sided that courts will not enforce them. To make the agreement appear more fair, some companies include a provision that allows you to opt out of the arbitration clause by sending them a letter, usually within a short time after you enter the contract. These companies include the opt-out provision because they know an overwhelming majority of consumers will never discover it. Similarly, some companies will make an exception to the arbitration clause to allow you to file suit against it in small claims court, up to a specific dollar amount. Review every contract you sign or online agreement you accept for an opt-out provision, and if it's included, be sure to immediately comply with the stated opt-out requirements. This includes your contracts for credit cards, cable and satellite services, internet and cell phone providers, home security systems, private student loans, consumer banking, sharing economy employment agreements, online retail accounts, and software services. Click here to see a list of companies that use forced arbitration clauses and those which give you the opportunity to opt out. However, you should always review the contract yourself to see if opting out is an option.

Third, if you find yourself in a dispute and subject to an arbitration agreement, you should contact an attorney to discuss your options. Courts have refused to enforce some arbitration clauses on the grounds that they are unconscionable. An arbitration agreement may be so unfair, given the inequalities between the parties as to age, intelligence, and bargaining power, that a court will refuse to enforce it. Additionally, courts may refuse to enforce arbitration because of one party's unfair use of oppression and surprise in the negotiation process. Whether a court will declare an arbitration clause unconscionable depends highly on the facts of each case. If you have questions concerning the scope and enforceability of a specific arbitration provision, you should consult with an attorney.