This is because, once you’ve signed on the dotted line for your cable subscription or clicked through the terms of service in a rideshare app, you’ve typically accepted an arbitration organization as the court of last resort for any disputes you might have against the corporation on the other side — whether it’s a hidden $5 fee or a wrongful death. These arbitration organizations, such as the American Arbitration Association and JAMS, are replacing trial courts as the place where employment and consumer disputes are heard in the U.S. I know this because my company, Radvocate, has dealt with thousands of consumer disputes through this system.
The online magazine Slate recently named the rise of arbitration clauses as a key legal trend of the 2010’s, calling it “the decade that class actions were gutted.” A 2011 decision by the U.S. Supreme Court allows corporations to use their contracts to prevent individuals from taking them to state and federal courts in this way, as well as to force all claims to be brought individually instead of on behalf of a class. The high court spent the rest of the decade building on this trend.
The ostensible reason you can be kept out of court is because the 30-page, fine print contract you’ve signed to get into that rideshare app is considered a contract negotiated between equals and subject to an obscure 1920’s law meant to encourage businesses to settle disputes out of court. In contrast, a 2013 dissent by Supreme Court Justice Elena Kagan notes that by allowing such terms, the court allows a company to exercise “its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.”
The effect on individual American consumers is jarring. My company recently assisted an individual with a claim against Philadelphia-based Comcast. The claimant, a California nurse, had fallen behind on her Comcast bills at which point the company had refused to allow her to move into a less expensive billing tier unless she could pay her balance due. She also had faced speeds consistently slower than those advertised by Comcast.
The claimant was wise enough to use our service to serve a legal demand on Comcast, and to file a case with the American Arbitration Association when the company was unresponsive. Over six months later, when the claim finally made it to arbitration, Comcast threw white shoe lawyers up against her while attempting to delay or avoid handing over account records and other details that might make her case. They tried to scare her with the possibility that she might be held liable for hearing costs, and even their lawyers’ fees, if the professional arbitrator found against her.
This consumer was organized and dogged in her pursuit of justice, and ended up being awarded $750 by the arbitrator. (Comcast, meanwhile, had likely spent $50,000 or more attempting to prevent such a judgment.) But even with this “happy” ending, the process of bringing a big company like Comcast to justice can be stressful and, when threats of legal fees come into play, downright terrifying.
This is where the new New Jersey law comes into play. It will provide consumers with greater protections in arbitration proceedings. Among these protections will be a prohibition on requiring an individual to pay for a company’s costs in an arbitration proceeding.
While arbitrations will remain a contest among unequals, lifting this particular sword of Damocles is a positive for New Jersey consumers. As more states start to realize the increasing role of arbitration venues in our consumer and employee justice systems, such protections are becoming more common. Last year, California passed a bill banning most mandatory arbitration agreements with employers, legislation in progress in Colorado would increase transparency about arbitration, and a bipartisan bill at the federal level seeking to do away with mandatory arbitration altogether.
But there’s still a long way to go to level the playing field between corporations and individuals when it comes to the arbitration system. We need stronger state-mandated due process protections, an increase in awareness and accessibility, and a commitment from companies like Comcast to be good actors in an arbitration regime that was largely designed and built by large corporations. Of course, such a commitment would be easier to extract if we could do something about the lack of competition in the telecom sector.
If the last decade was the decade when consumer and employment justice went dark, this decade has to be its recovery.
Max Kornblith is co-founder of Radvocate (now FairShake), a service based in Oakland, Ca. that helps individual consumers make legal claims against big companies.
Learn More