Arbitration: Why It’s a Worst-Case Scenario for American Consumers

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When Jeff Flake made his ground-breaking speech calling out the more questionable acts of the current Administration, he became a bit of a folk hero. For a few moments anyway.  Shortly after his speech, he and his GOP colleagues voted to arrange for the systemic screwing of countless American consumers. They voted to allow Wells Fargo Bank to deny its customers the right to file a class action lawsuit against it. That’s right, we’re talking about the insidious binding Arbitration clause.

This vote forces the thousands of customers defrauded by Wells Fargo to take them to court individually.  Every one of them must hire a lawyer and try to fight Wells in court.  As a practical matter, it makes it virtually impossible for them to achieve justice. If a class action had been allowed to proceed, however, those people might have obtained justice.  Certainly Wells Fargo would have gotten the wake-up call it deserved.  The allegations appear to indicate a massive and deliberate fraud.

Most consumers don’t understand class actions, so they don’t know why they should care if they go away.  We’re going to tell you why you should.

The Small Print:

Buried deep within virtually every online contract, lays the clause that kills your rights.  Arbitration. It usually follows the boring stuff.  Late-fees– interest charges– you know, the stuff you never read, because what’s the point?  But by inserting these individual arbitration clauses into almost every consumer (and employment) contract, big business has devised a way to circumvent the courts and bar people from joining together in class actions. Class actions are the only significant tool citizens have to fight illegal or deceitful business practices. Keeping them from happening saves corporations real money.

Since the landmark 2012 SCOTUS decision in Concepcion, companies have expanded their efforts to include arbitration clauses in everything you sign.  Applying for a credit card? Arbitration clause.  Purchasing a cellphone? Arbitration clause.  Having cable or Internet installed? Well, you get the drift. All of these things now require you to agree to private arbitration. The real problem is that these clauses invariably contain an additional provision waiving the consumer’s right to participate in a class action.

We wrote extensively on this issue in our earlier post, “CLICK TO AGREE: Are We Selling Our Souls to the Devil?”  This blog outlines the risks of arbitration and the skewed balance of power which results in us all having to sign off or do without those commodities & services we seek.

How This Affects Employment:

Arbitration clauses are showing up in employment agreements as well. Several employee class lawsuits claiming sex & race discrimination were blocked as a result of hidden arbitration clauses. When a company can force employees into individual arbitration, they can buy them off cheaper. Because they don’t run the risk of a collective-action lawsuit, they can continue to skirt the law.  For more information on why class-actions are critical to consumer and employee rights read our recent blog post.  Understanding your rights is the first step toward turning this ship around and restoring them.

How this Happened:

A few decades ago, big business began trying to buy favorable legislation.  The more companies there were, the harder that was.  They were too busy competing with one another. But now, with antitrust laws essentially toothless, the few remaining large corporations are free to pay legislators to push back against working Americans and consumers. They pursue this goal by changing the law to reflect the will of Big Money. It’s pretty simple. There’s just too much corporate money in politics.  The recently vacant seat on the Supreme Court, now filled by Justice Gorsuch, will be another vote against the interests of working Americans.

Don’t Believe the “Attorneys Just Want the Fees” Hype:

We all hear that class-actions exist only to make attorneys rich. What you don’t hear is they are also the riskiest, most costly, cases an attorney can file.  Going up against a company like Wells Fargo Bank is difficult. And expensive.  If a plaintiff’s firm loses a class-action suit, they stand to lose tens of thousands of dollars, if not more.  Attorneys take that risk because we believe in the work. One of our first class action was against Continental Can Company.  CCC had defrauded its employees out of vested pensions earned over decades of loyal service. We uncovered a “smoking gun” in discovery, proving the behavior had been a deliberate fraud.  In a scathing 60+ page opinion, the judge granted us almost $5,000,000.00 with which to pay the workers. Each man received an average of $80,000.00.  Victories like that are why we continue to fight for the American worker.

What can you do?

The best route to adequate consumer protections will be through better legislation. There are arguments going on in Washington right now concerning the future of the class-action. One side is advocating for the interests of corporate America. The other side is attempting to pass legislation to support our middle-class workers.  If you want to get involved, call your Member of Congress, or your Senator. Or both.  Support your local unions. Advocate for better consumer protections. Vote to protect your financial interests. Both sides have an important part to play in the debate, but we must level the playing field. And of course, if you believe you have an action that should be pursued, give us a call.

LAZEAR MACK LLP

436 14th Street, Suite 1117

Oakland, CA  94612

510.735.6316

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One comment

  1. November 24, 2017 at 3:45 am

    This is an issue that the ordinary person can get behind to support you in your efforts. I am a conservative and I have no problem calling the Republicans out… or the Democrats. I read your article, but almost did not because of your gratuitis Trump insult in the beginning. I saw this the other day, when everyone on all sides complained about bringing elephant trophies home. Some years ago I saw a very interesting article, by a believer in climate change, and I thought I might forward it to conservative friends… but then in the last paragraph he bashed George Bush, when he had zero to do with the article… I thought why should I forward this just to raise their blood pressure. So he got to present his ideas to the true believers, and missed his opportunity for bringing in new people to his cause.

    I have a question for you, if you knew that the judge you are going to present your case to voted for Trump, would you make the opening sentence of making your case a trump bashing one?

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