For Immediate Release: January 21, 1999

For More Information Contact: TLPJ, 202-797-8600

TLPJ Launches Mandatory Arbitration Abuse Prevention Project

Urges California Supreme Court Not to "Depublish" Badie Opinion

Trial Lawyers for Public Justice (TLPJ) today launched a major new program, designed to protect the right of all Americans to their day in court: the Mandatory Arbitration Abuse Prevention Project. To initiate the project, TLPJ filed an amicus letter in Badie v. Bank of America, urging the California Supreme Court not to "depublish" an important decision rejecting an attempted abuse of mandatory arbitration.

"Banks should not be permitted to misuse mandatory arbitration clauses to deny unsuspecting Americans of their fundamental rights. That is what Bank of America tried to do in the Badie case, and that's why the banking community wants the case wiped off the books," said TLPJ Foundation President Joseph A. Power, Jr. of Chicago's Power, Rogers & Smith. "This is precisely the type of abuse our new project is intended to fight."

TLPJ launched its new project because of the growing attempt by corporations to use mandatory arbitration clauses to deprive consumers of their rights. Increasingly, corporate wrongdoers sued by injured consumers, health care recipients, and employees are arguing that they cannot be sued because they slipped clauses into consumer, health care, and employment contracts requiring that all claims against them be resolved through mandatory arbitration. They make this argument even when the mandatory arbitration clauses were included in the fine print of credit card or insurance contracts supposedly added through materials stuffed in with updates or bills, the plaintiffs were not aware of and did not meaningfully consent to arbitration, and the mandatory arbitration process itself is unfairly weighted in the companies' favor. And far too frequently, they are winning.

TLPJ's Mandatory Arbitration Abuse Prevention Project is intended to expose and reverse this dangerous development. Through the project, TLPJ seeks to enforce plaintiffs' existing legal rights by objecting to illegal or unfair mandatory arbitration provisions and processes; develop the law by winning judicial recognition of additional protections against mandatory abuse; educate the bar, the judiciary, and the general public about mandatory arbitration abuse and possible ways to prevent it; and help others to do all of the above.

The Badie case is a perfect example of attempted mandatory arbitration abuse. The issue in Badie is whether a mandatory arbitration clause contained in a "bill stuffer" mailed with other documents could modify an existing credit card agreement. In 1992, Bank of America began amending its contracts with credit card customers to limit resolution of all disputes to mandatory arbitration or reference. Bank of America notified customers of this change by inserting a half sheet of paper with a cryptic reference to arbitration into a monthly account statement together with other documents -- a method designed to ensure that few customers would notice the contract change. The bank claimed that any customer who used the card after receiving this cryptic paper had agreed to submit any claims to mandatory arbitration. The trial court found that the notice was neither the best practical notice nor was it designed to achieve the customers' consent.

On November 3, 1998, the California Court of Appeal rejected Bank of America's appeal of that ruling and held that consumers must clearly understand that they are giving up the right to a jury trial before an arbitration clause, like any other material new term added to an adhesion contract, will be enforced. The court held that the language used in such an attempted contract modification "must be unambiguous and unequivocal, leaving no room for doubt as to the intention of the parties." The appeals court found this standard was not met in the Badie case, and therefore declared that the mandatory arbitration clause was not valid and could not be enforced.

Following this decision, a number of financial institutions affected by the decision formally asked the California Supreme Court either to review the case or to "depublish" the opinion. Under a unique rule of the California judicial system, any person may ask the state's highest court to depublish – or erase – an opinion within 30 days after it becomes final. Other interested parties may then submit a response, either supporting or opposing the request. The California Supreme Court has unlimited power to decide whether or not to depublish.

Today, TLPJ filed an amicus letter opposing the depublication request.

"The financial companies have a lot to gain if their request to depublish is granted, while consumers have a lot to lose," said TLPJ Staff Attorney F. Paul Bland Jr., who authored the amicus letter. "The companies are claiming that they have the right to involuntarily impose mandatory arbitration and other material new terms upon their unknowing customers through ambiguous and equivocal clauses. That is not the law, and it should not be the law."

TLPJ is also working on two other cases that involve mandatory arbitration abuse. It is handling a series of connected appeals in the Alabama Supreme Court arising from Silvernell v. First American Title Insurance Co., a case where a title insurer sent a mandatory arbitration clause to the plaintiffs after the contract to purchase the property was signed. And it has filed an amicus brief in support of the plaintiffs in Peterson v. Cater, seeking a declaration that the Alabama Department of Insurance acted illegally in approving a form for insurance policies that would permit insurers to force all disputes against them into arbitration.