Supreme Court arbitration decision preempts justice

Posted: July 3, 2013 in Uncategorized

I’m a few weeks late the party on this one, but the Supreme Court’s little noticed arbitration decision in American Express vs. Italian Colors shows how little regard the conservative wing of the court actually has for justice and the actual rule of law.

In a post entitled Worst Supreme Court Arbitration Decision Ever, Public Justice Attorney Paul Bland writes, “The decision is catastrophic for the antitrust laws, as well as for civil rights, consumer rights, and many other statutory rights. The decision is an unmitigated disaster, replacing adhesive contracts for the ideas of actual law. The drafters of the FAA [Federal Arbitration Act] would not recognize what it has turned into.”

I agree, and also think it’s a shame that the significance of the decision got lost in light of the DOMA and other Supreme Court rulings. The fact is that arbitration has become a private alternative justice system and that conservative justices on the Supreme Court and state and federal courts at the behest of large corporations are busy restricting access to the courts by anyone but the wealthy and large corporations.

In it’s ruling, the court went against years of rulings in small business arbitration, which repeatedly found that in order for arbitration clauses to be upheld, they had to permit the plaintiffs in the case to have the ability to effectively vindicate their statutory rights, as Bland notes.

In this decision, the court stated that it didn’t matter that to prove its case, the plaintiffs had to spend a prohibitively expensive amount while they had the ability to only recover small amount of money. What mattered was that they had the formal right to arbitrate, regardless of whether it made any economic or practical sense to exercise that right.

So essentially the Supreme Court said that the form of the law matters more than the substance. And unfortunately for consumers, small businesses and anyone else who is treated unfairly and must arbitrate, that is the view that will now be enforced nationwide, making it more likely than ever before that more consumers and small business owners will be forced to sign adhesion contracts that mandate arbitration.

Effectively, we’re all out of luck now pending legislation that reverses this decision. The implications are chilling — small businesses and consumers will no longer effectively be protected by antitrust provisions, notes Mother Jones in an article “The Supreme Court Just Made it Easier for Big Business to Screw the Little Guy.” As an example the article notes that employees could be forced to waive anti-discrimination rights via an arbitration clause in an employment contract while consumers might be forced to waive rights under the Truth in Lending Act in an adhesion contract in an agreement with a financial services company.

As Supreme Court Judge Elena Kagan notes in her dissent to this decision, it is “a betrayal of our precedents and of federal statutes like anti-trust laws.” Large corporations could — and most likely will — have a field day creating contracts that immunize themselves from any law that might impede their freedom of action, to our collective detriment.


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