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The Largest Heist In History


No, it is not a theft of millions of dollars worth of jewels, nor a bank robbery of tens of millions of dollars. It is not even the theft of billions of homeowners’ dollars during the mortgage/credit default swap scandal. It is in fact the hijacking of the entire civil justice system by Corporate America, with the aid of Congress and the blessing of our U.S. Supreme Court. The cost to all of us as consumers will be in the trillions!

In the latest, and perhaps capstone decision, shielding corporations from theft of consumer money, even from fraud, our Supreme Court in American Express v. Italian Colors has ruled that forced arbitration clauses can be enforced by corporations to prevent consumers from banding together in a class action to stop them from stealing relatively small amounts of money from their customers.

By preventing the class action remedy, they effectively eliminate any practical possibility of being held accountable because it would cost each individual consumer far more to arbitrate the case for return of their own money than they could ever recover even if they win their case. This means that companies with millions of customers can suck out tens or even hundreds of millions of dollars from their customers every year, or even every month, and get away with it. And, this is so even if the corporation is in violation of federal law in charging fraudulent or otherwise illegal fees!

Further, a little-understood aspect of the zealous endorsement of arbitration as a means of civil dispute resolution is that it is no longer truly a matter of the free and willing consent of both parties.

This has got to be fought, and it now looks as though the only remedy will be legislative. Congress must be pressured by the public to restore our civil justice system — it must be owned by the public, not corporations.

— Ronald L. M. Goldman

The original concept of arbitration was that parties of relatively equal bargaining power could decide to enter into a contract to settle their disputes in private arbitration. That quaint concept is now deader than a doornail. Forced arbitration is now the corporate order of the day. Every major corporate service now comes with pages of fine print “agreements” that contain arbitration clauses. Theoretically, one need not use the service, and thus avoid the “agreement.” That’s nice, but just try getting cell phone service, or utility service, or a credit card, or opening a bank account, for instance, without an arbitration clause being forced upon you. So, as a practical matter, we all have to get these services and succumb to forced arbitration.

Even worse, the civil justice system is hollowed out by this system of arbitration. Arbitrations need not be, and almost never are, public. Arbitrators are not bound to follow any particular law, even though they often claim to do so. The consumers’ claims cannot be tested because there is no appeal from an arbitration decision on the grounds that the arbitrator didn’t follow the law, or misinterpreted the law, or even misunderstood the facts and/or law. There is no appeal from an arbitrator’s findings of fact, no matter how tortured. In short, there is no judge looking over an arbitration decision to make sure it is fair and just, or even if it makes sense.

There is no requirement that an arbitrator write an opinion that everyone in the legal community, the press or consumers at large can read. The system is secret; it operates out of the sunshine of scrutiny that characterizes our justice system. Since the corporation pays some or even all of the arbitrators’ fees, and is a repeat customer of the arbitrator, one need not tarry long over whether corruption, albeit sub silencio, will creep in — assuming it has not already done so.

We encourage our clients and all consumers to contact their US Representative and US Senator and urge them to reform The Federal Arbitration Act to eliminate forced arbitration and restore citizens' rights to access the civil justice system.

While overt, provable corruption is one of the few ways one can challenge an arbitrator or his/her decision, it is well to worry that professional arbitrators will be influenced because they understand that “he who pays the piper calls the tune.” If one wants repeat business, one might be inclined not to bite the hand that feeds it too many times, or too harshly anytime, even if the facts and law — in a real court — would warrant it. In short, these proceedings can take on the characteristic of “Star Chamber” proceedings, resembling kangaroo courts more closely than courts of justice.

Finally, the ubiquitous nature of arbitration clauses robs the law of the development so necessary to a civilized society. It robs the consumer of the predictability provided by law written and administered by judges, most of whom are accountable to the people, and all of whom are subject to impeachment.

Arbitration can, therefore, be arbitrary. Corporations can extract their pound of flesh from the public, freely looting a little at a time from each, amounting to vast sums over the years in the aggregate, comfortable in the knowledge that there is not, as a practical matter, a damn thing you can do about it.

This has got to be fought, and it now looks as though the only remedy will be legislative. Congress must be pressured by the public to restore our civil justice system — it must be owned by the public, not corporations.

These thoughts are mine, and mine alone — at least as of this writing.

Ronald L. M. Goldman
Trial Lawyer, Arbitrator, Mediator
Baum Hedlund Aristei & Goldman PC

Originally published by Law360, New York (June 25, 2013, 3:54 PM ET)



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