
Arbitration Everywhere, Stacking the Deck of Justice - dnetesn
http://www.nytimes.com/2015/11/01/business/dealbook/arbitration-everywhere-stacking-the-deck-of-justice.html
======
makecheck
It's not just the length of the initial contract, it's the lack of a sane
"diff" system.

Even if someone is willing and able to read a 44 page contract the first time,
the next time version 1.0.1 of something comes out you are generally given a
44.5 page contract to re-agree to. "Somewhere" in there, they changed
something; good luck figuring it out. So even if the version you read gave you
permission to sue, the amendment that you clicked-through-in-agreement later
may have given away that right (an amendment they probably made because
somebody sued them).

We solved this type of thing years ago, the solution just hasn't made its way
into legalese: use revision control. I wish that large documents were:

\- Publicly revision-controlled with a system that has clients everyone can
easily use (i.e. no arcane commands, and push-buttons for the most common
things like "compare to last version").

\- Public accountability for the entire revision history of every single line.
If somebody wants to add [Horrible Clause A] two months after I first signed
it, then I get to know exactly who made the change and if I want to I can take
a look at other changes they've made to other documents.

~~~
nickff
What if arbitration clauses are not a problem at all? There is a great deal of
contradictory evidence with respect to whether arbitration is more or less
favorable to consumers and employees (though it is definitely very bad for
class-action lawyers). But even if we assume for the purpose of argument that
consumers always lose disputes which are arbitrated, they may be willing to
make that trade in exchange for reduced prices on goods and services, as well
as higher salaries.

~~~
jcfrei
That's a good point. One could just argue that in time consumers will just
favor contracts with companies that either don't have arbitration clauses or
if they do the consumer doesn't care anyway about losing potential disputes. I
think it's only really a problem when a company holds a (quasi) monopoly in a
certain business. Like telcos do in the US in many states.

~~~
wpietri
One could argue that. But markets are mainly good at solving problems that
occur frequently and with short feedback loops. The sort of problems that lead
to class action lawsuits are rarely either, let alone both.

------
hackuser
I'm disappointed that consumer research organizations, such as Consumer
Reports, don't include these issues in their reports. For example, their
review of many products could include:

* Legal control: Is it free/open? Is the user just a licensee?

* User privacy: Is user data collected? How much? Can the user access it? Does the user control it?

* Legal recourse: Is arbitration required? Are class actions banned?

These issues have a large impact on consumers; I don't understand why they are
overlooked. It also would raise awareness, a necessary step in addressing with
them.

------
hwstar
Governor Brown vetoed AB 465 which could have helped put a stop to this with
regards to employees having to arbitrate instead of having their day in court.
His reason for vetoing AB 465 was that Federal law pre-empts state law. The
federal government is too tightly controlled by large corporate interests, and
I don't see reform of the Federal Arbitration Act happening any time soon.
There are just to many powerful interests with a lot at stake, who would lose
if arbitration were reformed at the Federal level. Maybe we should put this on
the ballot as an initiative instead. At least it would send a message.

The problems with arbitration is that it does not affect court precedents, the
records are private, and there's no jury involved. This all weighs heavily in
favor of the employer over the employee.

------
matheweis
I suspect the fine print will eventually be outlawed for use on the average
consumer (unless we radically increase the education of the average consumer).
It is well established by now that today's average consumer lacks the reading
comprehension level required to fully understand these fine print agreements.

~~~
mikeash
I don't know that it's about reading comprehension. I think most consumers
could understand them if they put the effort in.

The problem is simply that _people don 't read this stuff in the first place_.
They simply sign without reading, assuming/hoping/praying that the terms are
reasonable.

And really, can you blame them? Contracts are so vastly overused and they're
made with the assumption that the consumer isn't going to read them. Most
companies won't give you a two-page contract if a twenty-page contract will
do. Many contracts are excessively long and are part of a sales process built
on speed that assumes nobody will take the time to read before signing.

I would like to see a change in how contracts are handled, such that if one
side knows the other side didn't read before signing, the contract is void.
That wouldn't take care of everything (American Express's contract is probably
handled by mail, so they can reasonably expect you to read the contract at
leisure in your home before you sign) but it would put a stop to abusive
situations in retail, where they had you a bunch of paperwork to sign. If they
had to actually watch you and make sure you read it all before signing, the
contracts would probably become a _lot_ shorter. If people got used to reading
the things, then it might even change their habits for other scenarios like
doing stuff through the mail.

However, I also think it is completely insane that contracts are allowed to
put any restrictions on either party's access to courts. The whole point of
courts is to be the arbiter when something goes wrong. A clause saying that
you must use some third-party arbitration service instead of the courts, or a
clause saying that you agree not to participate in class-action lawsuits,
should be completely unenforceable, just like a clause that says you agree to
become the other party's slave.

~~~
m_fayer
>Most consumers... They simply sign without reading...

You seem to be implying that many people on HN do read them, and if that's the
case, I would be very surprised. I certainly don't. There's frequently a new
EULA I have to consent to when I update iOS, or iTunes, or some app, or sign
into a cloud console, and the list goes on. If I read all of them it would
probably add up to a good workday every week. I'm willing to bet that the
number of people who are willing to devote that large a chunk of their lives
to reading EULAS is somewhere near zero.

~~~
BlackFly
I edit the HTML on most end user agreements I sign to read, "I disagree and
waive no rights," then I click that button.

I wonder in what sense these agreements are enforceable when they cannot prove
that people actually agreed with them? Hard copies of contracts are kept for a
reason, I always assumed.

~~~
morninj
Unfortunately, changing the text on your end has no legal effect. It's not a
contract unless the other party agrees to your change.

~~~
mikeash
Turning into "not a contract" is a legal effect, though, and typically it's
the desired one.

When there's a EULA or similar, the company is trying to form a contract with
you, usually with lots of unfair terms.

If replacing the text with your own and clicking a button that you renamed
from Agree to Disagree voids the whole thing, well, mission accomplished.

There would only be a problem if the law says that not only does your
modification not form a contract, but that you acted in such bad faith that
you actually still somehow agreed to the _original_ contract.

~~~
srtjstjsj
"voiding the whole thing" means you don't have a license to the software
either.

~~~
mikeash
Software doesn't necessarily need a license. Purchasing software can be simply
a matter of handing over money in exchange for a copy of the software. Free
downloads can simply be a matter of downloading a copy of the software. EULAs
are everywhere, but not because they're _necessary_ , only because software
makers see some advantage in using them.

------
powera
I'm going to take a contrary point of view: Class action lawsuits (where a
group of customers sue a company that they purchased a product from) are
almost always pointless and expensive wastes of money, and we should encourage
contracts to forbid them.

* Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product.

* The threshold for what can be the basis of a class-action is extremely low.

* A good portion of "legitimate" class-action suits could also be construed as federal fraud / false advertising suits. (the example of a bank selling insurance that couldn't possibly be used would be an example)

All of these are different from, say, a town suing a company for environmental
damage. In that case, there's no contract between the individual citizens of
the town and the company, so this trend won't impact those lawsuits at all.

~~~
wpietri
You're missing the social value of class action lawsuits.

There are basically three ways to have reasonably well run open markets:
individual action, state action, and collective action.

Individual action often makes no sense. If a company shafts me for $10, I'm
not going to spent the thousands or millions necessary to prove the error.
I'll just write it off and be less trusting next time. But if a company can
screw each American out of $10, they've made $3.2 billion, which is a great
incentive, and also provides for fantastic legal defense. Net result: a lot of
people have bad experiences, reducing consumer trust and making innovation
harder.

State action is also often problematic. It's not bad at some things. But
especially at HN, we don't want to encourage this as the primary means of
market regulation. Governments are slow to move and risk averse. It's easier
and safer for them to over-regulate, favoring incumbents and limiting
innovation to what they can be persuaded to permit. (See, e.g., the car
market.)

Class action, on the other hand, fills an important gap. Companies know that
they can't just screw everybody without risking a big lawsuit and a big
payout. But plenty of problems get solved without government having to
intervene. Class action basically allows for a "forgiveness, not permission"
model for regulation. As long as your customers are happy and you treat them
fairly, your risk is low.

If class action stops working as a way of redressing grievances, we'll see a
lot of people agitating for increased government regulation. As an
entrepreneur, I'd hate to see that happen.

~~~
dd36
This is a great response. Maybe there is another way to prevent class action
abuse but it's not through forced arbitration.

My small claim was removed to arbitration against my objections, and they
actually mention me in the NYTimes article: [https://medium.com/p/faq-
citibank-the-aaa-and-arbitration-my...](https://medium.com/p/faq-citibank-the-
aaa-and-arbitration-my-experience-fighting-for-quick-dispute-
resolution-427281c3b134)

------
bickfordb
I think it would be much better to make these obligatory consumer and employee
contracts unenforceable to begin with instead of trying to fix this
arbitration issue. They are predatory and exist only to protect the interest
of these corporations. Everyday life shouldn't be a legal negotiation.

~~~
joshuaheard
I would argue they are unenforceable "adhesion" contracts, which are basically
non-negotiable contracts where one party has more power over the other, such
as rental car, cell phone, and back of the form type contracts. Arbitration
clauses are not some giant conspiracy by big business. The courts have been
pushing it for years. True, they found a loophole to avoid class action suits,
but this could be easily remedied by the legislatures.

------
jimrandomh
It's a symptom of collapsing faith in the American judiciary. Individuals
can't trust that innocence and good faith will protect them, and corporations
have the same problem. This is their solution.

------
dd36
You can read about my experience having my small claim removed to arbitration
here: [https://medium.com/p/faq-citibank-the-aaa-and-arbitration-
my...](https://medium.com/p/faq-citibank-the-aaa-and-arbitration-my-
experience-fighting-for-quick-dispute-resolution-427281c3b134)

The NYTimes mentions me but completely skips the small claims removal portion,
which is a bit frustrating. Right or wrong, individuals should be allowed to
resolve disputes quickly and cheaply.

------
rayiner
Above all, the purpose of arbitration clauses in consumer contracts is to
eliminate class action lawsuits. Which may or may not be a good thing
depending on your point of view. In the long run, companies will probably not
see sustained relief from scrutiny of their practices. You'll likely see a
move to a more European model, with fewer lawsuits but more aggressive
consumer protection agencies.

------
scintill76
> At the other end of the spectrum, the chamber also criticized so-called
> coupon lawsuits that generated big paydays for lawyers and little money for
> consumers.

So what? If the customers feel they were wronged and the court agrees, the
company should give restitution. It is sad that the victims will get hardly
anything, but getting 0.05% of a wrongfully-charged fee back is better than
0%. And the class suit was the only way a large malicious corporation would
ever be held accountable, but they're trying to distract from that by
complaining that someone else gets their money that was found to be unlawfully
obtained.

> In interviews, corporate executives and defense lawyers predicted that
> consumers would use arbitration once it became more familiar.

So the old way was bad because ambulance-chasing lawyers sucked up all the
money. Now there's hardly any consumer recourse happening, but it's OK,
eventually they'll start hiring some lawyers... who for some reason will be a
good deal for the consumers this time. It's a good thing we have a coalition
of banks' lawyers looking out for the consumers' interests. /s

> “Clients were telling me they were getting killed by frivolous lawsuits and
> asking me what on earth could be done about it,” Mr. Kaplinsky said.

If a lawsuit can "kill" you, was it really frivolous? I am considering both a
plaintiff-won suit that extracts millions from the company, or a plaintiff-
lost suit that cost the company tens of thousands to defend. It would seem to
me that in the former case, the judge decided they were in the wrong, so it's
not frivolous. In the latter case, the more it costs to defend, the more
likely it is that the plaintiffs had a reasonable complaint. I know I'm
biased, but am I being naive here? It also bothers me to hear a complaint
about what a corporation finds "frivolous" when the individuals on the other
end are facing fraudulent charges, sub-minimum wages, and unchecked
monopolostic abuse -- "frivolous" is the least of the individuals' complaints,
by why is only the huge corporation's concerns protected by the law here?

------
kelukelugames
The post is about consumers but there are cases when an employers's binding
arbitration agreement is void. I am writing an article and will post when
finished. It's important that employees know our rights.

------
nabla9
This is why strong consumer protection laws and regulation is good. They
generate set of standards for enforceable contracts and remove surprises.

~~~
vezzy-fnord
Yet it appears a significant reason for the emergence of this phenomenon is
the regulatory statute of the FAA which elevates arbitration to the same
standard as contracts, and preempts state decisions on their enforcement, and
moreover has had its restrictions (i.e. ability to waive class action in
arbitration clauses) subsequently reaffirmed by SCOTUS.

As such, this has only _created_ more surprises. But it's a folly to call it a
failure due to lack of regulation, since this all takes place in an
environment that is already heavily, and in fact often incomprehensibly
regulated. The verbosity of standard-form contracts isn't incidental.

~~~
rayiner
That's a very misleading characterization. The purpose of the FAA is to
eliminate judge-created exceptions to enforceability of arbitration contracts.
The premise is that arbitration clauses should be enforced the same as any
other voluntary contractual provision and that the judiciary shouldn't be
allowed to give such provisions special treatment. The verbosity of form
contracts has nothing to do with regulation or the FAA, except to the extent
that they waive "default rules" which often protect consumers.

~~~
vezzy-fnord
Thanks for clarifying.

------
ccvannorman
In a law-heavy society, the rich, powerful and savvy can easily wield law
preparation to exploit the average joe. It's been trending that way in the US
since the beginning.

~~~
rayiner
And in a law-light society what happens when your phone company charges you
$600 to cancel?

~~~
kazagistar
They hire their thugs to break your kneecaps when you don't pay.

------
PythonicAlpha
When this sets precedence, the possibilities for customers to defend their
rights will be largely diminished.

One further step in direction to almighty international corporations and
right-less countries and people. Already, many countries are regularly
blackmailed by the big corporations.

The TTIP proceedings are also controlled by the industry lobbyists -- that is
the reason, that those are kept so secret, that even the parliaments of EU
countries are not allowed access to the data. With such regulations like TTIP,
the possibilities to abolish customer laws in the countries will be also
largely enlarged.

------
micwawa
Perhaps companies that choose not to do this can market their products with an
"100%-arbitration-clause-free!! " slogan somewhere. Then we could hope this
catches on.

Corporations are assuming that we don't pay attention to this. It's OK to give
an app or a business a 1-star review on the reason that the arbitration clause
makes you uncomfortable.

------
jsprogrammer
Arbitration should probably be a near mandatory starter. What shouldn't be
allowed, however, is absolute binding arbitration, where, constitutionally
guaranteed, access to courts is disallowed.

Probably, a public arbiter would be highly successful. There is great need for
arbitration and those who do it best could be rewarded appropriately.

------
jimktrains2
I've always wondered: since I don't have the ability or power to negotiate
these contracts, are they even a legal contract regardless of if I agree to
them?

Moreover, as a consumer, all (or nearly all) establishments that sell similar
products use similar contracts, so do I actually have a choice?

~~~
waqf
They are generally legally enforceable contracts but sometimes not: see
[https://en.wikipedia.org/wiki/Contract_of_adhesion](https://en.wikipedia.org/wiki/Contract_of_adhesion).

------
guelo
The term activist judges is normally used against liberal judges but the
corporate lawyers that Bush installed into the federal courts have been
overturning long established laws and precedents at an astonishing pace.

------
raj_o
I am very familiar with arbitration agreements and how they both are enforced
and came about. For years companies have tried in vain to get theses clauses
accepted by the courts and failed, until recently when SCOTUS chimed in with
their decision: Congress wanted the Federal Arbitration Act (FAA) of the 1920s
to be the law of the land and forced arbitration was considered statutorily
okay.. The FAA [
[https://en.wikipedia.org/wiki/Federal_Arbitration_Act](https://en.wikipedia.org/wiki/Federal_Arbitration_Act),
1925] originally was a maritime law, where two parties in different countries
would rather pick an arbiter to decide their dispute rather than in any one
country.

What may surprise people is it's not just the signing of a contract, which
enables this clause to be enforced, but also just a business' intent to settle
cases arbitrarily. For instance, opening up a package of something you just
bought might show intent that the contract therein is what you agree to. One
nurse wasn't going to sign her rights away to an arbitration agreement, so she
told her company 'no' to renegotiating her employment contract. But the courts
upheld that she knew the intent of her employer and forced her into
arbitration.

These companies are hiring their own judges, basically. What's scary is that
these just aren't private contracts, and private court systems we are dealing
with -- but private law!

SCOTUS ruled recently that even if the parties do not like the outcome of the
arbitration decision, they have no legal recourse. Imagine going into a
situation where a company knows the history of a judges decision and you do
not? How incredibly unfair, let alone intimidating. I wouldn't even bother to
sue, would you?

I won't go on about this. I can write a lot. Here's a list of links I
collected about companies shorting the normal process of laws that protect
citizens. The area is non-compete agreements:

[http://www.marketwatch.com/story/more-firms-requiring-non-
co...](http://www.marketwatch.com/story/more-firms-requiring-non-compete-
agreements-2013-07-05)

[http://www.lexisnexis.com/legalnewsroom/labor-
employment/b/l...](http://www.lexisnexis.com/legalnewsroom/labor-
employment/b/labor-employment-top-blogs/archive/2012/11/26/u-s-supreme-court-
arbitrator-must-decide-on-validity-of-noncompete-agreement.aspx)

[http://rickmasseyblog.com/2010/10/04/are-you-trapped-by-a-
no...](http://rickmasseyblog.com/2010/10/04/are-you-trapped-by-a-non-compete-
agreement-with-your-last-employer/)

[http://www.romingerlegal.com/floridacourts/court_opinions2/5...](http://www.romingerlegal.com/floridacourts/court_opinions2/5D01-2298.op.html)

[http://apps.americanbar.org/litigation/committees/adr/articl...](http://apps.americanbar.org/litigation/committees/adr/articles/winter2013-032713-federal-
arbitration-act.html)

[http://www.justice.org/cps/rde/justice/hs.xsl/19905.htm](http://www.justice.org/cps/rde/justice/hs.xsl/19905.htm)

[http://www.flacorplaw.com/Non-Competes.html](http://www.flacorplaw.com/Non-
Competes.html)

[http://thenoncompeteblog.com/2013/01/18/prominent-florida-
ch...](http://thenoncompeteblog.com/2013/01/18/prominent-florida-chef-sued-
for-violating-non-compete-agreement/)

[http://floridamediationgroup.com/articles/spero/2000_Employe...](http://floridamediationgroup.com/articles/spero/2000_Employer_employee_non-
compete_agreements_in_florida.html)

__[http://www.noncompetenews.com/?tag=/Arbitration](http://www.noncompetenews.com/?tag=/Arbitration)

[http://www.franczek.com/frontcenter-Nitro-
Lift_Arbitration_N...](http://www.franczek.com/frontcenter-Nitro-
Lift_Arbitration_Non-Compete_Agreement.html)

__[http://articles.chicagotribune.com/2012-08-01/jobs/sns-20120...](http://articles.chicagotribune.com/2012-08-01/jobs/sns-201207251300
--tms--careersntp--h-a20120801-20120801_1_mandatory-arbitration-arbitration-
clause-mandate-arbitration)

[http://www.youtube.com/watch?v=quZL7WKLXt4](http://www.youtube.com/watch?v=quZL7WKLXt4)

------
ddlatham
Previously submitted:
[https://news.ycombinator.com/item?id=10482504](https://news.ycombinator.com/item?id=10482504)

------
srtjstjsj
> "Claims are decided by a neutral arbitrator."

1\. Why can't consumers take a class action to an arbitrator for resolution.

2\. Why can't consumers shut down these arbitrators, by suing with a claim
that the arbitrators are not neutral? It is impossible for a company to
single-handedly choose a "neutral" arbitrator.

~~~
giaour
Many of the clauses reprinted in the article specify "individual arbitration."

------
ksk
It should be illegal to "sign away" legal protections that you're afforded
under the law.

~~~
Zigurd
It probably should not be uniformly illegal. For example, settling a lawsuit
generally involves promising not to sue. Perhaps such agreements need to be
supervised, which would take them out of the domain of "click-through"
contracts.

~~~
fineman
That's not even an important requirement though. If you settle a lawsuit and
then sue anyways the judge can look at the original issue and the aftermath
and choose to throw it out as you have been compensated at that point.

------
venomsnake
Many companies make opt out clauses - can we make an program that does
automatically?

~~~
ipsin
I've never heard of that. Can you provide one example of a company that allows
you to opt out of binding arbitration?

~~~
flyt
Dropbox:
[https://www.dropbox.com/privacy#terms](https://www.dropbox.com/privacy#terms)

Opt-out of Agreement to Arbitrate. You can decline this agreement to arbitrate
by clicking here and submitting the opt-out form within 30 days of first
accepting these Terms.

Which links to
[https://www.dropbox.com/arbitration_optout](https://www.dropbox.com/arbitration_optout)

~~~
srtjstjsj
Wow that's a skeezy place to bury it. Their email drip spampaigns don't remind
me to check the arbitration options when they tell me all about how to make
the most of my new account.

------
vinceguidry
Dispute resolution is a problem where there are always more disputes to
resolve than there are resources to do them adequately. There's a reason
lawsuits are the exclusive domain of the wealthy, because if we let everyone
use the system, it would collapse under its own weight.

The right way to solve resource allocation problems is through the market
which inevitably makes tradeoffs. Arbitration is just such a market solution.
What's nice about market solutions is that we can regulate them. But it takes
a long time to know what the regulations should be. Until then it's buyer
beware.

------
giaour
Wait, isn't this the exact kind of abuse the CFPB was created to address? Why
haven't they taken any steps to curb this behavior among banks?

------
waitingroom
Hey thanks for that - I just got my first credit card in years and just
managed to come in under the 45-day wire to opt out of that clause.

------
kazagistar
This is the second step of undermining individual liberties in favor of
corporate oligarchies, by subverting the justice system. Thr first step, of
course, was subverting the legislative system via citizens united, turning
elections into bidding wars.

There isn't much left to do now except slowly turn the dials.

EDIT: I guess the obvious next step is subverting state authority entirely,
through things like the TPA, that put corporate interests above that of
"democratically" elected states.

------
CodeWriter23
The most concerning thing to me in this article is the account of SCOTUS
rewriting the Federal Arbitration Act from the bench.

~~~
srtjstjsj
Eh, once Congress starts acting in bad faith against citizens, what's the harm
in SCOTUS exceeding its authority? The law derives is legitimacy from its
effect on the society it governs, not from the grace of God.

