The Philadelphia Enquirer reported today some news I expected years ago. The healthcare industry is turning to mandatory arbitration as a way to insure themselves from having to compensate people that they hurt. Stacy Burling reported in her article, “Arbitration a growing trend in healthcare” that while arbitration in healthcare contracts does not appear widespread, it is “common on the West Coast, and legal experts say it is spreading nationally.”
Mandatory arbitration is one of the tools used by predatory lenders to rip off consumers. Payday lenders, tax refund loan operations, auto finance companies and mortgage brokers have notoriously used mandatory arbitration clauses to force consumers that they defrauded out of court and into a private dispute resolution system that relies on their business to operate.
Who are these arbitrators? I represented an elderly veteran who had his finance rebate ripped-off by an auto dealer. He lost thousands of dollars and did not realize it until after he signed the contract. Unfortunately, he signed an arbitration agreement.
He was a fighter and pursued his claim in the private arbitration forum. Who was the arbitrator? A corporate lawyer whose law firm represents some of the largest auto dealers in America as well as the local auto dealer trade association. The auto sales person admitted that the consumer was offered the rebate. But the finance manager testified that my client rejected the rebate. The client testified this was false. You can guess who won.
The corporate lawyer “arbitrator” ruled that he believed the story that my client turned down the rebate. Does that make any common sense? Why would anyone turn down a rebate? The car dealer had no paperwork to prove that my client turned down the rebate. The car sales person admitted the rebate was offered. My client stated he asked for and expected the rebate. But the arbitrator sided with the predatory finance manager nonsensical story.
Obviously this arbitrator knew who buttered his bread and the bread of his law firm. If he would have decided for the consumer, the auto dealer, who is a member of the local auto trade association, might tell other members of the trade association that the arbitrator will rule for consumers. Car dealers often have vindictive personalities. As revenge, the trade association may take their legal business elsewhere.
Not all arbitrators are as intimately involved in representing the interests of the unfair businesses. Many arbitrators are fair-minded neutral individuals interested in resolving disputes. However, predatory lenders and unfair businesses are not interested in utilizing their services. The prefer to utilize arbitrators and arbitration forums where the deck is stacked in their favor. Paul Bland, a leading expert on arbitration and regular contributor to the Public Citizen Consumer Law & Policy Blog, has testified before Congress that “private arbitration companies are under great pressure to devise systems that favor the corporate repeat players who draft the arbitration clauses... For example arbitrators who rule against corporations and in favor of individuals are often blackballed from serving as arbitrators in future cases.”
It is important for consumers to educate themselves about arbitration. Before you sign a contract, see if it includes an arbitration clause. If it does, demand that the arbitration clause be excluded. If the lender or business refuses to exclude the arbitration clause, take your business elsewhere.
I recommend consumers to “Just say No” to pre-dispute mandatory arbitration. When you sign an arbitration agreement you give up your constitutional rights. You lose your right to a jury trial. You lose rights to access the courts to appeal a bad decision. Instead, you may get your case decided by a bought-and-paid-for “arbitrator”. Arbitration may be an appropriate way to resolve some disputes. But you should never have to agree to resolve a dispute through arbitration on a take-it or-leave-it basis before a dispute arises. If arbitration is appropriate when a dispute arises, then the parties can agree to arbitrate the dispute after it occurs.
Mark T. Lavery
Consumer Protection Lawyer
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