July 30, 2009

Before the Law part 2

Filed under: Corporatism, Law, Sovereignty and Constitution — Tags: , , — Russ @ 8:32 am
In my last post I discussed existential barriers to lawsuits in the public interest. Corporatism would like to juridically define the public interest out of existence by denying it standing to sue or be represented in court.
Yet while according to even this premise the aggrieved individual should have access to the courts, in practice there’s another device to keep the door barred to him as well. This is the widespread practice of forced arbitration. More and more types of consumer and employment contracts require, as a condition of employment or receiving a service, that the individual pre-emptively waive his constitutional right to a day in court.
These are a type of “contract of adhesion”, where one party who is in a much stronger position than the other presents its terms as a take-it-or-leave-it. Supporters of the concept claim that no one’s holding a gun to your head, and you can take your business elsewhere. They even claim that the market will punish anyone who is too abusive with such peremptory contracts.
But in practice the information-disadvantaged party may fail to experience it this way. He may fail to understand the fine print which details how he is surrendering his rights. The fact that this fine print is almost always written in non-English jargon, and that the seller does not volunteer to tell the buyer what he is signing (and may lie or obfuscate if directly asked), is proof on its face that information is being suppressed. 
It’s a form of hard sell, meant to take advantage of the pressure a naive consumer, pressed for time, may feel. Markets fail to deter this practice precisely because the practice has become so standard. Even if you were willing to go to heroic lengths, you may be unable to find a market alternative to forced arbitration.
Nor can these truly be called voluntary transactions. If it’s the price of getting a job, or a necessity like a phone line, internet connection, or credit card, then you were coerced into it, since the patterns of modern society largely coerce us into having these things (just like it’s very hard to get by without driving). While it may be strictly “possible” for someone who’s not rich to live unattached to these things and therefore not have to sign such contracts, and yet not retreat to a cave in the woods, it would still require an unusual way of living not amenable to most people. Therefore we can say that the services we’re talking about here are necessities, and therefore the provider and purchaser are not in some mythical free market, but in a social contract, which brings social values into the matter.
Similarly, the aforementioned shady and de facto dishonest business practices rule out any notion of this being a fair exchange.
So on both capitalist and social grounds these contracts are invalid in themselves.
Then we have the abusive way they are carried out. As Pam Martens’ recent Counterpunch article Judicial Apartheid describes, there are often conflicts of interest such as where the corporate litigant and the company supplying the arbitrator are owned by the same parent company. Such is allegedly the case with the National Arbitration Forum (NAF), one of the dominant arbitration firms, according to a fraud suit by the state of Minnesota.
Companies often require extortionate fees to allow access to the arbitrator. Discovery is completely one-sided in favor of the corporation. The arbitrators are often selected according to how corporate-friendly they are. Pro-corporate, anti-consumer decision rates of 95%+ are common. The arbitrators may even be illicitly coached on how to rule during the proceeding itself. Thus, according to the Minnesota suit, what the NAF called “Famous Parties”, that is corporate clients who were such regular respondents that they got a special rate, would receive help forging documents while the arbitrator played gotcha with consumer documents, rendering adverse judgements based on the most innocent error or typo. Some arbitrators would directly ask corporate lawyers what they wanted in the ruling, while others would be directed to modify unsatisfactory rulings. Arbitrators judged not sufficiently corporate-friendly would stop receiving assignments.
The arbitrators are not required to adhere to any law in their decisions. Corporate lawyers often ask them directly to disregard the law. The decision does not have to be explained in writing, nor does any explanation have to be given at all. This renders appeal, even where technically allowed, all but impossible.
The Seventh Amendment to the Constitution guarantees the right to a jury trial in all cases where the amount at issue exceeds twenty dollars. Common sense would say that bullying involuntary contracts enforced in a patently corrupt and predatory manner do not provide a sufficient basis for overthrowing a constitutional right.
But modern America’s corporatist Supreme Court doesn’t see things that way. In the seminal case, 2000’s  Green Tree vs Randolph, William Rehnquist writing for the majority saw fit to imperially declare that federal law can be enforced through private arbitrators, that forced arbitration contracts are valid, that there is no corruption in the system, and even that broader social goals may be properly channeled into privatized law. These are all factually false and/or malevolent as policy. 
The citizen can be forced into the privatized law system while the public law stands aloof. Only where the citizen fails to obey this system of feudal decree will the public law come in as a hired goon to “enforce agreements to arbitrate”, as Rehnquist put it in his lemon socialist decision. On its face, this is the public court displaying a pro-corporate, anti-public interest principle and prejudice. 
With the Court enshrinement and everyday entrenchment of this system of privatized law, we have a new kind of Plessy vs Ferguson and a new enshrined lie of separate but equal. Thus Kafka’s gatekeeper, who has already turned the people away from all social doors to the law, now turns the individual away declaring that he signed away his right to pass the threshhold. For him, there is no Law, and he is, in the face of the private corporate bureaucracy, stateless, rightless, and alone.  


  1. Hard as you may find this to believe, investors who are fleeced by brokerage firms actually do somewhat better in arbitration than in federal court, where judges seem to have a visceral disdain for securities plaintiffs, probably because nearly all the judges are alumni of big firms whose living depends upon representing defendants. As for getting justice in the court system, a plaintiff is lucky if he or she gets law, which is definitely not the same thing. BTW these posts are terrific.

    Comment by jake chase — July 30, 2009 @ 12:55 pm

  2. Thanks, Jake.
    Yes, I didn’t mean to imply that I think if you get into a courtroom that automatically means you get justice.

    I just make the point that privatized law and barriers to the courts are in principle a bad thing, and in the long run can only help foster corporate dictatorship.

    But I agree that even in the real courts the situation is increasingly unfriendly to anti-corporate litigants.


    Comment by Russ — July 30, 2009 @ 6:12 pm

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