A bill introduced by Sen. Al Franken (D-Minn.), above, and Richard Blumenthal… (Carolyn Kaster, Associated…)
Thanks to the U.S. Supreme Court, you may not have the right to sue a company you think has wronged you.
Instead, if the company prefers, you could have to arbitrate the dispute — a process that consumer advocates say tips the scales of justice in favor of businesses.
That imbalance would be remedied with passage of the Arbitration Fairness Act, a bill under consideration in Congress that would supersede the Supreme Court's ruling and reestablish consumers' right to sue and to join with others in class-action lawsuits.
"These forced arbitration clauses in contracts deny consumers their right to hold companies accountable when something is wrong," said Christine Hines, an attorney with the advocacy group Public Citizen. "They basically let companies off the hook."
The Senate Judiciary Committee held a hearing on the legislation last week. Democratic lawmakers called three witnesses who supported the bill. Republican lawmakers called two witnesses who opposed it.
The bill's chances of getting out of the Republican-controlled House are pretty much slim to none at the moment. But supporters say the groundwork is being laid for passage down the road.
So-called arbitration clauses have become standard practice for a wide variety of consumer and employee contracts. Millions of people are routinely required to forgo the right to sue or to join class-action lawsuits when they apply for credit cards, sign cellphone contracts or accept a job from an employer.
The Supreme Court upheld this practice in April. In a 5-4 decision, the justices said the Federal Arbitration Act of 1925, which was originally aimed at disputes involving maritime and rail shipments, trumps state laws in California and elsewhere that limit arbitration clauses deemed unfair to consumers.
The Arbitration Fairness Act — S. 987 — was introduced in May by Sens. Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.), and by Rep. Hank Johnson (D-Ga.) in the House. It would amend the Federal Arbitration Act to invalidate all arbitration clauses in consumer or employment contracts.
Just to be on the safe side, Franken and Blumenthal also introduced a more narrowly focused Consumer Mobile Fairness Act — S. 1652 — that would apply solely to wireless devices such as cellphones.
Not surprisingly, industry lobbyists are against both bills.
"The proposed legislation is a misguided effort to overturn a well-reasoned U.S. Supreme Court decision," said Jot Carpenter, vice president of government affairs for the wireless trade group CTIA.
Scott Talbott, senior vice president of governmental affairs for the Financial Services Roundtable, said consumers' rights aren't limited by arbitration clauses.
"They have a role in the relationship between consumers and businesses," he said. "If consumers don't want an arbitration clause, they can go to a different company that doesn't have one."
If only they could.
In reality, nearly all financial and telecom companies include arbitration clauses in their contracts, meaning that consumers often have no choice in the matter.
"There is nothing wrong with voluntary arbitration when it is chosen by both parties," said Julia Duncan, associate director of federal relations for the American Assn. for Justice, an organization of trial lawyers. "The problem is when arbitration is forced on consumers and employees on a take-it-or-leave-it basis."
She and other consumer advocates say that aside from denying people the right to a jury trial, arbitration clauses are unfair because the arbitration process is largely controlled by businesses. The company gets to pick the arbitrator, who in turn determines the rules of arbitration.
Then there's what Duncan called "the repeat player problem." Because businesses, not consumers, represent steady customers for professional arbitrators, she said, "there's a built-in incentive for the arbitrator to find in favor of the corporation."
Deborah Pierce, a Philadelphia doctor, told me this was her perception when she underwent arbitration in a dispute with the physician group that had employed her. She felt she'd been unfairly terminated when the group declined to renew her contract.
Pierce, 45, said she knew the deck was stacked against her when she saw materials in the arbitrator's office indicating that he'd had past dealings with the physicians' group. The arbitrator eventually ruled against her.
"If I had to do things over," Pierce said. "I would never accept mandatory arbitration."
She was one of the witnesses who testified last week before the Senate Judiciary Committee.
Another key issue here: Preventing people from banding together in class-action lawsuits can make it prohibitively expensive for the little guy to seek restitution in cases involving relatively small amounts of money — an overpriced cable channel, say, or a misleading cellphone fee.
Without the threat of a hefty judgment or settlement involving numerous customers, companies may be more willing to engage in unfair or deceptive business practices, consumer advocates say.
The Arbitration Fairness Act would fix that. It would refocus the Federal Arbitration Act on its original intent, providing a mechanism to resolve disputes among business interests.
At the same time, the bill would restore consumers' right to hold companies' feet to the fire when they think something's gone wrong.
Lawsuits, and particularly class-action suits, are frequently abused by money-hungry lawyers. That's obvious. But there are few other tools available to consumers that are as powerful in holding businesses to account for their actions.
Reform the system, if need be. But don't deny consumers their right to a level playing field.
David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to email@example.com.