Unlocking courts: Ending gag orders and arbitration mandates
Over the last decade, many of America’s corporations — including cellphone providers, credit card companies and major employers — have inserted requirements in their forms (which they have the gall to call “agreements”) that lock people out of courts and out of filing class-action lawsuits. Instead, anyone with a legal claim can only try to get a remedy by going alone to a private arbitration held behind closed doors.
In fact, very few people have the wherewithal to try arbitration. Instead, they don’t bring claims at all, and their legal rights go down the drain. To add insult to injury, many of the same corporations now insert clauses that prohibit anyone who tries arbitration from telling anyone else about what happened.
Critically needed help has just reemerged. On March 1, Sen. Richard Blumenthal, D-Conn., introduced the Forced Arbitration Injustice Repeal Act, or FAIRA. He is joined by many colleagues in the Senate and by parallel efforts in the House. Blumenthal’s legislation is part of a long quest to unlock state and federal courthouse doors for people facing discrimination, job loss and consumer fraud.
The bill is straightforward: FAIRA would make the unfair arbitration mandates that companies impose (called “predispute clauses”) unenforceable.
The need for this law is underscored by what has become a prevalent feature of corporate fine print. Last year, holders of one major credit card were told that: “You and we agree that the arbitration will be confidential. You and we agree that we will not disclose the content of the arbitration proceeding or its outcome to anyone” unless required by law to notify the government.
In plain English, this is a gag order — shutting up any users of arbitration. And this is a unilaterally imposed condition of the credit card, not a negotiated contract.
Advocates of arbitration insist it is “faster, cheaper, and more effective” than filing a lawsuit. Is that true? And if so, why can’t we choose for ourselves rather than being banned from filing lawsuits and silenced if we use arbitration?
To get answers, I dug into the data, provided by the American Arbitration Association, or AAA, under state law and recording all arbitrations it provided nationwide. What the numbers show is that virtually no consumers use arbitration and the reasons why efforts are now underway to silence the very few arbitration users that remain.
Take AT&T, which in 2011 succeeded in convincing the U.S. Supreme Court that its ban on class actions was enforceable. Between 2017 and 2019, AT&T had 140 million customers. Public data from the AAA show that only 172 customers a year — less than two out of every million consumers — filed arbitration claims.
Simply put, individuals don’t have the resources, knowledge, energy, time and money to go it alone. By cutting off classaction lawsuits, “repeat players” like AT&T can suppress legal claims.
Why then add silencing clauses? Under the AAA rules, the companies imposing arbitration on consumers and employees arbitration are supposed to pay the arbitrators’ fees. Lawyers and consumer advocates realized that if they could file hundreds of “individual” complaints, they could band together to get some vindication in arbitration and impose more costs on the company pushing them into it.
For example, in 2019, one law firm filed 2,250 arbitration claims in a single day against the delivery company DoorDash. The arbitrators’ fees would have totaled more than $10 million. In response, DoorDash tried to ditch the very system — arbitration — it had imposed on its drivers and go to court.
Although DoorDash made the news, it is not alone in facing large numbers of “individual” claims. Examining AAA data, I identified more than 30 instances of law firms filing multiple claims against a single company.
That is why words like “you and we agree not to disclose” are now appearing in the fine print in so many corporate forms. Suppressing information is suppressing access to remedies: in courts, in arbitration, or, as the #MeToo movement made plain, through public opinion. Companies’ efforts to stop collective actions — anywhere — aim to control information to avoid accountability.
In the employment context, and thanks to #MeToo, the pushback against arbitration and nondisclosure has been significant. Former Fox News anchor Gretchen Carlson, for example, criticized the network’s requirement that she stay silent. In 2020, she joined others in launching Lift Our Voices, focused on ending nondisclosure, confidentiality and arbitration obligations for employees. In the last two years, 13 state legislatures have made nondisclosure obligations unenforceable, mostly for employees with sexual harassment claims.
Some courts have limited arbitration agreements, as well. The Supreme Court of Washington, citing that state’s constitutional protection of “open courts” and rights to remedies, held silencing provisions unenforceable. But many other courts have let them stand.
But piecemeal solutions do not suffice. The 2021 FAIRA bill would solve many of the problems because it is broader than state efforts — protecting consumers and civil rights claimants, as well as employees — and it would apply across the country.
Contract, consent and agreement sound great. None of it is true for mass mailing credit cards and employment forms. Consumers, employees and civil rights claimants need to join together to support FAIRA because this legislation recognizes that they never did “agree” to be kept out of court, ride solo or be silenced.
Contract, consent and agreement sound great. None of it is true for mass mailing credit cards and employment forms.