Forced Binding Arbitration & Access to Justice

Imagine you sign a contract for a cell phone. You agree to pay $50 per month. At the end of the month you get your bill and it’s $200 instead of the agreed upon amount. Now, imagine you’re one of 10,000 customers that the phone company has done this to. You meet with a lawyer, you form a class and sue the phone company. A class action lawsuit is born.

Not so fast, says the phone company, you signed a contract. In the contract is an arbitration agreement. We can’t go to court, we must go to arbitration. And, by the way, there are no class actions in arbitration. You must proceed on your own. If you lose, you pay for your own legal fee plus the fees of the phone company. Sound fair?

The New York Times has published a three part series about forced arbitration clauses in consumer contracts. These clauses, slipped into contracts ranging from cell phones to nursing, strip a consumer from their ability to sue or form a class action. Instead, consumers are forced to arbitrate their cases.

I’ve written before about the dangers of forced arbitration. (See Class Dismissed: Concepcion and the End of Class Arbitration). Over the last few years, as the New York Times reports “it has become increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration. The same applies to getting a job, renting a car or placing a relative in a nursing home.”

Corporations are increasingly filing – and winning – legal motions to force plaintiffs in federal class actions out of the courts and into private arbitration hearings. In arbitration, plaintiffs must pursue claims as individuals and in private proceedings. The problem is that most damages are very low, often less than $100, while legal fees remain sky high. The Economic Policy Institute Explains:

Giving up the constitutionally protected right to sue in state or federal court is a big deal and is often the result of ignorance and deceit: millions of people have no idea the clauses are there in the fine print of contract provisions written in legalese that few individuals ever read or comprehend. They don’t find out they’ve lost their rights until they need them.

Individuals give up not just their right to go to court but all protections regarding the venue of any hearing their claim will receive (for example, the agreement might require arbitration in a city a thousand miles away). They might give up certain remedies and the right to appeal even if the arbitrator gets the law completely wrong, and give up the essential right to join with other victims to file a class action, especially important when each claim is small and no single individual could rationally pay to hire a lawyer and bring a lawsuit for such a small sum.

The myth is that arbitration is preferable because it allows individuals to resolve their grievances easily, quickly, and cheaply. In fact, arbitration can be more expensive for a plaintiff than a civil suit because instead of a small filing fee in court, the plaintiff will have to pay half of the arbitrator’s fee, or sometimes all of it if the arbitration clause includes a “loser pays” provision. Legal fees can be ruinous, and the Times story relates the case of a woman who owes $200,000 in attorney fees after losing a case in which her former employer allegedly destroyed evidence.

With businesses using forced arbitration, consumers are unwittingly giving up their right to sue in a traditional forum – the court room. As was the case in AT&T v. Concepcion. In AT&T v. Concepcion, customers said the company had promised them a free phone if they signed up for service, and then, when they didn’t get the free phone, charged them $30.22 for it anyway. While these damages may seem trivial, multiplied by the number of consumers affected, the damages would be significant as a class.

Forced to arbitrate as an individual over the $30 fee, the costs of arbitration and the risks of losing and paying legal fees for both sides, outweigh the benefits of proceeding through the process and remedying the wrong.

The costs associated with arbitration are too high and the risks too great for consumers to proceed and get the justice they deserve. For example, the data on consumer arbitration obtained by The Times shows that Sprint, a company with more than 57 million subscribers, faced only six arbitrations between 2010 and 2014.

Forced arbitration clauses are just another tool to prevent access to the courts and whittle away the rights of consumers.

via Forced binding arbitration robs workers and consumers of basic rights | Economic Policy Institute.

See also Arbitration Everywhere, Stacking the Deck of Justice – The New York Times.

Traumatic Brain Injuries on the Playground

Playgrounds aren’t always fun and games according to a new study. Researchers found that children are increasingly being diagnosed with traumatic brain injuries after a run-in with playground equipment.

Researchers from the National Center for Injury Prevention and Control looked at injury rates for kids under 14 from 2005 to 2013 and determined that there was a significant increase in children going to the emergency room for traumatic brain injuries. Boys accounted for 58.6 percent of the TBIs identified while 50.6 percent of children between the ages of five and nine had injuries, according to a study published today in the Pediatrics Medical Journal.Most playground-related TBIs were associated with monkey bars and swings, according to researchers.

The authors theorize that the rise in injuries can be attributable to two reasons: increased playground time for kids and increased awareness among parents and doctors about the dangers of head injuries.”It is also plausible that heightened public awareness of TBI and concussions has prompted parents to seek medical care for their children in the event of a head injury, when previously they would not have done so,” the authors wrote.

Source: More Children Are Suffering Traumatic Brain Injuries at the Playgro.. |

Medical Malpractice: The 1% of Doctors

The New England Journal of Medicine has analyzed data that 1% of physicians account for approximately 32% of paid medical malpractice claims. The data – which was pulled from the National Practitioner Data Bank – shows that over a recent 10-year period, a small number of physicians with distinctive characteristics accounted for a disproportionately large number of paid malpractice claims.

A study of 70,000 malpractice claims against approximately 55,000 doctors from 2005 through 2014, the Journal analyzed data with the hope of understanding the distribution of malpractice claims among physicians.

Among all of the physicians with paid claims, 84% incurred only one malpractice claim during the study period, which accounted for 68% of all paid claims. Of the remaining physicians, 16% had at least two paid claims during the relevant time frame, accounting for 32% of the claims.The last 4% of doctors had at least three paid claims (if not more), accounting for 12% of the claims.

Physicians who had three paid medical malpractice claims have three times the risk of incurring another paid medical malpractice claim in the future. Practitioner speciality also plays a role: the risk of malpractice among neurosurgeons, for example, was four times as great as the risk among psychiatrists.

The Journal’s conclusion boils down to this startling fact: “A small number of physicians with distinctive characteristics accounted for a disproportionately large number of paid [medical] malpractice claims.”

Source: 1% of Physicians Account for One-third of Paid Medical Malpractice Claims | The National Trial Lawyers

Avoidable Medical Errors: The Third Leading Cause of Death in America

The Center for Justice & Democracy reports that according to the report, published in the Journal of Patient Safety, ‘between 210,000 and 440,000 patients each year who go to the hospital for care suffer some type of preventable harm that contributes to their death,’ the study says. Only heart disease and cancer cause more deaths in America than avoidable medical errors.

Source: Marshall Allen, “How Many Die From Medical Mistakes in U.S. Hospitals?” ProPublica, September 19, 2013, cited in CJ&D’s Briefing Book: Medical Malpractice – By The Numbers (p. 77)

Source: Spotlight: Avoidable Medical Errors Are the Third Leading Cause of Death in America |

Government may soon begin putting an end to forced arbitration clauses

arc_1The Consumer Financial Protection Bureau is examining so-called arbitration clauses in terms and conditions for financial products. Last week, the head of the bureau, Richard Cordray, sent the strongest signal yet that the regulatory whip soon will come down on banks and other lenders denying customers their day in court if they feel mistreated.

“By inserting an arbitration clause into their contracts, companies can sidestep the legal system, avoid big refunds and continue to pursue profitable practices that may violate the law and harm consumers,” he said in a speech to the American Constitution Society.

“Companies should not be able to place themselves above the law and evade public accountability simply by inserting the magic word ‘arbitration’ in a document and dictating the favorable consequences,” Cordray said. “Consumers should be able to join together to assert and vindicate their established legal rights.”

Forced arbitration has become a routine part of many companies’ dealings with customers, thanks to the U.S. Supreme Court, which has issued several rulings in recent years upholding the practice.But under the financial reform law enacted in 2010, the Consumer Financial Protection Bureau was empowered to study forced arbitration by financial services firms and to issue new regulations if deemed necessary. It now seems certain that rule changes are in the works.This would affect banks, credit card issuers and other firms falling under the agency’s jurisdiction.

It wouldn’t affect non-financial businesses that also inflict arbitration clauses on customers, such as phone companies, pay-TV providers, rental car firms and others.That would take an act of Congress.

Lawmakers recently introduced a bill in the U.S. Senate called the Restoring Statutory Rights and Interests of the States Act. It would forbid companies from making customers waive their right to sue or join a class-action lawsuit.

Source: Government may soon begin putting an end to forced arbitration clauses – LA Times

Dow Chemical Says Scalia’s Death Doomed Class-Action Challenge

The impact of Justice Antonin Scalia’s death is already being felt in major business litigation with news Friday that Dow Chemical is settling an antitrust class-action lawsuit in part because the company lost a likely ally on the high court. Dow will reportedly settle the price-fixing class action suit involving 6 different chemicals for a whopping $835 million.

“With the untimely, unfortunate death of Justice Scalia, it leaves in question the current structure of the court,” Dow Chemical spokeswoman Rachelle Schikorra told WSJ. “With this changing landscape, the unknowns, we just decided to put this behind us.”

Source: Dow Chemical Says Scalia’s Death Doomed Class-Action Challenge – Law Blog – WSJ

J&J Must Pay $72 Million Over Talc Tied to Woman’s Cancer

From Bloomberg Business News:

Johnson & Johnson must pay $72 million to the family of a woman who blamed her fatal ovarian cancer on the company’s talcum powder in the first state-court case over the claims to go to trial.

Jurors in St. Louis on Monday concluded J&J should pay $10 million in compensatory damages and $62 million in a punishment award to the family of Jackie Fox, who died of ovarian cancer last year after using

Johnson’s baby powder and another talc-based product for years.
It’s the first time a jury has ordered J&J, the world’s largest maker of health-care products, to pay damages over claims that it knew decades ago that its talc-based products could cause cancer and failed to warn consumers.

The case is Fox v. Johnson & Johnson, Cause No. 1422-CC09012-01, Division 10, Missouri Circuit Court, 22nd Judicial District (St. Louis).

via J&J Must Pay $72 Million Over Talc Tied to Woman’s Cancer – Bloomberg Business.

Chicago Residents Sue Over Alleged Lead Risk From Water-Main Work

The Wall Street Journal reports three residents filed a lawsuit against the city of Chicago on Thursday, alleging that water main replacement projects over the past several years have exposed people across the city to higher levels of lead in drinking water.

The lawsuit, filed in Cook County Circuit Court, alleges that Chicago “has known for years that the work it is undertaking to replace water mains and meters is causing elevated and unsafe lead levels in the water traveling through lead service pipes that pour directly into residents’ homes.”

The lawsuit alleges that the city’s replacement of water mains has increased lead contamination, because the process typically only partially replaced lead service lines, which run between the mains and residences. Studies have shown that replacing part of a lead line can cause the metal to leach into water systems. This can come from disturbing the coating inside old pipes or through chemical reactions from the addition of other metals, like copper, in new sections of pipe.

Chicago has more lead service lines than any other U.S. city, with roughly 80% of properties in the city receiving water via lead pipes, according to the lawsuit. It also says that since Jan. 1, 2009, the city has undertaken more than 1,600 water main and sewer replacement projects.

The Chicago plaintiffs are seeking to recover the costs of testing to detect lead poisoning in them and their children. They also want the city to fully replace their service lines.

Source: Chicago Residents Sue Over Alleged Lead Risk From Water-Main Work – WSJ

The Flint Water Crisis: Finding a Loophole in Sovereign Immunity 

Federal and state governments and employees engaged in their official duties are shielded from most private lawsuits by a legal doctrine known as sovereign immunity. The doctrine stems from the centuries-old principle that the government itself cannot commit a legal wrong, though exceptions have evolved.

While cities in the U.S. are not technically considered to have sovereign status, they are similarly protected by state and federal laws.

In Flint, experts and plaintiffs’ attorneys have expressed hesitation over lawsuits filed against state departments and officials, saying the chance of success will be hindered by the sovereign immunity doctrine. But one Plaintiff’s lawyer sees a loophole.

[Plaintiff’s attorney Michael Pitt] said he believes the attorneys have a solid legal theory that renders governmental immunity irrelevant. The federal lawsuit, he said, claims Governor Snyder along with several state officials, violated the due process of Flint residents.

“If there’s a constitutional violation, the governmental immunity does not apply,” Pitt said. “It just does not apply. So we’ve filed a case in federal court … alleging a due process violation that the state of Michigan and its agents created a dangerous condition, and that the state and its actors are liable for the damages caused by this constitutional violation.”

It will be interesting to see how this legal loophole theory plays out in Federal Court and the possible effect it will have on other cities, states or local governments facing decaying water pipes and crumbling infrastructure.

Source: Thousands of Flint residents could join ‘billion-dollar’ water crisis lawsuits | US news | The Guardian

Chicago’s Lead Water Risk

flint-waterWhile the lead contamination in Flint has captured the nation, it has also raised questions about the safety of drinking water in other cities across the United States. Here in Chicago, the Chicago Tribune reports, 80% of properties in Chicago are hooked up to water service lines made of lead. Any home built before 1986 (the year lead pipes were banned) could have lead water service pipes. The Trib reports:

In a peer-reviewed study, researchers at the U.S. Environmental Protection Agency found alarming levels of the brain-damaging metal can flow out of household faucets for years after construction work disrupts service lines that connect buildings to the city’s water system.

The study also found the city’s testing protocols — based on federal rules — are likely to miss high concentrations of lead in drinking water.

Yet when city officials notify homeowners about new water mains being installed, the letters do not mention potential lead hazards. Residents are advised merely to flush all faucets and hose taps for several minutes after the work is completed to remove any “particulates,” a solution EPA scientists and independent experts say is grossly inadequate.

While city officials claim the water is safe to drink and that Chicago complies with the 1991 Lead and Copper rule, accurate and comprehensive testing in the city is lacking.

[T]he federal rule requires only 50 homes be tested every three years in Chicago, a city of 2.7 million people with more lead service lines than any other U.S. municipality.

Moreover, the rules require utilities to check only the first liter of water drawn in the morning. The EPA study found that although the first liter often is lead-free, high levels of the toxic metal can flow through taps for several minutes afterward, depending in part on the length of the service line between the home and street.

Studies have shown that exposure to even small amounts of lead can permanently damage the developing brains of children, lowering IQ and increasing the risk of learning disabilities, aggression and criminal behavior later in life.

While Chicago water may be safe to drink, for now, the EPA warns that the only way to ensure safety is the total and complete removal of all lead service lines. A project like that would be a tremendous undertaking for a city already crippled by debt and budget issues.