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Wednesday, February 22, 2012

Corporate Court Favors Forced Arbitration. Again.

Yesterday, the Supreme Court handed down its decision (.pdf download) in Marmet Health Care Center v. Brown and a consolidated case, ruling once again that everyday Americans may be barred from court and forced into arbitration by the corporations that have caused their injuries.

In these consolidated cases, three patients died allegedly due to the negligence of their West Virginia nursing homes. Surviving family members patients attempted to bring suit in state court, although the patients had signed contracts with the nursing homes that included forced arbitration provisions. The plaintiffs successfully made the case before the West Virginia Supreme Court that the forced arbitration clauses were both unconscionable under state law and against the public policy of West Virginia.

The U.S. Supreme Court has now stepped in and vacated that decision. The Court, in an unsigned opinion, reiterated its holding from last term’s AT&T Mobility v. Concepcion that “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the [Federal Arbitration Act].”

This case serves as yet another example of the Supreme Court’s consistent interpretation of the Federal Arbitration Act (“FAA”) in a manner that favors big business and hurts everyday Americans. As Alliance for Justice has detailed in our report, Arbitration Activism: How the Corporate Court Helps Business Evade Our Civil Justice System, the FAA was meant to place arbitration agreements “on the same footing” as any other contract, and was intended to apply primarily to business contracts between parties of roughly equal bargaining power.

The Supreme Court, however, has applied the FAA to all sorts of employment and consumer contracts, including “adhesion contracts” in which the employee or consumer has no real ability to bargain with the corporate party. By upholding forced arbitration in this context, the Corporate Court is actively erecting barriers to justice for the 99% in order to protect the 1%.

Some in Congress, however, are attempting to tear down some of these barriers. The prevalence of forced arbitration in the nursing home business led a bipartisan group of senators, including Sens. Herb Kohl (D-WI) and Mel Martinez (R-FL) to introduce the Fairness in Nursing Home Arbitration Act in 2009. This bill would eliminate forced predispute arbitration in nursing home contracts, ensuring Americans like the plaintiffs in Marmet get their day in court.

Alliance for Justice supports the Arbitration Fairness Act as introduced by Sen. Al Franken (D-MN), which would ban predispute, forced arbitration in cases involving civil rights, consumer contracts, or employment contracts. AFJ will continue to fight to make sure that arbitration remains a valuable way for parties to settle their disputes in a fair an expeditious fashion, but not as a way for powerful corporations to force consumers and employees from enjoying their ability to enforce their rights in court.

Click here to read more about AFJ’s work on arbitration fairness.

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