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Throw Out Everything You Thought You Knew About Contracts

Wells Fargo

Like the proverbial snake that ate up its own tail, our judicial system is destroying itself for the consumers of America. A new ruling by a United States District Court judge, The Hon. Vince Chhabari, in Jabbari v. Wells Fargo & Co. has thrown out every vestige of legal—or common—sense by ruling that a customer who opened a legitimate bank account is held to a forced arbitration clause in the fine print, and can’t sue in civil court over a fake account the bank opened by stealing his name and personal information. So, the customer, who started getting bank charges and fees stemming from the fake account has to have his case heard by an arbitrator handpicked by the bank who is accountable to no one, in a case to be decided in secret.


In the days of yore, an elementary, fundamental, requirement was that both contracting parties had to have a “meeting of the minds” over the terms of the contract. Each one had to express his or her consent to be bound by knowingly and voluntarily agreeing to the terms of the contract; sneaky clauses containing unfair terms could not be enforced in a court of law. If the contract was drafted by a party with superior bargaining power, and agreeing to it was required, with no opportunity to negotiate the terms, it was said the contract was one of “adhesion.” While such contracts could be valid, they would be strictly construed against the party drafting it, and terms that violated public policy or which were odiously unfair would be unenforceable. All that has changed.

The Hon. Judge Chhabria found that the bank customer would be bound by the arbitration clause found in the routine documents the bank required to open the genuine account. He ruled that Jabbari could not sue Wells Fargo in court, and could not band together with other victims of the same bank fraud to gain enough leverage to put a stop to this heinous behavior. With reasoning that would make a pretzel proud, the judge said that the documents governed the relationship between the customer and the bank, the fraudulent account was part of that relationship, and so even clearly criminal theft of one’s personal information for fraudulent purposes could not be redressed in a court of law.

Forced arbitration completes the corporate wish list of depriving consumers of the right to access our justice system, and grants to them a license to steal without any real recourse for the public. In this sense, the courts have anointed arbitration clauses buried in contracts of adhesion as that license. Those licenses allow more than just the theft of money from individuals, they permit corporations to steal from consumers their publicly held right to access our impartial, public, judicial system governed by rules of law, and safe-guarded by the right to appeal.

Court rulings have now sanctioned forced arbitration even where the charge against the corporation was a violation of federal law—even where the law says that consumers have a clear and explicit right to redress a violation of that law—and even though the consumer was never truly aware that the clause ever existed. If that is not a license to steal, it would be hard to know what was.

It bears remembering, arbitration is a private proceeding, where decisions are secretly made and the law need not be followed by the arbitrator. Each case is separate, so what happens in one can be completely different from another, identical, case. Arbitrators are all but immune from challenge or suit, as they can be removed only for limited reasons, like collusion with a party. But, arbitrators don’t need to collude. They all know which side of the bread is buttered in their favor: too many rulings against corporate interests, and the blacklist swings quickly into effect—for there is no law requiring a corporation to agree to any particular arbitrator for any reason.

So, it is in this manner, courts have allowed corporations to “steal” the justice system from consumers, and bar them from the courthouse door. And, make no mistake: this is an extremely valuable license corporations now hold, likely worth trillions of dollars over a decade or less, when taken in the aggregate of money pilfered from the pockets of the public.

What is particularly indigestible in all this is that the judges who have made these anti-consumer, anti-democratic, rulings are so hostile to the very system they represent. Apparently, in order to satisfy their ideological fealty to corporate interests, they are willing to be the salesmen that sold our justice system to private, corporate, interests.


Related LA Times article: Even in fraud cases, Wells Fargo customers are locked into arbitration


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