After almost two decades, the private judicial system of mandatory arbitration is being exposed as a lie.

It has been a scam and fraud of great proportions that has made a mockery of the seventh amendment of the Constitution, guarantee to a jury trial, and expanded wealth transfer that has caused such increasingly severe economic inequality in this country.

The heyday of forced arbitration and privatization of the legal system has occurred during the two Bush regimes and the GOP-lite Clintonite era, all corporatist administrations, with the support a conservative, corporatist Supreme Court that bamboozled even its liberal members whereby corporations had carte blanche in ripping off consumers, crippling workers, eviscerating civil rights laws, and inflicting other inequities and abuses of economic inequality.

From the WonkRoom: "The bedrock of America’s legal system is an impartial judiciary; if judges are in the pocket of an industry, then laws regulating that industry simply cease to exist.  This is why the credit card industry absolutely loves a company known as the National Arbitration Forum (NAF), which for years has allowed this industry to effectively write and enforce its own laws against consumers.

"The scam works like this:  beginning in the 1980s, the Supreme Court rewrote federal law to endorse a practice known as “forced arbitration.”  Under this practice, companies ranging from nursing homes to cell phone companies to employers can refuse to do business with anyone who doesn’t give up their right to sue or be sued in a regular court presided over by a neutral judge.  Instead, consumers and employees are shunted into a privatized, corporate-run judicial system, which overwhelming favors corporate parties.

"No one has taken greater advantage of forced arbitration than the credit card industry–it may now be impossible for consumers to get a credit card in the United States without signing a forced arbitration agreement–and the industry’s most important partner in this shell game has been the NAF.  According to one study, which examined over 20,000 NAF cases between a credit card company and a consumer, the credit card company won an incredible 95% of the time.

"The credit card industry’s halcyon days as judge, jury and victorious litigant may be numbered, however, thanks to a lawsuit brought against the NAF by Minnesota Attorney General Lori Swanson.  Under a settlement announced yesterday, the NAF will cease accepting any new consumer arbitration cases by the end of this week (NAF’s entire business will now be limited to arbitrating Internet domain disputes).  In other words, the credit card industry will need to find a new train conductor if they want to keep railroading consumers into lawless corporate tribunals.

"Unfortunately, NAF was vulnerable to this kind of attack because the evidence against it was so overwhelming–not every forced arbitration company has a Harvard Law professor prepared to testify about how they were strongarmed into shafting consumers–so it remains to be seen whether another, equally offensive company will emerge to fill the void (a bill, currently pending in Congress, would end the practice of forced arbitration in consumer and employment contracts altogether).  Even so, the near-total demise of NAF is one of the most important pro-consumer developments in decades; for the first time in years, credit card companies may actually have to follow the law."

And Pam Marten at Counterpunch writes: "For the past 18 years, a motley mix of corporate law firms, Wall Street powerhouses and private justice providers have been serving up false testimony to the highest court of our land that mandatory arbitration is “inexpensive, fast and fair” and a proper substitute for the public court system.  And for 18 years a majority of the U.S. Supreme Court has been cozying up to these brazenly preposterous statements while gutting our Constitution’s Seventh Amendment guarantee to a jury trial.  In doing so, wittingly or unwittingly, the Supreme Court had aided and abetted the key linchpin of a wealth transfer system that has brought the nfation (sic) to its knees.

"Today, everything from Wall Street brokerage accounts, employment contracts, credit cards, mortgages, even cell phone contracts have routinely removed the individual’s constitutional right to file a claim in court to seek redress of a grievance or fraudulent action.  Instead, the individual’s claim is forced into one of the privately run arbitration organizations where conflicts are rampant, discovery is limited, and the right to appeal is typically impossible because the arbitrators are not required to explain the rationale for their decisions in writing.

"In a saner era, these mandatory arbitration contracts would be thrown out by courts as contracts of adhesion because they were offered on a take it or leave it basis.  Under any rational interpretation of contract law, contracts must be a meeting of the minds, freely entered into, between parties of equal bargaining power. 

"But just as profits have been privatized on Wall Street and losses socialized, the right to a jury trial in a court system paid for by individual taxpayers is now increasingly reserved for corporations, not people.  It’s a form of judicial apartheid not dissimilar to the way the Supreme Court rationalized the segregation of blacks in its Plessy v. Ferguson decision in 1896, promising “equal” facilities, just separate. 

"Last week, a lone female state attorney general put the lie to mandatory arbitration.  And when she pulled back its dark curtain, what we saw was a grand theft of both justice and wealth perpetuated by the U.S. Supreme Court against the American people.

"Lori Swanson, Attorney General of Minnesota, charged the National Arbitration Forum with consumer fraud, deceptive trade practices and false advertising.  The National Arbitration Forum is a private justice provider that adjudicates upwards of  200,000 consumer claims a year and acknowledges that it has been appointed as the arbitrator in “hundreds of millions of contracts.”

"Swanson’s lawsuit charges that the National Arbitration Forum, which masquerades as  functioning like an independent judge and jury, is in fact financially shackled to debt collection law firms representing major credit card companies.

"From defective consumer products, to denial of overtime pay, to gutting the civil rights laws, to unconscionable mortgages, derivatives, obscene rates and bogus fees on credit cards, the corporations have had quite a run over the past decade with their judicial apartheid and anointed blessing of a majority of the U.S. Supreme Court.  And just where did it get them?  Those with the most egregious mandatory arbitration contracts are either bankrupt or zombie firms struggling for survival on the taxpayer’s dime."