Contracts that call for arbitration deny consumers the basic right to have their day in court.
Anytime a person gets a new job, signs up for a new credit card, or enters into any of dozens of other arrangements for goods or services, they may have signed a contract or simply agreed to the company’s “terms and services.” But few know that in many cases, such agreements contain a little known provision that gives corporations a virtual veto on judicial oversight when it comes to disputes with customers.
Corporate contracts that call for arbitration as the only method of resolving disputes are increasingly common, yet some legal experts say that such contracts are used by companies to evade the legal system when they are found in violation of consumer rights. Some state judges have called the contracts a “get of jail free card” that allows corporations to undermine the legal system, according to the New York Times.
One federal judge appointed by Ronald Reagan told the Times that the contracts give companies “…a good chance of opting out of the legal system altogether and misbehaving without reproach.”
Before such contracts became common, consumers could take companies to court in individual disputes, and could launch class-action lawsuits when large groups of consumers faced problems with companies whose products or practices caused them harm. But corporations, led by credit card companies and large retailers, have for the past decade been adopting contracts calling for arbitration to preempt the legal system and insure that their legal prowess can run roughshod over consumer rights.
Between 2010 and 2014, the Times investigation of court records showed that when corporations petitioned courts to dismiss class-action cases in favor of arbitration, the courts granted the requests eighty percent of the time.
Attorneys general from sixteen states warned in a letter last year that the rejection of so many class-action suits could usher in an era of unfettered “unlawful business practices.”