SCOTUS once again knifes the public in the back...upholds "binding arbitration"

[Meadmaker]

ETA:
Oh wait--so it this isn't a case of a frivolous lawsuit filed for the purpose of getting a settlement. It was false advertising. You just disagree with the jury's decision.

Again, the issue you have is not with it being a class action suit.

So who do you think should make such decisions in cases in controversy brought to the civil courts if not juries?

On what do you base your first paragraph?

Juries often rule in favor of unworthy plaintiffs. That's why lawyers file the frivolous lawsuits. If they always lost, the lawyers wouldn't bother filing them.

(For what it's worth, I said that the lawyers managed to convince a jury in the Gateway case. I don't actually know that. I know that they managed to get a settlement in their favor. Whether that came from a judge, jury, or pre-trial settlement, I don't know.)

The point is that regardless, I was not a victim of false advertising. I knew what I ordered. I got what I ordered. I thought the company provided good products, good services, and good prices, but some lawyers literally got rich by "representing my interests", and they did so at my expense.

The problem with class action lawsuits is that the reasoning goes like this:

Person A is a victim.
Person B shares some characteristic with person A.
Therefore person B is also a victim.

ETA: And to answer your last question, the short answer is that it makes a whole lot of sense to use knowledgeable arbitrators.

 

[Meadmaker]

I skimmed the opinion, and I think they got it right.

There is no constitutional issue here. Class action lawsuits are not some sort of fundamental right. Congress passed a law specifically dealing with this sort of suit, and said that the agreement is perfectly legal. Indeed, it is the sort of suit that law was intended for.

Courts shouldn't make laws. I'm ok with overturning laws that violate Constitutional principles, but that isn't the case here.

 

[Aulus Agerius]

Juries often rule in favor of unworthy plaintiffs. That's why lawyers file the frivolous lawsuits. If they always lost, the lawyers wouldn't bother filing them.

Even if you think the jury's verdict is wrong, that does not mean the underlying suit was frivolous. It just means you disagree, either with the jury's findings of fact or with the substantive law. Given that, even in the gateway case you say you don't know if there was a trial or not, what evidence do you have that "juries often rule in favor of unworthy plaintiffs"? There's been a lot of talk about frivolous suits since the 1980s but not a lot of evidence to back it up.

(For what it's worth, I said that the lawyers managed to convince a jury in the Gateway case. I don't actually know that. I know that they managed to get a settlement in their favor. Whether that came from a judge, jury, or pre-trial settlement, I don't know.)

So, we shouldn't really pay much attention to your account of the Gateway case: you said that it was a jury verdict, now you're saying actually you don't know. How reliable is the rest of your account likely to be.

The point is that regardless, I was not a victim of false advertising. I knew what I ordered. I got what I ordered. I thought the company provided good products, good services, and good prices, but some lawyers literally got rich by "representing my interests", and they did so at my expense.

So... you didn't opt out of the class and happily took your $5 settlement cheque?

The problem with class action lawsuits is that the reasoning goes like this:

Person A is a victim.
Person B shares some characteristic with person A.
Therefore person B is also a victim.

... this isn't how class action suits work. Person B will only be part of the class if the characteristics that they share with Person A mean that they are by law victims. For example, suppose that a debt collector, trying to collect debts barred by the statute of limitations, sends a letter to 1,000 debtors threatening to sue them. That is a violation of the Fair Debt Collection Practices Act, and could be the subject of a class action. All 1,000 debtors would be class members, because in law, they are all victims of the violation. The 5,000 debtors who got the letter, but whose debts were not barred by SoL would not be proper members of the class and the 5,000 who did not get the letter would not be proper members.

ETA: And to answer your last question, the short answer is that it makes a whole lot of sense to use knowledgeable arbitrators.

Actually, these days, most arbitrators are lawyers of some sort and many are retired judges. Commercial arbitration increasingly resembles litigation, something that annoys businesses which use commercial arbitration. The difference, in my observation, between a panel about commercial arbitration and a panel about consumer arbitration is this: on the commercial panel the discussion is about how to make arbitration procedures more efficient, save time etc. On the consumer panel the discussion is, on the industry side, about how awful the courts are and on the consumer side about how it's impossible to vindicate claims through arbitration.

I skimmed the opinion, and I think they got it right.

There is no constitutional issue here. Class action lawsuits are not some sort of fundamental right. Congress passed a law specifically dealing with this sort of suit, and said that the agreement is perfectly legal. Indeed, it is the sort of suit that law was intended for.

Courts shouldn't make laws. I'm ok with overturning laws that violate Constitutional principles, but that isn't the case here.

No, there is not a constitutional issue here, it is a problem of statutory interpretation: Italian Colors has a right under anti-trust statutes, passed many years after the FAA, to challenge the kind of monopolistic behaviour of which it accused Amex. Italian Colors said that, in practice, it impossible for it to vindicate that right through individual arbitration because of the costs involved. The Supreme Court's answer is that it doesn't matter if Italian Colors cannot vindicate its statutory right, provided the right still in theory exists.

This decision applies to all arbitration, not just arbitration used to bar class actions. So, for example, it clears the way for arbitration clauses that prevent effective vindication of individual claims, provided they do not attempt to explicitly exclude or waive those claims.

I can see the arguments for and against class actions - there are serious problems with the American model of the representative, opt-out class action - mostly problems of agency (i.e. class lawyers are not properly controlled by the class members, therefore unscruplous lawyers can exploit class actions). But the FAA does not exist to deal with that problem. Class actions did not even exist when FAA was enacted. If class actions are such a problem then the appropriate thing to do is to amend the Federal Rules of Civil Procedure and change the way class actions work. Using FAA to achieve a back-door change in civil procedure is a bad idea for at least three reasons:
1. Decisions about FAA apply to individual arbitrations as well as class arbitrations
2. Using FAA does not reach class actions against government bodies, or mass torts when there is no contract between the plaintiffs and the defendants. If the problem is the class action procedure, then it is still a problem in all these cases.
3. Using FAA prevents discussion of actual issue: class actions, what they are for, what their problems are and how they actually ought to work. Hiding these issues behind arbitration clauses will not fix any of them.

 

[JoeTheJuggler]

On what do you base your first paragraph?

A frivolous or meritless case by definition isn't a case that can be won in court. You admit that the plaintiff won a jury decision, therefore it couldn't have been a frivolous case.

Juries often rule in favor of unworthy plaintiffs. That's why lawyers file the frivolous lawsuits. If they always lost, the lawyers wouldn't bother filing them.

No. Frivolous cases are filed in an attempt to get a settlement. Even though there is no chance for the plaintiff to win in court, sometimes a defendant will settle because settlement is cheaper than defending the case. (Or simply the publicity of a trial is more "costly" than the settlement for one reason or another.)

And frivolous lawsuits are a problem, but it's not a problem that depends on class actions. Individuals can and do bring frivolous lawsuits with an eye for getting a settlement.

It's a different issue, but it's one I have proposed a simple solution. In all civil trials that are found for the defendant, ask the fact-finder one additional question, "Was this suit frivolous?" If so, you hold the plaintiff liable for the defendant's costs of defending the case. This would remove the primary incentive for defendants to settle frivolous cases. (I guess it wouldn't help in those cases where defendants are willing to settle just to avoid bad publicity, but I think those days are long gone anyway. Nowadays, there seems to be no such thing as bad publicity.)

(For what it's worth, I said that the lawyers managed to convince a jury in the Gateway case. I don't actually know that. I know that they managed to get a settlement in their favor. Whether that came from a judge, jury, or pre-trial settlement, I don't know.)

Settlements don't come from judges or juries. They're made between the parties. You seem to be confusing things.

The point is that regardless, I was not a victim of false advertising. I knew what I ordered. I got what I ordered. I thought the company provided good products, good services, and good prices, but some lawyers literally got rich by "representing my interests", and they did so at my expense.

You're confused on the idea of wrong doing. The defendant was sued for doing something wrong. Whether or not you as a member of the class perceived it as wrong isn't really relevant.

Again, the value of class action suits are cases when a large institution does a wrong (and be clear¸that we're not talking about a "small" wrong--it's usually a wrong in the millions of dollars) that has only harmed each potential plaintiff such a small amount that it's not in any one individual's interest to pursue the matter. The value of class actions in these situations is that it allows us as a society to hold such wrong-doers accountable.

Again, do you think it's less wrong to steal $1 from a million people than it is to steal $1 million from one person? Why should they get away with it simply because a lot of people were only minimally harmed?

 

[Meadmaker]

A frivolous or meritless case by definition isn't a case that can be won in court. You admit that the plaintiff won a jury decision, therefore it couldn't have been a frivolous case.

We are using different definitions of frivolous. Yours comes from Black's. Mine comes from Webster's.

Using Webster's definition of frivolous, lots of people win frivolous lawsuits.

Similarly, in criminal law, a convicted person is, by definition, guilty, because the definition depends on the ruling of the court. Nevertheless, plenty of innocent people are convicted of crimes.

 

[Meadmaker]

No, there is not a constitutional issue here, it is a problem of statutory interpretation: Italian Colors has a right under anti-trust statutes, passed many years after the FAA, to challenge the kind of monopolistic behaviour of which it accused Amex. Italian Colors said that, in practice, it impossible for it to vindicate that right through individual arbitration because of the costs involved. The Supreme Court's answer is that it doesn't matter if Italian Colors cannot vindicate its statutory right, provided the right still in theory exists.

And that makes a lot of sense to me. Congress said that the arbitration clause of a contract is binding. They were specific about it. Why should the court overturn it?

The way I see it, it is the flip side of a common situation. Often a defendant will settle because settling is cheaper than winning the case. In that case, they have, in practice, lost the right to a trial by jury. Oh, sure, the right exists in theory, but exercising it would be too expensive.

The real problem comes back to the fact that legal proceedings, be they courts or arbitrators, are so expensive that only those with deep pockets have access to them. In practice, it becomes not about justice or even law, but about who can manage to assemble a winning legal team that can threaten to bankrupt the other side through the cost of legal proceedings. Arbitration is supposed to address that by getting rid of most of the cost. Apparently, that isn't working.

I wonder, though, what went wrong. American Express is accused of monopolistic practices. What is it about the arbitration costs that would cost a million bucks to prove the case when you aren't in front of a judge. The concept of arbitration is that instead of going to a real judge in a real courtroom, you go before Judge Wopner, present your case, and get a ruling, without having to go through all those expensive proceedings.

Would there be a statutory way to control costs in arbitration so its purpose could be restored?

 

[JoeTheJuggler]

We are using different definitions of frivolous. Yours comes from Black's. Mine comes from Webster's.

Using Webster's definition of frivolous, lots of people win frivolous lawsuits.

How odd. You want to talk about a matter of law, and you want to use a conventional legal term ("frivolous lawsuit") but you don't want to use the conventional legal definition of that term.

OK. . . .

So if you're not talking about lawsuits filed for the purpose of getting a settlement, then you're only saying that you disagree with the jury, but you worded it as a statement of fact. Your claim that there was no false advertising in the example is just your opinion.

Nevertheless, plenty of innocent people are convicted of crimes.

According to whom? In fact, the system is set up to do the opposite. But if you claimed that an innocent person had been convicted, that's really just you saying you disagree with the verdict. It's a matter of opinion and not fact. Or at least an unsubstantiated claim of fact.

Are you proposing some other fact-finding system?

And since you aren't even sure if the example case was adjudicated or settled, I'm not sure if you're upset with a court's fact-finding or with allowing parties to settle cases on their own.

 

[Meadmaker]

Your claim that there was no false advertising in the example is just your opinion.

I suppose that's one way of looking at it.

In my opinion, I saw the ad, understood exactly what I was ordering, and got exactly what I ordered.

In someone else's opinion, they actually lied to me about what I was getting and.....well, I'm not sure what else comes after the "and", but I know that it involved some law firm receiving literally millions of dollars for uncovering it.

 

[The Central Scrutinizer]

Apparently I just successfully sued AT&T. Got a check for $8.36. No one ever offer arbitration as an option. I probably would have turned it down and went straight to court. That's (supposedly) how pissed I was!!!

 

[Aulus Agerius]

And that makes a lot of sense to me. Congress said that the arbitration clause of a contract is binding. They were specific about it. Why should the court overturn it?

Because Congress also specifically said that you can sue businesses for monopolistic practices, violations of consumer protection law, false advertizing and so on. The courts would strike down a simple waiver of such claims on the grounds the congress granted those rights. Arbitration clauses are, in some cases, particularly anti-trust, a de-facto waiver of those rights.
So, which Congress do we listen to? The Congress of 1925 which was thinking about businesses agreeing to arbitrate amongst themselves, or the later iterations of Congress seeking to protect individuals?

The way I see it, it is the flip side of a common situation. Often a defendant will settle because settling is cheaper than winning the case. In that case, they have, in practice, lost the right to a trial by jury. Oh, sure, the right exists in theory, but exercising it would be too expensive.

There are important differences. American Express could have afford to defend the lawsuit arbitration or no arbitration. But Italian Colors, and the other small businesses complaining about Amex could not pursue the suit without a class action. While Amex might think it economically inefficient to defend it can afford to do so, not so the plaintiffs.

The real problem comes back to the fact that legal proceedings, be they courts or arbitrators, are so expensive that only those with deep pockets have access to them. In practice, it becomes not about justice or even law, but about who can manage to assemble a winning legal team that can threaten to bankrupt the other side through the cost of legal proceedings. Arbitration is supposed to address that by getting rid of most of the cost. Apparently, that isn't working.

In the real world that isn't how litigation works. Plenty of cases are decided on the facts and on the law. The kind of chicanery you're talking about tends to be limited to a few understandably high profile cases (for example, the enourmous Chevron/Ecuador litigation).

I wonder, though, what went wrong. American Express is accused of monopolistic practices. What is it about the arbitration costs that would cost a million bucks to prove the case when you aren't in front of a judge. The concept of arbitration is that instead of going to a real judge in a real courtroom, you go before Judge Wopner, present your case, and get a ruling, without having to go through all those expensive proceedings.

On the one hand, part of the problem is that businesses lawyered up and brought litigators into arbitration because they wanted to win. Understandably, these lawyers tended to push arbitration to become more like litigation, because that was the model they knew and accepted as fair.
On the other, part of the problem is that arbitration is applied in disputes where it's not appropriate. Arbitration, as advocated for before the 1925 act, was not about individuals suing companies. Arbitration is ideal if, for example, P and D are wool brokers and P complains that D sold him low-grade wool instead of high grade wool. They can go to another wool broker they both reckon to be a good chap and ask him to decide what grade the wool is. Arbitration is not ideal if you're going to be arguing complicated issues of law, or really if P and D aren't in business together (and therefore need a fair amount of discovery in order to resolve the case). FAA doesn't allow appeals of law, so having important legal issues go before arbitrators isn't a great idea.
Another aspect of the problem is that the Supreme Court frowns on class arbitration (apparently, for some reason, arbitrators can be trusted to make up their own discovery rules, but not their own class, or aggregation rules).
In the Italian Colors case the reason that arbitration was impossible was:
(a) you can't do class arbitration and
(b) Italian Colors, and each other class member alone could not afford the expert evidence everyone agrees they would need to prove the facts they allege.

Would there be a statutory way to control costs in arbitration so its purpose could be restored?

That would be rather inconsistent with the nature of arbitration. In business arbitration, if the businesses want cheap then they need to encourage and elect for cheap rules for arbitration, and there is some talk of doing that - doing away with depositions, disclosure by lists, bifurcated hearings and so on - all innovations 5-10 years old in regular courts in England by the way.

In consumer matters, the costs are often going to be irrelevant. Individual claims are often too small to pursue in any forum without some sort of aggregation. In any event, if you want to keep costs down logically, you ought to aggregate claims which are genuinely similar - so you can hold only a single trial or hearing instead of multiple separate ones.

There are all sorts of alternatives to the existing arbitration/litigation choice in America, but they tend not to get much consideration: businesses are in love with arbitration clauses because they kill claims and consumer advocates are in love with classes because they can win a lot of cases all at once, and make a very good living doing it.