Once upon a time, there was a country where the courts could tell the difference between business-to-business disputes and consumer-to-business disputes.
The law for the commercial disputes values efficiency above all other concerns, which makes a lot of sense for disputes involving businesses, which are often fictitious entities anyway (corporations), with no personal stake in the problems.
Further, being fictitious legal persons, entirely created under the law and having no natural rights of their own, the corporations involved in most business litigation could hardly claim to fall under the 7th Amendment right to a jury trial -- the companies only had the rights that the law gave them, and since they essentially all just wanted their disputes resolved in a predictable, roughly fair way, it was no problem that Congress said that they could bind each other to arbitration clauses, which sent their fights out of the court system and into private arbitration, where there are no juries, and there is no open court system that creates precedent with each decision.
The problem is that, as in the Terminator movies, the creatures we created to help us have turned on us and taken over: the corporations have seized control of the courts and have persuaded a majority of the U.S. Supreme Court justices that, not only are they actually entitled to full constitutional liberties, including full First Amendment rights to "speak," they also should be allowed to force real people into arbitration, meaning that when you sue one of these fictitious people, you find yourself in a topsy-turvy world that Joseph Heller, author of Catch-22, could not have imagined on his most cynical day.
We've been heading towards this mess ever since the first decisions in the late 19th Century that perverted the 14th Amendment, turning it from an aid to freed slaves into a weapon for the just-forming multinational corporations. The recent "Citizens United" decision -- a fantastic act of historic judicial activism, with the Supreme Court majority going completely outside the bounds of the case before it to create a new superclass of corporate citizens (all the rights of people but none of the duties) is the best known of the long train of absurd decisions that, one by one, are turning real people into servants of the new superclass.
Which brings us to today's fantastic absurdity, where the federal 2nd Circuit, the appellate court for the Northeast, the second-highest court in all the land (and a leading court for commercial disputes), has held that a New York consumer -- that is, a flesh and blood person like you, one who might be under the vague impression that your Constitutional rights are at least as important as the "rights" of a legal fiction like a corporation -- must go to binding arbitration in Arizona to pursue the scoundrels who ripped off the consumer and essentially reduced the consumer to abject poverty (the company was one of the many (most?) bogus credit repair companies who promise to help you climb OUT of the hole with your credit cards).
There is no way to put it except to say that this is the kind of thing that terrifies people who study history, because this is the kind of thing that survivors study when they try to figure out "What was the spark that caused the explosion? How did what seemed to be a civilized place suddenly erupt in such fury?"
I would love to be wrong about this, but since the DNA of corporations requires that they grab all the power and money that they can, and that they do everything that they can get away with (to compete with all the others), expecting corporations to restrain themselves and not abuse consumers and real people is like expecting Donald Trump to take and keep a vow of silence and poverty. Thus, absent a miracle -- never the thing to bet on -- this isn't likely to get better. And that means we might well be getting close to finding out something awful, like what the 21st Century American equivalent is for 19th Century France's guillotine. Read on:
The law for the commercial disputes values efficiency above all other concerns, which makes a lot of sense for disputes involving businesses, which are often fictitious entities anyway (corporations), with no personal stake in the problems.
Further, being fictitious legal persons, entirely created under the law and having no natural rights of their own, the corporations involved in most business litigation could hardly claim to fall under the 7th Amendment right to a jury trial -- the companies only had the rights that the law gave them, and since they essentially all just wanted their disputes resolved in a predictable, roughly fair way, it was no problem that Congress said that they could bind each other to arbitration clauses, which sent their fights out of the court system and into private arbitration, where there are no juries, and there is no open court system that creates precedent with each decision.
The problem is that, as in the Terminator movies, the creatures we created to help us have turned on us and taken over: the corporations have seized control of the courts and have persuaded a majority of the U.S. Supreme Court justices that, not only are they actually entitled to full constitutional liberties, including full First Amendment rights to "speak," they also should be allowed to force real people into arbitration, meaning that when you sue one of these fictitious people, you find yourself in a topsy-turvy world that Joseph Heller, author of Catch-22, could not have imagined on his most cynical day.
We've been heading towards this mess ever since the first decisions in the late 19th Century that perverted the 14th Amendment, turning it from an aid to freed slaves into a weapon for the just-forming multinational corporations. The recent "Citizens United" decision -- a fantastic act of historic judicial activism, with the Supreme Court majority going completely outside the bounds of the case before it to create a new superclass of corporate citizens (all the rights of people but none of the duties) is the best known of the long train of absurd decisions that, one by one, are turning real people into servants of the new superclass.
Which brings us to today's fantastic absurdity, where the federal 2nd Circuit, the appellate court for the Northeast, the second-highest court in all the land (and a leading court for commercial disputes), has held that a New York consumer -- that is, a flesh and blood person like you, one who might be under the vague impression that your Constitutional rights are at least as important as the "rights" of a legal fiction like a corporation -- must go to binding arbitration in Arizona to pursue the scoundrels who ripped off the consumer and essentially reduced the consumer to abject poverty (the company was one of the many (most?) bogus credit repair companies who promise to help you climb OUT of the hole with your credit cards).
There is no way to put it except to say that this is the kind of thing that terrifies people who study history, because this is the kind of thing that survivors study when they try to figure out "What was the spark that caused the explosion? How did what seemed to be a civilized place suddenly erupt in such fury?"
I would love to be wrong about this, but since the DNA of corporations requires that they grab all the power and money that they can, and that they do everything that they can get away with (to compete with all the others), expecting corporations to restrain themselves and not abuse consumers and real people is like expecting Donald Trump to take and keep a vow of silence and poverty. Thus, absent a miracle -- never the thing to bet on -- this isn't likely to get better. And that means we might well be getting close to finding out something awful, like what the 21st Century American equivalent is for 19th Century France's guillotine. Read on:
- Today’s Arbitration Outrage: Second Circuit Says Destitute New York Resident Consumer Must Arbitrate Case in Arizona Leave a comment By Paul Bland, Senior Attorney @PblandBland
- Periodically, people ask me rhetorical questions like, "How much worse can the law of arbitration get? I mean, it's so incredibly bad that it has to have bottomed out, right?"
- As Jane Wagner famously wrote [for Lily Tomlin], no matter how cynical you become, it's never enough to keep up.
- The Second Circuit has just issued an opinion that reminds us that it is still possible for the law of arbitration to become even more terrible for consumers. In Duran v. The J. Hass Group, a woman who is essentially on the edge of being destitute alleges (very credibly) that she was the victim of a last-dollar scam, promised services that she didn't receive.
- The defendants allegedly operated a credit repair scheme, under which they took a fee of almost $4,000 from the consumer to settle all of her credit card debt, and then did nothing for her. So her credit card companies were suing her, she owed all the money that she’d owed when she first interacted with the defendants, and she was now completely broke. These allegations make an extremely strong claim under the Credit Reporting Act. The allegations and facts are discussed in greater detail in the district court’s opinion, available at 2012 WL 3233818 (E.D.N.Y. June 8, 2012).
- It probably will not surprise anyone who follows consumer law (although it would come as a surprise to nearly any actual consumer) that the defendant had an arbitration clause. What's striking is that the clause requires consumers (including the New York resident Ms. Duran) to arbitrate their claims across the country IN ARIZONA. Now, courts have been striking down these kinds of distant forum provisions in decisions going back 20 years. E.g., Patterson v. ITT Consumer Fin. Corp., 18 Cal. Rptr. 2d 563 (1993). But in the wake of more recent U.S. Supreme Court decisions, particularly the catastrophic Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010), a lot of bad actors out there have been experimenting with how unfair they can make their arbitration clauses and get away with it.
- This strategy worked pretty well for the defendants in this case. The Second Circuit required Ms. Duran to arbitrate her claim, and enforced the provision requiring it to take place in Arizona. They noted that there is a "logical flaw" and an "unusual" quality to the result, because if Ms. Duran's only remedy is to argue to the arbitrator that it's unfair and unconscionable to require her to arbitrate in Arizona, she first has to GO to Arizona to do it. Oh well, the Court explains, this is what the Supreme Court would have wanted.
- I think the decision is wrong, and that the better arguments are with the plaintiffs, and I'm very hopeful that a lot of other courts wouldn't go with this conclusion.
- But the case does show how the U.S. Supreme Court's ongoing adventures in re-writing and expanding the Federal Arbitration Act have a cost. What will the next scam artist put in their arbitration clause? Is there any reason that the Second Circuit would not have enforced a clause requiring the arbitration to take place in New Zealand on Leap Day? After all, why couldn't the New Zealand arbitrator figure out if that's fair? What if the arbitration clause required that the arbitration take place on the newly non-planet Pluto?
- If bad actors can get away with making arbitration clauses increasingly grossly unfair, and all the courts just wash their hands, do a Pontius Pilate, and say “well, this may SEEM really unfair, but oh well, it’s what the Supreme Court would have wanted,” mandatory arbitration will have no conceivable claim to any sort of legitimacy. It will become a complete joke, an openly rigged deal.
- Because saying that a poor person in New York can only get a refund of money stolen from her if she travels across the United States to begin the process of trying to get it back IS a joke, and it IS a rigged deal.
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