Summary: compulsory arbitration is a growing threat to elders and consumers in general. It is often best to try to avoid signing contracts that have compulsory, pre-dispute arbitration clauses. But, that may be impossible unless Congress changes the law. Until then do not give your durable power of attorney agents authority to agree to pre-dispute arbitration.
Suppose you moved your mother from her home to a nursing home. Two months later she is dead and you just know it was the fault of the nursing home. You want to sue in court. You can’t. You have given up your constitutional right to go to court. Instead you must “arbitrate” your claim.
Last week the United States Supreme Court ruled it is legal for a nursing home to force you to give up trial by jury and instead have arbitration of your case. The case is KINDRED NURSING CENTERS L. P. v. CLARK, decided May 15, 2017. It that case the elder was signed in to the nursing home by her daughter who was her agent – power of attorney. The court ruled that the federal Arbitration Act overruled the Clark’s Constitutional right to trial by jury.
This decision is the “tip of the iceberg” of a serious problem sweeping through business transactions with consumers. The day is coming when all businesses will require you to give up your rights to trial in court.
Why do we have trial by jury? And by jury we mean that the jury is made of average folks from the community. We have trial by jury because of our legal history going back to the Magna Carta signed by King John in 1215. It seems that before that the King was requiring trial by his appointed men, with the predictable results. The King won every time.
What is arbitration?
While there are many forms it boils down to an attorney, who should know something about the field of complaint, hears the parties’ evidence and makes a decision.
The advantage of arbitration is the speed and efficiency of a tribunal that is very familiar with an industry. We might say that arbitration grew out of the ancient English shipping law “Court of Cinque Ports.” That evolved into our law of admiralty, which is a highly specialized field of law. This is the same field of law that applies to the treasures of gold and silver coin found in ancient ship wrecks.
We can see that two companies in a specialized field may want to have a contract dispute settled by arbitration. They enter into a contract as equals. Both know the industry and what to expect of each other. Why go through the time and expense of waiting for a court date on a court’s congested docket, then educating a judge and jury about some arcane corner of industry when the parties can have a more accurate and efficient resolution by arbitration?
Businesses like arbitration because it is faster. Arbitration is faster than a trial in court. The results are more predictable. Often business parties’ pretty much know all the facts and only have a dispute on a limited area of their contract. They don’t want to wait for a trial date in a court over loaded with other matters civil and criminal.
So. Why isn’t speedy arbitration a plus for consumers?
The dispute is lop sided. The consumer has almost no information. The corporation has all the facts, all the records and all the witnesses. It takes time for the consumer to learn all the facts. One might briefly reflect on cases where a government official is convicted of a crime like taking bribes years after the bribes. It often takes years for investigators to get all the facts. It is true in consumer cases, it takes time to get all the facts. Arbitration does not allow consumers enough time to get all the facts.
So. What is the problem?
Surprise! Consumers do not get as favorable results by attorney arbitrators familiar with “the industry.”
Forced consumer arbitration is a one-sided game. Consider the nursing home case. When you place your family member in the nursing home you do not “bargain as equals.” You do not hammer out the terms of the contract. A nursing home is a licensed medical facility. You are wholly dependent on the nursing home to take care of her.
It’s that way across the board. Consumers are not experts in business; not experts in medical care; not experts in finance. Take just one example. If you were expert in consumer law, which state law would you choose to establish the rules to apply to your case. Michigan? New York? California? Yet in business contracts with arbitration the state law is imposed on you.
National companies are sticking compulsory arbitration in all consumer contracts. If you read your three page fine print credit card agreement you may be surprised to find that you have given up your right to trial by jury and have agreed to arbitrate any complaint you have under the laws of another state. The same is true of your mortgage and almost everything you buy from a national or international company.
So. Is arbitration evil?
By itself, no. There are times you may agree that between waiting for a trial date and or having arbitration, the latter is the best choice. But, you would make this choice after you have all the facts and have narrowed your dispute, and had the chance to get the advice of your attorney.
What is a person to do?
Right now you should update your general durable power of attorney. Do not give your agent authority to agree to pre-dispute arbitration.
If it is too late and your aging parent cannot execute any new legal documents: do not sign any contract or lease for your parent that has a pre-dispute binding arbitration clause. If you are placing your parent in a nursing home, then cross out the arbitration section. If you cannot do that and there is no alternative nursing home, then arrange to have the contract presented to your parent to sign. That would require the admission person to explain it to the parent/prospective resident.
The best overall solution is for citizens to contact Congressional senators and representatives and let them know “compulsory pre-dispute arbitration” is fine for business but unfair to consumers. The Federal Arbitration Act should be changed so that it applies to businesses and not to consumers.
