Whenever you sign a contract, you may be signing away your right to take legal action against the company requiring the agreement.

In the fine print, many companies, gyms, HMOs, insurance companies, credit card companies, and contractors give themselves virtual immunity against punishment for their wrongdoings with a clause that provides that the consumer agrees to settle any dispute through a process called Binding Mandatory Arbitration (BMA).BMA is a completely biased system that is a terrible substitute for the trial by jury that the Constitution of The United States and the Constitution of California guarantee to every citizen. Article 1, Section 16 of the California Constitution clearly states, “Trial by jury is an inviolate right and shall be secured to all.”

The Sixth Amendment to the United States Constitution provides the same.

The words are perfectly clear to everyone except the members of the Supreme Court of California and legislators in many other states and at the federal level who have taken away citizens’ right to trial by jury in many legal cases.

BMA is essentially a license to trample consumer rights. It is a huge problem in California, and it’s a process that’s harming consumers in every state in the union.
BMA gives businesses so much power that such a clause in an employment contract has allowed Halliburton to shield some of its male workers who raped and imprisoned a young woman who worked for Halliburton in Iraq.

The people who benefit from BMA make it sound like a good idea. In theory, arbitration delivers quicker results and costs less than a court trial.

In reality, consumers have almost no chance against big businesses in an arbitration case. One recent study found that in California, consumers lost 94% of 34,000 arbitration cases in disputes with credit card companies, and it’s probable that many more consumers simply gave up and never even bothered to go to arbitration.

BMA favors the big insurance and credit card company over the little consumer for several reasons. The first is that most consumers don’t realize that they’re signing away their rights to a jury trial. Consumers should read every word in every contract before signing, but contracts often contain so many pages of deliberately confusing small print that few consumers ever bother to read everything.

The cost of arbitration can be absolutely staggering, and it serves to deter many consumers from proceeding with a suit against a big company. An investigation by Public Citizen found this huge difference in fees: the forum fee for a $60,000 employment discrimination claim in the Circuit Court of Cook County, Illinois is $221. The forum fees for the same claim before the National Arbitration Forum (NAF) would be $10,925, 4,943% higher.

Secrecy is another reason why corporations like arbitration. In a court case, the outcome is public information. In a California arbitration case, the results remain shielded from public scrutiny, courtesy of the California Supreme Court and Legislature.

What may be most amazing about arbitration is that arbitrators don’t have to follow the law. They can base their decisions on anything that they choose, and their first priority is usually to please the corporation that hired them so that the corporation continues to send them more of the high-paying work.

In BMA cases, the typical consumer has as much chance against an HMO or a construction company as the Delta House had against the Disciplinary Council at Faber. The unfairness of a biased system of justice was funny in a movie, but it’s not funny when it destroys a family.

Elizabeth Bartholet is a law professor at Harvard who served as an arbitrator for several years. In her first 19 cases, she ruled in favor of the credit card company. In Case #20, she made a $48,000 ruling in favor of the consumer, and that was the end of her work as an arbitrator. She has since testified before the United States Senate Committee on the Judiciary, describing her experiences as an arbitrator and calling for an end to mandatory arbitration.

Everyone should join Ms. Bartholet in calling on our legislators to end BMA. It’s a horrible system and an insult to our Founders.


Richard Alexander