Alabama Personal Injury Blog - Arbitration

Dangers of Signing An Arbitration Agreement

Greg Cusimano — Sun, 20 Sep 2009 22:03:45 GMT

Consumers beware! Many consumer and employment contracts now include an “Arbitration Clause”. You can find the clause lurking in employment contracts, lease agreements, health care admissions documents, insurance enrollment forms and other consumer contracts. There are many dangers in signing an arbitration agreement.

You Lose Your Constitutional Right to a Jury Trial:

Signing a contract that contains an arbitration clause waives your constitutional right to a jury trial and in effect keeps you from having your dispute resolved by a court of law. Rather, you are required to submit your dispute or claim to a neutral third party, whom is neither an elected or appointed judge.

An Arbitrator’s Decision is Final:

After each party presents their case the arbitrator renders a decision that is final and binding on both parties. This decision cannot be appealed and unlike mediation. There are several other dangers in signing an arbitration agreement. Many arbitration clauses and systems do not allow you to recover your attorneys’ fees. This makes it practically impossible for consumers or employees to obtain legal representation. Additionally, the avenues for appealing an arbitrator’s decision are practically closed and regardless of whether the decision is erroneous, it cannot be easily overturned.

Arbitrators May be Biased Against Consumers/Employees:

Sometimes the arbitrator specified in the arbitration agreement may be biased because they depend upon the corporation for repeat business. Therefore, they have a personal motive and business interest in rendering decisions that favor the corporation. As a result, they are more inclined to rule against consumers and employees on the disputes that come before them.

Arbitration can Result in Significant Time Delays and be very expensive:

While arbitration is meant to serve as a more efficient method for resolving disputes, it can actually lead to significant time delays. Sometimes there are multiple arbitrators on a panel, which means that each arbitrator must juggle their schedule in order to hear your dispute. While your dispute may ultimately be heard, you might end up waiting awhile for your hearing to align with the schedules of multiple individuals. Most often the filing fees for Arbitration are 2 or 3 times more expensive that filing a case in court.

The Law may Not Make a Difference:

An arbitrator is not necessarily required to follow the laws that apply to your dispute. This can result in a seemingly unfair decision. Even though arbitrators are not able to completely disregard the law in rendering their decisions, it’s possible that they may render an unfair decision that does not go completely against the law.

Awards are Difficult to Enforce:

Since arbitration awards do not have the power of a court judgment they are not directly enforceable. Rather, if you seek to enforce an arbitration award you must resort to judicial remedies, such as bringing an action to “confirm” the award. While you may be able to utilize judicial remedies to obtain an award, these claims can be fiercely fought and often result in the consumer acquiring a significant amount of legal fees, fees which far exceed the economic incentive to bring their dispute in the first place.

Arbitration Clauses are Sneaky:

Consumers must be on the lookout for arbitration clauses. Arbitration clauses are inconspicuous because they are usually set forth in the fine print of a contract or are contained in an ancillary agreement. Consumers and employees are often unaware that they have agreed to mandatory, binding arbitration by simply purchasing a product or taking a job.

If you can, refuse to sign a contract containing an arbitration clause, cross through the language of the clause or attempt to negotiate its terms. Where it is impossible to negotiate, with large companies for example, you should shop around before you sign.

Originally posted at InjuryBoard by Greg Cusimano

How Do You Feel About Tort Reform? It Depends On How you Feel

Pete Mackey — Sat, 19 Sep 2009 21:28:39 GMT

Feelings about tort reform can vary with the landscape. Anyone who makes their policy decisions primarily in accordance with their financial bottom line, and happens to be on the white collar side of the equation, loves tort reform - as long as it does not affect their pocketbook. Damage Caps? Check. Insanely short statutes of limitation? Roger that. Arbitration? Of course.

Howard Bronson, the former publisher of the Mobile Press-Register since 1991, has seen the light. The man who carried all the water for the tort reform movent that he could, who made sure that his newspaper railed against what he saw as "jackpot justice" and "runaway verdicts," who never saw a punitive damage award that was justified, has done a one eighty. After being shown the door, he has filed suit against the owner, claiming that it reneged on a job security agreement made when he started with the paper. Way to go, Howard! Are you trying to make good law for life time employment contracts? Did you ask for punitive damages? Do you think that maybe it's time to recognize that "what's good for GM is what's good for America" may not be the catch phrase you thought it was? Ask Robert Bork - he had to make the same decision.

Originally posted at InjuryBoard by Pete Mackey

Arbitration Clauses and Consumers

Gaines Drago — Wed, 02 Sep 2009 11:07:12 GMT

Arbitration clauses are a huge aspect of many of our largest purchasers as consumers. Whether it is a mobile home, a car, or an entertainment center, many companies now have customers sign a contract that will require them to arbitrate any controversies that may arise from the purchase of a product. The Supreme Court has indicated a strong presumption of favor towards arbitration, so the following are just a few key pointers to realize about arbitration when deciding whether to make the final purchase. While, arbitration, is in no way all bad just please make sure you read thoroughly all the way through a contract you sign. The following just offers a few key points that consumers may not be aware of:

· Arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees sometimes do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job
· If the arbitration is mandatory and binding, the parties waive their rights to access the courts and have a judge or jury decide the case
· In some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes
· In some arbitration agreements and systems, the recovery of attorneys' fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation; however most arbitration codes and agreements provide for the same relief that could be granted in court
· If the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee
· There are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned
· Although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
· In some legal systems, arbitral awards have fewer enforcement remedies than judgments; although in the United States, arbitration awards are enforced in the same manner as court judgments and have the same effect
· Arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore
· Rule of applicable law is not necessarily binding on the arbitrators, although they cannot disregard the law.
· Discovery may be more limited in arbitration
· The potential to generate billings by attorneys may be less than pursuing the dispute through trial
· Unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award
· Although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought, thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.

Originally posted at InjuryBoard by Gaines Drago

Is Justice is Second Fiddle to Arbitration?

Billy Cunningham — Sat, 15 Aug 2009 12:56:51 GMT

Maybe arbitration involving consumers is beginning to run its course. A recent post by Wayne Parsons describes Bank of America’s decision to stop forcing arbitration on consumers. Wayne cited David Robertson’s belief that Bank of America's decision was a result of the recent decisions by the National Arbitration Forum and the American Arbitration Association to stop hanlidng consumer arbitrations as well as by increased congressional scrutiny. These changes in attitude are most likely a direct result of the Minnesota’s Attorney General’s law suit and subsequent settlement with the National Arbitration Forum to not be involved in consumer arbitration. Under the settlement, the National Arbitration Forum is prohibited from accepting, participating or administering any new arbitrations involving consumer debt, including credit cards, consumer loans, telecommunications, utilities, health care and consumer leases.

There is another issue in the arbitration arena that should concern everyone. In most arbitrations involving interstate commerce (which includes almost anything these days) the Federal Arbitration Act (FAA) controls. The Act lists four grounds to vacate an award issued by the arbitrator(s). For years courts also recognized non-statutory grounds for vacating an arbitration award, such as where the award exhibits a “manifest disregard of the law.”

Last Spring In Hall Street Associates, L.L.C. v. Mattel, Inc., the United States Supreme Court held that the statutory grounds are the exclusive means for vacating an arbitration award under the FAA. Does that mean we can have rules of law for the court system but arbitrators who do not violate the statutory grounds like showing bias, corruption, and fraud can just ignore the law? We should all be concerned if that is the case. Lower courts are beginning to interpret and apply the Hall Street decision and are coming to different conclusions as to whether manifest disregard of the law remains a proper basis to overturn an arbitration award.

I have a hard time after 35 years of practicing law believing that our courts cannot overturn an arbitration award that manifestly disregards the law. This is especially true in a consumer setting where most consumers never realize that had even signed arbitration agreements or know what arbitration means. It is time organize to get Congress to amend the FAA and include manifest disregard of the law and say to the American public everybody has to follow the law! Justice should not play second fiddle to arbitration.

Originally posted at InjuryBoard by Billy Cunningham

Aura Financial Services Inc. - Greedy Scams

Jon Lewis — Thu, 18 Jun 2009 21:02:29 GMT

What is the problem with our capitalistic society? Greed! Fraud! Scams! The recent economic collapse and corporate fraud highlights this problem. How do we protect against this problem? Our judicial system. No, say it ain't so. We have to resort to trial attorneys to protect us against such corporate abuse? Yes we do.

http://www.youtube.com/watch?v=GQnCFdjLJAM

Recently, this type of greed was illustrated by the brokers at Aura Financial Services Inc. According to the Birmingham News, brokers at Aura Financial churned customer accounts from 2005 through April 2009. The company and its brokers allegedly pocketed one million dollars in commissions and other fees while their customers lost the value from their accounts. According to Katherine Addleman, director of the Securities and Exchange Commission's Atlanta regional office, "This is the worst example of churning I have seen in 23 years with the SEC."

What is "churning"? This is where brokers trade stocks, mutual funds, and other securities unnecessarily in order to make more commissions and fees off of the trades. There is no reason to do this but for greed. Instead of taking care of their clients, they basically "steal" their money. Why? Greed.

Both the SEC and the Alabama Securities Commission have filed claims against Aura. What does that do? Well, they will probably end up fining them, and maybe, the people who lost money will recoup some of their losses through the restitution process. But, how else can the company be punished for the actions of its brokers and their like of monitoring them? Through civil lawsuits. The threat of a civil lawsuit keeps people honest. However, there is no such threat in this situation. Why you may ask? Arbitration.

That's right. Cases involving broker misconduct go to arbitration. No jury. No Judge. No appeal. You only get arbitrators who were involved in the industry. This process is governed by the Financial Industry Regulatory Authority (FINRA).

This is why we need the Arbitration Fairness Act. This Act will help eliminate arbitration in the consumer setting. The Federal Arbitration Act was originally intended for commercial disputes; however, corporations have abused it and used it as a shield from liability and accountability in consumer transactions. Call your legislators and tell them you want this Act passed, and the next time a corporation defrauds you, your peers can decide your case, not some industry insider.

Originally posted at InjuryBoard by Jon Lewis

No Arbitration in Nurisng Homes Cases In Illinois

Billy Cunningham — Fri, 05 Jun 2009 13:05:06 GMT

In the case of SSC Odin Operating Co. v. Carter, Sue Carter the U. S. Supreme Court on June 1, 2009 by refusing to review an Illinois appellate court ruling, has tacitly agreed that a state law nullifying nursing home arbitration agreements supersedes the Federal Arbitration Act which favors arbitration agreements. This may be another chink in the arbitration armor used by nursing homes to force residents and their families to give up their rights to a jury trial.

The state legislature of Illinois had the wisdom to recognize that arbitration clauses in nursing home contracts are unconscionable and passed the Illinois Nursing Home Care Act (NCHA) which has provisions prohibiting the facility from enforcing an arbitration agreement. Apparently, despite the law, Odin Healthcare Center in Odin, Illinois required Joyce Gott to sign an arbitration agreement agreeing that in event she or her family wanted to pursue a claim against the nursing home there would no trial but instead the dispute would be decided by arbitration.. Her family recognizing that the legislature prohibited such agreements filed a wrongful death claim in state court. The nursing home operator asked the trial court to enforce the arbitration agreement and argued that the Federal Arbitration Act should overrule any state law governing arbitration agreements, especially in light of the fact that the NHCA applies to nursing home contracts in a broad and more generalized way, rather than specifically singling out arbitration agreements. A state appellate court ruled that the NCHA applied and struck down the arbitration clause. The Illinois Supreme Court refused to review the decision in October of last year. With its refusal to hear the case, the U.S. Supreme Court has let the lower court's ruling stand, thereby setting a precedent under which other states' laws might trump the Federal Arbitration Act.

The failure of the Supreme Court to consider this case should give those of us who believe the right to a jury trial is right granted to us under the constitution, have family members in a nursing home and/or who represent nursing home residents cause to rejoice. This is the way it should be. As I have written numerous times in blogs on InjuryBoard, arbitration is just not designed for consumer situations and most especially should not apply to the elderly in nursing homes. We have opportunities to use this ruling to show other sates how it can be done and to urge Congress to get the Fairness in Nursing Home Arbitration Act passed.

Originally posted at InjuryBoard by Billy Cunningham

Fairness in Nursing Home Arbitration Act Does Not Become Law

Billy Cunningham — Sat, 30 May 2009 09:05:53 GMT

In January I wrote a blog on S. Bill 2838, Fairness in Nursing Home Arbitration Act. This bill never became law. The last action taken by the Senate on the bill was in September when it was reported favorably out of committee and then on October 1, 2008, it was placed on the Senate Legislative Calendar under General Orders. Calendar No. 1109. This bill has now been proposed in previous Sessions of Congress last two years. At the end of each session all proposed bills and resolutions that haven't passed are cleared from the books. The bill was never debated by the Senate. This means the bill will have to be reintroduced under a new number in the next session.

The bill was sponsored by Sen. Mel Martinez [R-FL] and co-sponsored by Sen. Patrick Leahy [D-VT], Sen. Russell Feingold [D-WI], Sen. Richard Durbin [D-IL] and Sen. Herbert Kohl [D-WI]. I would urge all you to contact your Senators and Congressmen before the next session and urge them to get this bill reintroduced and passed.

Nursing home abuse continues and arbitration is not the way to handle these cases. When loved ones are put in nursing home today the facility often presents a series of documents to be signed in order for the family member to be admitted. Often stuck in the middle of all those is an arbitration agreement. I have never seen one drafted that is designed to favor or even equally treat the resident. Those agreements are signed by residents with dementia who do not have the capacity to enter into any other kind of contract. Or they may be signed by a family member who does not have a power of attorney or court appointment authorizing them to enter into contracts on their behalf. The nursing home does not care who signs them- it is just part of a process. That process is not in the best interest of the resident. I have seen forged signatures on nursing home arbitration agreements and had one facility admit it forged the signature.

One way to protect against this happening is for everyone to have a power of attorney that prohibits the attorney in fact from entering into any contract that has an arbitration clause or agreement in it. Here is an example of the clause that should be in every power of attorney:

“NO POWER TO AGREE TO BINDING ARBITRATION. Although I have given my attorney-in-fact this general and durable power of attorney, I specifically withhold from my attorney-in-fact the power to agree or consent to binding arbitration, or to agree to any other process that would preclude the right to have a jury decide any issue in controversy concerning my person or my property; this does not, however, preclude non-binding alternative dispute resolution processes such as mediation. “

There are things we can all do to protect our loved ones in nursing home. Let’s start a letter writing campaign now to get the Fairness in Nursing Home Arbitration Act reintroduced and passed.

Originally posted at InjuryBoard by Billy Cunningham

ABA to Consider Resolution Curtailing the Arbitraiton Fairness Act

Billy Cunningham — Mon, 04 May 2009 09:00:00 GMT

Paul Bland, a staff attorney with Public Justice in Washington, D.C. and a leading advocate for consumers is asking attorneys who are members of the American Bar Association to contact colleagues about a proposed ABA resolution asking Congress to limit the proposed Arbitration Fairness Act.

The Arbitration Fairness Act, H.R. 1020 would end mandatory arbitration in consumer contracts we are compelled to sign when we purchase almost any service or product today -- from a cell phone to a new house. It would also cover long-term care contracts. The bill is sponsored by Sponsored by Rep. Hank Johnson (D-GA). It will be introduced in the Senate by Sen. Russ Feingold (D-WI). There is another bill that I have blogged on in the past: the Fairness in Nursing Home Arbitration Act, which. applies to nursing homes, assisted living, and other residential care facilities. Sponsored by Sen. Mel Martinez (R-FL) and Sen. Herb Kohl (D-WI); and Rep. Linda Sanchez (D-CA).

Mr. Bland advises that he just learned that the "Leadership Council" of the ABA Section on Dispute Resolution, has without notice to members adopted a resolution regarding the AFA. While no one outside the Section to his knowledge has seen a written version yet, he advises the resolution effectively says the AFA goes too far and instead endorses an alternative approach that would allow mandatory arbitration if and only if (1) consumers et al are given a pre-dispute chance to opt out and (2) Congress passes legislation regulating the fairness of the mandatory arbitration. The Section intends to put this resolution before the full ABA, in August, and seek approval from the ABA at that time. Such a resolution, if adopted, would then be part of the Chamber of Commerce, insurance companies, big business et al lobbying efforts.

Everyone knows the "opt out" right has proven to be a joke. Many credit card companies put "opt out" rights in their consumer contracts (as a ploy to block unconscionability challenges, by permitting them to argue that the clauses are not adhesive), and because so few consumers (a) read the fine print; (b) understand what this language and idea is about; and (c) are motivated to take affirmative steps to opt out, only the smallest percentage of consumers notice the “opt out” and act upon this right.

To the lawyers reading this, it is difficult to understand how the the American Bar Association could allow itself to be support a proposal that some corporations have been advocating for years as a way to undermine meaningful civil rights and consumer protection action. It's disheartening, to believe the ABA could be a party to such an explicitly anti-consumer resolution. Certainly, this is not in the public interest. This resolution will be considered at the ABA meeting in August. There is not a lot of time to organize a push against it, but forums like the InjuryBoard blogs and law firm blogs are great places to start.

As Mr. Bland stated in his email : “IF ANY OF YOU HAVE ANY INFLUENCE WITH THE ABA AND YOU'D RATHER NOT SEE THE ABA SIDING AGAINST EMPLOYEES, CONSUMERS, MEDICAL VICTIMS AND SO FORTH, PLEASE RAISE SOME NOISE.”

Originally posted at InjuryBoard by Billy Cunningham

Arbitrators do not have to follow the law

Pete Burns — Tue, 17 Mar 2009 13:13:05 GMT

Arbitration is an illogical procedure for dispute resolution in our society. Arbitration clauses are buried in consumer contracts of all sorts and until you have a legal problem most people either don’t notice the clauses or assume they are a reasonable alternative to our “costly” legal system. In truth arbitration is frequently more expensive than our court system and the result dramatically less predictable.

The United States has an advanced judicial system and to abandon it in favor of arbitration makes no sense. First, our judges are either appointed by the President of the United States with the advice and consent of congress or, in Alabama, elected by the people. Neither is a guarantee of integrity but both provide dramatically more vetting and assurance than the ad hoc procedure for selecting arbitrators. AAA, the most widespread arbitration organization, gives the parties the right to deselect from a panel provided by AAA. Unlike Judges who are paid with tax dollars, arbitrators are paid $150 to $300 per hour by the litigants. In my experience arbitration is dramatically more expensive than our judicial system.

In addition to economy, predictability is sacrificed to arbitration. Judges take an oath to follow the law and if one party thinks the judge failed to do so she can raise the issue on appeal. Appeal is very restricted in arbitration and getting worse. On March 5, 2009 the U.S. Court of Appeals for the 5^th Circuit ruled in Citigroup Global Markets Inc. v. Bacon http://www.ca5.uscourts.gov/opinions/pub/07/07-20670-CV0.wpd.pdf that even if the arbitrator shows a “manifest disregard for the law that is no basis for appeal.

Why in the world do we want to sidestep a sophisticated set of laws enacted by elected officials and interpreted by qualified judges in favor of allowing some random arbitrator to do as he sees fit?

Originally posted at InjuryBoard by Pete Burns

Beware of Arbitration

Pete Burns — Tue, 10 Feb 2009 17:31:44 GMT

Arbitration is expensive and favors business over consumers. Furthermore, it is an arrogant concept based upon the notion that industry insiders are better able to deliver justice than judges and juries.

Arbitration is expensive because participants pay a private individual, or individuals, thousands of dollars a day to do the job of a judge who is paid with tax payer funds. Unlike the judge, the arbitrator has not been carefully vetted and appointed or elected through a democratic process. Instead, arbitrators are primarily industry insiders who have no accountability for their decisions – which are almost unreviewable. Rather than having a jury of your peers in arbitration the fact finder is from the same line of business as the defendant. The idea behind arbitration is that parties are free to agree to anything they like. In the abstract that is true but in the real world arbitration clauses are buried deep in contracts and seldom "agreed upon" by the consumer.

In the thirty plus years I have been practicing I have never heard a client say “Boy I am glad we had that arbitration clause.”

Originally posted at InjuryBoard by Pete Burns