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Supreme Court Issues Ruling on Arbitration That Is Beneficial to Employees and Consumers

By Bill Tucker

The Supreme Court of the United States recently issued a ruling that will likely prove helpful to employees and consumers when their employers or lenders seek to prohibit their access to court. Employers and consumer lenders, including credit card companies, have increasingly sought to preclude employees and consumers from bringing claims in court by including arbitration agreements in their contracts.

In Vaden v. Discover Bank, the Supreme Court ruled that a lender could not compel a consumer to arbitrate claims that were brought as counterclaims in state court. The lender had filed a state court suit against the consumer seeking to recover past-due charges, and the consumer responded by filing counterclaims based on federal law. The Supreme Court reversed the rulings of the trial court and the Fourth Circuit Court of Appeals, both of which ordered arbitration, and held that the case could not be compelled to arbitration unless the entire case was subject to federal jurisdiction. Because the lender's claims were based on state law, and filed in state court, the claim could not be compelled to arbitration in federal court under the Federal Arbitration Act.

There are many shortfalls to arbitration provisions that are contained in form contracts that are offered on a take-it-or-leave-it basis. These provisions, which are frequently hidden in small type and written in language that is not easily understood, require the employee or consumer to submit the claim to a private arbitrator rather than a jury of their peers. Private arbitration costs consumers considerably more than the judicial system, and the rules typically allow less opportunity for the employee or consumer to discover evidence that will prove their claim. In addition, the provisions sometimes seek to allow the employer or lender to bring claims in court, while requiring the employee or consumer to waive their right to do so. Courts have refused to compel arbitration in cases where the terms are not mutual, the provisions are unfair, or the costs of arbitration are significant.

Originally posted at InjuryBoard by Bill Tucker

Full post as published by Richmond Virginia Personal Injury Lawyer on March 11, 2009 (boomark / email).