Commentary: Will the Supreme Court let corporate America judge itself?

Robert Weissman | Public Citizen
April 12, 2010

Suppose you buy a new house that turns out to be plagued by toxic mold. The home builder refuses to make repairs. You want to sue, but you learn that the fine print of your purchase contract requires you to arbitrate your dispute.

It also requires you to cough up an enormous fee – let’s say $50,000 – before going to arbitration. And, worst of all, it turns out that the arbitrator works for the local association of home builders. He gets paid by the home builders and he relies on their repeat business. The deck is stacked against you.

Outrageous, right? Under current law, consumers and workers can go to court and ask a judge to find the arbitration agreement “unconscionable” and therefore unenforceable.

But depending how the U.S. Supreme Court rules in Rent-A-Center v. Jackson, which it hears April 26, consumers and workers might not have that option much longer. Instead, guess who would rule on whether the arbitration clause was too outrageous to enforce?

The company’s arbitrator.

That’s right. The question presented to the Supreme Court in Rent-A-Center is, essentially: Can a corporation’s hand-picked arbitrator decide whether it is fair for the company to hand-pick its arbitrator?

A conflict of interest? You bet. And given that research shows arbitration overwhelmingly favors the company over the consumer, this tightening of the rules would give Corporate America yet another advantage over consumers, employees, franchisees and others who sign arbitration clauses, often without even realizing it. Citizens would have no other place to turn.

Recently, in Citizens United v. Federal Election Commission, the Supreme Court dramatically expanded corporate rights. In decreeing that corporations have a First Amendment right to spend unlimited amounts of money to influence elections, the court in January upended a century of precedent and gave corporations a much bigger voice in government than “We, the People.”

Now, in Rent-A-Center, the court could again stack the deck in the battle between average citizens and powerful corporations. The court is expected to issue a decision by the end of June.

Many others are concerned about the outcome of this case; a broad coalition of civil rights groups, labor unions and consumer advocacy organizations – everything from Lawyers’ Committee for Civil Rights Under Law and the National Women’s Law Center to Consumer Action) – have filed friend-of-the-court briefs. Even 23 prominent professional arbitrators and arbitration scholars, including arbitrators for Major League Baseball and the National Basketball Association, agree that arbitrators shouldn’t decide whether the arbitration process itself is fair. Instead, they say, courts must step in to prevent abuses.

The case stems from a lawsuit filed by Antonio Jackson, of Sparks, Nev., who was hired in 2003 as an account manager for Rent-A-Center, a rent-to-own company that provides furniture, electronics, appliances and computers. At the same time, Jackson was given an arbitration agreement and was told that he had to sign it as a condition of his employment.

Jackson, who is black, sought a promotion several times but was denied it, he said in a 2007 lawsuit alleging race discrimination and retaliation.

Rent-A-Center asked the court to dismiss the claim because Jackson had signed an arbitration agreement, saying that any dispute would be resolved by an arbitrator, not a court.

The arbitration agreement Jackson signed also said that an arbitrator will have exclusive authority to resolve any dispute about the agreement itself, including any claim that the agreement is unfair. Jackson argued that the arbitration agreement was unconscionable because, among other things, it was one-sided in favor of his employer and it was presented to him as a non-negotiable condition of his employment.

Rent-A-Center argued that whether the arbitration clause was enforceable should be decided by an arbitrator, not a court.

The district court granted Rent-A-Center’s request to send the matter to arbitration. Jackson appealed, and in a 2-1 decision, the U.S. Circuit Court of Appeals for the Ninth Circuit reversed and said that Jackson should be able to have his day in court.

Mandatory arbitration is one of the many ways Corporate America stacks the deck against consumers, employees and others. Most people don’t know it, but when they take a job, buy a cell phone, or start a small business franchise, they give up their right to sue, because buried in the fine print is an arbitration clause – an “agreement” to send all disputes to mandatory binding arbitration.

At least we have been able to seek recourse in the courts when an arbitration clause is unfair or illegal.

Now, the U.S. Supreme Court is poised to free corporations to create their own kangaroo court system, outside the scrutiny of the public courts. That would leave people who have been wronged by corporations without any recourse at all.

If the court decides that it’s all right for the only judges of arbitration’s fairness to be the arbitrators themselves, then all American workers and consumers – not just Antonio Jackson – will be harmed.

ABOUT THE WRITER

Robert Weissman is president Public Citizen, 600 20th Street NW, Washington, D.C. 20009; Web site: www.citizen.org.

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