Evan Press’ father was in a Fayetteville, Arkansas, nursing home for three months when he died. Press said he had a bed sore the size of his fist, and that an attendant says he was so dehydrated that he appeared not to have been given any liquid or food for four or five days, according to a report from local news station KARK.
The nursing home may dispute these allegations. But Press will never be able to hash it out in court, because his contract contained a boilerplate clause. The advent of contractual terms known as “arbitration clauses” seem particularly dry and obscure on their face. They’re about procedure, and contract law. But what they mean is that people like Press can’t hold companies accountable. Nursing homes are one of a number of industries in which arbitration clauses have become a standard for those pages-long contracts that customers and employees believe they have no choice but to sign. What they do is bind customers to take their case to a private arbitrator, rather than to court.
The arbitration hearing is private, so the nursing home won’t necessarily receive public reprisal for its actions. The arbitrator is not a government service, and has to be paid by somebody. Usually, it’s paid for by the company to handle its entire roster of cases, which could be one of several explanations for why arbitrators overwhelmingly side with these companies. Even when arbitrators do side with individuals, they are likely to get a much lower judgment than they would in court. And arbitration doesn’t come with any of the procedural protections that exist in court, including the right to appeal. So whatever they come up with is binding.
Clauses like this give companies such as a nursing home significantly less incentive to quash bad behavior. The same sort of disincentives apply to cell phone contracts, cable contracts, and others that you sign with large companies just to be their consumer. They also frequently apply to employees, who are denied judicial recourse for workplace abuse.
Couch went public with his case, because he wants others to know what the real-world effect is when individuals are unknowingly signing these contracts, even in cases where you are trusting a business with a relative’s live. “People just need to know when they’re signing that initial paperwork if something happens it’s going to arbitration. That’s the way the facilities want it, that’s not how it should be,” he told KARK.
Unfortunately for Press, the U.S. Supreme Court has been one of the greatest friends to these clauses. California tried to make its own state law saying some arbitration clauses are unconscionable and should not be enforced. The Roberts Court struck it down. Even small businesses tried to challenge an an arbitration clause that prevented them from challenging the alleged monopolistic practices of American Express. The Roberts Court struck that, too, over a dissent by Justice Elena Kagan that called the ruling a “betrayal of our precedents, and of federal statutes.”
A Consumer Financial Protection Bureau study found that arbitration clauses are even worse than they seemed. Because even though companies claim going to arbitration is easier and faster than filing a lawsuit, almost nobody goes to arbitration.
Congress could have reformed arbitration clauses with a bill known as the Arbitration Fairness Act. But that bill is even less likely to go anywhere in a Republican-controlled Congress.
There’s one other avenue for reform. Another bill already passed by Congress, the Dodd-Frank Act, directs the Securities and Exchange Commission and the CFPB to limit or even ban use of the clauses — at least for entities subject to the CFPB’s jurisdiction — after studying the issue, they find that it is “in the public interest and for the protection of consumers.” CFPB is continuing its study of the issue. But any reform would have to overcome the pressure of the U.S. Chamber of Commerce, which is already exerting its heavy influence on the process.
Most individuals don’t know what to make of pages-long contracts with terms that they assume they cannot amend. But in the absence of other regulatory reform, nursing home advocates are urging those entering into long-term care agreements to refuse to sign the forced arbitration clause.
Arbitration clauses prevent consumers and employees from going to court. But they don’t impose the same burden on companies. In fact, KARK reports that the nursing home is now filing a federal lawsuit against press, rather than the other way around, because Press is bringing public attention to the case.