No Consensus among Republicans and Democrats’ Debate on Small Business Class-Action Lawsuits, Forced Arbitration

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Senate Committee on the Judiciary Meeting in Dirksen Senate Building

By Emily Simonsen

WASHINGTON – After years of serving our country as a navy electrician, Hank Goldsmith’s jobsite exposure led him to develop mesothelioma, a cancerous condition which leaves victims with 12 to 21 months to live, according to Asbestos.com. Goldsmith later died from his condition, surrounded by family, like grandson Andy Goldsmith.

Mesothelioma also killed Linda Moore’s husband, James Moore, whose line of work exposed him to asbestos.

Lives lost to jobsite malpractice even extend into branches of government. In 2000, Susan Vento lost her husband, Minnesota congressman Bruce Vento, to mesothelioma complications.

As a state-paid laborer for years in his youth, Vento contended his condition resulted from his job’s exposure to asbestos. After removal of a lung and ongoing chemotherapy treatments, Vento passed away on his 60th birthday. His litigation against business malpractice, like the Goldsmith’s claims and Moore’s claims, was never resolved.

“The need for corporate accountability has never been clearer,” said Sen. Al Franken (D-MN), one of the dissenting voices from the minority party on the Judiciary Committee.

Franken, among Chairman Chuck Grassley (R-IA), Sen. John Cornyn (R-TX), and other committee members, sat before Andy Goldsmith, Linda Moore, Sue Vento, and the rest of the public Wednesday morning in room 226 of the Dirksen Senate Building. There, the judiciary committee debated S.237, the Lawsuit Reduction Act of 2017.

Introduced by the Senate in January 2017, the Lawsuit Reduction Act of 2017 would introduce a few judicial system changes.

Firstly, it would amend Rule 11 from the Federal Rules of Civil Procedure, by requiring courts to impose sanctions on lawyers or parties who introduce ‘frivolous’ arguments that lack merit.

Secondly, the amendment requiring sanctions would uphold sanctions even if the frivolous argument were to be withdrawn.

Thirdly, required sanctions would include monetary compensation, where lawyers or parties introducing a frivolous argument would be forced to reimburse defendants for reasonable attorney fees.

Essentially, the Lawsuit Reduction Act of 2017 would ensure injustice for people like Goldsmith, Moore, Vento and others, by upholding forced arbitration clauses, said Senator Franken.

Forced arbitration clauses are when a person or company sign a contract waiving their right to sue the firm they conduct business with, according to the National Association of Consumer Advocates.

Forced arbitration clauses explain why Wells Fargo – a company that opened 1.4 million fraudulent accounts in customers’ name – and why Equifax – a firm that compromised 143 million people’s private information – can evade litigation for their wrongdoings; because customers sign away their right to sue said Franken.

“Americans face unprecedented obstacles to exercising their seventh amendment right,” said Professor Myriam Gilles, a Vice Dean and law Professor from Yeshiva University in New York, testifying on behalf of the minority party.

“This is no time to be looking to for new ways to further limit Americans’ access to justice. Instead, this committee should be looking at ways to increase access to a fair and transparent systems where corporations, no matter how massive, no matter how powerful, can be held accountable,” Gilles said.

Gilles’ argument sets the backdrop for the Senate’s recent decision to block the Consumer Financial Protection Bureau’s suggested arbitration rule.

The arbitration rule would have forced institutions to adopt voluntary over forced arbitration rules, meaning, consumers can choose to waive away their rights to sue rather than being forced to forego suing rights.

Although forced arbitration remains intact after the Senate’s blocking of the legislation, demands to enact legislation altering forced arbitration persist, such as the Americans for Financial Reform’s Online Letter-writing campaign and petition.

Furthermore, although large corporations commonly employ forced arbitration clauses, small business can similarly enact these clauses in their terms of agreement, explaining the minority party’s sentiments amid the Lawsuit Reduction Act of 2017 debate.

“It is important to give victims of injustice their day in court, but lawsuits can also victimize those who are sued,” said Elizabeth Milito, the Senior Executive Counsel at the Small Business Legal Center in Washington, D.C, testifying on behalf of the majority party.

Small businesses do not have in-house counsel and are easy targets for frivolous lawsuits, said Milito.

Law firms looking to make quick money will drive around looking to cite small businesses who may be violating a legal statue without even realizing their wrongdoing, said Chairman Grassley.

Furthermore, after receiving a class-action lawsuit letter, small businesses will frequently pony up the money, because financial ruin through litigation is greater than simply settling the dispute out of court, said Milito.

Finally, small businesses in litigation disproportionately pay more for lawsuits because some cannot afford legal insurance, and for those who can, premiums tend to be higher, said Milito.

“Another problematic trend is the use of third party litigation funding; companies investing in lawsuits,” said John H. Besiner, a partner from the Skadden, Arps, Slate, Meagher, & Flom law firm, testifying on behalf of the U.S. Chamber of Commerce Institute For Legal Reform for the majority party.

After testimony from all three witnesses, question and answer rounds between Senators, jurors, and the public persisted for an hour, before Sen. Franken delivered the closing remarks.

“In a constitution that is otherwise dedicated to protecting the individual against the power of the state, this is the institution that protects the individual against the power of other, more powerful individuals,” said Sen. Franken, looking from the audience members to jurors like Milito and Besiner. “And I hope we’ll bear that in mind as we continue this conversation,”

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