GOP leaders are totally out of touch.
Republican leaders have been ardent, verging on fanatical, in their support of forced arbitration, but new information suggests they may be profoundly out of step with their own political base. According to a 2019 Hart Research survey, 64 percent of voters oppose forced arbitration, while 84 percent of voters — including 87 percent of Republicans — say they support legislation to make the practice optional. That, of course, is the same thing as banning it.
So nine in ten Republicans want to ban forced arbitration. That’s overwhelming.
Republican leaders should take heed.
Forced arbitration is the corporate practice whereby a company uses a take-it-or-leave-it contractual provision to deny its own customers and employees the ability to sue the company for wrongdoing.
Thanks to support for this controversial practice among industry chiefs and Republican congressional leaders, forced-arb clauses have become ubiquitous.
And yet most Americans oppose the clauses — including, it turns out, most Republicans.
In a forced-arb clause, a consumer ‘agrees’ to waive his or her Seventh Amendment right to a jury trial in the event of a dispute with the corporation. Instead, the consumer agrees to accept the results of binding arbitration.
The trouble is the ‘neutral’ arbitrator is usually selected and paid by the corporation. And unlike a jury trial, arbitration is a secret process without benefit of a jury, fixed rules, or effective oversight.
Contrary to the rosy view of the United States Chamber of Commerce and its allies, forced arbitration is almost never truly voluntary, and is frequently biased. When Public Citizen studied the use of arbitration by California banks over a four-year period, it found that ‘neutral’ arbitrators sided with the corporation 94 percent of the time. Arbitration can also be just as slow and costly as litigation.
Consider these real-life stories, which you’ll never hear from the Chamber:
- Wells Fargo defrauded millions of its own customers by creating fake accounts in their names and then assessing fees on them. After getting caught, the company invoked fine-print forced-arb clauses signed by those victims in connection with legitimate accounts.
- Massage Envy, a chain of membership-based massage parlors, cited the boilerplate forced-arb clause buried in its mobile app to squelch lawsuits by female customers who claimed to have been raped or sexually assaulted by poorly screened male masseuses.
- Earlier this year the Petland pet store chain was caught on tape admitting that it knowingly sells sick and injured puppies acquired from puppy mills, and that it includes a forced-arb clause with every purchase to make sure unsuspecting buyers ‘can’t sue us.’
- In 2018 Tamko Products, a maker of asphalt roof shingles, successfully avoided responsibility for property damage to Florida homes by invoking a forced-arb clause printed on the shingles’ shrink-wrap packaging, despite the fact that the homeowners had never seen the packaging, which had been removed by anonymous contractors.
- Online retailer Wayfair used a forced-arb clause to block lawsuits by angry purchasers of bedbug-infested upholstered headboards from China.
- Teachers at Brentwood School, an elite private academy in Los Angeles, used a forced-arb clause to thwart a lawsuit by the outraged parents of an underage child who was repeatedly statutorily raped by a teacher.
It was not always so. Prior to the 1920s, American courts typically refused to enforce pre-dispute arbitration agreements, deeming them unconscionable because they are tantamount to buying a pig in a poke.
In 1925, however, Congress enacted the Federal Arbitration Act, which directs U.S. courts to enforce the clauses in virtually all cases. Since the 1980s, thanks to a series of Supreme Court decisions aggressively broadening the Act’s scope, the tide has turned in favor of corporations and celebrities.
Today these clauses amount to a gilded privilege, a sordid get-out-of-jail card routinely abused by the powerful to get away with the abominable.
As a matter of justice, it’s time to make forced arbitration clauses optional again.
Happily, a new bill in Congress, the FAIR Act would do just that. A near-majority of Representatives and one-third of Senators support the legislation. And if the recent Hart polling is accurate, so does the vast majority of the public — including, apparently, nine in ten Republicans.
On this issue, GOP leaders aren’t just wrong, they’re totally out of touch.
Dean Clancy, a partner at Adams Auld LLC and former senior Republican official in Congress and the White House, writes on U.S. health reform, budget, and constitutional issues. Follow him at deanclancy.com or on Twitter at @DeanClancy.