By Aaron Jordan, Alliance for Justice
Peter Thiel has said many things people might find objectionable. Last month, Thiel stated, “If you are a very talented person, you have a choice: You either go to New York or you go to Silicon Valley.” Only one problem—he was in Chicago when he made the remark.
More concerning are his comments about the 51% of our citizens with two X chromosomes. In his 1995 book The Diversity Myth, Thiel wrote that “since a multicultural rape charge may indicate nothing more than belated regret, a woman might ‘realize’ that she had been ‘raped’ the next day or even many days later.” He added that the “rape crisis movement seems as much about vilifying men as about raising ‘awareness.’” In 2009, he bemoaned that he no longer believes “that freedom and democracy are compatible,” largely because the 20th century saw a “vast increase in welfare beneficiaries and the extension of the franchise to women,” which has “rendered the notion of ‘capitalist democracy’ into an oxymoron.”
On Monday, however Thiel made an accurate and important point about our legal system. In a speech clarifying his support for Donald Trump, Thiel defended his decision to finance Hulk Hogan’s lawsuit against the gossip site Gawker. He stated that if “you’re a single-digit millionaire like Hulk Hogan, you have no effective access to our legal system.” While we at Alliance for Justice tend to make this point less colorfully, Thiel’s core argument is correct. The courtroom door is being closed to ordinary Americans, as class actions face increasing procedural hurdles and large numbers of consumers are shunted into forced arbitration proceedings instead of getting their day in court.
Class action lawsuits are an important vehicle for large groups of employees or consumers with a similar grievance to join together and file a lawsuit. They have protected consumers deceived by tobacco companies and fishermen who found themselves out of a job after the BP oil spill. The Supreme Court, however, has limited class action suits in several recent cases. In Wal-Mart v. Dukes (2011), the Court ruled that 1.6 million women who work at Wal-Mart and alleged sex discrimination by the retailer could not be certified as a class. That same year, in AT&T v. Concepcion, the Court also determined that state laws prohibiting contracts that prevented class actions were unconstitutional because they were preempted by the 1925 Federal Arbitration Act. As Thiel noted, it can be prohibitively expensive for even millionaires to challenge powerful companies. Class actions – by allowing many people to join together- are one of the key avenues through which ordinary Americans can achieve civil justice.
Cases like AT&T and American Express v. Italian Colors have also made it easier for companies to force consumers into arbitration rather than giving them their day in court. Buried in the fine print of many contracts are requirements that consumers must arbitrate their cases rather than getting a court hearing. This is problematic for a number of reasons: arbitrators operate in secret, need not respect precedent, follow no pre-set or broadly agreed-upon list of procedural rules, and are reliant on the very companies whose cases they judge for their incomes. Their decisions cannot even be appealed.
The recent Wells Fargo scandal, in which the bank created nearly two million fake accounts and subsequently charged customers late fees on accounts they never wanted, has highlighted this unfortunate practice. Wells Fargo’s 2016 business account agreement states that all clients “irrevocably…waive the right to a trial by jury.” Noting the stark language of the agreement, federal Judge Vincent Chhabria found that the agreement was extensive enough to cover any dispute between the bank and its clients, and ultimately decided to deny the bank’s defrauded customers access to the courts.
There are at least a few positive signs on the horizon. Senator Sherrod Brown of Ohio is writing a bill that will prevent companies that open fake accounts from making use of arbitration clauses on actual accounts. A number of federal agencies have also taken positive steps to curb forced arbitration: the CFPB has released a proposed rule that would prohibit class action bans in arbitration clauses while the Department of Education recently finalized a rule banning for-profit colleges from enforcing arbitration clauses in many student enrollment contracts.
No one can doubt that Peter Thiel has shown himself to be a savvy businessman and investor in the past. He co-founded PayPal and Palantir and was the first outside investor in Facebook. As a graduate of Stanford Law School and a former clerk on the 11th Circuit Court of Appeals, he also knows the importance of our legal system. Perhaps it would be for wise for Thiel, next time he’s looking for an investment opportunity, to look for ways to bolster access to our existing legal system, instead of throwing money at some libertarian island utopia..
Because some of us are not even single-digit millionaires.