Corporate Accountability

Citizens United Is Just the Tip of the Supreme Court’s Pro-Corporate Iceberg

The President, the press, and the public have been rightly outraged by the Supreme Court’s 5-4 decision in Citizens United v. FEC to allow corporations to drown out the voices of We the People in our political system. But Citizens United is just the tip of the iceberg. In less publicized cases, the Roberts Court is moving in a pro-corporate direction in other areas of the law as well, touching the lives of just about every American.


For example, two cases in the Supreme Court this week addressed the issue of arbitration–something that should be of interest to anyone who has applied for a job, owns a cell phone, uses a credit card, or has been to see a doctor (which pretty much covers all of us). Arbitration is a form of dispute resolution that takes cases out of the court system and moves them into a resolution process where a private arbitrator, not a judge, decides the dispute. Arbitration was previously used mostly by commercial trading partners as a more efficient alternative to the courts, which was what Congress had in mind when it protected contracting parties’ choice to submit to arbitration in the Federal Arbitration Act of 1925. However, forced arbitration clauses now routinely crop up in the fine print of consumer and employment agreements. The problem is that in the consumer and employment settings there isn’t much of a “choice” at all about whether to sign the arbitration “agreement”: you agree to give up your right to seek justice in the courts for any and all future claims you might have against the corporate entity on the other side of the contract, or you don’t get the job, or can’t use your cell phone or credit card, or see the doctor.


The two cases in the Court this week–Rent-A-Center v. Jackson and Stolt-Nielsen S.A. v. AnimalFeeds International Corp.–illustrate perfectly the Supreme Court’s maddeningly pro-corporate arbitration jurisprudence.


On Monday, during the Rent-A-Center v. Jackson oral argument, discussed in more detail here, the conservative Justices gave every indication that employees who sign arbitration agreements with corporate employers without having any real choice whether to sign at all–let alone agree to the terms of arbitration–are simply out of luck. Chief Justice Roberts dismissively referred to “economic inequality or whatever.” Justice Scalia went so far as to tell the lawyer for Antonio Jackson that just because a job applicant might have no choice but to submit to the unfair terms of an employer’s forced arbitration agreement in order to get the job doesn’t mean the employee has been coerced into anything–the employee is just “a stupid person who voluntarily signs an unconscionable contract.”


Then, on Tuesday, in a ruling along ideological lines in Stolt-Nielsen, the conservative Justices refused to require Stolt-Nielsen, an international shipping company, to submit to class arbitration of price-fixing claims because it wasn’t entirely clear to the Justices that the company had meaningfully agreed to arbitrate class actions. Demonstrating a newfound solicitude for full, clear, meaningful agreement to arbitrate that seemed to have been lacking in the Court just the day before, Justice Alito–joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas–explained that the Court’s pro-arbitration policy is all about consent. (In case you were wondering, there was no suggestion whatsoever that Stolt-Nielsen was just a stupid international shipping company that voluntarily signed an ambiguous and broad arbitration agreement.)


So what gives? Well, it turns out that as different as the conservative Justices’ approach to arbitration in these two cases may seem on the surface, they lead to the same result: more arbitration, less justice.


An explanation of the facts and real-world consequences of the two cases helps to explain why this is so. A pro-arbitration ruling in Rent-A-Center would mean that job applicants and employees–not to mention pretty much anyone who has a consumer contract with some fine print legalese–can be forced to give up their right to seek justice in the courts and instead be required to resolve any and all future disputes in private arbitration even if they did not have a meaningful choice about whether to be bound by such an arbitration agreement. This is especially troubling given that these cases generally involve everyday Americans on one side of the agreement, and a big corporation on the other. Because corporations are repeat players in the arbitration system and their continued patronage keeps private arbitrators in profitable business, arbitrators may well be predisposed to rule in favor of the corporate interest. Moreover, many corporations load arbitration agreements with terms that favor them over the individuals who are effectively required to sign them. Thus, it was deeply troubling in the Rent-A-Center argument on Monday to see the conservative Justices so committed to forcing workers and consumers into arbitration, particularly because there is powerful textual and historical evidence that Congress did not even intend to include consumer and employment contracts within the Federal Arbitration Act in the first place.


One could perhaps defend the Justices’ “pro-arbitration” stance in Rent-A-Center on the grounds that the arbitration process is less costly and more efficient than federal court litigation. But that argument is undercut considerably by the Court’s ruling Tuesday. In Stolt-Nielsen, the arbitrators ruled that antitrust claims against Stolt-Nielsen could proceed as a single class action, thus saving the claimants the time and money that would be needed to arbitrate each claim separately. But the conservative majority’s ruling disallows such class proceedings when the corporation has not expressly agreed to them, which threatens to wipe out consumer class claims altogether in instances in which the parties have signed a general arbitration agreement. The ruling in Stolt-Nielsen thus isn’t an anti-arbitration decision–Stolt-Nielsen’s customers are still required to arbitrate their claims that the company engaged in bad corporate conduct, they just have to do so individually in separate arbitrations instead of as a group in one proceeding. So much for efficiency. And, as Justice Ginsburg pointed out in her excellent dissent, this often means that claims won’t be brought at all due to the cost of arbitration for those seeking to vindicate their rights, resulting in fewer corporations being held responsible for their misconduct. (If there were any doubt that Stolt-Nielsen applies beyond the context of international cargo shipping, it should be dispelled by the fact that the wireless communications industry–the folks who put the arbitration agreement into your cell phone contract–filed a brief supporting the outcome reached in the case.)


Should the Court rule against the employee in Rent-A-Center, such a ruling, combined with Justice Alito’s opinion in Stolt-Nielsen, would be a double blow to the rights of consumers and employees to seek justice in the courts when they believe they have been wronged. Given the tenor of the oral argument in Rent-A-Center, and the ruling in Stolt-Nielsen, it just may be that the Roberts Court will allow corporations to force pretty much every claim into private arbitration, but won’t respect arbitrators’ efforts to make the process fairer or more efficient for the victims of corporate misconduct. Heads, corporate America wins; tails, ordinary Americans lose. This is not what Congress intended when it passed the Federal Arbitration Act, and it is surely not what the American people consider to be justice.