TLPJ Charges National Arbitration Forum with Violating CA Disclosure Law

Trial Lawyers for Public Justice (TLPJ), a national public interest law firm, filed a lawsuit on May 17, 2004 in Superior Court in San Francisco against the National Arbitration Forum (NAF), charging that the private arbitration company has violated a California consumer protection law by refusing to disclose information about how it handles cases when consumer rights are at stake. That law requires private arbitration companies to disclose data about how many consumer cases they handle, which corporate defendants are involved, who wins, and how much consumers had to pay the arbitration company. Although the suit alleges that the NAF has handled numerous arbitrations subject to the law, it has not released any of the required information. For example, the NAF has failed to meet requirements to post such information online and to file reports in California on the outcomes of consumer and employment arbitrations.

The complaint in Corbett and Consumer Action v. National Arbitration Forum was filed as a representative lawsuit on behalf of all California consumers. The named plaintiffs in the case are Assemblymember Ellen M. Corbett (D-San Leandro) - who chairs the Assembly Judiciary Committee and authored the arbitration disclosure law - and Consumer Action, a San Francisco-based, national public interest organization that has successfully challenged abuses of mandatory, pre-dispute arbitration clauses. The plaintiffs seek a court order declaring that the NAF’s refusal to disclose information about the arbitrations it handles violates California law, and requiring the company to disclose this information on its website immediately.

Although the California Code of Civil Procedure requires that arbitration companies disclose information about their consumer arbitrations by generating quarterly reports and posting this information on their websites, the NAF has not posted any such information. On its website, the NAF states that it has had no arbitrations in the period between January and December of 2003. However, the TLPJ lawsuit alleges that the NAF has presided over many California arbitrations in this period, and simply refuses to post information about these arbitrations on its website.

“California consumers may be surprised to know that if they drive a car, own a phone, or use a credit card, they’re almost certainly subject to binding arbitration. That’s why they need to know basic information about who is deciding their cases, and how much they may have to pay an arbitrator,” said Corbett. “I am proud to have authored California’s arbitration disclosure law, which ensures that consumers can make informed decisions about how to choose between private judging companies. The NAF - like every other private arbitration firm that does business in California - must give consumers the basic information required by California law.”

The NAF is one of the country’s three largest arbitration companies. Consumer contracts often specify which one of these companies will hear any dispute between the consumer and the corporation supplying the consumer with goods or services. When the contract specifies a particular arbitration firm, that firm provides an arbitrator or panel of arbitrators to hear the dispute, and sets out the rules that will govern that dispute. The other two major arbitration companies, the American Arbitration Association and J*A*M*S, comply with California’s disclosure law.

“By refusing to follow California’s consumer protection laws, the NAF is deliberately denying consumers the ability to learn about the fairness and expense of its services,” said Cliff Palefsky of San Francisco’s McGuinn, Hillsman & Palefsky, co-lead counsel in the case. “The NAF is not above the law. How can consumers expect NAF’s arbitrators to follow the law when the NAF itself refuses to do so?”

“It is particularly important that consumers be able to access information about the NAF because of allegations that it has engaged in a pattern of bias in favor of corporations and against injured consumers,” said TLPJ Staff Attorney F. Paul Bland, Jr., co-lead counsel. “Several courts across the country have refused to enforce arbitration agreements that required consumers to arbitrate their claims before the NAF. The complaint in this case should give many consumers particularly strong reasons to want to know about the NAF’s track record.”

In addition to Bland and Palefsky, the plaintiffs’ legal team includes TLPJ’s Executive Director Arthur Bryant and TLPJ Baron-Brayton Fellow Kate Gordon. The complaint in Corbett v. National Arbitration Forum is posted on TLPJ’s web site, www.tlpj.org.

Trial Lawyers for Public Justice is the only national public interest law firm dedicated to using trial lawyers’ skills and resources to advance the public good. Founded in 1982, TLPJ utilizes a nationwide network of more than 3,000 outstanding trial lawyers to pursue precedent-setting and socially significant litigation. It has a wide-ranging litigation docket in the areas of civil rights and liberties, consumer rights, environmental protection, toxic torts, worker safety, and access to the courts. TLPJ is the principal project of The TLPJ Foundation, a not-for-profit membership organization. It has offices in Washington, DC, and Oakland, CA. TLPJ’s State Coordinators for California are Ingrid Evans, tel. (415) 554-3884, and Sharon Arkin, tel. (949) 720-1288.