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Mandatory Arbitration and the Rewriting of Consumer Rights

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Consumers could be seriously affected by a case currently before the Supreme Court assessing the legality of adhesion contracts requiring mandatory arbitration. These forceful provisions have found their way into all kinds of consumer and employment contracts and have very serious impacts for the rights of the parties. The result is that consumers and employees can sign away their rights without ever even knowing it, and when disputes arise, they find themselves locked out of the courthouse.

Mandatory arbitration is the requirement that a party proceed to arbitration instead of the civil court system when a dispute arises as between the parties to a contract. Once a contract is signed, your right to access a judge in a state or federal courthouse is gone. Arbitration is the only option. Arbitration is a procedure wherein a neutral arbiter is chosen, usually a practicing lawyer, to hear the case and decide the dispute. After arbitration, one can file a civil suit, but there are only very narrow circumstances under which a court will review the judgment of the arbitrator.

These provisions have permeated the relationships of everyday transactions between individuals and large corporations. The contracts are often long and complex, with absolutely no opportunity for negotiation. Consumers do not meaningfully participate in the contract and instead must sign away their right to access the courts, simply so they can buy the product or services from the corporation.

Mandatory arbitration does not just dictate the forum for dispute resolution. It affects all the rights that go along with that forum. Arbitration is unlike court. There is no judge; there is only a neutral party chosen from a list. Moreover, the arbitrator is not governed by the law. They can decide the dispute based on other concerns, and are not subject to the procedural rules that normally apply in a court of law. There is also no option to appeal an arbiter’s decision unless there are egregious circumstances beyond the outcome itself. Furthermore, many are worried about the dynamic between arbitrators and the corporations that utilize mandatory arbitration. Corporations are repeat customers in the arbitration industry. As a result, there is concern that there will be systematic bias in the arbitrators’ decisions, in favor of the corporations.

There have been some efforts to make mandatory arbitration agreements illegal. However, the courts have mostly upheld the contracts under current law. Furthermore, some key players who are fighting mandatory arbitration will soon be leaving the scene. Part of protecting consumer rights is protecting the opportunity to vindicate them in the court system. Corporations are getting more and more creative in their efforts to avoid traditional legal channels. If we fail to protect those channels, we have little hope of protecting the application of the laws that govern those relationships. If others don’t step up to curb this manipulative practice, consumers could face the unilateral and wholesale repeal of their rights — not by Congress, but by the parties they contract with.

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