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Groups Call for Legislation to Prohibit Mandatory Arbitration

How Mandatory Arbitration Agreements Hurt Consumers

MIAMI, FL -- May 6, 2005 -- Helen Etting, a resident of the Regents Park nursing home, was hospitalized for malnutrition, dehydration, and bed sores before she died in 2001, according to a recent article by the American Association for Justice. Helen's family was not allowed to sue the nursing home in court for her death, however. Although Helen was blind, she had supposedly signed a clause requiring arbitration of any disputes with the nursing home. This "mandatory arbitration clause" was upheld and the family was forced to use an arbitration board.

The case of Helen Etting's family illustrates the problems faced by consumers. Mandatory arbitration clauses are usually in small print, the consumer may not really understand the document, and he or she may be offered no alternative. Often, the consumer does not have a choice of arbitration boards, which may be biased in favor of businesses. Even though arbitration is usually touted as a low-cost alternative to the courts, it is actually more expensive for consumers, according to a report by Public Citizen, a national nonprofit consumer advocacy group. In many cases, arbitration costs are so high that people drop their complaints because they cannot afford to pursue them.

"At Public Justice, we have been repeatedly asked for help by consumers and employees who had strong legal claims, but were being forced into arbitration systems badly tilted in favor of corporate defendants," said Paul Bland, staff attorney (Consumer Action, Press Release, February 24, 2005). "These people find it hard to believe that something so unfair could happen to them in America, but it happens every day. Under our current system, the fine print of binding mandatory arbitration provisions in corporate contracts can and does hurt people who have been ripped off by corporate wrongdoing."

Consumer Groups Campaign to Stop the Use of Mandatory Arbitration Agreements

Recently, over two dozen public interest groups launched a nationwide effort to stop the use of mandatory arbitration clauses (Public Citizen, Press Release, February 24, 2005). In their ten-point call to action, they agree to:

  • Launch web sites to educate consumers about mandatory arbitration clauses. They have created two sites so far-- and
  • List companies that do not use mandatory arbitration clauses.
  • Ask consumers to close credit card accounts that have mandatory arbitration clauses.
  • Urge home buyers to avoid lenders that use mandatory arbitration clauses.
  • Ask consumers to avoid auto dealers that use mandatory arbitration clauses.
  • Call for auto dealers to remove mandatory arbitration from their contracts.
  • Provide bill stuffers for consumers to send with their payments to repudiate mandatory arbitration clauses.
  • Urge membership organizations to insist that partners providing services to their members remove mandatory arbitration clauses from their group contracts.
  • Promote the passage of state laws limiting the use of mandatory arbitration clauses.
  • Call for legislation prohibiting mandatory arbitration clauses, and ask for Congressional hearings on the subject.

"Contracts that trick consumers into signing away their legal rights through binding mandatory arbitration clauses buried in the fine print are not the fair way to do business," comments Sen. Patrick Leahy (D-Vt.) Consumer Action, Press Release, February 24, 2005). "It's an abuse that is quickly spreading, and it's time to blow the whistle and start giving consumers a break."

Brayton Purcell applauds efforts to protect consumers against mandatory arbitration agreements, and belongs to groups that support this position, including American Association for Justice, Public Justice, and Public Citizen. Our firm's senior and founding partner, Alan R. Brayton, currently serves as vice president of the Public Justice Foundation, a nonprofit organization that supports the work of Public Justice.

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