ARBITRATION IS THE WAY

  YOUR GOVERNMENT

TOOK YOUR RIGHTS AWAY
From a report by the Texas Watch Foundation
Most people would think twice before they signed away their right to free speech.  Many would hesitate before they agreed to waive the right to vote, and more than a few would pause before they passed on the right to freely worship the god of their choosing.  The same can be said of the fundamental right to a jury trial.  However, it is now simply commonplace for Texans to unknowingly sign away this cornerstone of democracy.

Everyday, folks from all walks of life—parents, homeowners, medical professionals, business executives, consumers, small business owners, and nursing home residents—unknowingly encounter binding arbitration agreements.  These hidden contract clauses may pose significant pitfalls for consumers as they take conflict resolution out of the public domain of court proceedings and into private venues controlled by profit-driven arbitrators

Truer words have never been spoken.  In 1925, the Federal Arbitration Act  (FAA) became law, allowing businesses to contractually agree to private resolution of commercial disputes.  The FAA, as passed, expressly endorsed arbitration of disputes arising from maritime and commercial contracts.  Recently big corporations have been sneaking "binding arbitration" clauses into their contracts.
 Here's Paypal's clause.
" Any controversy or claim arising out of or relating to this Agreement or the provision of Services shall be settled by binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association. Any such controversy or claim shall be arbitrated on an individual basis, and shall not be consolidated in any arbitration with any claim or controversy of any other party. The arbitration shall be conducted in Santa Clara County, California, and judgment on the arbitration award may be entered in any court having jurisdiction thereof. Either you or PayPal may seek any interim or preliminary relief from a court of competent jurisdiction in Santa Clara County, California necessary to protect the rights or property of you or PayPal, Inc. (or its agents, suppliers, and subcontractors) pending the completion of arbitration."
Fact is, Paypal is a member of the American Arbitration Association (AAA), so is the arbitrator.  The one who isn't is YOU.  Or in our case it was us.
Basically "binding arbitration" is akin to a kangaroo court.  In our case, I was trying to work things out with Paypal, when the next thing we knew, arbitration proceedings were filed against us.  I told the arbitrator, which they had picked, that I was not going to agree to this.  We were told we didn't have a choice.  The next thing we knew we were getting bills from the AAA.  I spent days calling attorneys before we found one that would even talk to us about the case.  The 2 biggest reasons for not taking the case were that it had to do with the internet and that it was in California.  By the time we found a lawyer and he looked into this, Paypal's attorneys and the AAA's fees were more than the amount that Paypal said we owed them.  Incidentally Paypal was being billed by the law firm of Perkins Coie LLP over $1,100.00 an hour and the arbitrator was billing $250.00 an hour plus expenses.

Consumers are led to believe that arbitration is less expensive than going to a court of law.  In our case filing fees in court would have been less than a thousand dollars, however, the arbitration fees in what Paypal called a "simple contract dispute" so far have amounted to $24,000.00.  
from Texas Watch
Arbitrators then feel pressure to rule in favor of the corporation in order to retain the business for their firm.   The NAF handled collection disputes for the bank First USA.  First USA paid NAF several million dollars as a result of the contract, and First USA won 99.6% of the cases out of 50,000 total.

Now to the arbitrator in our case.  At this time, because he has only rendered an interim decision, which was in their favor, we will not use his name.  However, we have many reasons to believe that his decision was wrong or biased on the side of Paypal.  

The reasons:
When Paypal was requested to provide certain documents by our lawyers they intentionally provided the wrong ones, when they did send the right ones it was evident that the records had been changed "doctored".  Our lawyers asked for them to be sanctioned, the arbitrator failed to do so.  At the arbitration, Peter Thiel (the CEO of paypal) was scheduled to be the first witness called.  Naturally he was unexpectedly called out of town and his lawyers said he would be able to testify by telephone, (making his testimony ineffectual).  That was fine with the arbitrator and our lawyers had no say so in the matter.  When a Paypal customer service rep. lied under oath that she had called me, he ignored it. When that same rep testified that a "red carpet" account was were they listened longer Paypal's lawyers contended that we received "EXCELLENT" customer service, the arbitrator agreed.  Testimony of their web programmer, who said you had to click on "accept" to their TOS before you could acquire an account was proven false, the arbitrator ignored that.  A Paypal  manager testified that if a credit card failed an address verification check the transaction wasn't processed, when shown a credit card transaction that had failed at least twice, he just shook his head and could not give an answer, again the arbitrator ignored it.  These are a few of the ways we feel the arbitrator was biased.  However, the most ignorant one was when Paypal and their lawyers lied, and said we were given preferences that provided us with protection and we chose to change the preferences.  It was shown that these preferences were only available after all the charge backs had occurred, again the arbitrator ignored the facts.  Probably, the worst injustice in this KANGAROO court was the fact that a 2 day time limit was placed on the proceedings, which was set by the arbitrator, at the request of Paypal's attorneys.  In other words lets convict them, hang them and get on with other business.  Witnesses whose testimony might have benefited our side did not get to be examined and other testimony was shortened to meet the deadline.

People have to remember that in an arbitration, the arbitrator is NOT bound by the same rules as a judge would be in a REAL court .  Evidence showing Paypal was operating in violation of California law since it began, was presented to the arbitrator, in post arbitration briefs, and again he totally ignored it.  So in essence, the arbitrator ruled that it was alright to violate the  law because it wasn't brought up at the hearing.  Our lawyers didn't find out about this until afterwards.

Consumers have to understand, that when they agree to arbitration they give up their rights to a jury of their peers.  Arbitrators are mostly from big corporate law firms. These law firms DON'T take the "man on the street" as a client.  Consumers give up their right to appeal in most cases.  Research has proven that big corporations win arbitrations more than 95% of the time, they have a poor winning record in a REAL court of law.
from Texas Watch
Edward Anderson, Managing Director of the National Arbitration Forum, discussed "do it yourself" civil justice reform through the use of arbitration.  In other words, according to Mr. Andersen, corporations can avoid responsibility to its customers by using arbitration.

Under the cloak of being a "not for profit" organization, the arbitration associations make tens of millions of dollars a year, simply by keeping their members happy.  When a case arises, they pick the arbitrators that can be chosen.  Take our Paypal case, we had to go to San Francisco, the case was held on Paypal's home ground.  Paypal's lawyers selected the arbitrator because we thought we could refuse arbitration.  As it turned out the AAA offices, Paypal's lawyers offices, and the arbitrators offices were with in walking distance of each other, as well as the main offices of Paypal.  It was easy to see who had the home field advantage.

Why do I believe arbitration is unfair ?  Arbitration associations actively solicit big corporations membership, by boasting favorable solutions to their legal problems, and that unlike the court system, that favorable decision cannot be appealed.  They provide for privacy of the hearings, so the media is not involved and the hearings are not public record.

Arbitrators are, for the most part, lawyers for big corporate law firms.  The arbitrator in our case was a founding partner of a high profile San Francisco firm.  Their client list includes, among others, American Express, Bear, Stearns & Company  Inc., Citicorp, Chemoil Corp., Hewlett-Packard, Merrill Lynch and Wells Fargo bank.  At least 4 of these companies are directly involved in doing business with Paypal.  Many others on their list can be indirectly traced back to Paypal.  Arbitrators rely on repeat business.  In our case the arbitrator commented about having to pay $80.00 a square foot for office space, and let me tell you, most could not afford the amount of space in his waiting room.

In conclusion, If you believe, what proponents of arbitration tell you about it being a cost effective way of solving a dispute, your sadly mistaken.  You are required from the start to pay half of the fees.  If you file a counter claim the minimum is $500.00 and it could range as high as $16,000.00 depending how much you counter claim for (you pay that).  Our case, excluding the counter claims fee was in excess of $20,000.00.  Again, I remind you Paypal claimed it was a simple contract which generated over 20,000 pages of documents.  So I believe you can see that justice, in the form of arbitration, is only for those who can afford it.