openpolitics.com

The right to require arbitration was ratified in a series of battles in the Supreme Court, which, Silver-Greenberg says, was engineered by a Wall Street coalition of credit card companies and retailers.

.. Arbitration was designed – in its ideal form, it was designed to really be a system where companies of equal bargaining power went to work out their disputes.

.. What we have in the consumer context and the employment context is far different.

.. It is binding. So one of the tricky things about arbitration – one of the things that came up a lot in our reporting – was that, regardless of how the process has gone, the decisions in arbitration – the decisions of the arbitrators – are virtually impossible to appeal. So judges have said when plaintiffs have gone in and asked them to overturn a decision they say is unfair by an arbitrator, they have said their hands are tied. And even in instances where an arbitrator’s decision resulted in substantial injustice, they would still – a court said they would still be unable to overturn or revoke the arbitrator’s decision.

.. Class action lawsuits, because they enable large groups of people that might be similarly affected to pool their resources, are really the only way that an individual can afford to go up against a deep-pocketed company with vast resources. It allows people to join together to prove their case. And these are cases that require often a lot of expert testimony, a lot of evidence, and so they would otherwise be prohibitively expensive to bring.

.. The lawsuits are also really important when you were dealing with systemic issues, like wage theft, that affects many people in the same way. So we’re not just talking about disputed fees or a checking account problem. We’re also talking about discrimination that impacts, you know, hundreds of thousands of people and is a practice that can be changed because of a successful class action.

.. So these were a group of class action lawsuits that were brought around 2009 against more than a dozen banks for allegations of reordering transactions. So what that looked like was – say I made two purchases. I bought a $500 stereo system and a $2 cup of coffee. The banks were accused of processing the most expensive – the largest transaction – that stereo system – first, even if I bought it after I bought the cup of coffee, and then withdrawing money to cover the cup of coffee.

.. And so the banks were accused of reordering all these transactions to maximize the amount of fees that they could get from overdraft.

.. And the class actions resulted in, I think, more than a billion dollars in relief for customers. And so those are, I think, a particularly poignant example because if I have a $35 overdraft fee, I’m probably not going to take the time to file a lawsuit about it.

.. it wasn’t just about the money they got back. It was about changing the practices.

.. And in the – and if those disputes are instead confined to arbitration, all of the parties who might be affected by the practice, whether it’s an employment practice or consumer practice – they don’t even know because the arbitration is limited to a single individual.

.. So for years, what would happen was companies that tried to put arbitration clauses with class-action bans in them – in the fine print of their contracts – were told by judges that that just was not going to fly. So judges refused to routinely uphold these clauses because they said that they amounted to – one judge in California put it very starkly – a get out of jail free card. And the reason they said that was because…

.. And the reason they said that is because realistically, you need a class action in order to mount a legal challenge as an individual against a deep-pocketed company. So when these companies were putting in their arbitration clauses, hey, you guys can’t file a class, you know, you can’t join together as a group, judges said that that was the equivalent of saying, you can’t bring a lawsuit at all.

.. And for that group, their victory, their real kind of coup, came in 2010

.. One of the lawyers apparently involved in this was John Roberts, the current Chief Justice of the Court. But he was involved in this effort, you say, as an attorney. What was his role?

.. Yes, so he was working for Discover Bank in a case that Discover was trying to get the Supreme Court involved in. So what the cases was is Discover Bank was accused of charging unfair fees.

.. They said that Discover was trying to grant itself – and the quote is – “a license to push the boundaries of good business practices to their furthest limits,”

.. And he said that allowing consumers to bring a case as a class would violate the core purpose of this Federal Arbitration Act.

.. They win because the Supreme Court in 2010 – so now, you know, John Roberts is now Chief Justice – and they take up this case that involves AT&T.

.. And the California courts in this case involving AT&T that the Supreme Court is hearing had said class-action bans are unfair. They’re unconscionable. And the Supreme Court in their decision basically said the Federal Arbitration Act, it beats out state law.

So all the state court judges that were using state contract law to invalidate these arbitration clauses with class-action waivers, they suddenly lost that power. They lost the ability to use state law to do that because the Supreme Court said, no, the federal law wins out.

DAVIES: And a big difference was the Supreme Court had changed by then, right?

SILVER-GREENBERG: Yes. Yes, I mean, that’s a huge difference in that John Roberts, when he was petitioning the court as a private lawyer in 2002, he was not there yet, right? He was not the Chief Justice. Then fast-forward to 2010 when they take on this AT&T case and he is. So that did change things.

.. Tell us how the arbitrators themselves are chosen, and are they genuinely impartial?

SILVER-GREENBERG: So when I began an arbitration there’s a firm, an arbitration firm, that kind of oversees the whole thing. And they provide to both sides a list of potential arbitrators. And they are made up of retired judges and many, many, many, many, many corporate lawyers. And so each side gets a list of say five people and they can go through and cross out the people that they would object to hearing their cases. So that creates an incentive, a kind of skewed incentive as described by the arbitrators, where if they want to be picked to hear future cases, if they want to continue having business they say and said in interviews that they feel they need to be friendlier towards the companies because the companies are the ones that can offer them future cases, whereas the plaintiffs can’t. The plaintiffs are going to be there probably once in their lives. Whereas the companies offer a repeat stream of cases. And they talk about arbitrators who had very plaintiff-friendly rulings. And the nightmare scenario, in one they said, was an arbitrator who ruled in favor of an employee and forced the employer to pay more than a million dollars in damages. And that arbitrator, the story goes, was never given another case again.

.. And the arbitrator said to Debbie and the other students he said – he chastised them for not being savvier shoppers. He basically said you exercised about as much discretion as if – I think his quote was buying a Snickers bar at the local market. And he ruled against them, and because of the hardship that he said they inflicted on the school he forced them – he ruled that they would have to pay the school’s attorney’s fees. So that was the, you know, $300,000 – a little over that, that they had to pay – that they were ordered to pay to cover the school’s attorneys.

.. one case in your story where customers with televisions that had fuzzy pictures were part of a class-action lawsuit. They ended up getting coupons for $25 or $50 apiece for the merchant and the lawyers in the question got $22 million for the effort. Do these folks have a point?

.. So any plaintiffs lawyers fees have to be – they don’t happen in a vacuum. They have to be approved by a judge.

.. conservative legal scholars, including one who clerked for Justice Scalia, and what he said, this one professor, he said that attacking class actions for yielding small individual amounts is beside the point because class actions help lots of people get back a little bit of money. But they serve another function as well, which is they help address practices. So they help get rid of and change business practices that would otherwise go unchecked.

.. I think people are surprised. I mean, I think there’s been a lot of surprise that they signed away this right and people are signing away a constitutional right when they sign these clauses.