Lost in the Fine Print
Lost in the Fine Print is a film which is filled with liberal claptrap. It was published online in October 2014, and consisted primarily of poorly-researched disparagement of arbitration, combined with anecdotes from parties that did not like arbitration. The intellectual level of the argument presented in the film rarely rises above "I lost an arbitration case; therefore arbitration is biased."
(work in progress)
- We start with man-on-the-street interviews asking passersby to define "forced arbitration". What interests me is that one of them goes right to the loaded terminology by questioning the interviewer "forced arbitration?"
- 0:28: we're off to a great start, as the film features a clip of a news broadcast in which the anchorwoman grossly mischaracterizes arbitration as "Imagine that you've just stepped into the ring for a prize fight, only to learn that the referee and the judges are employed by your opponent."
- 0:40 Deepak Gupta (who represented the Concepcions who were seeking to block AT&T from enforcing its arbitration clause), claims that arbitration clauses are buried in fine print. In a bit of irony, the B-roll zooms in on a Verizon Wireless contract, in which the arbitration clause is in bold and all capital letters and is set off from the rest of the contract by a black box.
- 0:50 Next, we get liberal Sheldon Whitehouse, who disparages "forced arbitration" as allowing "powerful special interests to pick consumers' pockets in unfair ways". Also, in another bit of irony, the B-roll shows companies that have arbitration clauses, including at least three (T-Mobile, Time Warner Cable, and StubHub) that do not require consumers to agree to arbitration as a condition of receiving goods or services.
- 10/31 update: based on additional reading materials, it appears the film's producers classify arbitration clauses that a consumer can choose not to be bound by as "forced arbitration" (in contrast to the ordinary English meaning of the adjective "forced").
- Whitehouse additionally criticizes arbitration as "degrad[ing] the system of government that we fought for back in the American Revolution."
- 1:23 Now the mastermind of the attacks on arbitration, F. Paul Bland, asserts without evidence that "the vast majority of Americans have no idea the rights that they have supposedly given up in fine print contracts"
- 1:52 Bland states that "more than 95% of credit card debts are subject to forced arbitration". I doubt this statistic is true, especially in light of the Ross settlement, in which several major credit card issuers agreed to remove arbitration clauses from their credit card contracts. Bland also mentions other statistics about the prevalence of arbitration clauses in consumer contracts in various industries that he provides no evidence to support (and which are probably, at the very least, severe overestimates).
- 2:14 Gupta describes arbitration clauses as "an exit clause from the civil justice system".
- 2:23 Liberal Hank Johnson describes arbitration as a "for-profit system of justice". See below. In addition, the American Arbitration Association is not-for-profit.
- 2:31 F. Paul Bland says that businesses "rig [arbitration] rules in their favor". This is not supported by the evidence. As Rutledge and Drahozal point out, in credit card agreements, the only unfair clause that was prevalent was a class-action waiver. Many consumer contracts in fact modify the default AAA consumer rules (or JAMS rules) in favor of the consumer, as the Concepcion agreement did.
- 2:45: Here's the title card!
- 2:53 and our presenter in front of a green screen, Robert Reich (billed as "Former U.S. Secretary of Labor").
- 10/31 update: the film apparently takes a page from the creationist debate book in bringing on an expert in one area as an authority in an irrelevant area.
- 3:33 Reich states that arbitration clauses require the arbitrator to be "picked by the company that wronged" the consumer. This is untrue. The AAA rules have the AAA select the arbitrator from its roster of neutrals; neither party is involved in the arbitrator selection process unless there is a challenge for cause to an arbitrator's service. Under the JAMS rules, a list of arbitrators is prepared by JAMS, and both sides get to strike the same number of arbitrators and rank the remainder. None of these well-tested arbitrator selection systems can be fairly characterized as a business selecting the decisionmaker.
- 3:37 refers to the 94% statistic. Reich, of course, does not mention
- the "study" was conducted in 2007, seven years before the film was published
- it involved arbitrations before the National Arbitration Forum, a forum that stopped conducting consumer arbitrations in 2009, five years before the film was published
- most of the cases involved were debt-collection cases, which also very frequently result in judgments for the business/creditor in court
- in many of the debt collection cases, the arbitrator did not award the full amount demanded by the business
- AAA and JAMS do not have a massive consumer debt collection caseload that the NAF had (34000 California consumer cases in five years); in fact, their consumer caseload is just over a thousand cases a year (for AAA) and a few hundred cases a year (for JAMS).
- 3:47 Reich states that there is no appeal from an arbitration award. Although review of an arbitration award in court is limited, there are grounds for vacating the award, one of which would be evident partiality of the arbitrator (which would almost certainly be the case if the business unilaterally selected the arbitrator, as Reich claims).
- Reich states that arbitration "helps companies evade responsibility for violating ... laws". This is false.
- 4:12 Nicole Mitchell provides our first anecdote. Her complaint about arbitration is that arbitration is not public and that the arbitrator apparently granted summary disposition against her (never mind the fact that summary judgment in courts is a frequent disposition of cases). Of course, Mitchell does not provide the award or any of the documents filed (but, apparently, she is not barred from discussing the outcome of the arbitration, so it is unlikely that a gag clause was involved), so viewers can't see the other side of the story to verify the accuracy of Mitchell's story. Gupta chimes in saying that arbitration requires "giv[ing] up your right to have whatever result become public"; notwithstanding this is exactly what Mitchell did in participating in the film. F. Paul Bland is back at it saying that arbitration allows businesses to opt out of laws; this is patently false.
- 10/31 update: my research found a probable match in the AAA consumer case files (Q2 of 2014). According to the available information, Mitchell (represented by Lance LoRusso of the Georgia law firm LoRusso Law Firm, PC) filed arbitration against The Weather Channel, LLC (the only AAA case in which it has appeared) pursuant to an AAA clause on April 19, 2012, claiming $5,000,000. The assigned case number was 302012000220. On June 4, 2012, Edith N. Dinneen, Esq. was appointed as the arbitrator. The case was closed as dismissed on May 22, 2014. The arbitrator's fee of $82,254 was paid 41.15% by the consumer (approximately $33,850) and 58.85% by the business (approximately $48,410).
- 7:00 Our next anecdote comes from Debbie Brenner, who went to a for-profit college that allegedly lied about job placement statistics. She signed an arbitration agreement but claims she wasn't aware of it or the ramifications. Then someone describes arbitration as "somewhere between an uphill slog for you and a flat-out rigged game". F. Paul Bland complains that arbitration clauses are hard to understand and that one (unspecified) clause began with a 256-word sentence (one must wonder whether the FRCP is any easier for consumers to understand). Brenner complains about an award in which the arbitrator ruled in favor of the college and awarded the college their attorney's fees (stated to be over $700,000, reduced to $362,000). No copy of the award is shown to the viewers. Also, no mention is made of whether a similar result is possible in court. Brenner claims that "arbitrators are in the back pockets of corporations and they're not going to side against the corporation because they know that I'll never see somebody again but the corporation definitely will get sued again". This is simply tail-wagging-dog: the proportion of consumer cases to the overall caseload (both in terms of fees collected and total cases) is miniscule; it makes no sense for an arbitration to intentionally bias himself in favor of a business in the hope of getting a few more consumer cases (not to mention the loss of reputation, hence business, resulting from allegations of bias).
- 10/31 update: based on the AAA case files, Delta Career Education Corporation (who appeared in 13 AAA cases) filed a claim for $450,000 against Brenner pursuant to an AAA clause on December 21, 2011. The case number was 762011000299. Brenner was represented by Jeffrey Cox of the Cox Law Office in Arizona. Dennis Negron Esq. was appointed as arbitrator on May 31, 2012. An in-person hearing was held at 111 West Monroe Street Suite 1600, Phoenix, AZ 85003. An award was issued on December 9, 2013. The record indicates a zero award of damages to the business and the consumer, and an award of $360,358 in attorney's fees in favor of the business. The arbitrator's fees of $168,690.64 were allocated entirely to the consumer. Negron served as an arbitrator in twelve other cases. In one of those cases, the consumer was found to be the prevailing party in claim brought by the business (Hargrave & Hargrave, An Accountancy Corporation). In three others, the consumer was awarded monetary relief (against Worldwide Travel aka Del Rey, Fidelity National Title Insurance Company, and Century Negotiations, Inc.). One of those awards also included an award of attorney's fees in favor of the consumer. Negron did not award attorney's fees to the business in any other case in the records, and in only one other case was the consumer assessed more than $750 in arbitration fees (48.66% of a $19,520 fee on the $111,500 claim against Fidelity that for which the consumer received an award of $39,600 and $4,291 in attorney's fees).
- F. Paul Bland criticizes arbitration because the business selects the arbitration organization that selects the arbitrator. (I wonder how he would feel about forum selection clauses, where the business selects the court that selects the judge.) Not to mention that several consumer contracts allow the consumer to select from a list of arbitration forums (such as AAA or JAMS). Bland insinuates that the arbitration is "picked by the other side".
- Gupta jumps in with further innuendo about the repeat player effect (discussed above) that results from arbitrators being "hired" (inaccurate characterization) by businesses. Gupta states that "there are examples where arbitrators have been blacklisted". Gupta is probably referring to former NAF arbitrator Elizabeth Bartholet, who says she was removed by peremptory challenge by a bank that had lost a case she served on (not, as Gupta implies, removed by the NAF). It's worth pointing out that AAA, the largest consumer arbitration company, does not have peremptory challenges in its Consumer Arbitration Rules, so any blacklisting of the kind alleged is highly improbable.
- 11 minutes in, we get to our third anecdote, Italian Colors, the lead plaintiff in the class action against American Express that was the subject of a U. S. Supreme Court decision in June 2013. According to our narrator, American Express's arbitration clause meant that the company "could not be held accountable in a court of law". (Also, interestingly, the B-roll shows what appears to be American Express's current cardmember agreement, but not the merchant agreement at issue in Italian Colors.) The lawyer interviewed suggests the owner of Italian Colors does not know about the merchant agreement he received. The co-owner says that it was not about the swipe fees but rather the arbitration clause (the underlying suit was about the Honor All Cards provision that Italian Colors claimed to be an antitrust violation). Gupta conflates not being cost-effective to pursue a claim with not being able to bring a statutory claim at all. The owner candidly admits that he didn't read Scalia's decision that he is complaining about.
- Gupta calls Italian Colors a "green light" for businesses to add arbitration clauses. But, in fact, Rutledge and Drahozal found that adoption of arbitration clauses in franchise contracts did not significantly increase after Concepcion or Italian Colors.
- The film concludes with F. Paul Bland ranting about the General Mills arbitration clause and what he calls "really unfair" and "exotic provisions". He asserts that liking a Facebook page constituted assent to the arbitration clause; this was specifically disclaimed by General Mills.
- F. Paul Bland says that "most Americans" don't know about arbitration and "certainly don't agree" with arbitration. There was a poll on arbitration from parties that resulted in mostly favorable opinions on the arbitration process. F. Paul Bland gets his statistics from an unknown source (possibly the top of his head).