Arbitration clauses in consumer transactions. They are found in cell phone contracts and credit card agreements, but in more recent years have been venturing into online profiles for small businesses such as local gyms, children’s athletic teams, and even spas.
What is forced arbitration?
A forced arbitration clause is language within a contract that says to use a particular service, the person must agree that they will not engage in their constitutional right to a jury trial by suing the company publicly. Instead, they are forced to file a private arbitration to be decided by a private arbitrator usually chosen by the business. The benefit to the company is twofold: 1) the entire proceeding will remain outside of public view; and 2) cost to bring the case to conclusion is lower. To top this, many clauses state that arbitration is “binding,” meaning that neither party can appeal to the court.
There are many business to business contexts where arbitration clauses may be favored. But in the world of consumers versus businesses, the forced clauses are often one-sided and unfavorable to consumers. Additionally, the private nature of the proceeding highlights the basic failure of the proceeding to adequately protect them. Keeping company failings quiet benefits the company and does nothing to protect other consumers from future harm.
For example, even now in today’s more open discussion of sexual trauma, organizations are still working to protect themselves and sexual predators through confidential arbitration proceedings. Keep it out of the courts, and keep it out of the news. Businesses use arbitration clauses to protect themselves in other types of cases as well, such as nursing home neglect, personal injury, and employment disputes, to name a few.
Over the past few years, legislation and rules have slowly been introduced to chip away at this practice. According to a National Consumer Law Center press release, a bipartisan bill was introduced at the Federal level called the Ending Forced Arbitration of Sexual Harassment Act. If it passes, the bill “would void forced arbitration provisions as they apply to sexual assault and harassment survivors, allowing survivors to seek justice, discuss their cases publicly, and eliminate institutional protection for harassers.”
If you or your loved one was injured and may have signed a contract with an arbitration clause, contact Murphy & Landon for a complimentary consultation at 302-472-8100.