Incremental changes in court precedent and legislation, accumulating over the last several decades, have drastically constrained the power of the courts to be a “great equalizer” in our society.[i] Much of this damage has been accomplished through federal or state legislation, which has followed three general approaches; bar the courthouse doors; divide and conquer the plaintiffs; and shift the burden to the victims.
Bar the Courthouse Doors
Congress and several states have enacted or are considering several bills to impose onerous requirements that plaintiffs must satisfy in order to have their claims heard. These obstacles can include heightened pleading standards that plaintiffs must sustain or inappropriately short statutes of limitations.[ii]
Other bills would make it easier for businesses to force their customers to use arbitration instead of the courts to resolve claims.[iii] In 2017, Congress used an obscure law known as the Congressional Review Act to repeal a regulation issued by the CFPB that sought to limit the kind of forced arbitration clauses that banks and other financial institutions regularly include in their contracts with consumers. Thanks to the repeal of this rule, financial institutions once again enjoy nearly unfettered leeway to subject their consumers to forced arbitration.
The harms to consumers are illustrated by some of the earliest lawsuits brought against Wells Fargo regarding the fake accounts scandal, which were dismissed on the grounds that the plaintiffs were subject to the forced arbitration agreements they had entered into when they had opened their original, non-fake accounts.[iv] In other words, even though the customers’ claims arose from the accounts and services they had not opened – subject to terms, including forced arbitration agreements, that were imposed without their knowledge or consent – the terms of their original accounts nonetheless barred them from suing.
As compared to litigation in civil court, arbitration is more secretive and more likely to be rigged to prevent plaintiffs from pursuing justice. Individuals often must overcome a host of burdensome procedural obstacles to initiate an arbitration proceeding, including large up-front filing fees and potentially risky fee-shifting arrangements. Some clauses provide that arbitration hearings must take place in specified locations, which could require claimants to travel hundreds or thousands of miles from home at their own expense. Other impediments include unreasonably short statutes of limitations and a bar on pursuing arbitration through a class action claim. This bar on class action arbitration is particularly significant because many claims that might be resolved through this process involve smaller dollar amounts, which make the costs of individual arbitration actions prohibitively expensive.
Even when individuals do overcome these barriers and manage to initiate arbitration actions, they are unlikely to prevail because of the various ways in which the arbitration process can be stacked against them. Corporations typically enjoy a close relationship with the arbitrator that resolves their disputes, raising serious concerns about whether arbitration provides consumers with a neutral forum in which to pursue their claims.
The arbitration process is also skewed against the interests of consumers and the public because it is typically conducted in secret. In most cases, relevant information concerning the proceedings and results of individual arbitrations, as well as the existence of the arbitrations themselves, are shielded from public disclosure. Not only does this lack of transparency harm the public by enabling scofflaw businesses to hide their misdeeds; it also silences victims, preventing them from speaking out against wrongdoing.
In many areas of public policy, the deterrence effect that civil justice litigation offers is the most significant countervailing force that discourages industry from cutting corners on health, safety, consumer, and environmental protections in pursuit of greater profits.
This silencing effect can be uniquely pernicious for disadvantaged members of society who already face significant challenges in having their concerns heard. For instance, while policymakers are just now beginning to turn their attention to the issue of workplace sexual harassment, women – especially those employed in low-wage positions – have been speaking out against this injustice for decades to little avail. In contrast, civil justice gives an important platform to all victims. When they are allowed to share their experiences, it can encourage others to come forward, tell their stories, and shine a spotlight to the injustices they have suffered.
Unlike civil courts, arbitration offers few procedural safeguards to ensure that claimants receive a meaningful opportunity to seek relief. Arbitrators are generally not required to have any legal training or expertise. In making their decisions, arbitrators are not required to follow precedent or any applicable law, and they do not have to provide parties with clear reasons for their decisions. The lack of such procedures increases the likelihood that an arbitrator’s decisions will be arbitrary or otherwise based on improper considerations. Nevertheless, these decisions are binding on the claimant and could subject them to tens of thousands of dollars in fees and penalties. When individuals receive adverse determinations, they rarely have the opportunity to appeal them on the merits to either a civil court or an arbitration appeals panel.[v]
Divide and Conquer
The second category of legislation that Congress and state lawmakers have considered involve bills that are designed to make it harder for groups of similarly situated plaintiffs to bring and sustain class action lawsuits, potentially denying them a realistic and fair opportunity to obtain justice.[vi] As the North Carolina hog farm nuisance, opioid epidemic, and Arkema chemical plant explosion cases illustrate, some controversies involve complex fact-finding and a large number of potential plaintiffs with substantially similar claims. One critical function of class action litigation is to achieve a fair and efficient resolution of these kinds of controversies, and to do so in a way that conserves scarce judicial resources. In the absence of this tool, many individuals who have been harmed by corporate wrongdoing might not pursue their claims at all, concluding that the expense would be too great to justify proceeding on their own, particularly in light of the uncertainty involved.
Moreover, corporate wrongdoing often involves defrauding a large number of people out of a small amount of money, as the Wells Fargo account scandal illustrates. Individually, the amount at stake might be too small to warrant individual lawsuits. Class action lawsuits help victims overcome this barrier by enabling the plaintiffs to band together and share the litigation costs.
Shift the Burden to Victims
The third category of legislation seeks to force the public to bear some portion of the costs of the corporate defendant’s wrongdoing. The main way such legislation pursues this objective is by instituting arbitrary limits on damages that plaintiffs can seek in certain kinds of lawsuits or by making it economically infeasible to bring a lawsuit in the first place.[vii]
The statutory caps on punitive damages for the plaintiffs in the North Carolina hog waste cases illustrate the impact of such limitations. Among other things, these caps will likely blunt the ability of these suits to spur industrial hog production facilities to adopt modern waste disposal practices. As a result, communities that live adjacent to these facilities will continue to suffer harm to their health, property, and dignity.
The High Stakes of the Legislative Assaults on Civil Justice
While the assaults on civil justice are not new, they are taking on even greater significance, given the increasingly hobbled state of our federal and state systems of regulatory safeguards. At the federal level, the convergence of politicized interference, outdated statutory authorities, and destructive budget cuts have reduced the regulatory system to a dysfunctional state. Protector agencies like the EPA, the CFPB, the Consumer Product Safety Commission (CPSC), the Food and Drug Administration (FDA), and OSHA are now often unable to fulfill their statutory responsibilities of protecting people and the environment. To make matters worse, the Trump administration has made weakening public safeguards and undercutting the regulatory system one of its top domestic policy priorities.[viii] Rebuilding an effective regulatory system – one that works for everyone – from this damaged state will likely take decades.
In this environment, the pursuit of civil justice becomes all the more important for protecting the public. In many areas of public policy, the deterrence effect that civil justice litigation offers is the most significant countervailing force that discourages industry from cutting corners on health, safety, consumer, and environmental protections in pursuit of greater profits. Likewise, agencies have become increasingly dependent on civil justice advocates to advance the implementation of parts of their regulatory programs. With fewer resources available to independently investigate new and emerging risks, agencies may instead rely on information generated in the course of civil litigation to drive improvements to their regulatory programs.
The PFOA contamination of community drinking water supplies in West Virginia was one instance where civil discovery allowed EPA to institute greater protections related to the toxic chemical. Similarly, the FDA’s post-market oversight of prescription drug and medical device safety has benefited from civil litigation. Suits involving prescription drugs like Vioxx have been instrumental in identifying post-market problems that the FDA was not able to identify during the pre-market approval process. These suits have been invaluable because the FDA’s own post-market monitoring programs have been rendered ineffective by weak legal authority and chronic underfunding.[ix]
As the case studies above reveal, the inevitable result of the hobbled regulatory system is that more and more preventable harms are occurring. Weak chemical facility safety rules helped contribute to the Arkema plant explosion after Hurricane Harvey. The Wells Fargo fake accounts scandal was in part attributable to absence of a consumer protections watchdog focused on banking and financial services prior to the creation of the CFPB. And one of the major causes of the opioid epidemic was poor FDA oversight of the pharmaceutical industry’s fraudulent marketing of its opioid products to doctors and patients. In the absence of a functional regulatory system, the pursuit of civil justice – and the promise of compensation and accountability that it offers to the victims – represents the best hope for preventing these harmful behaviors. Critically, and unlike rules adopted through the regulatory system, successful outcomes in civil justice litigation can directly help individuals who have been harmed by unreasonably dangerous actions or products by restoring them to a position where they are able to fulfill their innate potential and thrive.
[i] Thomas O. McGarity, Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival 204-14 (2013).
[ii] For example, H.R. 1565, the so-called “Saving Lives, Saving Costs Act,” sponsored by Representative Andy Carr in the 115th Congress, would effectively insulate specified health care professionals from civil liability for injuries arising from their provision of health care treatments by establishing a complex process for screening lawsuits brought against them. Saving Lives, Saving Costs Act, H.R. 1565, 115th Cong. (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/1565. Significantly, if this bill were law, it could be used to defeat claims against doctors who contributed to the opioid epidemic by overprescribing these medications to their patients.
[iii] Renae Merle & Tory Newmyer, Congressional Republicans Use Special Manuever to Kill ‘Arbitration Rule,’ Wash. Post, Oct. 25, 2015, https://www.washingtonpost.com/business/economy/once-again-congressional-republicans-find-it-easier-to-kill-policy-than-write-it/2017/10/25/06eb764e-b997-11e7-be94-fabb0f1e9ffb_story.html?noredirect=on&utm_term=.7aae8a3d8f55 (last visited July 11, 2018).
[iv] James Rufus Koren, Even in Fraud Cases, Wells Fargo Customers are Locked Into Arbitration, L.A. Times, Dec. 5, 2015, http://www.latimes.com/business/la-fi-wells-fargo-arbitration-20151205-story.html (last visited July 11, 2018).
[v] Martha McCluskey et al., Regulating Forced Arbitration in Consumer Financial Services: Re-Opening the Courthouse Doors to Victimized Consumers 11-21 (Ctr. for Progressive Reform, CPR Paper 1604, 2016), available at https://progressivereform.org/articles/Forced_Arbitration_Paper_050416.pdf.
[vi] For example, in 2017, the House of Representatives passed H.R. 985. Among other things, this bill would establish several new onerous requirements that injured consumers or workers would have to satisfy before their class action lawsuit can proceed in federal court. Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017, H.R. 985, 115th Cong. (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/985.
[vii] There have been several examples of this type of legislation introduced in the 115th Congress. The FCRA Liability Harmonization Act would limit the amount of damages that could be awarded in class action lawsuits brought against credit reporting agencies under the Federal Credit Reporting Act to just $500,000 while barring punitive damages altogether. FCRA Liability Harmonization Act, H.R. 2359, 115th Cong. (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2359. The Protecting Access to Care Act would set an arbitrary cap of $250,000 on non-economic damages in all “health care lawsuits.” Protecting Access to Care Act of 2017, H.R. 1215, 115th Cong. (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/1215.
[viii] Thomas McGarity et al., Trump’s New ‘Regulatory Czar’: Poised to Lead the Assault on Our Safeguards 4-7, 14-21 (Ctr. for Progressive Reform, CPR Paper 1701, 2017) available at https://progressivereform.org/articles/Trump_Regulatory_Czar_1701.pdf.
[ix] See FDA, Merck, and Vioxx: Putting Safety First?: Hearing Before the S. Comm. on Finance, 108th Cong., 2004 (statement of David J. Graham, MD, PHD, Assoc. Dir. for Sci. & Med., Office of Drug Safety, U.S. Food & Drug Admin.). See also Buzbee, supra note 62, at 1616