Why and How Arbitration Constitutes the “Strip Mining of Legal Rights”

When it comes to consumer or employment contracts, forced arbitration is a problem in Maryland, and throughout the country.

In their April, 2014 article titled “The Strip Mining of Legal Rights” Ralph Nader and Theresa Amato call for limits on the use of fine-print terms to undermine legal rights. They call the use of fine print to avoid liability an “expanding coup d’etat against the civil justice system” and suggest action by Congress and federal agencies to control the use of forced arbitration clauses and establish model contract terms which are fair to both consumers and businesses.

Nader and Amato support their arguments with two tragic stories:

a 78-year-old woman in the Alzheimer’s wing of a Colorado nursing home leaves her apartment wearing a bathing suit and carrying a towel. She arrives at the pool about 10 minutes before the instructor for a scheduled swim class. She wears no safety device to trigger a wandering alarm, and there is no lifeguard on duty at the pool. The woman—a wife, mother, grandmother, and former high school teacher—drowns. . . .

. . .

The family of the drowned resident did not sue, deterred by the signed agreements.

In another case, a 92-year-old challenged an arbitration clause in her nursing home contract. Although the trial court allowed her challenge, the Appellate Court found that

the 92-year-old, with a fourth-grade education and memory problems, waived her rights to go to court when she signed an arbitration agreement upon admission to the facility. The court noted that there was “no evidence that the admissions staff . . . used any improper methods to obtain Ms. Holloway’s signature or that she was misled.”

However the court also openly acknowledged that

“a significant percentage” of applicants will have limitations that make it difficult to understand these contracts. With remarkable bluntness, the court agreed that these agreements are “sufficiently complex,” that “ablebodied adults would not fully understand” them.

Nevertheless, the court believed that fine print contracts which undermine consumer rights are so much a part of the way we live today that “[o]ur modern economy simply could not function if a ‘meeting of the minds’ required individualized understanding”

Reforms

Like many others, Nader and Amato support the Arbitration Fairness Act, which has failed in Congress many times in the past. But they also point out the importance of Federal Agencies, like the Consumer Financial Protection Bureau and the Securities and Exchange Commission, which can use their authority to limit businesses’ use of fine print that undermines rights. They also suggest a soft approach, in which agencies would draft and test standard form contracts that consumers can understand and which do not take away their rights. The agencies would then be able to promote those forms in the same way that fair trade, green and organic products are promoted today.

Finally, Nader and Amato point out the importance of discussing the problem of fine print and sharing stories such as those of the victims of nursing home negligence, who are prevented from having their day in court by fine print. It is only through such stories that people are made aware of the cost of fine print to society a cost which can be measured in stories of “defrauded consumers, devastated families harmed by negligent and wrongful behavior, and workers prevented from redressing catastrophes.”

To get involved and stay up to date on this issue, go to Fair Arbitration Now, here.  They explain the problem concisely as follows:

In arbitration, there is no judge, jury or right to an appeal. The arbitrators do not have to follow the law, and there is no public review of decisions to ensure the arbitrator got it right. Moreover, contracts typically name the arbitration that must be used – the one preferred by the company.