Forced Arbitration: U.S. Chamber's License to Steal

This morning the American Association for Justice released a new report on forced arbitration entitled License to Steal: How the U.S. Chamber Forced Arbitration on America. Below is the national press release and links to share online.


Most Americans do not realize they have forfeited their legal rights until it is too late. Buried in the fine print of many contracts – from credit card and nursing home contracts to employee handbooks and online user agreements – are dangerous forced arbitration clauses that eliminate access to justice and replace it with a secretive, corporate tribunal. The American Association for Justice released a new primer today detailing how the abusive practice of forced arbitration hurts American small businesses, consumers and employees and how the U.S. Chamber of Commerce is spearheading efforts to force arbitration on America.


“The civil justice system provides a key incentive for corporations to act responsibly and prioritize safety. But the U.S. Chamber knows when consumers and small businesses lose access to the courts, corporations can get away with the worst,” said American Association for Justice President Burton LeBlanc.


The primer, License to Steal: How the U.S. Chamber Forced Arbitration on America, shines a spotlight on how forced arbitration clauses are routinely buried in the fine print of contracts and secretly abolish many of the safeguards the civil justice system provides. The new primer is being released the same day the U.S. Chamber’s Institute for Legal Reform (ILR) is holding its annual summit to discuss ways to eliminate the ability of small businesses, employees and consumers to hold corporations accountable in court.


As with anything the U.S. Chamber does regarding the legal system, this event and its campaign to force arbitration on America serves one purpose: to help its corporate sponsors evade legal accountability when they harm and kill Americans,” added LeBlanc.


License to Steal points out a number of hidden dangers in forced arbitration. One such example is the story of 86 year-old Mabel Strobel, who “won” her forced arbitration hearing against Morgan Stanley after the investment firm persuaded her to sell her property and use the money to buy unpredictable stocks with heavy sales charges. Strobel lost $281,729, but the arbitrator only awarded her $5,000, then charged her $10,350 in forced arbitration fees.


Additionally, Take Justice Back, the American Association for Justice’s grassroots campaign, is urging activists to protect their rights by asking Congress to support the Arbitration Fairness Act (S.878 / H.R.1844).


As the world's largest trial bar, the American Association for Justice works to make sure people have a fair chance to receive justice through the legal system when they are injured by the negligence or misconduct of others--even when it means taking on the most powerful corporations. Visit



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Expense of Arbitration Found to be Unconscionable

A man who suffered severe pressure ulcers due to neglect sued a nursing home, which tried to force him through arbitration. The evidentiary showing by the plaintiff met the burden to prove that the clause was prohibitively expensive.   The good news is that the Arizona court struck down as unconscionable an arbitration clause that imposed enormous fees on an individual before the individual could go to arbitration.

In Clark v. Renaissance West, a man sued a nursing home for medical malpractice, alleging that neglect had caused him to develop a severe pressure ulcer that caused enormous problems. An Arizona state Court of Appeals held that the man had proven that the arbitration clause would impose prohibitively expensive costs of arbitration on him before he could pursue his claim, and it struck down the clause as unconscionable.

The court held that a plaintiff alleging that an arbitration clause would be prohibitively expensive has the burden of showing specific facts proving that claim, with reasonable certainty. The plaintiff had an expert who testified about the average hourly rates of arbitrators in the area (hundreds of dollars an hour), and who testified that the complexity of the plaintiffs' claims would require him to put forward testimony from enough expert and fact witnesses that an arbitration hearing on his claims would likely take five days. The plaintiff -- a retiree with a fixed income -- would have had to pay $22,800 to arbitrate his claims, and he couldn't afford it.

“An arbitration agreement may be substantively unconscionable if the fees and costs to arbitrate are so excessive as to ‘deny a potential litigant the opportunity to vindicate his or her rights,’” citing Harrington, 211 Ariz. 241.




Center for Investigative Reporting

Public Justice published a great article by Leslie Bailey, Esq. on the need for vulnerable adults to be protected by the Courts.  The article discusses the disturbing report released by the Center for Investigative Reporting.   "The failure of California regulators to adequately investigate and pursue claims of abuse and misconduct by nursing assistants and health aids is “putting the elderly, sick, and disabled at risk.” In fact, the regulators that are charged with protecting vulnerable patients in nursing homes and assisted living facilities are either conducting “cursory and indifferent” investigations, or simply closing cases without taking any action at all."  The report underscores how critically important it is for people to have the ability to sue when loved ones are harmed by nursing home neglect—or worse.

The CIR reports there are approximately 160,000 nursing assistants and in-home health aids working at hospitals, nursing homes, and mental health facilities throughout California.  As of 2009, the backlog of reported abuse and theft cases was so high that is was deemed a “crisis.”  So the state Department of Public Health secretly ordered investigators to dismiss 1,000 pending cases … without any action, not even a single phone call.   While the number of cases closed without action is on the rise, the main tool by which the agency is supposed to protect patients from abuse—revoking the licenses of nursing home employees—has plummeted in recent years. In other words, the abusers are permitted to continue working at their jobs, where they can continue to commit more horrific abuse. It’s gotten so bad that even a former Public Health director warns Californians: “do not count on the government taking care of you.

See the rest of the article below.

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AARP Briefs on Arbitration

AARP reported that AARP filed briefs in two cases arguing that signing a health care proxy regarding end-of-life decisions does not waive a nursing home resident’s right to have a jury decide his or her case.  The two disputes are now on appeal. Attorneys with AARP Foundation Litigation filed AARP’s friend-of-the-court briefs in both cases in conjunction with the National Academy of Elder Law Attorneys, arguing that signing a health care proxy is vastly different from signing over all legal rights. In particular, the right to a jury trial for disputes is a fundamental individual right enshrined in the state constitution that could not be waived ambiguously.

In 2011, Stephanie Johnson Leslie and Barbara Johnson – co-administrators of the estate of Dalton Johnson – filed a wrongful death lawsuit against the nursing home.  Defendants moved to dismiss the proceedings based on a clause in his nursing home admission contract that sent all disputes to arbitration, and a trial court agreed.

Plaintiffs argue that although Dalton Johnson had signed a health care proxy that was to govern specific medical decisions regarding end-of-life options, he had not given away his decision-making authority about all contracts. Specifically, he had not authorized anyone other than himself to make decisions about whether to obligate himself to arbitrate future disputes. Arbitration is a dispute resolution mechanism designed for business-to-business transactions and it does not provide the same public scrutiny, right to a jury trial, right to access evidence, adherence to precedence and other procedural protections lawsuits do; it can also be significantly more expensive.

Similarly, Rita Lacita suffered from Alzheimer’s and was admitted to a nursing facility run by GGNSC Malden Dexter. Her son admitted her to the hospital and while there signed the paperwork discharging her to GGNSC without fully understanding what he was signing and believing that if he did not sign all the documents the facility would not admit his mother. When he sued for wrongful death, that trial court found that the Massachusetts health care proxy statute permits agents only to make health care decisions, and the scope of that role did not include the authority to waive the right to seek legal redress in court.

In planning for incapacity and surrogate decision making, people consider who will be suited and qualified to make specific and separate decisions in the event of incapacity – decisions regarding financial matters are different from health care matters and require different skill sets. Merely designating a qualified health care agent does not indicate this person is intended to combine both roles. If a health care proxy is regarded as tantamount to a power of attorney for all affairs, people will be left at tremendous risk of signing away significant rights while assuming they are merely designating a medical decision maker.

Johnson v. Kindred and Licata v. GGNSC Malden Dexter are both before the Appeals Court of the Commonwealth of Massachusetts.


Class Actions and Arbitration

The Supreme Court's recent decision regarding arbitration in American Express Co. v. Italian Colors Restaurant shows how far the Conservative Majority will protect the inteests of the monied class. The ruling was very technical, but it boils down to this:

Italian Colors Restaurant contended that American Express had a monopoly when they charged more for their credit cards than other cards. Because of Express’ arbitration contract, Italian Colors couldn’t come together with others affected by the monopoly, and couldn’t fight the contract because of limited resources.  The cost of each arbitration would outweigh the benefit so the monopoly would continue.  In effect, by upholding the arbitration contract, the Supreme Court nullified the restaurant’s right to a jury, due process, equal protection, and a fair compensation.

Justice Kagan correctly called the decision a “BETRAYAL” of the Court’s previous decisions regarding mandatory arbitration. In doing so, they found that it was okay for the company to make it impossible for the restaurant to vindicate their statutory rights. The conservative Court’s decision was a blatant violation of rights in favor of corporate interest.

The Arbitration Fairness Act of 2013

The Arbitration Fairness Act of 2013 was introduced in Congress.  The House bill had 22 cosponsors and the Senate bill had 17 cosponsors to reintroduce the bill in the 113th Congress.

See press release from Take Justice Back.

The Facts

•The AFA would eliminate forced arbitration in employment, consumer, civil rights, and anti-trust cases.
•The AFA would ensure that the decision to arbitrate is truly voluntary.
•The AFA would restore fundamental rights created by state and federal laws that are currently at risk of being wiped out by forced arbitration.


What can you do now? Please take the following actions today.

1. Contact your member of Congress today and tell them you support the legislation.

2 Send an email to Congress through Take Justice Back:

3. Ask your friends and colleagues to act.

4 Share the Take Justice Back action item with them:

5. Spread the word--Email the press release to your colleagues and media contacts.

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Florida Supreme Court Ignores Precedent

The Orlando Sentinel reported on the recent Florida Supreme Court decision permanently altering contract law in Florida. In a giant win for the nursing-home industry and a loss of Florida elderly consumers, the state Supreme Court decided that a lawsuit stemming from the wrongful death of a nursing-home resident must go to mandatory arbitration despite the lack of a proper signatory.

Debra Laizure, whose father, Harry Stewart, died in 2006, about four days after being admitted to the Avante at Leesburg nursing home, pursued a wrongful-death case against the facility.  Laizure did not sign the arbitration agreement when her father entered the nursing home.  Stewart was admitted to the nursing home after undergoing knee surgery at Leesburg Regional Medical Center.  Stewart developed a horrific infection because of neglect at the nursing home.  He was transferred back to the hospital before dying.

Mandatory arbitration agreements strip away people's rights to jury trials.  Most nursing-home residents and their families do not understan arbitration when the documents were signed.  The senior-advocacy group AARP filed a brief on behalf of Laizure, who is the representative of Stewart's estate.  The Florida Health Care Association, a nursing-home industry lobbying group, filed a brief supporting mandatory arbitration agreements.


West Virginia Supports Right to Jury Trial

The Daily Mall reported the ongoing battle between the West Virginia Supreme Court, the U.S. Supreme Court and the nursing home industry attempting to take away resident's right to a jury trial by hiding pre-dispute mandatory arbitration clauses in admission paperwork.  Critics argue the arbitrators are beholden to the companies that give them repeat business. "The state's high court is obviously dubious of an emerging and parallel system of justice in America: arbitration hearings." "People who sign these agreements - often without knowing they are doing so - are giving away their right to jury trials. Instead, they agree to leave things in the hands of private arbitration judges."

In summer 2011, the court said: "Disputes should be decided by juries of lay citizens rather than paid, professional fact finders who may be more interested in their fees."  The nation's high court said in early 2012 that Ketchum's ruling that all nursing home arbitration clauses are "per se" unconscionable was "incorrect and inconsistent" with federal law.  The W. Va.  Supreme Court  found a new way to ensure some bereaved family members can sue nursing homes in normal courtrooms with jury trials. The court's most recent ruling said people who check their relatives into nursing homes as a health care surrogate couldn't sign away a resident's right to a jury trial. This means an untold number of arbitration agreements are unenforceable unless the resident or legal representative signs the arbitration clause. Arbitration agreements (like any other contract) are not valid or legally enforceable unless the signatory had legal authority.



11th Circuit Denies Arbitration

The Eleventh Circuit ruled in Green v. Cash Advance that the choice of NAF as the chosen arbitrator is an integral and material term of the arbitration agreement.  Since NAF can no longer conduct arbitrations, the contract is unenforcable as written.  Four years after the NAF was forced out of the consumer arbitration business, nursing homes still put NAF as the chosen arbitration forum.  The Court empasized the fact that the NAF was so corrupt being a reason to suspect that defendants didn’t just accidentally accept it.

Resident not bound by arbitration clause

 The West Virginia Supreme Court of Appeals held that a resident's family may make health care decisions for persons not able to do so under the state's health care surrogates statute, but that agreeing to arbitration is not a "health care decision" of the sort authorized by the statute.  The resident is not bound by the arbitration clause in the admissions paperwork.  A family member (or similar person) who signs the paperwork for admission for incapacitated person to a nursing home or similar facility, they don't have the authority to agree to arbitration.

Here's a link to the decision: