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Mandatory Arbitration Affecting Missouri Troops

The New York Times Article

Earlier this week, The New York Times ran a front page story on the issue of mandatory arbitration. The story exposes how corporations use mandatory arbitration to  to avoid being held accountable when they violate the rights of men and women in uniform.

Our troops aren’t the only ones being affected by this legal loophole. Mandatory or forced arbitration likely applies to you as well. It’s found in many terms of service agreements: from cell phone contracts to leases, to nursing home admission forms. To put it simply, corporations are exploiting arbitration clauses to get away with breaking the law!

What is mandatory arbitration?

In order to understand the scheme against the troops, it’s important to understand how forced arbitration clauses work.

Arbitration clauses protect companies from frivolous lawsuits: basically, through a bunch of legal jargon, company contracts will tell you that you can’t go to court if you have a dispute. Instead, you are contractually obligated to file a claim through a private arbitration company.

Sounds reasonable at first, but the issue is that it’s being exploited. (In arbitration, your rights differ slightly from your rights in court. This is important, but we’ll talk about this later.)

Forced arbitration really comes into play for corporations because they know that there’s power in numbers. The clause prevents consumers from banding together to challenge a company in court.

These corporations benefit from keeping their battles small: they know arbitration fees alone will send individuals packing. Who wants to spend thousands of dollars over a five or six hundred dollar dispute? I don’t either.

So individuals give up, the company saves thousands, and (most importantly) they can get away with some really sneaky stuff … most recently, cheating servicemembers out of their rights.

What does that have to do with our troops?

We said that we’d explain how your rights differ in arbitration. Since arbitration is a private system, courtroom rules of evidence don’t apply and you cannot appeal. Oh, and guess who chooses which arbitration company you will have to go through? That’s right: the very corporation you’re having a dispute with!

It’s rigged against you from the start.

Such was the case for Sergeant Charles Beard of the Army National Guard, who was on duty in Iraq when his family’s car was repossessed. They told Beard’s wife that she would go to jail if she didn’t hand over the keys to their car.

Like all active military members, Sgt. Beard and his wife should have been protected from this situation under the Servicemembers Civil Relief Act (SCRA). The SCRA either postpones or suspends civil obligations for service members so that they may devote their full attention to their military duties. The act specifically allows active duty members and their families to terminate any real estate or auto lease when their orders require them to do so. Despite the fact that the SCRA requires lenders to get court orders before repossessing vehicles of active duty service members, the repossession men took the car from Beard’s wife.

The lender, Santander Consumer, broke the law, but Beard’s contract sent him to arbitration rather than court. It took over four years before an arbiter ruled on his case against Santander Consumer. Sergeant Beard was awarded $6,500, but Santander was not required to compensate Beard for the wrongful repossession.

According to The New York Times, “Arbitration is often stacked against servicemembers from the start.” Some contracts go so far as to only offer only two possible locations for a hearing: one city on each side of the country. Naturally, companies will pick the city that is farther away from the customer.

Beard’s situation is not unique. “I tried to fight for everybody” Sgt. Beard said of his case, adding that it “will destroy soldiers in combat by putting them in a position where they can’t help their loved ones.”

Sign the Petition at Change.org

Will you join in the fight to end forced arbitration? You can help protect our troops from this corporate loophole by signing the petition against mandatory arbitration, and spreading the word on Facebook.

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