- Forced Arbitration
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Forced arbitration clauses – which are buried in the fine print of credit card terms, employee handbooks, health insurance plans, nursing home admissions forms and many other contracts – eliminate consumers’ and employees’ access to the courts and require that they submit their disputes to a private legal system that favors corporations. Forced arbitration clauses enable big business to undermine consumer protections, circumvent civil rights laws, bypass product safety and escape accountability for wrongdoing.
Below are stories about individuals and small businesses that suffered severe hardship due to forced arbitration.
Fonza Luke (Birmingham – Employment)
Fonza Luke began working as a licensed nurse for Baptist Medical Center – Princeton, also known as Baptist Health Systems (BHS), in 1971. For almost 30 years, she was a dedicated employee who received the highest performance ratings. In November 1997, Fonza was required to attend a meeting of hospital employees in which she was given a copy of a new “Dispute Resolution Program.” The employees were told that BHS was starting a new program that would require them to give up their right to go to court, and that all claims would be subject to forced arbitration. When she refused to sign this agreement, Fonza was told twice that she would be fired. About three years later, in early 2001, the hospital finally fired her, claiming that she was guilty of “insubordination.” Believing that BHS fired her because of her race and age – she is African American and was 59 years old when she was terminated – Fonza filed race and age discrimination claims with the U.S. Equal Employment Opportunity Commission and then in federal court.
BHS responded by asking the federal court to dismiss the case, claiming that Fonza had agreed to bring all claims to arbitration, even though she had never actually signed the dispute resolution program form. Despite this, the federal court held that BHS could force Fonza into arbitration because she continued working at BHS after she was shown the arbitration clause. When Fonza appealed the federal court’s decision, the appeals court affirmed and ordered arbitration. Once in arbitration, the arbitrator was chosen from a list that was heavily composed of defense lawyers. Consequently, it was impossible for Fonza to get an impartial arbitrator, much less someone who might be sympathetic to an employee’s case. As a result, Fonza’s discrimination and retaliation claims were denied, and she received no relief whatsoever.
Today, Fonza has to work two jobs to make as much as she did at BHS.
John Ramirez (Fontana – Employment)
John Ramirez worked for University Hospital, a company owned by Tenet Healthcare, as a phlebotomist. John, who lost his leg in a train accident, used a prosthetic leg at work. However, when the prosthetic began to cause him great discomfort, he started to use crutches around the office. Nimble on the crutches, John’s workplace performance was unaffected.
In 2001, John transferred to Garfield Medical Center, another subsidiary of Tenet Healthcare. When his new supervisor saw John working on crutches, she sent him home and told him that he had to put on his prosthetic leg. Unfortunately, John was unable to comply because his prosthetic leg still caused severe discomfort and was too painful for him to wear. Consequently, John was forced to order a new prosthetic leg. His supervisor, however, would not allow him to work on crutches while he waited for his insurance company’s approval and for his new prosthetic leg to be delivered. In the interim, John lost a substantial amount of wages.
Believing he had an open-and-shut case of disability discrimination, John notified Garfield Medical Center’s Human Resources Division that he would be filing a grievance against his supervisor. It was only then that Garfield Medical Center began to complain about John’s performance. Subsequently, John filed a lawsuit against Garfield Medical Center and its parent company, Tenet Healthcare. John was fired four days later.
Because John signed an arbitration agreement as a condition of employment, he was forced into binding arbitration for his claims of disability discrimination and retaliation. After the arbitration hearing, but before the decision was handed down, Tenet approached the arbitrator and offered to select her as its arbitrator for the two other cases it had pending. These two cases would amount to a substantial amount of additional fees and revenue for the arbitrator, and she accepted Tenet’s offer without disclosing this fact to John and his lawyer. Shortly thereafter, and not surprisingly, the arbitrator ruled entirely for Tenet in regards to all of John’s claims.
Because of the manifest injustice of the ruling, John attempted to have it vacated in court. But his effort failed; the court ruled that it had no basis to review the award because arbitration awards are not subject to court review even when they are in clear error of the law.
Jon Perz (San Diego – Auto)
On February 16, 2007, Jon Perz thought he found a used car to purchase at a local car dealership in California. Even though it was a Certified Used Car, the car, when driven, noticeably shook. The dealership told Jon the car simply needed an “idle adjustment” and assured him that it would fix it, free of charge. Based on those assurances, Jon decided to purchase the car for $8,000. Before signing the paperwork he asked if the idle adjustment could be done before the car left the lot. The dealership told Jon he would have to make an appointment, but could only do so for the following week. Four days later, after the 48-hour cancellation policy had already expired, Jon was able to get an appointment with a mechanic. It was then that the mechanic told Jon they could not repair the car he had just purchased. Jon had the car inspected and learned that the certified vehicle he purchased had substantial water damage, possibly from a flood, and had previously been wrecked. It was the water damage that caused the vibrations due to the resulting electrical problems. After additional visits to the mechanic and with the car remaining virtually undrivable because of the vibrations, Jon asked the dealership for a refund. The dealer refused.
Subsequently, Jon hired a lawyer and filed a lawsuit alleging that the dealership had sold him a previously wrecked and water damaged car. The dealer successfully compelled arbitration. However, two years later, Jon’s case has yet to be heard. The dealer, using the arbitration system to its advantage, has successfully stalled the case – denying Jon the opportunity to seek retribution for the fraud committed against him.
Greg Cole (Marietta – Home Construction)
In July 2000, Greg and Kimberly Cole paid $429,000 for a new house built by John Wieland Homes and Neighborhoods Inc., in Marietta, Georgia. Within months of moving in, they discovered numerous construction problems. For example, the house contained such major structural deficiencies that during heavy and extended periods of rain, it literally rained inside the home. Experts who inspected the house found numerous problems attributable to faulty construction. As a result of these defects, Greg, Kimberly and their three children began to experience health problems. Subsequent testing revealed that the house was full of mold spores and that the Coles were suffering from mold poisoning. An environmental expert advised that occupants in the house should consider using personal protective equipment such as face masks, coveralls, gloves, etc. The Coles also were advised to abandon the house and all its contents, including their clothing.
In May 2006, Greg and Kimberly sued Wieland Homes. Citing a clause in its contract, Wieland Homes forced the Coles into arbitration. The arbitration hearing was held at the Coles’ house on August 22, 2006. Unbeknownst to the Coles at that time, the arbitrator had connections to National Association of Home Builders (NAHB). In fact, he was the instructor for eight NAHB continuing education seminars and was the instructor in at least six courses, including one on using homeowner warranties and arbitration to “protect your business.”
Nearly eight months later, the arbitrator ruled that only 29 of 94 alleged defects were the builder’s responsibility to fix. The arbitrator rejected Greg and Kimberly’s most serious complaints – including the mold that had made the house unsafe to live in. The arbitrator required repairs within sixty days of Wieland Home’s receipt of the April 4, 2007 decision. According to Greg, none of the ordered repairs has been completed.
For additional information on the Cole’s story see, “Homeowners Say Arbitrators Biased Toward Builders” by Kevin Duffy in The Atlanta Journal Constitution, February 17, 2009 at http://www.ajc.com/metro/content/business/stories/2009/02/17/wieland_home_arbitrator.html?cxntlid=inform_sr.
Scott Kimbell (Jefferson – Home Construction)
In 2001, Scott and Leslie Kimbell found a 1¼-acre lot in an attractive subdivision in Jefferson, Georgia. The subdivision developer, Sue Campbell Properties Inc., agreed to build the Kimbells their dream home, and Scott and Leslie signed a purchase contract. The Kimbells paid $256,500 and moved into the home in May 2002. About one year later, Scott and Leslie noticed some problems, including “a dip in the fireplace and some cracking in the walls above the fireplace.” A home inspector told them the floor was sloping toward the fireplace – there was a three-quarter-inch drop in the floor over a two-foot span – that a dual staircase to the second floor was pulling away from the walls, and the front staircase sloped toward the back of the house. A structural engineer reported that a single stud wall supported the fireplace and that it was only resting on subflooring. When the builder was alerted, she promised to install a steel jack under the fireplace to support it, but never did. Scott and Leslie solicited three estimates for repairs on their home, ranging from $43,320 to $72,350.
When the Kimbells wanted to sue against Campbell in court, Campbell their lawyer told them they could not because of the arbitration clause in their construction contract. Subsequently, the Kimbells filed a claim with the American Arbitration Association (AAA). A two-day hearing was held in August 2006, but the arbitrator refused to visit the Kimbells’ house to see the structural damage. In his decision, the arbitrator accepted the existence of the defects listed by Scott and Leslie, but concluded that Campbell was not responsible for the repairs because the defects were either caused by the Kimbells’ own actions or inactions, were typical homeowner maintenance items, or were otherwise Scott and Leslie’s responsibility. The arbitrator ordered the Kimbells and Sue Campbell Properties to split his fee and costs totaling $21,200 and the AAA fees of $4,700. Each side was also ordered to bear its own costs, including attorney fees.
Michelle Rechtien (Savannah – Home Construction)
In 2006, six months after John Rechtien returned from a year of Army duty in Iraq, he and his wife, Michelle, closed on the purchase of a new house in Savannah, Georgia. At the house inspection the day before closing, the newly constructed home showed signs of sloppy workmanship. However, the builder, JCW Wardlaw, reassured the Rechtiens and the sale proceeded as scheduled. After growing impatient at the slow pace of repair, the Rechtiens later hired a professional engineer, who found five building code violations involving roof trusses, drainage around the house and requirements for construction of houses built in a 110-mph hurricane zone. In addition, a Savannah environmental firm hired by the Rechtiens found evidence of mold because of excessive leakage in the house and recommended that all the damaged materials be removed.
After learning that their warranty required forced arbitration, John and Michelle paid $2,500 to file an arbitration claim with DeMars & Associates, listing 182 problems in their house. In his decision, the arbitrator awarded the Rechtiens only 36 of the 54 items that Wardlaw claimed were covered by the warranty, and added three other items as “covered” defects. The arbitrator also asked the Rechtiens and the builder to supply estimates for the cost of repairs. The Rechtiens’ estimates approached $20,000. The arbitrator, however, accepted Warlaw’s low-ball estimates and awarded John and Michelle $3,210 for all of the repairs. Days after receiving the arbitration decision, John was deployed for his second year-long tour in Iraq, where he is an Apache attack helicopter pilot in the Mosul area.
When John returns from Iraq – now scheduled for October 2009 – his unit will be transferred to Fort Drum, N.Y. Accordingly, John and Michelle will have to sell the house and disclose everything, including the structural engineer’s report, the mold inspection, and the house’s substantial code violations. They expect to lose thousands of dollars.
Martin Cleland (Manson – Credit Card)
In 1998, Martin Cleland, while watching TV, saw an advertisement for Gateway computers. Excited, he ordered the computer by telephone. To cover the $1,700 cost of the computer, Martin setup a payment plan with MBNA. Martin paid his bills on time, but he did miss a couple of payments. After paying a total of $3,000 in late fees and interest, almost twice the cost of the computer itself, Martin stopped paying.
Ten years later, Martin learned that on July 25, 2008, a debt collection firm had gone to the National Arbitration Forum (NAF), without his knowledge, and gotten an award entered against him for $6,703. The award was entered despite the fact that the statute of limitations to collect on the debt had expired and that Martin had never agreed to arbitrate any claim with NAF (something the debt collection firm later acknowledged). Upon learning about the entry of the arbitration award, Martin contacted an attorney.
Unfortunately, by that point there was little the attorney could do because, under Iowa law, the 90 days to contest the existence of the agreement to arbitrate and the fairness of the arbitration process had already expired.
The case was later settled under a confidential settlement agreement, where Martin was forced to pay an undisclosed amount to the debt collection firm.
Tim and Karen Gilbert (Bossier City – Home Construction)
Tim and Karen Gilbert contracted with Robert Angel Builder Inc. to build their new home. Upon completion of the construction, a number of significant defects became apparent. The Gilberts’ lawyer alleged that the problems included massive water leaks that led to major structural damage in the home, floors that weren’t properly installed, doors that were defective and installed the wrong way, and a finish on the home that did not last even six months. The president of the Louisiana Home Builders Association testified in detail about the defects of the home. Tim and Karen subsequently spent $200,000 on repairs.
When Tim and Karen filed a claim against Robert Angel Builder in Louisiana state court, the case was forced into binding arbitration with Construction Arbitration Services (CAS). The arbitration proceedings proved to be one nightmare after another. First, the Gilberts were awarded much less than the $200,000 they needed to make repairs and cover arbitration costs. Worse, court documents showed that the CAS arbitrator destroyed all of the evidence submitted during the arbitration proceeding, even though the arbitrator was notified that the Gilberts planned to appeal his ruling and he had promised to keep the evidence safe. The Gilberts went to court and successfully proved that their arbitrator obstructed justice. Both the arbitrator and CAS were held in contempt by the court. On March 23, 2009, the court held a hearing on the motion to overrule the arbitrator’s award; the case is currently pending.
For additional information on the Gilberts’ case see, Gilbert, et al. v. Robert Angel Builder, Inc., No. 126,995-B, 26th Judicial District Court, Bossier Parish, Louisiana; “Construction Arbitration Services’ Arbitrator Allegedly Destroys Evidence, Faces Motion for Contempt,” September 23, 2008 at http://pubcit.typepad.com/clpblog/2008/09/construction-ar.html.
Richard Welshans and Deborah Williams (Annapolis – Franchise)
After Richard Welshans left his sales job at a chemical manufacturer, he and his wife, Deborah Williams, used his severance package to open a Coffee Beanery cafe in Annapolis, Maryland. Richard and Deborah did not know that Michigan-based Coffee Beanery’s franchise pitch had made their franchises look more profitable than they actually were. Most shops closed within three years, leaving their owners deep in debt. By the time Richard and Deborah agreed to buy their franchise, approximately 40 franchises had failed. About 60 more have failed since. The company also concealed the fact that company Vice President Kevin Shaw had been convicted of grand larceny in 1987.
After the business went poorly for Richard and Deborah, they attempted to recover some of their losses from Coffee Beanery in Maryland federal court. However, because of an arbitration clause in the fine of the franchise agreement, a federal judge in Michigan presided and ordered the case into arbitration. The process required steep fees up front, so Richard and Deborah borrowed $100,000 from his brother-in-law to participate in the arbitration process.
The arbitrator selected by Coffee Beanery, JoAnne Barron, had several potential conflicts of interest: She worked as an attorney at the state court where Coffee Beanery’s lawyer had served as a judge for 20 years, and she and Coffee Beanery shared an accounting firm. Barron also had overseen at least two previous franchise disputes involving Coffee Beanery’s lawyer, finding in the company’s favor both times. Richard and Deborah tried to have Barron removed but were unsuccessful.
Richard, Deborah and their attorney flew to and from Ann Arbor, Michigan, where the arbitration was being held, three times in 11 days. Richard and Deborah’s case against Coffee Beanery alleged that pursuant to an earlier Maryland Security Commission’s ruling, the company had violated Maryland law by not revealing, among other things, Shaw’s felony conviction. After 11 days of hearings and despite the state’s previous fraud findings, Barron concluded that the franchise had likely failed due to “operator inexperience.” She then ordered Richard and Deborah to pay $187,452 in legal fees and arbitration expenses (which did not include their own legal fees or travel costs). Among the charges Richard and Deborah were ordered to pay were $16,800 for the arbitrator’s services, $35,571 for a court reporter and transcription, and $504 for the Beanery lawyers’ lunches.
Their experiences with Coffee Beanery and arbitration have forced Richard and Deborah to mortgage their home and file for bankruptcy. Last August, they were finally vindicated when the Sixth Circuit Court of Appeals struck down the arbitrator’s award – an incredibly rare event – because Barron had ignored state law by disregarding Shaw’s felony conviction. The Coffee Beanery is now appealing the Sixth Circuit’s decision.
For additional information about the Richard’s and Deborah’s case see, “Franchise Fraud: Wake Up and Smell the Fine Print,” by Stephanie Mencimer in Mother Jones, March/April 2009 at http://www.motherjones.com/politics/2009/02/franchise-fraud-wake-and-smell-fine-print.)
Sidney High (Detroit – Nursing Home)
Vunies B. High, the sister of the legendary boxer Joe Louis, was a 92-year-old Detroit area resident suffering from dementia. She was a graduate of Howard University and a longtime English teacher and counselor in Detroit public schools. Because of her dementia, Vunies’ family was forced to move her into an assisted living facility, thinking it would be safer for her there. However, on a frigid night in February 2008, staff at the assisted living facility failed to notice when Vunies wandered outside wearing only her pajamas. As a result, Vunies froze to death. When her family went to file a claim against the nursing home corporation, they discovered that the admissions agreement they signed contained a forced arbitration clause.
The forced arbitration clause stated that in the case of any dispute, the provider had the sole and unfettered option to choose to resolve the dispute in arbitration, would choose the location for the arbitration and the arbitrator, to apply the rules of the American Arbitration Association (AAA), and would retain its right to use any legal means against Vunies or her family in any court, even though Vunies was required to forgo that option. It also turns out that Vunies never actually signed the mandatory arbitration clause; despite this, the nursing home still tried to force Vunies’ family into mandatory arbitration.
Vunies’ family fought arbitration in federal court and, because the court agreed that Vunies had not signed the clause, the court refused to enforce the mandatory arbitration clause. After losing in federal court, the nursing home finally agreed to settle with Vunies’ family.
Fonza Luke (Birmingham – Employment)
Patrick Klinger (Apple Valley – Home Construction)
In 1999, Patrick Klinger and his wife purchased a home in Apple Valley, Minnesota. The purchase agreement came with a 15-year extended warranty provided by Residential Warranty Company (RWC). The total cost of the home was $319,000.
In September 2007, while the Klingers were having exterior painting done on their home, it was discovered the house’s trim had rotted. Subsequently, a contractor was hired to replace the trim. After pulling the wood from the house, the contractor quickly ascertained that there was significant damage to the structural components of the house, appearing to be caused by excessive moisture. A moisture analysis was then conducted by a professional home inspection firm, which found high moisture and considerable damage to the home. As they were still within the 15-year warranty, the Klingers filed a claim with the RWC. A RWC representative denied the Klingers’ claim, finding that the water damage was outside the warranty’s coverage.
The Klingers secured an attorney to pursue their claim against RWC. The warranty required that the matter be submitted to arbitration. After incurring approximately $30,000 in legal and arbitration fees, the Klingers received a judgment from the American Arbitration Association for $107,500, $33,000 short of the actual damage done to their home.
RWC appealed the arbitrator’s decision. Facing thousands more in additional legal and arbitration fees and another winter in a structurally unsound home, the Klingers relented and agreed to an $82,000 settlement. After over a year and tens of thousands of dollars in expenses to pursue their claims, the Klingers ended up with about half of what they needed to repair their home.
Troy Cornock (Hillsborough – Credit Card)
In 1995, as Troy Cornock’s marriage was breaking apart and he was moving out of the house, Troy’s wife opened an MBNA credit card account in his name, adding herself to the account as an “authorized user.” Troy first learned of the account four years later when he received a telephone call from MBNA saying his account was past due. At that time, Troy had not received a single bill from MBNA because bills were being sent to the house where he and his ex-wife used to reside prior to their divorce. Upon finding out about the MBNA credit card, Troy explained that he had not opened the account and requested that his name be removed. MBNA refused, saying that they would need his ex-wife’s permission to do so.
In 2001, MBNA filed a case against Troy for his alleged unpaid debt with the National Arbitration Forum (NAF). Again, MBNA sent the notice of the arbitration to Troy’s former address. Luckily, the Airborne Express mail carrier delivering the notification knew that Troy no longer lived at his ex-wife’s residence and delivered it to Troy’s workplace instead. Troy responded to the notice again with an explanation that he did not take out the account.
Hearing nothing further, Troy assumed that his explanation had been accepted. Unfortunately, he was wrong. MBNA, and now NAF, mailed all their correspondences to Troy’s former address despite the fact that he had provided both of them with his new address. Consequently, Troy was unaware that the arbitration was proceeding. In March 2002, the NAF arbitrator, with no evidence of a credit card agreement or a credit card receipt with Troy’s signature on it, found for MBNA and awarded the company $9,446.85. MBNA in turn moved to enforce the award in court. Yet again, MBNA sent the court papers to Troy’s former address, and again, Troy was unaware of the proceedings pending against him. The court eventually confirmed the arbitration award and later entered a default judgment against Troy.
In 2005, Troy received a summons to appear in court. At that time, Troy hired an attorney. The attorney, despite MBNA’s arguments otherwise, successfully got the default judgment set aside and the arbitration award vacated.
Anastasiya Komarova (Syracuse – Credit)
In February 2005, Anastasiya Komarova, then living as an art student in San Francisco, got a series of phone calls about a delinquent MBNA account from debt collectors at National Credit Acceptance Inc. The callers brushed off her protests that she had no MBNA account, telling her they were certain that she had a joint account with a Christopher Propper.
In June 2005, National Arbitration Forum (NAF) arbitrator issued an award of $11,214.33 in favor of National Credit and against Christopher S. Propper and Anastasia (no “y”) Komarova of Long Beach, California – the real holder of the account. A month later, Anastasiya, was still trying to convince National Credit that it was targeting the wrong person. She called MBNA and learned that no one with her Social Security number had ever had an MBNA account. In July 2005, National Credit sent her a verification of debt for $7,872.98. Seven months later, after being served court papers that sought confirmation of the NAF arbitration award against the Long Beach couple, Anastasiya again called MBNA. Subsequently, MBNA sent her a letter that said Anastasiya Komarova was not responsible for the debt.
Anastasiya has filed her own action against MBNA America Bank NA, National Credit Acceptance and FIA Card Services NA, the new name for MBNA. MBNA admits in court papers that Anastasiya was wrongly targeted, but blames National Credit Acceptance for the unlawful debt collection practices. In addition to Anastasiya’s lawsuit, the San Francisco City Attorney has filed a lawsuit against NAF alleging unfair business practices and seeking civil penalties.
For more information on Anastasiya’s story see, Why Do Card Companies Almost Always Win? by Jim Avila, Reynolds Holding, Beth Tribolet and Joann Brady on ABC News, May 29, 2008, at http://abcnews.go.com/GMA/Consumer/Story?id=4955187&page=1; “S.F. Sues Credit Card Service, Alleging Bias,” by Sam Zuckerman in The San Francisco Chronicle, April 8, 2008 at http://www.sfgate.com/cgibin/article.cgi?f=/c/a/2008/04/08/BU2S101CV2.DTL.
Cari Butcher (Brook Park – Employment)
When Cari Butcher was 24, she began working at Bally’s Sports Club as a receptionist. Cari became the target of severe and pervasive sexual harassment by several co-workers and supervisors.
Despite her continual complaints, her supervisor did nothing to stop the harassment. Eventually Cari went to a higher supervisor and requested a transfer. Subsequently, Cari was transferred to a different Bally’s club, taking a demotion to do so. On her first day at the new Bally’s club, Cari was immediately sexually harassed by yet another supervisor. She was ultimately terminated in retaliation for her complaints.
Cari, after her termination, filed a sexual harassment lawsuit against Bally’s. Citing their employment contract, Bally’s forced Cari’s claims into arbitration. The arbitrator, misstating the law and misunderstanding the nature of the evidence, found for Bally’s. It wasn’t until after the arbitration that Cari and her attorney discovered that the arbitrator’s qualifications and knowledge of employment discrimination law had been misrepresented and that Bally’s knew of these misrepresentations all along.
Cari then moved to vacate the arbitrator’s decision. The District Court of Ohio vacated the decision, and Bally’s appealed. The Ohio Court of Appeals affirmed the District Court’s decision, and now Bally’s has appealed to the Supreme Court of the United States. That appeal is still pending and Cari, seven years after the sexual harassment and her wrongful termination, has yet to receive justice.
Deborah Pierce, D.O., M.S. (Philadelphia – Employment)
Dr. Deborah Pierce of Fort Washington, Pennsylvania started working as an emergency medicine physician for Abington Emergency Physician Associates (“AEPA”) in July 2004. Management told Dr. Pierce that she needed to work full-time for two years and then would be voted on for shareholder status. At the time of her hire, AEPA’s shareholders consisted of 17 males and one female. Prior to Dr. Pierce’s hire, every male physician who had ever come up for a shareholder vote had been granted shareholder status. Dr. Pierce worked for AEPA on a part-time basis for one year, and as a full-time physician for two years. During those three years, Dr. Pierce received only positive feedback on her job performance. However, in November 2006, she was notified that she had been rejected for shareholder status and would be terminated at the end of her contract term. In support of its “no” vote, AEPA management told Dr. Pierce that she was perceived to be too boastful when talking about her treatment of patients, that she was not productive enough and that it was unlikely that she would be able to “contribute in a positive way to the success of the practice.” The record did not support these claims and in fact, AEPA later conceded that they had no problems with Dr. Pierce’s job performance.
Approximately two months later, AEPA shareholders voted to reject a male shareholder candidate for shareholder status, but instead of terminating him, voted to put the male candidate on nine months probation. Unlike Dr. Pierce, this male candidate had documented performance problems of a very serious nature and despite no evidence that he had corrected the deficiencies, AEPA granted shareholder status to this male physician at the end of his probationary term.
Subsequently Dr. Pierce filed a gender discrimination claim against AEPA. Her claim was forced into arbitration before American Health Lawyers Association. Despite significant evidence of gender discrimination introduced by Dr. Pierce, the arbitrator ruled against her. Furthermore, Dr. Pierce was required to pay the arbitrator $58,521.51, one-half of the $117,000 fee for his services. Dr. Pierce’s only option to appeal was to go back to the arbitrator, at her own expense, and ask him to reconsider his decision. Having already taken out a large loan in order to arbitrate her case the first time around and knowing that the chances of the arbitrator reversing his own decision was extremely unlikely, Dr. Pierce reluctantly ended her fight.
To learn more about Dr. Pierce’s story see, “Gender Discrimination Still An Issue for Women Doctors,” AmEdNews.com, October 8, 2007; “Doctor Sues Practice for Sex Discrimination,” The Intelligencer, November 16, 2007; “They Press the Fight to Break Glass Ceiling,” The Philadelphia Inquirer, February 13, 2008. Dr. Pierce can be reached through her lawyer, Nancy O’Mara Ezold, at NEzold@Ezoldlaw.com.
Linda and Rick Etherson (Knoxville – Home Construction)
After purchasing their new house in Knoxville, Tennessee in August 2003, Linda and Rick Etherson discovered serious leaks in the house’s foundation. Mold eventually grew in their home’s crawl spaces. The Ethersons tried to get the builder and the warranty company, 2-10 Home Buyers Warranty Corporation, to make the necessary repairs. When they refused, the Ethersons filed a lawsuit. The judge, pursuant to the warranty contract, ordered the Ethersons to submit their claims to arbitration.
After a Construction Arbitration Services (CAS) arbitrator denied them relief on all but a single minor claim, the Ethersons asked CAS for an appeal hearing before a new arbitrator. When CAS assigned Stephen S. Spencer to the case, the Ethersons repeatedly asked for his resume. Days before the appeal hearing, CAS sent the Ethersons Spencer’s resume. It indicated that Spencer, a real estate appraiser, had done work for the warranty company. It said his “relevant experience” included the following: “Perform Home Buyers Warranty (2-10) inspections” and “Assist in the Certification of Real Estate Contactors in order for them to become certified Home Buyers Warranty (2-10) Contractors.”
Believing the arbitrator had a conflict of interest, the Ethersons demanded that Spencer recuse himself. CAS did not reply until the morning of the arbitration. As Spencer was driving to the Ethersons’ house to conduct the arbitration, CAS acceded and agreed that another arbitrator could be assigned. Subsequently, Spencer put his recusal in writing, stating, “With my prior involvement with home warranty companies as an inspector and appraiser, I feel that I may not be able to be an impartial arbitrator for this particular hearing.”
Although the Ethersons had paid CAS $150 to cover Spencer’s travel expenses, the arbitration company demanded that they pay another $300 to cover the travel costs for a new arbitrator. Another arbitrator, a former home builder, was subsequently selected by CAS. That arbitrator upheld the bulk of the original arbitration decision and only ordered some minor repairs. The Ethersons are now trying to have a judge overturn the arbitration decision. Their case is currently pending.
Jordan Fogal (Houston – Home Construction)
In 2002, Texas grandparents Bob and Jordan Fogal paid $368,534 for a townhouse near downtown Houston. On the day they moved in, Bob used the whirlpool bath located in the upstairs. When he got out, he pulled the plug and was surprised when all of the bath water poured down through the dining room ceiling. After the drain was fixed and the ceiling repaired, other more serious problems emerged. Three weeks later Jordan noticed a water leak around a window. She immediately called the builder, Stature Construction Inc. Soon thereafter, Bob discovered a leak in the attic, prompting more calls to Stature. Later, Jordan had to call Stature about a mysterious fluid pouring from the side of the house into the yard. In response, Stature downplayed the water intrusions and said it was unable to determine the cause of the problems. However, the Fogals soon learned that prior to their purchase of the home, Stature discovered serious problems with the house’s roof construction, had made some repairs, and sued the roofing subcontractor as a result.
Additional inspections of the home revealed that the Fogals’ kitchen contained a very high concentration of a mold (a kind linked to autoimmune diseases and some cancers), there was water pooling behind the bulging stucco, caulking throughout the house was inadequate and improperly installed, and a window was installed upside down – allowing water leakage into the kitchen. Seven months after Jordan and Bob moved into the house, Jordan was diagnosed with an immune deficiency. Two years later, on Jordan’s doctor’s recommendation, the Fogals moved out of the house, abandoning it to foreclosure.
The Fogals sued Stature, but pursuant to their purchase contract, their case was compelled to arbitration. In September 2006, the Fogals’ case went before an American Arbitration Association arbitrator. At the arbitration hearing, the builder testified that his firm was demanding more than $200,000 from the roofing contractor at the same time that the Fogals were requesting repairs on their home. Based on the builder’s failure to disclose the litigation against the roofer and the substantial, but unsuccessful repairs to the house before the Fogals’ purchase, the arbitrator ruled that the firm had committed fraud in the house sale and failed to respond promptly to the Fogals’ complaints. The arbitrator also found Stature’s settlement offers to be unreasonable and consequently ordered Stature to pay the Fogals $26,088.40, about a tenth of what they paid for the unlivable house.
In April 2007, a court confirmed the arbitration award. The Fogals unsuccessfully appealed the decision. Since the Fogals walked away from the house, it has been sold three times and is again under foreclosure.
To learn more about the Fogals’ story see, “Home Sour Home” by Randall Patterson in Mother Jones, July/August 2005 at http://www.motherjones.com/politics/2005/07/home-sour-home; “Malicious Intent” by Kevin Drum in The Atlantic Monthly, Jan./Feb. 2007; “Foreclosure’s Building Problem: Is Shoddy Home Construction Exacerbating the Housing Crisis?” by Maya Roney in Business Week, Aug. 221, 2007 at http://www.msnbc.msn.com/id/20393984//.
Jamie Leigh Jones (Houston – Employment)
On July 25, 2005, 20-year-old Jamie Leigh Jones began working as a civilian contractor for Halliburton/KBR at Camp Hope in Iraq. Two days after arriving, Jamie complained to her supervisor about the hostile living conditions in KBR’s co-ed barracks. At that time, Jamie’s supervisor dismissed her complaints and told her to just “go to the spa.” Three days later, on the night of July 28, 2005, Jamie was drugged and gang raped by a group of Halliburton and KBR firefighters. After she reported the assault, she was confined to a shipping container, interrogated by management and human resources personnel for hours, and told that if she left Iraq to seek medical attention she would be fired. Jamie finally convinced one of the men guarding her to lend her his cell phone. She called her father back in Texas, who called the Texas office of Congressman Ted Poe. Congressman Poe contacted the U.S. State Department’s Office of Overseas Citizens Services, and within 48 hours, two agents dispatched from the U.S. Embassy in Baghdad rescued Jamie and brought her home.
In January 2006, Jamie filed a formal complaint with the U.S. Equal Employment Opportunity Commission against KBR for sexual harassment. In May 2006, the EEOC determined that Jamie was sexually assaulted by one or more KBR employees, that physical trauma was apparent, and that KBR’s own investigation of the rape was inadequate. When the government took no further action, Jamie tried to file her own lawsuit against KBR. However, KBR’s employment contracts with Iraq-bound employees required all personnel disputes to go to private arbitration. Jamie first filed for arbitration, but later also brought a lawsuit in Texas federal court for, among other things, violating Title VII of the Civil Rights Act of 1964, false imprisonment, assault and battery, and intentional infliction of emotional distress. In May 2008, a federal court ruled that some of Jamie’s claims had to be sent to arbitration, including her sexual harassment claim. Jamie’s claims of assault and battery, intentional infliction of emotional distress, negligent hiring, retention, and supervision, and false imprisonment were allowed to proceed to court. However, KBR has appealed the ruling to the U.S. Court of Appeals for the Fifth Circuit. The case is set to be argued at the end of April, 2009.
Since Jamie went public with her story, 38 women who worked as contractors in Iraq, Kuwait and other countries have contacted her to discuss their own experiences with sexual abuse in Iraq.
To learn more about Jamie’s story see, http://www.jamiesfoundation.org/press.htm; Victim: Gang-Rape Cover-Up by U.S., Halliburton/KBR by Brian Ross, Maddy Sauer & Justin Rood, ABC News, December 10, 2007 at http://abcnews.go.com/Blotter/Story?id=3977702; “Limbo for U.S. Women Reporting Iraq Assaults” by James Risen in The N.Y. TIMES, February 13, 2008 at http://www.nytimes.com/2008/02/13/world/middleeast/13contractors.html?pagewanted=1&_r=1&bl&ei=5087&en=bf8812ecc5524a95&ex=1203051600.
Petra Lopez (Donna – Burial Services)
In 1976, Petra Lopez bought four adjoining burial plots from SCI Texas Funeral Services Inc. Unbeknownst to Petra, SCI later sold one of her plots to the Garza family. In 1997, when Petra’s mother passed away, she asked SCI to bury her mother in one of her four burial plots. At that time, SCI told Petra that the burial plot she requested for her mother’s remains was already occupied. The company said it would remove those remains and bury Petra’s mother at the site per Petra’s request. Petra later learned that SCI moved the remains of Mr. Rodolfo Garza from her mother’s burial spot without ever contacting or informing the Garza family. She also learned that SCI was forced to bury Mr. Garza in her mother’s burial plot because SCI had sold the plot belonging to the Garza family to the Rogers family.
In 2002 Mr. Garza’s brother-in-law went to the Garza grave site only to discover Mr. Garza’s headstone missing. When he confronted SCI about the missing headstone, the company first told him that Mr. Garza was not buried there and later that he was there, but would have to be moved. In actuality, SCI had thrown Mr. Garza’s headstone behind a shed so that that the Rogers family would not discover it.
Petra, along with the Garza and Rogers families, filed a lawsuit against SCI and its parent company, Service Corporation International (the largest cemetery chain in the country). In turn, SCI tried to force Petra and the Garza and Rogers families into arbitration. SCI claimed that because Petra had signed a mandatory arbitration clause when she arranged for the burial of her husband in 2002, all three families were subject to arbitration. The Garza and Rogers families had never signed a mandatory arbitration contract. SCI admitted this, but claimed that the facts were so intertwined that all three cases should be forced into arbitration. The trial court denied SCI’s request and SCI appealed. The appeals court ruled that the Garza and Rogers families should not be forced to arbitrate their claims because they never signed an arbitration contract. As for Petra’s case, the appeals court refused to enforce the mandatory arbitration clause because it was so unfair and one-sided.
After years, two court battles, and thousands of dollars in legal fees, Petra’s case continues; SCI has appealed to the Texas Supreme Court. That appeal is currently pending.
For more information on Petra’s story, see SCI Texas Funeral Services, Inc. v. Leal, 2009 WL 332043, Tex.App.-Corpus Christi, 2009.
Jason Carter (Burke – Auto
In October 2007, Jason Carter bought a Certified Pre-Owned car from a dealership in Virginia. Before purchasing the car, Jason asked about the car’s history and whether it had been in any accidents. The dealership assured him that the car had not been in any accidents and provided him with a “clean” CarFax report as proof.
In May 2008, Jason took his car into a repair shop for servicing. The service mechanic took one look at Jason’s vehicle and declared that it had been in a bad accident. Jason explained that it could not have been because he had confirmed at the time of purchase that the car was wreck-free. After some investigation, the service mechanic contacted Jason and told him that the car had indeed been in a major front-end collision and was repaired by the very dealership who sold him the vehicle and who had assured him that the car had never been in an accident.
Jason attempted to resolve the situation with the dealer, but when they refused to cooperate, he hired an attorney. Despite having a very strong fraud claim against the dealership, Jason has been unable have his case heard in court. Citing their purchase contract, the dealership has forced Jason into mandatory arbitration. The arbitration proceeding is still pending.
William Kurth (Burlington – Nursing Home)
At age 84, William Kurth, a World War II veteran from Racine County, Wisconsin, passed away as a direct result of the negligent care he received while residing at Mount Carmel Medical and Rehabilitation Center, a subsidiary of Kindred Healthcare Inc. After his wife of 63 years could no longer care for him at their home, she and her family made the difficult decision to place Mr. Kurth into a nursing home. However, at that time, the only nursing home in their town, Mount Carmel, had no available beds. Consequently, Mr. Kurth was put on Mount Carmel’s waiting list and was admitted into another nursing home that was approximately 20 miles away. This was not ideal for Mrs. Kurth because she did not drive and could not easily visit her husband. So when Mount Carmel contacted Mrs. Kurth to tell her there was an opening, she was elated.
On October 29, 2004, Mrs. Kurth went to Mount Carmel to fill out the necessary paperwork to have her husband admitted into the nursing home. The admissions coordinator rushed Mrs. Kurth through over 50 pages of admissions documents. At that time Mrs. Kurth was taking prescription medication and was not given the opportunity to read the multiple pages of text. Rather, the admissions coordinator summarized in her own words the documents and asked Ms. Kurth to sign them. At the end of the 50-page admissions contract was a forced arbitration clause. The admissions coordinator described the forced arbitration clause as necessary in order to admit Mr. Kurth into the nursing home. Mrs. Kurth signed where she was told.
Sometime later, Mr. Kurth underwent hip surgery. Upon his discharge from the hospital he returned to Mount Carmel virtually immobile and at high risk of pressure ulcers. Despite this knowledge, Mount Carmel did not update or change Mr. Kurth’s care plan. Consequently, Mr. Kurth lost substantial amounts of weight and developed pressure ulcers that were so severe that they left bone and organs exposed. During this period of time, Mount Carmel transitioned from a wound care team of multiple caretakers to a single wound care nurse, who was responsible for all of the wound care for 155 residents. Due to the downsizing, failure to train, and failure to supervise staff, Mr. Kurth suffered from untreated pressure ulcers, dehydration, and malnutrition. These factors directly led to his death.
After Mr. Kurth’s passing, Mount Carmel and Kindred, claiming to feel somewhat responsible, offered to pay for half of Mr. Kurth’s funeral expenses. When the Kurth family rejected their offer, Kindred offered to pay all of the funeral expenses. Again, the Kurth family rejected the offer and instead requested multiple copies of Mr. Kurth’s medical charts and all documents relating to his care. The Kurth family subsequently filed a lawsuit in Racine County Circuit Court. Kindred moved to dismiss the lawsuit and argued that the Kurth family should be compelled to submit their claims to arbitration. The judge ruled, pursuant to the admission contract, the case had to be arbitrated. The Kurth family intends to appeal this decision.
Forced Arbitration in the News
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Aguilar spot-on about mandatory arbitration
Reuters, April 16, 2013
U.S. SEC's Aguilar urges end to mandatory arbitration agreements
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