Corporations Not Happy Innovators Have 'Hacked' The Crappy U.S. Binding Arbitration System
from the dysfunction-junction dept
For years, AT&T worked tirelessly to erode its customers’ legal rights, using mouse print in its terms of service preventing consumers from participating in lawsuits against the company. Instead, customers were forced into binding arbitration, where arbitrators chosen and paid by the companies under fire unsurprisingly rule in favor of the party likely to hire them again a huge percentage of the time. Initially, the lower courts derided this anti-consumer behavior for what it was, critics highlighting that however brutally flawed the class action system can be, binding arbitration, at least the way we let companies design it, in many ways made things worse.
But these lower court roadblocks quickly evaporated when the Supreme Court ruled in 2011 (Mobility v. Concepcion) that what AT&T was doing was perfectly OK. While lower courts saw this as an “unconscionable” abuse of consumer rights and the law, the Supreme Court bought into the ongoing myth that binding arbitration is a hyper-efficient, modern alternative to class actions. The Supreme Court reiterated its position in 2015, and now most companies employ similar language in their terms of service fine print. Thanks, AT&T.
Shockingly, despite the telecom industry being a clear and obvious train wreck rife with endless examples of clear billing fraud, users aren’t finding arbitration provides an effective path to justice. Despite having a combined 330 million video, voice, and broadband customers, just 30 people took AT&T and Comcast to arbitration last year. Driven in part by this, folks in recent years have been trying to find ways to help simplify the complicated process for pissed off consumers and employees, launching services like Radvocate and Fairshake.
As the NY Times notes, these systems are unsurprisingly driving up arbitration complaints as the process is streamlined and made more affordable for participants (consumers and employees often can’t afford to take on corporations individually):
“Mr. Lidow, a Silicon Valley entrepreneur with a law degree, figured there had to be more people upset with their cable companies. He was right. Within a few months, Mr. Lidow found more than 1,000 people interested in filing arbitration claims against the industry. About the same time last year, Travis Lenkner and his law partners at the firm Keller Lenkner had a similar realization. Arbitration clauses bar employees at many companies from joining together to mount class-action lawsuits.”
While the original arbitration idea may have been sound, corporations designed their vision of it with an eye on minimizing costs, tap dancing around accountability, and making it a costly uphill climb for employees and customers to battle them. And now that folks are actually trying to use the system, they’re unsurprisingly not excited about it:
“There is no way that the system can handle mass arbitrations,? said Cliff Palefsky, a San Francisco employment lawyer who has worked to develop fairness standards for arbitration. ?The companies are trying to weasel their way out of the system that they created.”
AT&T, which helped kick this whole shift off with its sneaky bullshit mouse print, has been one of several corporations to hype binding arbitration as a more efficient alternative to class actions. Yet once folks actually began using the process thanks to these new services, companies like AT&T were caught flat footed:
“The companies were caught off guard. It took six months for many of the claims to move through arbitration. And some were still making their way through the system two years later. To Mr. Lidow, that seemed like a long time for two of the nation?s largest companies, with ample legal resources, that have vouched publicly for the efficiencies of arbitration over court.”
Again yes, the class action system is broken, more often than not delivering new boats to attorneys and very little to those who are treated unfairly. But class actions most certainly have driven substantive change over the years (such lawsuits stopped cellular carriers from charging you long term contract early termination fees, for example). And the replacement system corporations built to replace the justice system is proving, as many predicted, to be decidedly worse.