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Individual Arbitration Clauses Protect Corporations at the Expense of Employees and Consumers’ Rights

Posted By Regan Zambri Long, PLLC || 13-Nov-2015

Picture of Salvatore J. Zambri

Posted by: Salvatore J. Zambri, founding member and partner

A recent investigative article by the New York Times reveals alarming facts about many contracts that consumers are forced to sign every day that essentially abolish their rights to fight against unfair and deceitful business practices.

Many consumer and employment contracts include a clause that requires the parties to submit their disputes to binding arbitration, stripping consumers from their constitutional rights to access the court system. Binding arbitration clauses also prevent class actions, which challenge businesses for predatory lending, discrimination, or any other unfair practices against employees or consumers.  As an example, here is one phrase from a rental car contract that illustrates the practice: "Arbitration, No Class Actions."  Just about all online purchases include a similar clause.

As background for uncovering this wide-spread practice, The Times investigative team discovered that “lawyers for the companies talked about arbitration clauses as a means to an end. The goal was to kill class actions and send plaintiffs' lawyers to the ’employment lines.’ ”

“Many judges across the country did not object to companies' requiring consumers to use arbitration. But they bridled at preventing those consumers from banding together to bring a case.

State law guaranteed citizens a means to defend their rights, and contracts that tried to take that away were "unconscionable," many judges said. In other words, class-action bans were unfair.”

However, the June 20th, 2013, ruling by the Supreme Court essentially went against state laws and ruled for corporations and against consumers in deciding that class actions would be banned by arbitration clauses.

Arbitration clauses could outlaw class actions, the court said, even if a class action was the only realistic way to bring a case. "The antitrust laws do not guarantee an affordable procedural path to the vindication of every claim," Justice Scalia wrote.

The most withering criticism came from Justice Elena Kagan, who wrote the dissenting opinion. "The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse," she wrote. She went on to say that her colleagues in the majority were effectively telling those victims, "Too darn bad."

It is outrageous to me to think that companies, with all the bargaining power, can slip arbitration clauses into their contracts and unwittingly strip Americans of their right to fair justice. The Supreme Court ruling in favor of forced arbitration tips the scale of justice in favor of corporations and against American consumers.

Let me be clear, there is a place for arbitration in our judicial system. If parties, after an incident giving rise to a claim, wish to voluntarily submit their dispute to an arbitrator, then I am all for it. What I am against is permitting companies, with all the bargaining power, to force consumers into arbitration.

As Thomas Jefferson said in 1789, “I consider trial by jury the only anchor ever yet imagined by man [or woman], by which a government [or other entity] can be held to the principles of [the] constitution.”

About the author:

Mr. Zambri is a board-certified civil trial attorney by the National Board of Trial Advocates and a Past-President of the Trial Lawyers Association of Metropolitan Washington, D.C. The association recently named him "Trial Lawyer of the Year".  Super Lawyers recently named him among the "Top Ten" lawyers in the Metro Area (out of more than 80,000 attorneys). He has been rated by Washingtonian magazine as a "Big Gun" and among the "top 100″ lawyers in the entire metropolitan area. The magazine also describes him as "one of Washington's best-most honest and effective lawyers" who specializes in personal injury matters, including automobile accident claims, premises liability, product liability, medical malpractice, and work-accident claims. He has successfully litigated multiple cases against truck and bus companies, the Washington Metropolitan Area transit Authority, and other automobile owners.  His law firm, in fact, has obtained the largest settlement ever in a personal injury case involving WMATA.  Mr. Zambri has also been acknowledged as one of "The Best Lawyers in America" by Best Lawyers (2014 edition) and has been repeatedly named a "Super Lawyer" by Super Lawyer magazine (2014) - national publications that honor the top lawyers in America.

If you have any questions about your legal rights, please email Mr. Zambri at szambri@reganfirm.com or call him at 202-822-1899.

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