How companies weaponize the terms of service against you

Today, I’m talking with Brendan Ballou, founder of the Public Integrity Project and author of a new book, called When Companies Run the Courts, about the rise of forced arbitration.

Brendan’s actually been on the show before — his previous book, Plunder, was about private equity taking over huge swaths of American life, and that conversation is among our most popular episodes.

Forced arbitration is similarly everywhere in modern life. Deep in every single terms of service for almost any product you buy or service you use there’s a clause that says that by buying or using the thing, you’re giving up your right to join a class-action suit if something goes wrong and instead you and the company have to go to arbitration.

There have been some really high-profile cases these past few years highlighting how deeply unfair these clauses are to consumers. One you’ll hear Brendan talk about — which we also covered here on The Verge — was the very sad instance where a man’s wife died of an allergic reaction after eating at a Disney World restaurant. When the man sued, Disney tried to force him into arbitration instead, arguing that because he’d signed up for streaming service Disney+ many years earlier, he’d waived his right to sue.

Disney changed their tune after massive public pushback, as you may remember. But there are thousands or maybe millions of other, lower-profile instances every year where consumers and employees have completely lost their right to redress if something goes wrong. Brendan’s book really delves into how and why we got here — spoiler: we can blame Antonin Scalia for some of it — but also, most importantly, what we might be able to do about it in the future.

Brendan and the Public Integrity Project are also in the early stages of legal action against Paramount over possible quid pro quo with the Trump administration in the Warner Bros. acquisition. So we had to start by talking about that.

Okay: Brendan Ballou, When Companies Run the Courts. Here we go.

This interview has been lightly edited for length and clarity.

Brendan Ballou, welcome back to Decoder.

Good to be here.

I’m excited to talk to you. The last time you were on the show, we introduced you as a former DOJ prosecutor in the Antitrust Division. We talked about your book Plunder, which was about private equity. You’ve got another cheerful deep dive out on the rise of arbitration in America; the book is called When Companies Run the Courts. I really want to talk about that book; I have a lot of thoughts about terms of service agreements and arbitration.

But it turns out you’re here right after the Public Integrity Project has launched a big new initiative. You filed a lawsuit against Paramount over the Warner Bros. merger. Explain what’s going on there.

The Public Integrity Project, just to set a baseline, is a new public interest law firm that we’re running to raise the legal and reputational cost of corruption in the United States. In a world where the Department of Justice is not interested in pursuing corruption cases, and in some cases may be facilitating corruption, we want to go after the folks inside of government that are being bribed and the folks outside of government that are trying to bribe them. We’ve brought a number of cases already. We sued the president for approving the illegal sale of TikTok’s US assets to various administration allies. We sued the attorney general for failing to disclose fully the Epstein files, in violation of the law. And now we are laying the foundation for bringing a suit against Paramount for potentially, at least based on public reporting, the Ellison family discussing with the president, administration officials potentially firing CNN anchors in exchange for regulatory approval of their acquisition of Warner Bros.

That’s profoundly troubling, the idea that a company or billionaires might agree to reshape the media landscape to the president’s liking. And so we’ve made what’s called a books and records demand to Paramount to understand what documents the board has about specifically these potential acts of corruption. They have five calendar days to respond and then potentially we can bring this to litigation in Delaware Chancery Court.

Are you the party, or are you representing someone who has the right to demand books and records?

We are representing two great organizations, the Foundation for Freedom of the Press and Reporters Without Borders, both of whom represent journalists and the interests of the free press generally. They’re also individually, as organizations, shareholders in Paramount and so have the right to demand these books and records. This is about a big issue, but the actual thing that’s being asked for here is very standard. Shareholders ask for this information all the time. At least on the law, this is a very straightforward request.

This strikes me as a very interesting mechanical approach to bringing corruption to light. You’re going to find an interested party who is a shareholder. You’re going to say, “Hey, there are these standard practices. Shareholders have access. Show me the documents that led to whatever deal we’re going to get to, and then we can use that to prove that there is some corruption at play.” That’s very clean. I respect the cleverness of it. It strikes me that maybe these guys didn’t write down, “Do corruption tomorrow.” How do you think that’s going to go?

Yeah, no, absolutely. And you have the question about, did they write it down? Do the documents still exist? All these sorts of things. I think there is really interesting public reporting about the actions that Paramount took in its various acquisitions. When David Ellison was trying to buy Paramount in the first place, when he just owned Skydance, there was really interesting public reporting saying that the Ellisons had agreed to a “side deal” with the president to provide millions of dollars in free advertising for causes that he supported to settle a transparently bogus lawsuit that he had against 60 Minutes, and in exchange, potentially get regulatory approval for the Paramount acquisition.

Those are the sorts of decisions that a board would have to be involved in, and so it wouldn’t be terribly surprising if there actually is some documentation at a high level about this stuff. And what’s really great is, this is the stuff that we can surface as private parties, and what we can get out there in the public record can be enormously important. But the folks who can really get at this information are state attorneys general because they have what’s called pre-complaint discovery. They can actually demand this information before even filing a lawsuit. And so if we find interesting information, potentially this is the sort of stuff that can empower state AGs to take action here.

Let me ask about that a little more in depth, because your book is about the court system and how it has generally pushed Americans towards private dispute resolution, private systems of law, and how that’s bad. Hopefully you get your books and records and you can move forward with whatever happens next.

Is all the emphasis on the states now? Because it doesn’t seem like the Federal Department of Justice is that interested in it. That seems like chaos in a very specific way. From my perspective, there’s the court of public opinion. CBS’s ratings are down as they transparently make moves to please Trump, and then maybe a bunch of state AGs are going to say, “Hey, this is actually against the laws that we are charged with enforcing,” and there is that the federal system might have nothing to do with anything.

I’d make a distinction there between the federal enforcers and the federal courts. You’re exactly right that the federal enforcers now controlled by the Trump administration are absolutely indifferent to corporate corruption, and in many ways seem to be trying to enable it. You see all these, frankly, horrifying examples of rich people in companies giving money to various Trump-allied campaign committees or businesses and so forth, and seeing their government investigations dropped, their government lawsuits dropped, and in some cases, their criminal prosecutions dropped. These are extraordinary, essentially unprecedented actions where people are able to literally buy their way out of the justice system.

We live in an era where we absolutely cannot count on federal enforcers to have any interest in going after rich criminals. If I can add to that, there are these individual examples of people buying their way out of the justice system. But at a more programmatic level, the Department of Justice is absolutely dismantling the entire infrastructure for going after rich criminals. They disbanded the Tax Division, which goes after rich tax cheats. They’ve kneecapped the Antitrust Division. They disbanded the KleptoCapture Task Force, which goes after Russian oligarchs. So we’re really destroying all the tools that we have for going after rich criminals. Those are the federal enforcers.

There’s a difference with federal courts. Now, obviously the Supreme Court is an extraordinarily conservative court that’s extremely supportive of this administration, but I can say as a practicing lawyer, the lower courts are by and large appalled by the corruption that’s going on right now and have been taking actions to stop it. And there are a lot of tools that exist outside of federal enforcers that can be brought in state and federal court that actually can make a difference. State attorneys general, like we just suggested, can be enormously valuable here. They have the ability to enforce all federal antitrust laws, and are doing so. You saw them get that big win in the Ticketmaster case a few weeks ago when the federal DOJ abandoned them. That was extraordinary, but they have all sorts of tools on consumer protection, anti-fraud and so forth.

And importantly, private plaintiffs have power here, and that’s the gap that we’re trying to fill, which is that there are so many people who have been harmed by this corruption. We’re talking about people who are buying their way out of the justice system. Many of those people owed millions of dollars in restitution to their victims. Those victims potentially have causes of action to sue in cases like that. And you can go after example after example after example. So I understand why people might be cynical or might be pessimistic at this moment, but there’s actually an enormous amount of tools that we have at our disposal. We just need to use them.

This feels like an excellent transition into the book.

A lot of what’s happened with arbitration is a reaction to the perceived explosion in litigation in the 1970s and 1980s. You talk about this very directly in your book. The idea that there’s a bunch of dormant power that state attorneys general should use or that private plaintiffs should use — it’s dormant for a reason. We just haven’t seen it happen. And you’re saying, “Hey, we should bring this back. And actually, the rise of arbitration agreements stands in your way as a citizen of the United States to get the relief that you might deserve, that the federal government or even the state governments might not be pursuing for you.” How do you think about that dynamic and why did you end up starting with arbitration specifically?

There are a bunch of things there, so I’ll try not to go on too long, but a couple things —

Read your book to me, Brendan! [Laughs]

[Laughs] Yeah, yeah, yeah, exactly.

Let’s start with the why and then get into arbitration and then why it’s bad, and then maybe we can get into the history here. I’m a practicing lawyer. We got to talk a few years ago about my first book about private equity. As I was doing follow-up work from that and just in my own practice, I got the sense that I think most people feel that the legal system is profoundly stacked against them and really organized to benefit the rich, whether it’s rich individuals or big corporations.

I wanted to explain to folks at a very practical level that, by and large, they are right. But to do it in a very specific instance so that people understood very directly how the legal system has changed over the past four decades or so, to really benefit large companies and in a literal sense — not a figurative sense, in a literal sense — put them beyond the reach of the law. And I figured that if I could explain that in the specific context of forced arbitration, it would not only anger people and get them mad about our current system, but also help them understand how this has happened and also how we might change things for the better. So that was the initial motivation.

If I can just add onto that what we’re actually talking about here with forced arbitration, because I think it’s a term that many people have heard, and it’s certainly something that is affecting your life right now. But it’s something that I think a lot of people don’t actually know what it is, so just to set a baseline here. Forced arbitration is a private alternative to the justice system. If you are harmed by a company, if you are cheated, if you are discriminated against, if a family member of yours is hurt or even killed, by and large, you have probably signed an agreement with that company saying that you cannot sue them for that harm in court. Instead, you have to go to a private justice system where the judge, called an arbitrator, is typically paid for, or many times, by the company that you’re trying to sue. And as you can imagine, when a judge is paid for by one party, all the incentives are for them to rule for that party and the statistics bear that out.

And so, whereas consumers win 89% of the time in small claims court, they win 20% to 30% of the time in forced arbitration. When they represent themselves without a lawyer, it might be less than 10%. Before, one arbitration company, it was 0.2%, so a two in 1,000 chance of winning. It’s a system of justice that is profoundly stacked towards big companies and it’s one that we are all, whether we realize it or not, a part of.

One of the most striking stories in your book is the poor man whose wife died at a Disney park, and Disney tried to move him to arbitration because he had signed up for Disney+. Explain what happened there.

Yeah. Jeffrey Piccolo and his wife went to Disney World. His wife, who was a doctor, had severe allergies and so they were trying to be very careful about where they ate. According to his subsequent legal complaint, they went to this faux Irish pub. They were assured that the food was safe. In fact, it was not. His wife died of anaphylactic shock. But when he tried to sue Disney for wrongful death, Disney tried to compel him into forced arbitration by saying that he had consented to it when he signed up for his Disney+ account several years prior. And I think it’s extraordinary for folks to imagine that by signing up for a streaming service, you could essentially sign away your right to sue over your wife’s death.

But to be clear, the law was very much on Disney’s side and they would have won. I think because of enormous public pressure, they eventually backed down, but they would have won if they continued. The next example that we gave was about a woman who worked on a cruise ship and who was allegedly raped by a coworker. She tried to sue the cruise ship for having this enormously unsafe work environment. She was compelled into arbitration and compelled to arbitrate in the Philippines, which was her home country. We obviously never knew the outcome of that arbitration because arbitration is almost always kept secret. So it’s a system that really does bind us all.

There’s an aspect of this where it’s just so obviously unfair for the regular consumer or the regular employee, and the courts have consistently looked at that and said, “Yeah, that’s fine, but you signed up. You signed up for Disney+. You entered into this contract. It occurred. You scroll to the bottom and you hit, ‘I accept,’ and now your life has been signed away.”

Why does that keep happening? Because to me, the idea that the formal justice system, the system where you go to open court and you make your case and there’s a jury, that thing should be very protective of its outcomes. That system should say, “Actually, we decide, and big corporations evading our authority is bad.” And I don’t know why they’re not more protective of that authority.

It’s interesting because when you describe stories of forced arbitration, I think sometimes people often think that you’re just making it up because it sounds so lopsided. There are stories of people being compelled into arbitration and then can’t escape even when their arbitrator is exhibiting signs of senility or falling asleep during their arbitration. And yet, their decisions are still confirmed and actually cannot be appealed in court. So why would “real” judges sign off on a system like this? Well, by and large, they’re taking their cue from the Supreme Court, which beginning in the 1980s really fell in love with forced arbitration. There was this idea that there was this explosion of litigation that was costing big companies millions or billions of dollars and there needed to be some way to get consumers and employees out of court. And forced arbitration with the way to do that.

So the conservative justices beginning with Warren Burger, but then Antonin Scalia, John Roberts and so forth, took this little law from 1925 called the Federal Arbitration Act, which was meant to really allow sophisticated companies and merchants to bind themselves into arbitration so they didn’t have to go through the headache of going to court, and said, “We’re actually going to take this law, which is meant for sophisticated parties of roughly equal bargaining power, and we’re going to extend it to employees and to consumers. And we’re going to extend it to the kinds of contracts that you just mentioned, the click-to-accept, take-it-or-leave-it contracts that we sign every day with companies.” That was never the intention of the statute and it really wasn’t supported by the text of the statute either. But I think the conservative justices really saw this as a vehicle to keep certain people and certain kinds of cases out of court, and they were enormously successful in that endeavor.

I’m smiling because you devote a chapter each to these judges, these characters who have pushed us towards arbitration in this way. And maybe the most important now — you can disagree — is a chapter on Antonin Scalia, who is the most famous textualist in legal history and he’s reading well beyond the law. How did that happen with Scalia specifically?

I’m very critical of Scalia, but I always try to give credit, which is that, far and away, he is the most fun Supreme Court justice we’ve had in a long time. He seemed to have a real love of life. There’s this very evocative picture, a description of him typing his opinions on an old computer while drinking black coffee and smoking Marlboro cigarettes and listening to Bach. I mean, it’s kind of hard not to be charmed by a guy like that.

He’s funny. The opinions are funny. You can’t say anything else about it. They’re funny.

Exactly. I both want to acknowledge that and also say that the decisions that he had around forced arbitration have had profoundly damaging effects for most consumers and employees.

One of the key purposes of forced arbitration is to kill class actions. So class action is when everybody’s hurt in the same kind of way, you can bring one lawsuit instead of hundreds or thousands or millions of lawsuits. And much, if not most, of our social progress on the courts has come through class action. So Roe v. Wade was a class action, Brown v. Board of Education was a class action. And then in the consumer and employee context, you have cases for instance of women who are dying of cancer because of defective birth control. Those are cases brought as class actions. Or people whose family members all die in a plane crash, brought as class actions.

Forced arbitration kills this system by requiring people into arbitration and to arbitrate their cases individually, so each person has to bring an individual case. And you can immediately imagine for anything other than the most expensive harms, that makes pursuing a case completely unaffordable. So you think about all those little fees that a bank might have on your bank statement, or your cell phone company has, and you’re like, “Why am I getting charged $30 a month for this? This seems like BS.” It may well be, but there is no effective way for you to resolve that because you’re forced into individual arbitration. You can’t join a class action over that $30 fee. All that is because of Antonin Scalia. He issued an incredibly important decision in 2011 called [AT&T Mobility LLC v.] Concepcion that said that however — and this is a legal term — however “unconscionable” a contract like that may seem, so unfair and lopsided to employees and to consumers, federal courts would still enforce those agreements. And there was nothing that a court could do to say, “This is unfair. We’re not going to allow this.” And that was really because of Scalia.

What led him to that result?

I don’t want to psychologize too much, but I think if you look at his judicial work, with the exception of some limited stuff in criminal justice, I think he was always an advocate for the powerful in pretty much any sort of dispute. And he was absolutely an advocate for expansive presidential power, expansive corporate power and so forth. And so oftentimes, he’s lauded as this textualist, this idea that somebody whose ultimate fidelity is to the text of the law or to the Constitution. And in some cases he was. But when textualism or originalism ran up against, by and large, ruling for corporate interest, he almost always dropped the textualism and ruled for the corporations. And I think it’s really interesting.

Again, one of the things that I really admire about Justice Scalia is that he is one of the best writers that’s ever been on the court. He has very evocative writing that’s very easy to follow, but on a lot of these decisions, the actual legal reasoning is kind of incoherent because he really had an outcome in mind, and he was trying to figure out a way to get to it. And you see in the dissents from those times pointing out, it’s like, “This decision doesn’t make sense.” But time and time again, he was able to rule for the employer or for the company that was being sued by consumers.

I have a lot of sympathy for that. My entire career is masking poor reasoning with jokes, so…

[Laughs] Yeah, don’t we all? Yeah.

The reason I bring that up and I ask about it in that way is that Scalia was writing before pervasive terms of service agreements. He was writing before pervasive arbitration. He was writing before a pretty unhappy American public started staring at tech companies saying, “No, we can just take whatever we want to make AI.” Something has shifted in the public, in the perception of big tech. Whatever you want to say. It’s an angrier country, it’s a more unhappy country. It feels more exploited. The people feel more exploited and Scalia would have had to open up his Mac and click 10,000 terms of service agreements and it just feels like something has changed. Any justice today, and maybe they’re all still in bubbles in the ivory tower and they don’t experience what regular people experience. But everyone else feels it, and to just participate in society you’re agreeing to 10,000 contracts every day that you definitely don’t read.

The legal fiction that anyone has actually read these contracts is the foundation of the American economy. It feels like we should maybe look at that more thoroughly. No one can negotiate them and then they change all the time. And all of that, I’m just thinking back to my law school education, I’m like, “Oh, those are just unconscionable contracts. Those are contracts of adhesion.” To literally use my phone, I’ve entered into some agreement with Apple that no one can negotiate. That seems ridiculous to me. And to participate in society, I must use my phone. So now there’s a secondary legal system that is mediating my relationship to the country and the world and literally no one can look at it. Do you think that that is going to change? Because it doesn’t seem that tenable to me.

I don’t think it’s going to change at the Supreme Court, not without a change in personnel. I’m referencing some studies that are a little old now, but if you look at how the Supreme Court has ruled for corporations, I believe that this is the most pro-corporate Supreme Court at least since the 19th century. The Supreme Court rules for the Chamber of Commerce somewhere in the order of 80% of the time or higher. This was before Justice Jackson joined the Court. But as I recall, Justice Sotomayor was previously the most anti-corporate justice on the court, and even her decisions were 50% for the Chamber of Commerce.

We live in an era where the Supreme Court in particular is just enormously deferential to corporations. That’s probably for at least two reasons. One is that getting appointed to the Supreme Court has now become a multimillion dollar operation. A single donor gave $17 million to help get Justice Kavanaugh appointed to the Court. Similar numbers for Justice Gorsuch and so forth. If you have that kind of money that’s necessary to put somebody on the Court, chances are the person that’s going to get put on the Court is pretty sympathetic to the people with that kind of money.

There’s something about the nature of Supreme Court litigation itself that has changed, which is that the Supreme Court has become much more insular over the past several decades. Back in the day, the people that were arguing cases in the Supreme Court were, by and large, the people that started the cases in the district court in whatever state they happened to be in. Now I think 20 lawyers and clinics are responsible for arguing something like 50% of all cases before the Supreme Court. And by and large, those lawyers represent large corporate interests. And so the folks that are most successful and most liked by the justices, by and large, are the ones telling them a pro-corporate story.

I don’t think that there’s really going to be a change at the Supreme Court level, but I do believe that there is going to be change nationally for exactly the reasons that you’re talking about. I think that there’s widespread dissatisfaction with corporate power right now. I think it is the very rare person that feels that corporations have too little power in America. There’s going to be a lot of change, but I think change is, by and large, going to happen at the state and local level rather than in the Supreme Court or in Congress.

This is the last third of your book: How do you fix it? And you lay out a few ways of fixing it and getting people away from the coercion of forced arbitration agreements. The first thing you could do is, you could just fix arbitration itself. What would that look like?

One of the reasons that I think corporations are so attracted to forced arbitration is that it’s unlike a regular court. In regular court, court happens out in the open so people know that it’s not corrupt. Decisions are written down so that people who have similar cases can reference those and be treated similarly. And if the judge makes a mistake, that decision can get appealed. None of those things are necessarily true in arbitration, which generally occurs in secret. Oftentimes, decisions aren’t written down. In fact, sometimes companies contract that they specifically aren’t. And ironically, it’s actually much harder to appeal an arbitrator’s decision than it is to appeal a real judge’s decision.

There are ways that we can make arbitration more fair by requiring certain disclosures, by allowing procedural fairness so that plaintiffs can actually get what we call discovery from the other side, and allow or require decisions to actually be written down and shared. We can also require arbitration companies to actually share the statistics on how arbitrators rule. One of the advantages that companies have is, you and I are probably going to arbitrate one case in our life. A company might arbitrate dozens or hundreds or thousands. And so they know which arbitrators to pick and we don’t. But by requiring actual disclosure on how arbitrators rule on things, you actually have a better chance of picking one that’s going to be fair to you.

All those may sound like incremental changes, but the more that arbitration can become like a regular court, both arbitration itself will become fairer and companies will become less attracted to it, because they’re specifically attracted to it right now because it’s not like court.

There are some states that have tried to do all this. Is it effective?

California’s made a lot of progress on this. One of the biggest changes that they’ve made is not just making arbitration fairer, but actually finding ways to get people out of arbitration in the first place. And there’s this law called the Private Attorneys General Act, PAGA, and it’s really smart. What it says is, if you’re an employee that’s been harmed by your company, you didn’t get the wages you were deserved, you were discriminated against, or whatever it happens to be, and you sign an arbitration agreement, normally that’s too bad. You can’t sue your company. But we’re going to say to you, employee, that you can represent us, the state, which can enforce all these same laws in the state labor department, and you’re representing us in a lawsuit against the company. And if you win, the state will get a cut and you’ll get the rest.

But what’s so clever about that is, while you’re bound by an arbitration agreement, the state is not. And so it’s effectively a way to circumvent arbitration agreements. Now, that’s great for employment law and I think it has made California employees much better treated than a lot of other states. We need to expand that sort of legislation to all sorts of laws, to consumer protection laws, securities and antifraud laws, antitrust and so forth. If we can do that, then we can narrow down arbitration to become a much smaller part of our lives and companies are going to treat us better.

Can I just ask about that? You were a federal prosecutor in a previous life. There’s a part of me that says our approach to the American legal system right now generally is like a series of hacks and magic words. We can’t just go and do the policy issue. We have to be like, “I deputize you to be a state attorney general to escape the contract that you signed,” and now the state will get a cut of your private litigation and we’ve just created a whole other set of weird policy problems instead of just solving the policy problem. Why does that keep happening?

You keep employing lawyers and that’s something that we do. You’re exactly right that we have a lot of odd hacks to deal with, some structural injustices in our legal system that are hard to solve. So much of the workarounds that we’ve been having about trying to come up with new regulations at the federal level is because it’s become so increasingly hard to pass legislation in Congress. The reason why we’re having to do so many things at the state level right now is because the Supreme Court has been so adverse to progressive change at the federal level and so forth. We have to have these awkward workarounds.

I will say, though, that awkward workarounds have been a fact of human existence, and as profoundly unfair in many ways as our legal system is, and probably more unfair than it was a few decades ago, it is vastly better than what we had 60 years ago when we effectively had an apartheid state in the United States, or 100 years ago during the Gilded Age when we are interpreting our antitrust laws to break up unions but not corporations, and so forth. So maybe I’m just too captured by my own profession, but I see it as a cost of doing business in any human society where we’re all flawed.

I think I look at it from, I don’t know, maybe I just want the system to be more elegant, right?

That’s your Silicon Valley background, yeah.

Yeah. Right. I’m a tech person. I’m like, “This computer makes no sense. You should make a different, better computer.” I think terms of service agreements should be illegal. Fundamentally, I think they are unconscionable contracts. I think you can point to forcing people into arbitration as one element of them being unconscionable. You can point to just the fact that no one can negotiate them. And the bald truth that literally no one reads them is a problem. I think it is bad that a huge amount of the American economy is predicated on no one reading the contract at scale. You should probably fix that problem in some way.

At least for me, it’s like, how would you fix that problem? The state, which represents all of us, should negotiate the contract. It should write a privacy law. And that should be the foundation of whatever contract comes next, but it should pre-negotiate the floor. As you point out, maybe Congress seems incapable of pre-negotiating the floor.

Maybe I’m taking this in an odd direction, but I think you’re exactly right, and in a lot of ways, our government’s made that literally harder to do. Back in the 90s, Montana passed a law where, if you had an arbitration agreement in your contract, contractually you had to put it on the first page. You had to notify people that you had an arbitration agreement. That very straightforward law got struck down by the Supreme Court and said that was actually discriminating, ironically, against arbitration agreements. So there’s a lot of impediments to those sorts of things. I think you’re exactly right that at a high level, I think these are the responsibilities, as you say, of democracy to resolve a lot of these issues.

Talking at a high level of generality can be paralyzing in its own way, because when you talk about how everything in its own way is broken, it sort of makes it impossible to fix it. It’s like if you’re depressed and you’re looking at your apartment, it’s in a mess, you’re like, “I can’t do anything about it.” Whereas if you think like, “Okay, I’m going to focus on the kitchen right now and start doing that,” it becomes a much more solvable problem, which is why I chose to focus on this seemingly fairly technical issue of forced arbitration. Because I thought, if I get people to focus on this thing specifically, I thought it would help them understand both how things get broken, but also, here’s how we can fix this one specific thing. And I think that actually can be empowering for people.

The reason I talked about hacks and magic words is, yeah, we can try to go through their front door and fix it with state laws that tweak arbitration. And then your proposal is, we should just break the system. We should just do mass arbitration and cost these companies a lot of money and make that entire operation just untenable. Explain what you mean by breaking arbitration.

You’re talking about hacks, this was a fascinating one. Arbitration, like you said, is meant to kill class actions so that each person has to bring a case individually. It’s too expensive for each person to do it, so nobody ever does it. One thing that the companies who were doing this just messed up on is, in order to make these agreements seem facially a little more fair, they said, “We’re going to pay for the initial cost of the arbitration. We’ll even pay for the arbitrator. You just have to start the arbitration.” And some very smart lawyers said, “Okay, we’re going to take you up on your offer and we are going to initiate thousands of arbitrations all at once, and you have to pay for all of them all at once.” And it’s clear that the companies just never even considered the possibility that a lot of people would arbitrate their cases, because as soon as they did, they tried to back out of their own agreements and said, “We actually don’t think we should pay these tens of millions of dollars that we promised to pay.”

There were some very funny court decisions where judges, who had been watching their powers slip away and consumers’ powers slip away through arbitration, say, “It is the height of irony that these companies are now trying to escape these things,” and compelled them to pay these costs. So mass arbitration is really a way to turn arbitration on its head and actually say, “Okay, companies, if you’re going to force us to do this, we’re actually going to do it, but you’re going to have to pay a bunch of costs,” which creates leverage for consumers and employees.

That’s great, and in some ways, mass arbitration can actually be very helpful for certain kinds of cases. For a year, I was involved in a mass arbitration representing employees who had been illegally sued by Elon Musk at Twitter and Shannon Liss-Riordan, who’s just a fabulous attorney, was leading that whole effort. But companies are trying to get smart and figure out ways to avoid paying any money, or moving to even less reputable arbitration providers that have rules that are so skewed, rules that sometimes the companies even helped write, to try to kill these mass arbitrations.

Tell me the story of suing Elon Musk and Twitter. How did that come about?

It was fascinating. And there are certain limitations of what I can talk about. Again, Shannon and her team were the real heroes on this. But it was fascinating because Elon Musk summarily fired 2,000 employees and had clearly promised severance that he refused to pay. And these employees had unfortunately signed arbitration agreements, which prohibited them from being class actions. And so Shannon and the team I was part of decided to say, “Okay, we’re actually going to represent these hundreds or thousands of employees and individually arbitrate.” Can’t get into the details, but I think that we had enormous success, and I hope Elon Musk doesn’t make the same mistake twice.

Can you not get into the details because the arbitration agreements keep you from talking about the details?

I don’t know if it’s the specific arbitration agreements, but being a lawyer in general, sometimes when you’re doing these cases you have to be kind of cagey about things.

It does seem like Elon just doesn’t want to pay the money. Now he’s rolling up all of his companies. He might IPO SpaceX in some way. Somehow Twitter is now part of SpaceX, and it’s all very confusing. Did it all just wrap up because he needed it to go away?

It does seem like he’s rebuilding the Korean conglomerates that you see going on, where you have a single family running 18 different kinds of businesses, often supporting each other financially. Or the Japanese, what is it, keiretsu? Banking conglomerates that you had. Those keiretsu collapsed in the 1990s and Japan’s had a multi-decade recession as a result. So I’m not sure Elon Musk is necessarily going to do better than that. But yes, speaking personally, I am enormously skeptical of Elon Musk’s financial acumen.

I feel like I should have you back just so we can talk about weird Korean chaebol corruption scandals and including the Samsung family and the horse racing thing. That’s a different episode.

I think you want to grow your audience, not shrink it. But yeah.

Mass arbitration — the idea that you can cost these companies an enormous sum of money, but just by making them enforce their own agreements, they are pushing back against it. There’s some instances where, I don’t know, Valve, the video game company, took their arbitration clause out of its agreement because of mass arbitration. And then there’s Bank of America, which changed its user agreement but forces individual arbitration, and that’s going to go into effect I think the week after we’re talking. It’s coming. Is that going to be effective? Is it going to push back on the idea that you can hack the system this way?

At the beginning of mass arbitration, it was easy because the companies just hadn’t considered the possibility, and so were completely caught off guard and had committed to paying millions of dollars to consumers that, if they had been strategic, they would not have done. The challenge that you’ve got is that there are what are called arbitration companies. AAA and JAMS are the two largest ones that actually provide the arbitrators for these companies. They are businesses and are in the business of providing arbitration. In the rules of the game that they set, they are naturally inclined — whether they would admit it or not, they have a natural incentive — to make the rules favorable to the companies that are actually paying for arbitration and that are the repeat players in these sorts of things. So there is a natural incentive for these guys to make arbitration ever less fair for consumers and employees, which I think to your point about the power of the state, is just one more reason why we need democracy to constrain forced arbitration as an institution in general.

It’s funny you brought up the AAA. We just had Bridget McCormack, who was the Chief Justice of the Michigan Super Court. She’s now the CEO of the American Arbitration Association and we talked about this at length. Her proposal was we should just have AI do it. Between construction firms, this is where they’re starting. It’s documents-only construction cases. And she was like, “You don’t need an arbitrator. These are actually both sophisticated parties. They both show up in front of us all the time. All the cases can be resolved, and the nature of the contracts and whatever delivery invoice was late or on time or whatever, and the AI can just do it. And that is perceived as more fair and they can just move on with their lives.” There’s something to that.

If you perceive the entire justice system to already be so unfair, at least ChatGPT is going to listen to you. You can just talk to it until it gives in and says, “I’ve issued a ruling.” And there’s some data saying that people will perceive that to be more fair because they were at least listened to. That does feel like the next turn. You open your Verizon app and you’re like, “I didn’t get service today. I’m arbitrating my bill for the month,” and some combination of arbitration and customer support merges into a chatbot and delivers you an outcome. That seems very bad. It also seems like where all of these companies want to go. What does that look like to you?

Speaking personally, it’s horrifying. I don’t want to be a Luddite about these things and I think AI can be very useful for certain parts of legal work, document review and so forth. I think that there are two problems here. One at a very high level is, when you’re talking about dispute resolution, lawyers are paid to understand the individual nuances of each case rather than the generalities. And I have often found that AI bots have been very ineffective at actually writing sophisticated legal briefs that are specific to a case. They can write the generic section about what the legal standard is and so forth, but actually understanding the nuances of the case, it’s more than just a matter of natural language processing. But even if they were perfect at it, for a justice system to work, people need to be bought into its legitimacy. And I think it’s very hard to buy into the legitimacy of a large language model that’s essentially a black box. How can people possibly believe that it was ultimately fair?

At a more practical technical level, one of the challenges — we alluded to this earlier — that you have with forced arbitration is that decisions often aren’t written down, or if they are written down, they’re not made public. And the reason why that’s so important in a functioning legal system, it’s actually the key to a legal system, is that similar cases get treated similarly. That’s what justice is. And when decisions aren’t made public, it’s actually literally impossible to create a case law upon which people can make decisions. The way that arbitration is currently structured, even if in every other respect it was fair, if you have an AI that has no corpus of case law to rely on, the decisions are going to be ultimately arbitrary and case dependent and have no internal consistency.

When I think about that, there’s so much about AI and LLMs in the ether that is related to dynamic outcomes. You’re going to talk to the system and the system will understand you, and something will happen for you that maybe isn’t happening for someone else. Uber’s CEO was just on the show and they’re redoing all of their actual customer support to deliver dynamic outcomes. And instead of having written policies, they’re basically just going to tell the AI, “Here are the vibes we want customers to feel.” And I asked him, “You’re going to back into having policies?” Because you still want the perception of being fair, and right next to that is all these companies instituting dynamic pricing, which is fundamentally unfair. And right next to that is they’re all signing up for forced arbitration agreements where the outcomes can be totally arbitrary, and you will never know if your case was resolved, to the next and the next case.

And when you say justice is about the same set of facts having the same outcomes, it feels like that’s rippling through the entire experience of being an American right now, that you can be treated differently in almost every case, in every interaction in some way. Do you think just changing arbitration is the first step towards being like, actually, we need to treat people more fairly? We need to equalize the outcomes. Instead of at every case saying, “Oh, you have a credit card that’s tied to this airline, we can see you’re spending, your price is going to be up for this route.” Which is what we’re barreling towards every single day.

That’s a really profound question and I’ve never really thought about it, Nilay. Thank you for asking that. I certainly think at a practical level, ending forced arbitration or constraining forced arbitration can help solve that. When you talk about the problems, the dynamic pricing or the personalization that an Uber CEO is promising, maybe even with the best of intentions, is likely going to violate a whole bunch of laws. So you can imagine a world in which otherwise well-intentioned dynamic pricing dramatically discriminates against people based on their race, or dynamic hiring practices end up discriminating in making job offers and so forth, dramatically discriminating against people based on their gender. I think that this attempt at personalization, intentionally or not, is probably going to violate a whole bunch of laws. And unless we constrain forced arbitration, it is going to be very hard for anybody to challenge those.

The arbitrariness that we’re all experiencing — I really like the way that you’ve put it — can in some ways be chalked up to forced arbitration. I don’t want to overpromise this one thing, but maybe it’s part of a larger story. In that, as so much of our societal disputes get channeled outside of the public justice system and we don’t have the development of the body of law, and we don’t have public discussion of these issues, I do think we grow increasingly Balkanized and isolated, and at a certain level, definitionally what we are as a society begins to fray.

I mean, now we’re deep into my own feelings, so just I apologize for it, but please go with me for one second. I have always thought that what The Verge sells to people is a sense of hope. “We cover people who make things and we cover companies who build really remarkable things, and then people use those things to build new things.” It’s just the cycle of what a tech magazine is. Fundamentally, we’re like, “Here’s some new stuff. Do you like it?” Then people say, “Now I can make a different kind of music than ever existed before.” That is very fun. Lately I have sensed just an overwhelming kind of nihilism from our audience, particularly our young audience, and I relate it very much to a feeling of powerlessness. I relate that feeling of powerlessness directly to arbitrary outcomes.

We started by talking about corruption. And what is corruption except, “You’re rich, so the justice system won’t touch you. Or you could buy the DOJ to go away. Or you can spend enough money to make the DOJ go away.” And maybe putting it all on forced arbitration is too much, maybe it can’t bear all the weight, but there’s some part of it where it’s like, where do you begin? How do you escape the sense that everything is arbitrary and actually the system should be more fair? And maybe the system should be more elegant, but maybe we actually just have to do a bunch of hacks to make it more fair.

No, that’s a really deep sentiment, and I both understand it and don’t agree with it, because I taught a class at Stanford last year on January 6th and talking to young students about the current political moment. And it was very unsettling, both how deeply young students were thinking about so many of these issues, and at the same time, how scared they were to act on them. Not just because the problem seemed so large that it was paralyzing, but because they were literally worried about getting doxed or losing their job outside of college or law school or whatever it happened to be if they said the wrong thing. And so I completely understand people’s sense of overwhelming despair and nihilism.

I am not particularly despairing, I’m not particularly nihilistic, in large part because of the work that I do. I am fortunate in that I get to talk to a lot of people who have done one specific thing, which is they have chosen an issue that they care about and then they stick with it for several years. Over and over again — this happens to me about every six to nine months — I’m astounded by the amount of change that one person has had on a specific issue just because they stuck with it for one year or three years or 20 years, or whatever it happens to be. I watched a handful of people completely change the prison phone industry. I watched a handful of people make mobile housing in their communities dramatically more fair.

It goes back to what we were talking about earlier in our discussion. When your viewers and when your listeners and when your readers see things in the macro, I completely understand how despairing it is. But I remain incredibly hopeful about the power of individual people if they stick with something to make progress, because I have seen it happen over and over and over again.

Brendan, I think that’s as good of a place to end it as I can think of. How should people think about escaping arbitration now? How should people think about taking more control over this one aspect of things?

You’re not going to escape it by reading your contracts more carefully, because most of them aren’t negotiable and Verizon’s not going to let you negotiate them. We’re not going to ethically consume our way out of this problem. This is, to your earlier point, something we are going to solve collectively. Ultimately, that’s going to happen in the city councils and the state legislatures. I worked with a young, very smart University of Chicago law student to draft some model legislation. I have a personal website, brendanballou.com, where you can download it. Send it to your legislator and get them to start passing some laws. That is the practical way that we’re going to make progress here.

The book is called When Companies Run the Courts. It’s a great read. The previous book was called Plunder, about private equity. It still comes up on Decoder all the time. I recommend that one as well. Brendan, we’re going to have to have you back and we’ll just do more therapy for me personally. Thank you so much for being on Decoder.

Thank you!

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